Logan v. Johnson et al

Filing 5

OPINION AND ORDER denying 1 Motion to Withdraw Reference; denying 2 Motion to Withdraw Reference; denying 3 Motion to Withdraw Reference. Signed by Judge James L Graham on 4/18/13. (ds)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
William B. Logan, Jr, Trustee in Bankruptcy,
Case No. 2:13-cv-156
Plaintiff,
v.
Michael B. Johnson, et al.,

Judge Graham

Defendants.
OPINION AND ORDER
This matter is before the court on three motions to withdraw the reference to the Bankruptcy
Court. Plaintiff William B. Logan, Trustee in Bankruptcy for LPN Healthcare Facility, Inc., filed
this adversary proceeding against thirteen defendants asserting various tort and bankruptcy claims.
For the most part, plaintiff’s claims relate to allegedly unauthorized post-petition transfers and
payment of accounts receivable. Doc. 3 at 4-5. Defendants Si Digman and Si Digman, LLC
(“Digman”) seek withdrawal of the reference with respect to three of plaintiff’s fourteen counts.
Docs. 1, 2. Plaintiff and six other defendants (hereinafter “joint movants”) jointly move for
withdrawal of the reference with respect to the remaining counts.1 Doc. 4. For the reasons set forth
below, each motion to withdraw the reference is DENIED without prejudice.
Under 28 U.S.C. § 157(d), “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.” While Congress did not define “cause,” courts have identified a number of factors
to consider when deciding whether cause exists: whether the claim or proceeding is core or non-core;
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Though the joint movants do not appear to have directly responded to Digman’s motions to withdraw, in
their motion they argue that the Court should deny Digman’s motion for withdrawal with respect to plaintiff’s third
count.

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judicial economy; promoting uniformity in the administration of bankruptcy law; the delay and costs
to the parties; preventing forum shopping; and the presence of a jury demand. See In re Orion
Pictures Corp., 4 F.3d 1095, 1101 (2d Cir.1993); In re Parklane/Atlanta Joint Venture, 927 F.2d 532,
536 (11th Cir.1991); In re Pruitt, 910 F.2d 1160, 1168 (3rd Cir.1990); Holland America Ins. Co. v.
Succession of Roy, 777 F.2d 992, 999 (5th Cir.1985); CNH America, LLC v. Venture Indus. Corp.,
344 B.R. 526, 528-29 (E.D.Mich.2006); Holland v. LTV Steel Company, Inc., 288 B.R. 770, 774
(N.D.Ohio 2002); see also In re Oakley, No. 2:06-cv-556, 2007 WL 710244, at *1 (S.D. Ohio Mar.
6, 2007).
The party moving to withdraw has the burden of proving that the reference should be
withdrawn. Holland, 288 B.R. at 773. Here, Digman argues that the reference for plaintiff’s first and
second counts against him for negligence and breach of fiduciary duty must be withdrawn because
Digman has a right to a jury trial on those counts. Doc. 1 at 6. Digman argues that the reference for
the third count, in which plaintiff objects to Digman’s fee application, should be withdrawn because
it relates to the same facts as the first two counts. Doc. 2 at 5. The joint movants argue that the
reference for each of the remaining counts should be withdrawn. The joint movants’ motion seems
to be premised on the assumption that the Court will grant Digman’s motion to withdraw the
reference, and argues that in such case, judicial efficiency and the possibility of inconsistent results
warrant the withdrawal of the reference for the remaining claims. Doc. 3 at 6-7.
“When considering whether a reference should be withdrawn due to a jury demand, courts
have considered the following factors: (1) whether the case is likely to reach trial, (2) whether
protracted discovery with court oversight will be required, and (3) whether the bankruptcy court has
familiarity with the issues presented.” Spaeth v. Heckenkamp, No. MC-3-07-002, 2007 WL 188570

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at *2 (S.D. Ohio Jan. 22, 2007); see also Venture Holdings Co., LLC v. Millard Design Australia
Pty, Ltd., No. Civ. 05-73621, 2006 WL 800806 at *1 (E.D.Mich. Mar. 6, 2006) (“A district court
may consider a demand for a jury trial insufficient cause for discretionary withdrawal if the motion
is made at an early stage of the proceedings and dispositive motions may resolve the matter.”).
Here, the adversary bankruptcy proceeding was filed approximately six months ago. It
appears that discovery has begun, but that the bankruptcy court has not yet set a date by which it
must be completed. Nor has the bankruptcy court set a deadline for dispositive motions. Given the
early stage of the bankruptcy proceedings, each factor weighs against withdrawing the reference.
It is too soon to evaluate whether the case is likely to reach trial, discovery is underway under the
supervision of the bankruptcy court, and, finally, given the bankruptcy court’s familiarity with the
case and the relation of the claims to ongoing bankruptcy matters, the Court determines that
withdrawal of the reference is improper at this time. The two counts for which Digman asserts a jury
right are primarily focused on the disposition and documentation of the estate. These counts are
intertwined with clear bankruptcy claims, and it would appear at this time that bankruptcy issues
predominate.
The right to a jury trial may entitle parties to partial or complete withdrawal of the reference
at some point and all parties may move for withdrawal of the reference in the future. The motions
to withdraw the reference (docs. 1-3) are DENIED without prejudice.

IT IS SO ORDERED.

S/ James L Graham
James L. Graham
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UNITED STATES DISTRICT JUDGE
Date: April 18, 2013

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