Gregory Power Partners, LLC v. Reynolds Metals Company

Filing 11

ORDER ADOPTING REPORT AND RECOMMENDATIONS re: 1 Report and Recommendations. (Signed by Judge Hilda G Tagle) Parties notified.(sylopez, 2)

United States District Court
Southern District of Texas

ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
GREGORY POWER PARTNERS, LLC,
Plaintiff,
VS.
REYNOLDS METALS COMPANY,
Defendant.

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July 18, 2017
David J. Bradley, Clerk

CIVIL NO. 2:16-CV-540

ORDER
The Court is in receipt of the Report and Recommendation (“R&R”) of the
bankruptcy court before which Defendant Reynolds Metal Company (“Reynolds”)
filed its pending motion to withdraw the reference for the adversary proceeding filed
as Adversary No. 16-02015. See Dkt. No. 1. On review of this R&R and all relevant
pleadings, the Court ADOPTS the R&R, Dkt. No. 1, and withdraws the reference
effective when the bankruptcy court rules on the pre-trial motions, subject as
necessary to the bankruptcy court’s adjudication of those motions by findings of fact
and conclusions of law presented to this Court pursuant to 28 U.S.C. § 157(c)(1).
The adversary proceeding here stems from a dispute over an energy services
agreement (“ESA”) under which energy is provided by Gregory Power Partners,
LLC (“Gregory”) to an alumina facility in Gregory, Texas, formerly owned and
operated by Reynolds Metal Company (“Reynolds”). See R&R at 1. When the debtor
in the underlying bankruptcy proceeding, Sherwin Alumina Company, LLC and
Sherwin Pipeline, Inc. (collectively, the “Debtor”), purchased this alumina facility
from Reynolds, it also assumed the ESA. Id. Gregory, however, maintains that after
this sale Reynolds retained continuing obligations under the ESA, and filed a
complaint in this adversary proceeding on September 16, 2016 asserting claims for
breach of contract and declaratory judgment against Reynolds, as well as for money
damages in excess of $40 million. Id. at 2.

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In response to this complaint Reynolds filed both a motion to dismiss, which
includes a jury demand, and a motion to withdraw the reference based on this
demand. Dkt. No. 1 at 2. Initially, Gregory objected entirely to withdrawal of the
reference in this adversary proceeding, although it also argued, in the alternative,
that at a minimum, the reference should be maintained with respect to pre-trial
motions. See Dkt. No. 3. Reynolds replied that withdrawal is required and should be
immediate, as the bankruptcy court lacks authority to enter final orders. Dkt. No. 4
at 10. On consideration of these pleadings and testimony offered by the parties in a
status hearing, the bankruptcy court concluded in its R&R that Reynolds is entitled
to a jury trial, rendering withdrawal of the reference mandatory under 28 U.S.C. §
157(d). See Dkt. No. 3. The bankruptcy court also recommended that this
withdrawal be delayed, on the basis that pre-trial matters can be most efficiently
handled directly by the court, given its “familiarity with the underlying issues” of
this adversary proceeding. Id. at 3.
Subsequently, Reynolds filed with this Court a “limited objection” to the
bankruptcy court’s R&R, which requests immediate withdrawal of the reference,
contrary to the bankruptcy court’s recommendation. Dkt. No. 5. In support of its
request, Reynolds urges that “[n]umerous court within the Fifth Circuit, including
the District Court for the Southern District of Texas, have noted that judicial
economy favors immediate withdrawal of the reference when, as here, a bankruptcy
court cannot enter final orders or judgments on dispositive motions, and instead can
only issue proposed findings of fact and conclusions of law.” Id. at 6-7. Gregory, by
contrast, has filed with this Court a statement in support of the bankruptcy court’s
R&R, which argues that this court “is familiar with the parties and the underlying
facts at issue in this adversary proceeding,” and that in cases like this “District
Courts routinely refer pre-trial matters to the Bankruptcy Court even where a
litigation has a valid jury trial right.” Dkt. No. 6 at 2.

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First, the Court agrees with the R&R and apparently, the parties,1 in finding
that withdrawal is indeed mandatory in this adversary proceeding, pursuant to §
157(d). Second, the Court notes that “[t]he right to a jury trial does not preclude a
bankruptcy court from resolving pre-trial dispositive motions,” as no jury trial right
arises “until jury issues are presented.” Levine v. M&A Custom Home Builder &
Developer, LLC, 400 B.R. 200, 207 (S.D. Tex. 2008) (citing McFarland v. Leyh, 52
F.3d 1330, 1339 (5th Cir. 1995). Yet “[a] bankruptcy court may exercise full judicial
power only in core proceedings.” In re White Robinson, 777 F.3d 792, 795 (5th Cir.
2015) (citing In re Wood, 825 F.2d 90, 91 (5th Cir. 1987)); see also 28 U.S.C. §
157(b)(1). By contrast, bankruptcy courts exercise “only recommendation authority
over ‘non-core’ matters that are merely ‘related to’ a bankruptcy case.” In re White,
777 F.3d at 795 (citing 28 U.S.C. § 157(c)(1)). In the latter case, the bankruptcy
court may not rule directly on dispositive motions, but must instead “submit
proposed findings of fact and conclusions of law to the district court,” which then
shall enter “any final order or judgment” after considering the bankruptcy court’s
proposals “and after reviewing de novo those maters to which any party has timely
and specifically objected.” See § 157(c)(1).
The R&R does not make a recommendation as to whether this adversary
proceeding presents core or non-core matters, while both parties appear to suggest
Gregory’s claims are non-core, on the basis that they merely “relate to” the Debtor’s
bankruptcy petition. See Dkt. No.1; Dkt. No. 5 at 1; Dkt. No. 6 at 2. In either case,
however, this Court finds that principles of judicial economy are best served by the
bankruptcy court’s management of all pre-trial matters in this adversary
proceeding. The bankruptcy court has greater familiarity with the issues underlying
Gregory’s claims and is prepared to assist this Court in managing its caseload. R&R
at 3. The bankruptcy court also has authority to determine “whether a proceeding is
a core proceeding.” § 157(b)(3). Accordingly, the Court hereby ADOPTS the R&R,
Dkt. No. 1, and withdraws the reference effective when the bankruptcy court rules
The R&R notes that both parties acknowledged in a hearing before the bankruptcy court that if this
matter proceeds to trial, Reynolds is entitled to a jury trial. Dkt. No. 1 at 2.
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on the pre-trial motions, subject as necessary to the bankruptcy court’s adjudication
of those motions by findings of fact and conclusions of law presented to this Court
pursuant to 28 U.S.C. § 157(c)(1).
It is so ORDERED.

SIGNED this 18th day of July, 2017.
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Hilda Tagle
Senior United States District Judge

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