MICROBILT CORPORATION v. FIDELITY NATIONAL INFORMATION SERVICES, INC. et al

Filing 7

OPINION filed. Signed by Judge Freda L. Wolfson on 12/3/2014. (eaj)

*NOT FOR PUBLICATION*
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
MICROBILT CORPORATION,

:
:
Debtor/Plaintiff, :
:
v.
:
:
FIDELITY NAT’L INFO. SERVS., INC.
:
CHEX SYS., INC., and
:
FIS MGMT. SERVS., LLC,
:
:
Defendants. :

Adv. Pro. No. 11-02488 (MBK)
Civ. Action No. 14-03284 (FLW)
OPINION

WOLFSON, United States District Judge:
Presently before the Court are (1) a motion by Defendants Fidelity National Information
Services, Inc. (“FNIS), Chex Systems, Inc. (“Chex”), and FIS Management Services, LLC (“FIS”)
(collectively, “Defendants”) to withdraw the reference of this matter to the United States
Bankruptcy Court for the District of New Jersey and (2) a cross-motion by Plaintiff MicroBilt
Corporation’s (“MicroBilt,” or “Plaintiff”) for a jury trial pursuant to Rule 39(b) of the Federal
Rules of Civil Procedure. Upon the review of parties' papers and the relevant case law and for the
following reasons, the Court grants Defendants’ motion and denies Plaintiff’s motion.
I.

Background
This is Defendants’ second motion to withdraw the reference of this matter. The first motion

was denied without prejudice by the Honorable Joel A. Pisano in 2012. MicroBilt Corp. v. Fid.
Nat. Info. Servs., No. CIV.A. 12-3861 JAP, 2012 WL 4955267, at *4 (D.N.J. Oct. 16, 2012). As
such, this Court incorporates Judge Pisano’s comprehensive statement of the facts herein. Briefly,
this motion to withdraw the reference arises out of an ongoing bankruptcy proceeding in the

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bankruptcy court, initiated by MicroBilt’s voluntary petition for relief under Chapter 11 of the
bankruptcy code. Id.; see also In re MicroBilt Corp., 484 B.R. 56, 61 (D.N.J. 2012). Chex filed a
proof of claim in the underlying bankruptcy case relating to pre-petition amounts MicroBilt
purportedly owed related to an Information Resale Agreement, dated August 26, 2009, between
MicroBilt and Chex (the “Resale Agreement”).1 Id.
Both Chex and MicroBilt filed motions to resolve the dispute over the Resale Agreement with
the bankruptcy court; the Honorable Michael B. Kaplan, U.S.B.J., entered an order resolving
certain issues in MicroBilt's favor but found MicroBilt in default of the Resale Agreement and
directed MicroBilt to cure the amount owed.2 Id.
On October 18, 2011, MicroBilt commenced an adversary proceeding in bankruptcy court
against FNIS and Chex. The Second Amended Complaint alleges two causes of action: in Count
One, tortious interference with prospective contractual relations (lost investors); and in Count
Two, trade libel/commercial disparagement/slander/libel. See Docket No. 37, Case 11-02488MBK. MicroBilt’s claims are premised on Defendant’s purported accusations that MicroBilt
engaged in “data caching” (i.e., the wrongful storage and re-use of consumer credit information).
Id.
On June 22, 2012, Defendants filed (1) their first motion for withdrawal of the reference and
(2) a motion for determination of core and non-core proceedings in the bankruptcy court. On
August 5, 2012, Judge Kaplan issued an order regarding the core and non-core proceedings,

1
 MicroBilt is a customer credit information reseller and Chex is a consumer credit information supplier. Docket
No. 37, Case 11-02488-MBK.   

2
 Microbilt and Chex’s dispute over the Resale Agreement is ongoing. Chex appealed Judge Kaplan’s order to
the Honorable Michael A. Shipp, U.S.D.J., who remanded the pricing issue to Judge Kaplan. Judge Kaplan modified
his pricing decision in accordance with Judge Shipp’s rulings, and MicroBilt appealed the modified decision to Judge
Shipp. On October 31, 2014, Judge Shipp affirmed the findings and determinations of the Bankruptcy Court. Docket
No. 28, 14-00750-MAS. On November 26, 2014, MicroBilt filed a Notice of Appeal to the Third Circuit as to Judge
Shipp’s Order and Opinion. Docket No. 30, 14-00750-MAS. 

