Brenenstuhl et al v. Amica Mutual Insurance Company

Filing 61

MEMORANDUM-DECISION and ORDER granting 48 defendant's Motion to have this Court withdraw the reference of this action to the Northern District Bankruptcy Court pursuant to 28 U.S.C. section 157(c). Signed by Magistrate Judge Christian F. Hummel on 7/1/2013. (lah)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------------KRISTOPHER BRENENSTUHL and
SARAH BRENENSTUHL,
Plaintiffs, Counter-Defendants,
v.

No. 10-CV-1365
(CFH)

AMICA MUTUAL INSURANCE COMPANY,
Defendant, Counter-Claimant,
-------------------------------------------------------------------APPEARANCES:

OF COUNSEL:

KINDLON & SHANKS, PC
Attorneys for Plaintiffs
74 Chapel Street
Albany, New York 12207

GENNARO D. CALABRESE, ESQ.

MURA & STORM, PLLC
Attorneys for Defendant
14 Lafayette Square
930 Rand Building
Buffalo, New York 14203

SCOTT D. STORM, ESQ.

MEMORANDUM-DECISION AND ORDER
Currently before the Court in this breach of contract action, filed by Kristopher
Brenenstuhl and Sarah Brenenstuhl (“Plaintiffs”) against Amica Mutual Insurance Company
(“Defendant”), is defendant’s motion to have the United States District Court for the
Northern District of New York withdraw the reference of this action to the Northern District
Bankruptcy Court pursuant to 28 USC § 157(d).1 Dkt. No. 48. Plaintiffs have opposed
defendant’s motion. Dkt. No. 54. For the reasons set forth below defendant’s motion is
granted.
1

By Order dated November 30, 2012 this matter was referred to a United States
Magistrate Judge to conduct all proceedings and order the entry of a final judgment in
accordance with 28 U.S.C. § 636(c) and Fed. R. Civ. P. 73. Dkt. No. 43.

I. Relevant Background
Plaintiffs’ are the owners of a property located in the City of Watervliet, New York.
Compl. (Dkt. No. 1 at 6-11) ¶ 2. Defendant issued a homeowners policy for the period of
November 16, 2009 through November 16, 2010 to plaintiffs with plaintiffs named as
insureds. Id. ¶¶ 2-3. The homeowner’s policy provided coverage for the building structure
and personal property contained therein. Id. ¶ 2.
On February 3, 2012, while the homeowner’s policy was in full force and effect, the
subject dwelling and contents were destroyed in a fire. Compl. ¶ 9. Plaintiffs’ advised
defendant of the fire in accordance with the terms of the homeowner’s insurance policy. Id.
¶ 17. Defendant issued a disclaimer of liability and denial of coverage letter. Dkt. No. 2-3.
Defendant alleges that plaintiffs, and others, burned the property in order to recover the
insurance proceeds. See e.g. Dkt. Nos. 2 & 48.
Plaintiffs’ commenced this action in the Supreme Court of the State of New York,
Albany County. Compl.; Pet. for Removal (Dkt. No. 1 at 1-3) ¶ 1. Defendant filed a petition
of removal as this Court has original jurisdiction over this action based upon complete
diversity of citizenship of the parties pursuant to 28 U.S.C. § 1332(a) and this action is one
which may be removed pursuant to 28 U.S.C. §1441. Pet. for Removal ¶ 2. Plaintiffs seek
damages in excess of five hundred thousand dollars. Id.
On November 10, 2010 defendant filed a verified answer with counterclaims against
plaintiffs. Dkt. No. 2. The counterclaims allege, inter alia,
The plaintiffs intentionally concealed or misrepresented material
facts or circumstances and engaged in fraudulent conduct related
to this insurance during the course of Amica Mutual
Insurance Company’s investigation of plaintiffs’ reported loss and
claim including, but not necessarily limited to, the following: having
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denied any involvement in causing and/or knowledge of the cause
of the fire; having falsely stated and testified about their activities or
connection with the fire; and the amount of the alleged damages.
Fraudulent statements are included in such documentation as the
plaintiffs’ transcripts of their examinations under oath, proof of loss
forms, and estimates of alleged damages.
Id. at 12, ¶ 45. Defendant seeks to recover for any and all expenses incurred in the
investigation and evaluation of this matter plus interest. Id. at 14. Plaintiffs filed an answer
to the counterclaims on November 19, 2012. Dkt. No. 5.

