USA United Fleet, Inc. et al v. Jonsilver Auto Sales, LLC et al
Filing
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MEMORANDUM DECISION AND ORDER denying 1 Motion to Withdraw Reference. Movant Alan Richards, a defendant in an adversary proceeding seeking recovery of fraudulent transfers in bankruptcy court, seeks to withdraw the reference of that adversary proceeding to this Court. Richards' 1 motion to withdraw the reference is denied. Ordered by Judge Brian M. Cogan on 6/27/2014. Bankruptcy Court AP case number 1:13-01360. Bankruptcy Court Notified. (Barrett, C)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------In re:
USA UNITED FLEET, INC.
a/k/a SHORELINE FLEET, INC., et al.,
Debtors.
----------------------------------------------------------RICHARD J. MCCORD, Chapter 7 Trustee for
the Estate of USA United Fleet, Inc., et al.,
Plaintiff,
-againstJONSILVER AUTO SALES, LLC; ALAN
RICHARDS, ESQ.; THOMAS SCIALPI,
individually and as principal of GARDEN
STATE NISSAN, LLC,
Defendants.
----------------------------------------------------------COGAN, District Judge.
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MEMORANDUM
DECISION AND ORDER
13-mc-00768 (BMC)
Movant Alan Richards, a defendant in an adversary proceeding seeking recovery of
fraudulent transfers in bankruptcy court, seeks to withdraw the reference of that adversary
proceeding to this Court. He contends that he is only tangentially involved in the adversary
proceeding; that the Bankruptcy Court lacks jurisdiction to grant his pending motion to dismiss;
that if the proceeding goes to trial, he will want a jury, which the Bankruptcy Court cannot hold
absent his consent; and that judicial efficiency therefore compels having the proceeding heard by
a District Court Judge.
Richards’ legal point is correct – the bankruptcy court may not enter final judgment
against him. Although it is a fraudulent transfer claim, which Congress has defined as a “core
proceeding” within the Bankruptcy Court’s jurisdiction, 28 U.S.C. § 157(b)(2)(H), the Supreme
Court’s decisions in Stern v. Marshall, ––– U.S. ––––, 131 S. Ct. 2594 (2011), Granfinanciera,
S.A. v. Nordberg, 492 U.S. 33, 109 S. Ct. 2782 (1989), and, most recently, Exec. Benefits Ins.
Agency v. Arkison, ––– U.S. ––––, 134 S. Ct. 2165 (2014), make it clear that classification as a
core proceeding in the statute does not affect a non-creditor’s right in a private rights action to
have fraudulent transfer cases against him finally determined by an Article III judge.
Nevertheless, Richards is incorrect that considerations of judicial economy warrant
withdrawal of the reference. They seldom will in the Eastern District of New York. In this
district, it is the almost universal practice to have all non-dispositive pretrial matters disposed of
by Magistrate Judges. It is a widely used, although not near universal, practice to have
Magistrate Judges render a Report and Recommendation on dispositive motions. Like
Bankruptcy Judges, absent consent, Magistrate Judges cannot render final judgments in cases
which are referred to them. If the case is not disposed of in a pretrial motion, the Magistrate
Judge will alert the District Court Judge that the case is ready for trial by the District Court
Judge.
So what Richards is effectively proposing is that we withdraw the adversary proceeding
from one non-Article III judge upon which it will likely be referred to another non-Article III
judge. In either case, the District Court Judge that decides the case is most likely to do so after a
non-Article III judge has managed the case and either certified it as trial ready or rendered a
Report and Recommendation to dismiss the case. Given the Bankruptcy Judge’s familiarity with
this particular Chapter 7 case and the law of fraudulent transfer in general, I see no reason to do
this. Richards makes the point that the Bankruptcy Judge is not familiar with this recently filed
adversary proceeding, but what she is quite familiar with is the need to structure, prioritize, and
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render consistent rulings on common legal points raised in the plethora of avoidance actions that
the Trustee has commenced.
Richards asserts that a Bankruptcy Judge cannot render a Report and Recommendation
because there is no statutory authority for her to do so in a case that Congress has labeled a core
proceeding, and that Stern v. Marshall thus created a jurisdictional “gap.” There is no such gap.
Executive Benefits demonstrates that as long as a District Court Judge gives de novo review to
what would be the dispositive ruling of the Bankruptcy Judge, there is no constitutional
infirmity. Moreover, Chief Judge Amon has closed any gap by her Administrative Order of
December 5, 2012, upon which the Trustee relies but to which Richards did not respond. That
Administrative Order gave the Bankruptcy Court the power to do exactly what Richards says it
cannot do. Chief Judge Amon’s Administrative Order is the functional equivalent of the
“Interim Emergency Rule” and related local administrative orders and rules that the United
States Courts adopted when the Supreme Court invalidated the jurisdictional allocation
provisions of the Bankruptcy Reform Act of 1978 in Northern Pipeline Construction Company v.
Marathon Pipe Line Company, 458 U.S. 50, 102 S.Ct. 2858 (1982). See generally In re Kaiser,
722 F.2d 1574 (2d Cir. 1983) (upholding Interim Emergency Rules and local implementation).
Richards’ [1] motion to withdraw the reference is therefore denied.
Digitally signed by Brian M. Cogan
SO ORDERED.
U.S.D.J.
Dated: Brooklyn, New York
June 27, 2014
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