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finding that MicroBilt’s claims against any defendant who has filed a proof of claim in this
bankruptcy court are core proceedings and any other claims are non-core; further, “the
[bankruptcy] Court lacks the constitutional authority to enter a final judgment on a state law
counterclaim that is not resolved in the process of ruling on a creditor’s proof of claim.”3 Docket
No. 27, Case 11-02488-MBK.
On October 16, 2012, Judge Pisano denied Defendants’ motion without prejudice, finding at
the time that withdrawal of the reference was not warranted because “[t]he Bankruptcy Court has
familiarized itself with the parties, their relationships and their various disputes and is uniquely
situated to address the outstanding issues in this case, as well as to manage issues related to
discovery and any potential settlement discussions.” MicroBilt Corp., 2012 WL 4955267, at *4.
However, Judge Pisano reserved judgment on Defendant’s contention that the Bankruptcy Court
does not have the constitutional authority to finally adjudicate the claims in the adversary
proceeding because the proceeding was in its early stages and “even if the District Court ultimately
must adjudicate the matter, the Bankruptcy Court is currently in the best position to preside over
the Adversary Proceeding and resolve motions and discovery disputes until such time as the case
is ready for final adjudication.” Id. Judge Pisano concluded that “[i]f, after the Bankruptcy Court
has resolved all discovery and pre-trial issues, there are remaining claims over which the
Bankruptcy Court lacks authority, Defendants may then move to withdraw the reference under a
new civil action number.” Id. 
On April 28, 2014, soon after the third amended joint scheduling order was issued in the
Bankruptcy Court, Defendants filed a second motion for withdrawal of reference. On September
26, 2014, Defendants filed separate motions for summary judgment. Docket Nos. 66, 67, Case 11-

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 Chex filed a proof of claim in the underlying bankruptcy proceeding; FNIS and FIS did not. See supra page 2.

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02488-MBK. On October 1, 2014, Judge Kaplan stayed the adversary proceeding pending the
resolution of this motion to withdraw. Docket No. 73, Case 11-02488-MBK.
II.

Discussion
a. Withdrawal of the Reference
Title 28 U.S.C. § 157(d) provides: “[t]he district court may withdraw, in whole or in part,

any case or proceeding referred under this section, on its own motion or on timely motion of any
party, for cause shown. The district court shall, on timely motion of a party, so withdraw a
proceeding if the court determines that resolution of the proceeding requires consideration of both
title 11 and other laws of the United States regulating organizations or activities affecting interstate
commerce.” 28 U.S.C. § 157(d).
According to 28 U.S.C. § 157(d), there are two forms of withdrawal—mandatory and
permissive. Courts in this jurisdiction have held that a withdrawal of reference is mandatory if the
“resolution of the proceeding requires a substantial and material consideration of both Title 11 and
non-code Federal law.” In Re Anthony Tammaro, Inc., 56 B.R. 999, 1006-07 (D.N.J. 1986)
(emphasis in original); see also, e.g., Doctors Assocs., Inc. v. Desai, No. CIV.A.10-575, 2010 WL
3326726, at *4 (D.N.J. Aug. 23, 2010). Conversely, 28 U.S.C. § 157(d) provides that permissive
withdrawal is appropriate “for cause shown.” What constitutes “cause” to withdraw is not evident
from the statute, see NDEP Corp. v. Handl–It, Inc. (In re NDEP Corp.), 203 B.R. 905, 907
(D.Del.1996) (citing In re Pruitt, 910 F.2d 1160, 1168 (3d Cir.1990)), but courts in the Third
Circuit and elsewhere have articulated a number of factors for the District Court to consider,
including (1) whether the proceeding is core or non-core, (2) judicial efficiency, (3) uniformity
and economy, and (4) discouraging forum shopping. See In re Pruitt, 910 F.2d at 1168; Prof'l Ins.
Mgmt. v. Ohio Cas. Group of Ins. Cos. (In re Prof'l Ins. Mgmt.), 2000 WL 679247, at *5 (D.N.J.