II. Plaintiffs’ Bankruptcy Petition
On July 6, 2012, plaintiffs’ filed a petition pursuant to Chapter 13 of the United States
Bankruptcy Code with the United States Bankruptcy Court for the Northern District of New
York. Dkt. No. 48-5. The plaintiffs listed estimated assets between $500,001 and
$1,000,000. Id. at 10-13, 36. This action is listed under the category of “[o]ther personal
property of any kind not already listed, itemize.” Id. at 13.
Plaintiffs listed a variety of creditors, and types of creditors in the Chapter 13 petition.
Dkt. No. 48-5 at 19-31. On Schedule F, creditors holding unsecured non-priority claims,
plaintiffs named defendant. Id. at 19.2 On July 2, 2012 the attorney for the debtors,
plaintiffs herein, certified that the petition had been mailed to all persons and entities who
appear on the list of creditors. Id. at 69.
On July 6, 2012 a Notice of Chapter 13 Bankruptcy Case, Meeting of Creditors and
2

In addition to listing defendant as a creditor holding unsecured non-priority claims,
plaintiffs’ listed the law firm of Mura & Storm, PLLC, defendant’s attorneys in this action,
as creditors holding unsecured non-priority claims. Dkt. No. 48-5 at 26. The petition
further lists plaintiffs’ attorneys as a creditor holding an unsecured non-priority claim. Id. at
23.
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Deadlines was issued by the United States Bankruptcy Court for the Northern District of
New York. See Notice of Ch. 13 Bankr. Case, In re Brenenstuhl, No. 1:12-BK-11821
(Bankr. N.D.N.Y.) (Dkt. No. 7). That notice provided that:
If you do not file a Proof of Claim by the “Deadline to File a Proof of
Claim” listed on the front side, you might not be paid any money on
your claim from other assets in the bankruptcy case. To be paid
you must file a Proof of Claim even if your claim is listed in the
schedules filed by the debtor.
Id. at 2.
The deadline to file a proof of claim for all creditors, except a governmental unit, was
October 29, 2012. Notice of Ch. 13 Bankr. Case. Defendant did not file a proof of claim.
See generally In re Brenenstuhl, No. 1:12-BK-11821 (Bankr. N.D.N.Y.).
A hearing on the confirmation of plaintiffs’ Chapter 13 bankruptcy plan was scheduled
for August 23, 2012. See Notice of Ch. 13 Bankr. Case. On December 4, 2012 an Order of
Confirmation was issued for plaintiffs’ Chapter 13 plan dated July 6, 2012 by Hon. Robert E.
Littlefield, Jr., Chief, United States Bankruptcy Judge for the Northern District of New York.
See Order of Confirmation, In re Brenenstuhl, No. 1:12-BK-11821 (Bankr. N.D.N.Y.) (Dkt.
No. 24).

III. Governing Legal Standard
A. Motion to Withdraw Subject Lawsuit From Bankruptcy Court
“District Courts have original and exclusive jurisdiction over all cases under title 11.” In
re Appalachian Fuels, LLC, 472 B.R. 731, 736 (E.D.Ky. 2012) (quoting 28 U.S.C. § 1334(a))
(internal quotation marks omitted). “District Courts also have original but not exclusive

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jurisdiction over all civil proceedings arising under title 11 or arising in or related to cases
under title 11.” Id. (quoting 23 U.S.C. § 1334(b)) (internal quotation marks omitted).
Proceedings that arise in a bankruptcy case or under title 11 are considered core
proceedings. Stern v. Marshall, __ U.S. __, 131 S. Ct. 2594, 2605 (2011). Conversely,
“those that are otherwise related to a case under title 11 are considered ‘non-core
proceedings.’” Appalachian Fuels, 472 B.R. at 736 (quoting Stern v. Marshall, __ U.S. __,
131 S.Ct at 2605). In accordance with Local Rule 76.1 for the Northern District of New
York, all cases under Title 11, and all such proceedings arising under Title 11, or arising in
or related to cases arising under Title 11 are referred to the Bankruptcy Court.
A party may move to withdraw the reference pursuant to 28 U.S.C. § 157(d). In re
Chance, Bankr. No. 11-40517, 2013 WL 501392, at *1 (Bankr. D.Kan. Jan. 16, 2013).
“That statute provides that a ‘district court may withdraw, in whole or in part, any case or
proceeding under the Bankruptcy Code.’” Id. (quoting 28 U.S.C. §157(d)).

