In Re: Lloyd B Maynard

Filing 2

ORDER granting 1 Motion to Withdraw Reference of the case styled In re Lloyd B. Maynard now pending in the United States Bankruptcy Court for the Southern District of Ohio, Case No. 14-55375. The Court withdraws the reference for the limited purpose of handling the discovery dispute between attorney for Debtor and the United States Trustee concerning the Trustees motion to review attorneys fees in the bankruptcy matter. Signed by Judge Algenon L. Marbley on 4/13/2016. (cw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
IN RE LLOYD B. MAYNARD,
Debtor,
&
DAVID M. WHITAKER & ASST. US
TRUSTEE (COL),
Trustees.

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Case No. 14-CV-2649
JUDGE ALGENON L. MARBLEY

OPINION & ORDER
Before the Court is attorney for Plaintiff-Debtor Lloyd B. Maynard (“Debtor”) Michael
Wm Warren’s unopposed Motion to Withdraw the Reference of the case styled In re Lloyd B.
Maynard now pending in the United States Bankruptcy Court for the Southern District of Ohio,
No. 14-55375 (Doc. 1). For the reasons that follow, the Court GRANTS the Motion.
I. BACKGROUND
Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on
July 30, 2014. (Tr.’s Mot. to Review Att’y Fees, Order Fees Returned to Debtor, and to Cancel
the Fee Agreement between the Debtor and His Counsel, Doc. 1-2 at 2.) At the September 4,
2014 Meeting of Creditors for the matter, Trustees learned that in April of 2013, Debtor entered
into a fee agreement at the suggestion of Warren, exchanging as barter Debtor’s 2003 Honda
VTX 1800 Motorcycle at an agreed upon value of $3,290 for Warren’s legal services. (Id.)
United States Trustee Daniel M. McDermott (“McDermott”) believes that the bargain
overcompensates Warren for his services, and McDermott filed an October 15, 2014 motion
alleging as much in the bankruptcy court. (Id. at 1.) McDermott alleges both that Debtor’s

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bankruptcy case was ordinary and unremarkable and that the value of the motorcycle is
somewhere between $5,000 and $5,800 based on McDermott’s independent research. (Id. at 23.) McDermott’s motion to review attorney fees asks the bankruptcy court to order Warren to
refund to Debtor “at least a percentage of the difference between the bartered value, actual value
of services, and actual market value of the motorcycle.” (Id. at 4.) The motion also asks the
bankruptcy court to cancel the fee agreement between Warren and Debtor. (Id.)
Warren asserts that Debtor’s case was extraordinary and that the motorcycle was fairly
valued at $3,290 at the time of barter. (Objection to Tr.’s Mot. to Review Att’y Fees, Order Fees
Returned to Debtor, and to Cancel the Fee Agreement between the Debtor and His Counsel, Doc.
1-5 at 1-2.) Warren argues that the bankruptcy case was extraordinary because it included the
following issues: (1) a self-employed debtor; (2) a non-filing spouse: (3) household income
above average for a household of two; (4) a business, non-consumer case; (5) multiple real
estate; (6) rental income; (7) assets with non-exempt equity for the Trustee to examine and
potentially administer; (8) representation longer than 18 months. (Id. at 1.) Warren further argues
that facts will reveal the agreed-upon value of $3,290 to be not only appropriate but in favor of
Debtor. (Id. at 2.) Warren billed Debtor $240 per hour for attorney work and $120 per hour for
assistant work. (Doc. 1-2 at 3.) Warren avers that he has recorded all time and expenses
contemporaneous with activity in the matter and that, at his stated rate, the total billed to date is
$4,771.78. (Doc. 1-5 at 1.) Warren contends that this total is higher than some Chapter 7 cases
due to the case’s myriad and complex issues. (Id.)
Before filing his objection to the Trustee’s motion to review fees in the bankruptcy case,
Warren avers that he twice tried to meet with the Trustee’s attorney to discuss the matter, but
was “rebuffed.” (Doc. 1 at 2.) In response, Warren served interrogatories and other basic

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discovery on the Trustee in order to prepare for an eventual hearing. (Id.) The Trustee responded
by asserting privilege for discovery afforded him and all other employees of the United States
Department of Justice, pursuant to 28 C.F.R. § 16.21 et seq. Warren then filed the instant motion,
contending that “[e]very party to every court proceeding should have the due process right to
conduct discovery,” which has been denied or otherwise frustrated by the Trustee’s assertion of
privilege (Id.)
II. ANALYSIS
A. Standard
28 U.S.C. § 157(d) is a two-sentence statute setting forth two scenarios in which a district
court will withdraw the reference of a bankruptcy case from the bankruptcy court, removing that
case to the district court. The first sentence provides for permissive withdrawal, stating that
“[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 second
sentence provides for mandatory withdrawal, stating that the district court “shall, on timely
motion of a party, . . . withdraw a [bankruptcy] proceeding if the court determines that resolution
of the proceeding requires consideration of title 11 and other laws of the United States regulating
organizations or activities affecting interstate commerce.” The statute defines neither “cause” nor
“other laws,” and the Sixth Circuit has yet to explain either, but we have the following guidance.
As to permissive withdrawal for “cause shown,” several federal circuit courts of appeals
guide courts to “consider the goals of promoting uniformity in bankruptcy administration,
reducing forum shopping and confusion, fostering the economical use of the debtors' and
creditors' resources, and expediting the bankruptcy process.” In re Pruitt, 910 F.2d 1160, 1168
(3d Cir. 1990) (quoting Holland America Ins. Co. v. Succession of Roy, 777 F.2d 992, 999 (5th