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May 25, 2000); Times Mirror Magazines v. Las Vegas Sports News, L.L.C., 1999 WL 179749, at
*2 (E.D.Pa.1999).
Importantly, courts in this district have held that a threshold factor in determining whether the
district court should withdraw a reference is whether the proceeding is “core” or “non-core” to the
pending bankruptcy case; only after such a determination is made will a court consider the
remaining factors when deciding whether to withdraw a reference for cause. See Feldman v. ABN
AMRO Mortgage Grp. Inc., 515 B.R. 443, 451 (E.D. Pa. 2014) (analyzing whether the adversary
proceedings in question were “core” to the larger bankruptcy proceeding before proceeding to
consider the non-exclusive factors in In re Pruitt). 27 U.S.C. § 157(b)(2) provides a non-exhaustive
list of core proceedings, including “counterclaims by the estate against persons filing claims
against the estate.” 28 U.S.C. 157(b)(2)(C).
So-called Stern claims, which include state law counterclaims that are not resolved by ruling
on a creditor’s proof of claim and over which bankruptcy courts lack jurisdiction under Article III
of the Constitution, should be treated as non-core claims.4 See Stern v. Marshall, 564 U.S. ––, 131
S.Ct. 2594, 2608 (2011); see also Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165, 2173
(2014) (instructing courts to adjudicate Stern claims as non-core claims). “[I]n ‘noncore’
proceedings, the Bankruptcy Court's adjudicatory power is limited to hearing the dispute and
submitting proposed findings of facts and conclusions of law to the district court. The District
Court, after considering the Bankruptcy Court's proposed findings and conducting a de novo

4
  The Supreme Court has cautioned that Stern concerns only a narrow class of bankruptcy claims. Stern v.
Marshall, 131 S. Ct. 2594 (2011). (“We do not think the removal of counterclaims such as [the petitioner’s] from core
bankruptcy jurisdiction meaningfully changes the division of labor in the current statute; we agree with the United
States that the question presented here is a ‘narrow’ one.”).

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review of any matter objected to therein, enters final orders and judgments in ‘non-core’
proceedings. Halper v. Halper, 164 F.3d 830, 836 (3d Cir. 1999) (internal quotations omitted).
The remaining factors of permissive withdrawal analysis, grounded in the interests of judicial
economy, address whether withdrawal would: (1) promote uniformity in bankruptcy
administration; (2) reduce forum shopping and confusion; (3) foster the economical use of the
debtors' and creditors' resources; and (4) expedite the bankruptcy process. In re Pruitt, 910 F.2d at
1165.
The parties do not dispute that Defendant’s motion to withdraw the reference should be
examined under the permissive, not mandatory, withdrawal analysis.5 Therefore, I begin by
analyzing the threshold issue for permissive withdrawal: whether the adversary proceedings are
core or non-core. Based on Judge Kaplan’s order on the core/non-core nature of the adversary
proceedings, it appears that MicroBilt’s claims against Chex, which had filed a proof of claim in
the underlying bankruptcy proceedings, were core proceedings, but MicroBilt’s claims against FIS
and FNIS, both of which had not filed proofs of claim in the underlying bankruptcy, were noncore proceedings. Docket No. 27, Case 11-02488-MBK. Additionally, Judge Kaplan included
language in his order following the holding in Stern, noting that the bankruptcy court “lacks the
constitutional authority to enter a final judgment on a state law counterclaim that is not resolved
in the process of ruling on a creditor’s proof of claim.” Id.
Defendants argue that MicroBilt’s claims against Chex are non-core because they do not relate
to Chex’s proof of claim in the underlying bankruptcy proceeding; Chex’s proof of claim relates
to the Resale Agreement between MicroBilt and Chex, whereas MicroBilt’s claims in the
adversary proceeding relate to allegedly false statements Chex and the other Defendants made

5

 See Defs.’ Brief; Pl.’s Opp. Brief; Defs.’ Reply Brief. 

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about MicroBilt engaging in “data-caching.” Alternatively, Defendants argue that MicroBilt’s
claims against Chex are, like the tortious interference counterclaim in Stern, “state law action[s]
independent of the federal bankruptcy law and not necessarily resolvable by a ruling on the
creditor's proof of claim in bankruptcy.” Stern, 131 S. Ct. at 2611. Thus, the bankruptcy court lacks
jurisdiction to issue a final judgment on the claims and they should be treated as non-core. Id.;
Executive Benefits Ins. Agency, 134 S. Ct. at 2173.
The Court agrees with, and will not disturb, Judge Kaplan’s determination that Plaintiff’s
claims against any defendant who has filed a proof of claim in this bankruptcy court—i.e., Chex—
are core proceedings, while Plaintiff’s claims against FIS and FNIS are non-core proceedings. See
Docket No. 27, Case 11-02488-MBK. However, Plaintiff and Defendants do not dispute that Judge
Kaplan made his determination on the basis that Plaintiff’s claims against Chex are essentially
“counterclaims by the estate against persons filing claims against the estate,”6 the category of core
proceedings described in Section 157(b)(2)(C) and at issue in Stern. 28 U.S.C § 157(b)(2)(C);
Stern, 131 S. Ct. 2594. Plaintiff’s claims—tortious interference with contractual relations and trade
libel/commercial disparagement/slander/libel—are also indisputably state law claims. See Docket
No. 37, Case 11-02488-MBK. Finally, Plaintiff does not dispute Defendants’ contention that
Plaintiff’s claims in the adversary proceeding, which relate to false statements Defendants
allegedly made about Plaintiff engaging in “data caching,” are factually unrelated to Chex’s proof
of claim in the underlying bankruptcy proceeding, which relates to the Resale Agreement between
Plaintiff and Chex. Thus, necessarily Plaintiff’s claim against Chex will not be disposed of upon
the resolution of Chex’s proof of claim. See Pl.’s Reply Brief.