1. Timeliness of the Motion
The first issues is whether the motion to withdraw the reference is timely. 28 U.S.C.
§157(d) (explaining withdrawal may occur by a court’s “own motion or on timely motion of
any party . . . .”). Timely relates to a party making the motion to withdraw the reference as
soon as the moving party becomes aware of the basis for withdrawal of the reference. In re
Black Diamond Min. Co., LLC, No. 10-84-KKC, 2010 WL 5173271, at *1 (E.D.Ky. Dec. 14,
2010) (citations omitted). The timeliness requirement prevents parties from engaging in
forum shopping or other delaying tactics. Id. (citations omitted). The timeliness standard is
flexible and must be administered in a way which fosters the fair and efficient resolution of
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disputes. See e.g. In re Enron Creditors Recovery Corp., 410 B.R. 374, 381 (S.D.N.Y.
2008) (articulating a six part test to determine whether cause exists to withdraw a reference
which includes inter alia the nature of the claim, efficient use of judicial resources, uniformity
in decision making, and cost analysis for the parties).
The Notice of Chapter 13 bankruptcy Case, Meeting of Creditors & Deadlines was
issued on July 6, 2012. See Notice of Ch. 13 Bankr. Case, In re Brenenstuhl, No. 1:12-BK11821 (Bankr. N.D.N.Y.) (Dkt. No. 7). This motion to withdraw the reference to Bankruptcy
Court was filed on March 20, 2013. Dkt. No. 48. While over eight months elapsed between
the two filings there is nothing before the Court to establish that plaintiffs were prejudiced by
the delay or that the defendant was engaging in forum shopping. As such, the Court finds
that the motion is timely.

2. Core v. Non-Core Issues
Core proceedings are those matters which arise under the
Bankruptcy Code; whereas, a matter that arises under nonbankruptcy law and happens to be an issue in a bankruptcy
proceeding merely because . . . one of the parties to the dispute is
a debtor in the bankruptcy case in most instances is a non-core
proceeding.
Liljeberg Enter., Inc. v. Lifemark Hosp. of Louisiana, Inc., Nos. 99-3750, 99-3751, 2000 WL
63307, at *3 (E.D.La. Jan. 21, 2000) (citations omitted). A core proceeding is one “that
involves rights created by bankruptcy law, or that could arise only in a bankruptcy case . . .
.” Dewitt Rehab. & Nursing Ctr., Inc. v. Columbia Cas. Co., 464 B.R. 587, 591 (S.D.N.Y.
2012) (citing inter alia MBNA America Bank, N.A. v. Hill, 436 F.3d 104, 108-109 (2d Cir.
2006)). A claim which does not rely on bankruptcy law for its existence and which would
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proceed in a court lacking federal bankruptcy jurisdiction is non-core. In re EMS Fin. Serv.,
LLC, 491 B.R. 196, 203 (E.D.N.Y. 2013) (citations omitted).
In this case the parties’ dispute, plaintiffs’ claims and defendant’s counterclaims,
concern a conflict over insurance coverage under an insurance contract which was entered
into before plaintiffs filed a bankruptcy petition. Rather than relying on bankruptcy laws for
their existence, those claims are state common law contract claims that could proceed in a
court without bankruptcy jurisdiction. As such, the Court finds that plaintiffs’ claims and
defendant’s counterclaims involve non-core matters. In view of the foregoing, defendant’s
motion to have this Court withdraw the reference of this matter to the United States
Bankruptcy Court is granted.3

3

The withdrawal of the reference to the Bankruptcy Court is effective as of the date
of this Memorandum-Decision and Order. It does not effect the requirement that an
unsecured creditor must file a proof of claim in bankruptcy court for the claim to be
allowed. FED. R. BANKR. P. 3002(a). The Notice of Chapter 13 Bankruptcy Case, Meeting
of Creditors & Deadlines in plaintiffs’ Chapter 13 case required that a proof of claim be
filed by October 29, 2012. See Notice of Ch. 13 Bankr. Case, In re Brenenstuhl, No. 1:12BK-11821 (Bankr. N.D.N.Y.) (Dkt. No. 7). Here defendant has counterclaimed for a
money judgment. Federal Rules of Bankruptcy Procedure 3002 prohibits such relief
where a creditor has a disputed claim and has not filed a timely claim; however, a holder
of a disputed claim who has not timely filed a proof of claim may pursue that claim as a
set-off against an affirmative claim of the debtor. See e.g. In re Calderone, 166 B.R. 825,
830-31 (W.D.Pa 1994). A creditor asserting a set-off is not requesting affirmative relief
from the assets of the bankruptcy estate “but is seeking instead to satisfy the debt owed to
it by the debtor to the extent of the debt it owes to the debtor.” Id. at 830.
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IV. CONCLUSION
Accordingly, it is ORDERED that defendant’s motion to have this Court withdraw the
reference of this action to the Northern District Bankruptcy Court pursuant to 28 U.S.C.
§157(d) is GRANTED.

IT IS SO ORDERED.
Dated: July 1, 2013
Albany, New York

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