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Cir.1985)). The Second Circuit suggests the Court weigh the following factors: (1) whether the
claim is core or non-core, (2) the most efficient use of judicial resources, (3) the delay and costs
to the parties, (4) what will promote uniformity of bankruptcy administration, (5) what will
prevent forum shopping, and (6) other related factors.” In re Burger Boys, Inc., 94 F.3d 755, 762
(1996).
As to mandatory withdrawal for consideration of “other laws,” district courts in this
circuit and elsewhere have determined that the other law must be “‘substantial and material’ . . .
non-Bankruptcy Code law [that] ‘is necessary for the resolution . . . of [the] case.’” Holland v.
LTV Steel Co., Inc., 288 B.R. 770, 773 (N.D. Ohio 2002) (quoting In re White Motor Corp., 42
B.R. 693, 703-04) (N.D. Ohio 1984)). Courts have generally interpreted this statute restrictively.
See id. at 772 (citing In re S. Indus. Mechanical Corp., 266 B.R. 827 (W.D. Tenn. 2001), and In
re Vicars Ins. Agency, Inc., 96 F.3d 949, 952 (7th Cir. 1996)). Accordingly, the Court’s
consideration of those “‘substantial and material’ [non-Bankruptcy Code laws must] involve
more than mere rote application of the provisions of a federal law.” Id. at 773 (quoting In re
Federated Dep’t Stores, Inc., 189 B.R. 142, 144 (S.D. Ohio 1995) (citing In re Americana
Expressways, Inc., 161 B.R. 707, 714-15 (D. Utah 1993))). That is, the pertinent inquiry is not
whether the Court must merely apply non-Bankruptcy Code law, rather whether the Court must
interpret that non-Bankruptcy Code law. Id.
As the moving party, Warren bears the burden of persuading the Court to withdraw the
reference. See In re Vicars, 96 F.3d at 955.
B. Analysis

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Warren moves only for mandatory withdrawal, i.e. withdrawal pursuant to the second
sentence of 28 U.S.C. § 157(d). The Court will nonetheless sua sponte also consider Warren’s
argument as one for permissive withdrawal for cause shown.
As to mandatory withdrawal, the non-Bankruptcy Code federal law at issue here is
Warren’s constitutional right to due process of law. The Fifth Amendment to the United States
Constitution provides that no person “shall . . . be deprived of life, liberty, or property, without
due process of law.” Warren contends that this amendment gives him the right to serve discovery
on the Trustee, and that the Trustee may not continue to assert privilege under 28 C.F.R. § 16.21
et seq. Warren argues that he must have the discovery he requests in order to prepare for the
hearing that might deprive him of money. In terms of weight, one’s constitutional right to due
process of law is gigantic. And determining the scope and effect of Warren’s due process rights
in the course of this matter would require a court to interpret substantial federal law beyond the
Bankruptcy Code. As such, the Court finds that 27 U.S.C. § 157(d) compels mandatory
withdrawal. See Holland, 288 B.R. 773, cited and discussed in pt. A, supra.
The Court also finds that Warren’s motion constitutes cause shown under 27 U.S.C. §
157(d) to warrant permissive withdrawal. Warren has the right to appeal to this Court any
decision of the bankruptcy court directly pecuniarily adverse to him. In re Trailer Source, Inc.,
555 F.3d 231, 235 (6th Cir. 2009). By clearing up discovery disputes now, the Court will prevent
possibly duplicative litigation, streamlining the course of the bankruptcy litigation in line with
the Second Circuit’s Burger Boys advice. 94 F.3d at 762.
CONCLUSION
For the foregoing reasons, the Court GRANTS movant’s unopposed Motion to Withdraw
the Reference of the case styled In re Lloyd B. Maynard now pending in the United States

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Bankruptcy Court for the Southern District of Ohio, Case No. 14-55375. The Court withdraws
the reference for the limited purpose of handling the discovery dispute between attorney for
Debtor and the United States Trustee concerning the Trustee’s motion to review attorneys’ fees
in the bankruptcy matter.

IT IS SO ORDERED.
s/Algenon L. Marbley
ALGENON L. MARBLEY
UNITED STATES DISTRICT COURT
Dated: April 13, 2016

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