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 Pl.’s Opp. At 3; Defs.’ Reply at 6. 

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Therefore, I find that Plaintiff’s claims against Chex are Stern claims. It follows that the
bankruptcy court lacks jurisdiction over such claims, and the claims should be treated as non-core
proceedings. Thus, the entire adversary proceeding at issue is a non-core proceeding and is subject
to de novo review by the district court, weighing in favor of granting the motion to withdraw the
reference. In re G-I Holdings, Inc., 295 B.R. 211, 217 (D.N.J. 2003) (“Efficiency [will be]
enhanced by withdrawal of the reference if non-core issues predominate.”).
Now, I turn to the remaining factors of the permissive withdrawal analysis. Given my
determination that the adversary proceeding is non-core, the remaining factors also weigh in favor
of withdrawing the reference. Allowing the district court to decide the adversary proceeding would
promote uniformity, judicial economy and expediency—the first and third factors as delineated in
Pruitt. Admittedly, the presiding bankruptcy judge has more familiarity with the facts at issue in
this case and has guided these proceedings through the pre-trial stages; however, that familiarity
is outweighed by the economy of the district court deciding this case in the first instance instead
of having the bankruptcy court submit proposed findings of fact and conclusions of law and the
district court then engaging in de novo review, including the parties submitting briefing at both
stages. See, e.g., In re NDEP Corp., 203 B.R. 905, 913 (D. Del. 1996).
As for the second factor relating to forum shopping and confusion, both Defendants and
Plaintiff accuse each other of engaging in forum shopping by supporting and opposing this motion
to withdraw, respectively. The Court finds that this factor is neutral. At any rate, withdrawing the
reference would not promote forum shopping, since I find unpersuasive Plaintiff’s argument that
Defendants seek to withdraw the reference because Defendants are displeased by Judge Kaplan’s

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decisions (1) resolving Chex’s proof of claim under the Resale Agreement in the underlying
bankruptcy proceeding and (2) Defendants’ motions to dismiss in the adversary proceeding.7
The fourth factor, which examines whether withdrawal of the reference would expedite the
underlying bankruptcy proceeding, is irrelevant. As stated above, the adversary proceeding’s
issues have no bearing on the outcome of the underlying bankruptcy proceeding and Plaintiff does
not contest Defendants’ argument that the underlying bankruptcy proceeding has nearly been
completed and Plaintiff’s reorganization plan substantially consummated. See Defs.’ Brief at 18;
Pl.’s Opp. Brief.
Accordingly, the Court finds “cause shown”8 to grant Defendants’ motion to withdraw the
reference.
b. MicroBilt’s Motion for a Jury Trial
In the alternative, MicroBilt has cross-moved for a jury trial under Rule 39(b) of the Federal
Rules of Civil Procedure. Generally, a party moves for a jury trial on any triable issue under Rule
38(b) of the Federal Rules of Civil Procedure; the motion must be contained in a written demand

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Indeed, as Defendants point out, Judge Kaplan has issued favorable rulings for Defendants in the above-cited
decisions. Judge Kaplan found that MicroBilt was in default under the Resale Agreement and accordingly ordered
MicroBilt to make cure payments to Chex. In re MicroBilt Corp., 484 B.R. 56, 61 (D.N.J. 2012). Further, Judge Kaplan
granted, in part, Defendants’ motions to dismiss MicroBilt’s claims in the adversary proceedings.
8

