Northeast Industrial Development Corp. et al v. ParkStone Capital Partners, LLC et al

Filing 5

OPINION AND ORDER re: 1 MOTION TO WITHDRAW THE BANKRUPTCY REFERENCE. Bankruptcy Court Case Numbers: 14-09005A, 13-B-37619(CGM) filed by Vincent Rippa. The Court has considered all of the arguments of the parties. To the extent not specificall y addressed above, the remaining arguments are either moot or without merit. For the foregoing reasons, Rippa's motion to withdraw the reference to the Bankruptcy Court is denied. The Clerk is directed to close Docket No. 1 and to close this case. SO ORDERED. (Signed by Judge Nelson Stephen Roman on 5/28/2014) (mml)

I. MOTION TO WITHDRAW STANDARD
In relevant part, 28 U.S.C. § 157(d) provides: “The 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 statute does not define the phrase “for cause,” but
courts have focused on considerations of judicial economy and uniformity in the administration
of bankruptcy law. See, e.g., Orion Pictures Corp. v. Showtime Networks, Inc. (In re Orion
Pictures Corp.), 4 F.3d 1095, 1101 (2d Cir. 1993). The Court of Appeals for the Second Circuit
established the framework whereby the threshold question is whether the case involves a core or
non-core proceeding, “since it is upon this issue that questions of efficiency and uniformity will
turn.” Id. After the District Court “makes the core/non-core determination, it should weigh
questions of efficient use of judicial resources, delay and costs to the parties, uniformity of
bankruptcy administration, the prevention of forum shopping, and other related factors,” such as
the presence of a jury demand. Id.; see also Schneider v. Riddick (In re Formica Corp.), 305
B.R. 147, 149–50 (S.D.N.Y. 2004). The moving party bears the burden of demonstrating that
permissive withdrawal of the reference is warranted. Nisselson v. Salim (In re Big Apple
Volkswagen, LLC), No. 12 Civ. 92, 2013 WL 1245548, at *3 (S.D.N.Y. Mar. 25, 2013).
Stern held that a Bankruptcy Court could not enter final judgment on some claims
otherwise characterized as core. See 131 S.Ct. at 2605, 2611–18, 2620. While the core/non-core
determination is an important factor, courts have repeatedly emphasized that this factor is not
dispositive of a motion to withdraw a reference. See, e.g., Amended Order, Lehman Bros.
Special Fin. Inc. v. Fed. Home Loan Bank of Cincinnati (In re Lehman Bros. Holdings Inc.), No.
13 Civ. 4121, at 3–4 (S.D.N.Y. Mar. 27, 2014); Lehman Bros. Holdings Inc. v. JPMorgan Chase
Bank, N.A. (In re Lehman Bros. Holdings Inc.), 480 B.R. 179, 195 (S.D.N.Y. 2012); Schneider,

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305 B.R. at 150–51; Enron Power Mktg., Inc. v. City of Santa Clara (In re Enron Power Mktg.,
Inc.), No. 01 Civ. 7964, 2003 WL 68036, at *10–11 (S.D.N.Y. Jan. 8, 2003). In this case, the
Court need not decide the effect of the Supreme Court’s decision in Stern v. Marshall, ––– U.S.
––––, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), on the application of the Orion factors. In re
Lehman Bros. Holdings Inc., 2014 WL 1877937, at *6 (S.D.N.Y. May 10, 2014).
The Bankruptcy Court may hear the case in the first instance and recommend proposed
findings of fact and conclusions of law for final adjudication in the District Court. See 11 U.S.C.
§ 157(c)(1). From a practical standpoint, the Bankruptcy Court will oversee discovery in this
adversary proceeding. In re Lehman Bros. Holdings Inc., 2014 WL 1877937, at *3. Thereafter,
there may be a motion for summary judgment, or the matter may be settled. Id. If a motion for
summary judgment were granted, the District Court would review the decision de novo, but the
decision by the Bankruptcy Court would be helpful to the Court and the District Court’s review
would not be a separate and additional litigation. Id. If the adversary proceeding progressed to
trial, Rippa could seek to withdraw the reference at that time. Id. For example, Rippa could seek
to withdraw the reference if a decision depended on judicial determinations of credibility. See
Schneider, 305 B.R. at 151–52. But until that time, it is plain that efficiency would be served by
leaving this adversary proceeding in the Bankruptcy Court, which is currently supervising
discovery. JPMorgan Chase, 480 B.R. at 196 (“[G]iven the bankruptcy court’s involvement thus
far in the litigation, the Court finds that judicial economy weighs against withdrawing the
reference at this time.” (collecting cases)). This experience will inform the Bankruptcy Court’s
recommendations, which will therefore be of particular value to the District Court in making its
ultimate determination on the matter. See Amended Order, Fed. Home Loan Bank of Cincinnati,
No. 13 Civ. 4121, at 4.

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The Bankruptcy Court’s resolution of any motion for summary judgment, or any decision
by the Bankruptcy Court based on the documentary record, will be very useful to the District
Court given the Bankruptcy Court’s expertise with adversary proceedings. Sec. Inv. Prot. Corp.
v. Bernard L. Madoff Inv. Sec. (In re Madoff Securities), 490 B.R. 46, 58 (S.D.N.Y. 2013)
(commenting on the efficiency realized by “receiving the recommendation of a court that
possesses both intimate familiarity with the underlying liquidation and substantial expertise in
the bankruptcy law . . . .”). The Bankruptcy Court’s expertise in these matters is entitled to
respectful consideration.
Rippa has not met the burden to withdraw given the complexity of the bankruptcy, the
litigation in this pending adversary proceeding that has already occurred in the Bankruptcy
Court, and the Bankruptcy Court’s ongoing experience. In re Lehman Bros. Holdings Inc., 2014
WL 1877937, at *4. Ultimately, “the second round of litigation will be made much easier by the
first.” Amended Order, Fed. Home Loan Bank of Cincinnati, No. 13 Civ. 4121, at 4 (citing
Kirschner v. Agoglia, 476 B.R. 75, 83 (S.D.N.Y. 2012)).
“Whether a dispute is legal or equitable in nature and consequently whether the litigants
are afforded the right to a jury trial is another consideration in determining whether the reference
should be withdrawn.” McHale v. Citibank, N.A., No. 09 Civ. 6064, 2009 WL 2599749, at *4
(S.D.N.Y. Aug. 24, 2009). Courts have denied motions to withdraw a reference in cases
involving legal claims and jury demands where they have found that it would be more efficient
for the Bankruptcy Court to handle pre-trial matters. See, e.g., Schneider, 305 B.R. at 150; see
also Murphy v. Cnty. of Chemung (In re Murphy), 482 F. App’x 624, 628 (2d Cir. 2012) (“The
mere presence of a jury demand in a case does not mandate withdrawal of the reference....”).
Thus, the legal nature of the claim has no particular relevance in this case and does not support
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