 There are two other factors courts often analyze in determining whether “cause” for permissive withdrawal
exists—the timing of the motion to withdraw and whether a jury trial has been requested. Grigg v. Chaney, No. CIV.A.
3:13-292, 2014 WL 5823108, at *6 (W.D. Pa. Nov. 10, 2014) (“The Third Circuit has observed that there is an implicit
timing element in considering motions for withdrawal . . . .”); Feldman, 515 B.R. at 446 (“Courts also consider whether
a jury trial has been requested.”) (citing to Pennsylvania Acad. of Music v. Regitz, 2010 WL 4909952 (E.D.Pa. Nov.
30, 2010)).
Here, Defendants’ motion is timely. The motion was filed in accordance with the scheduling order deadlines as
well as Judge Pisano’s order on Defendants’ first motion to withdraw the reference. Further, Plaintiff’s request for a
jury trial is irrelevant to the “cause shown” analysis because the Court denies Plaintiff’s request for a jury trial. See
infra at 11.

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served on the other party “no later than 14 days after the last pleading directed to the issue is
served.” FED. R. CIV. P. 38(b).
However, Rule 39(b) governs when a proper jury demand under Rule 38 has not been made.
In such an instance, “the court may, on motion, order a jury trial on any issue for which a jury
might have been demanded.” Id. 39(b).  Courts consider the following factors in determining
whether to grant an untimely jury demand: “1) whether the issues are suitable for a jury; 2) whether
granting the motion would disrupt the schedule of the Court or the adverse party; 3) whether any
prejudice would result to the adverse party; 4) how long the party delayed in bringing the motion;
and 5) the reasons for the failure to file a timely demand.” U.S. S.E.C. v. Infinity Grp. Co., 212
F.3d 180, 195-96 (3d Cir. 2000). A trial court’s decision on whether to grant a jury demand under
Rule 39(b) is reviewed under an abuse of discretion standard. Id.
Here, the discretionary factors articulated by the Third Circuit weigh against granting
Plaintiff’s untimely jury demand. While Plaintiff’s state law claims may be suitable for a jury,9
granting Plaintiff’s jury demand at this late stage of the litigation would be disruptive to both the
Court and the parties as well as prejudice Defendants. At this point, discovery has been completed,
the dispositive motion deadlines have passed, and both parties could potentially incur additional
expenses and engage in further discovery to adequately prepare for a jury trial. See, e.g.,
Katzenmoyer v. City of Reading, No. Civ. A. 00–CV–5574, 2001 WL 1175139, at * 1 (E.D.Pa.
Aug. 6, 2001) (The parties have “already made strategic decisions with respect to the scope of
discovery based on the assumption of a bench trial.”).

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However, the Court notes that Plaintiff does not cite any facts or law for the proposition that Plaintiff’s claims of
tortious interference and trade libel/commercial disparagement/slander/libel are particularly suitable issues to be tried
by a jury; Plaintiff merely and cursorily states that “Plaintiff has brought non-core state law claims. The Defendants
cannot dispute that each such claim is suitable for a jury trial. “Pl.’s Opp. Brief at 11. See Infinity Grp. Co., 212 F.3d
180, 196 (3d Cir. 2000) (“We agree that the defendants did not make an adequate showing that the issues involved in
this case were particularly suitable for a jury.”).

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Further, Plaintiff waited more than two and a half years after filing this adversary proceeding
to request a jury trial, a delay many other courts have found excessive under Rule 39(b) analysis.
E.g., In re Inacom Corp., No. 00-02426 (PJW), 2005 WL 2148563, at *4 (D. Del. Sept. 6, 2005)
(finding a delay of more than two years excessive); Katzenmoyer, 2001 WL 1175139, at *2
(denying Rule 39(b) motion brought three months after the beginning of discovery and four months
prior to trial). Finally, Plaintiff’s explanation for why it failed to make a jury demand earlier in the
adversary proceeding—that “given this case was (and is) pending in the bankruptcy court, Plaintiff
was not in a position to make a Rule 38 jury demand”—is unconvincing. See Inacom Corp., 2005
WL 2148563, at *4 (noting that “defendants in adversary proceedings will often file timely
demands for a jury trial and, subsequently, move to withdraw the reference to the district court in
order to pursue the demand”). Thus, this Court finds the foregoing factors do not warrant granting
Plaintiff’s motion under Rule 39(b) for a jury trial.  
III.

Conclusion

For the reasons stated above, Defendants’ motion to withdraw the reference is granted and
Plaintiff’s motion for a jury trial is denied.
An appropriate order will follow.

Date: December 3, 2014

/s/ Freda L. Wolfson_____
Freda L. Wolfson, U.S.D.J.

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