Hofmann et al v Hall et al

Filing 31

MEMORANDUM DECISION denying 2 Motion to Withdraw Bankruptcy Reference; granting 9 Motion to Substitute Party. Elizabeth R. Loveridge added. George B. Hofmann terminated. Signed by Judge Robert J. Shelby on 09/23/2013. (tls)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
In re:
RENEWABLE ENERGY DEVELOPMENT
CORPORATION,
Debtor.

MEMORANDUM DECISION
AND ORDER

ELIZABETH R. LOVERIDGE,1
Plaintiff,
vs.
TONY HALL, et al.,

Case No. 2:12-cv-771

Defendants.

The Defendants have filed a Joint Motion to Withdraw the Reference for Adversary
Proceeding 12-2225. (Dkt. No. 2.) This adversary proceeding is currently pending in the United
States Bankruptcy Court for the District of Utah and involves allegations that the Defendants
violated the automatic stay in the underlying bankruptcy proceeding, Case No. 11-38145. For the
reasons discussed below, the court denies the Defendants’ Motion without prejudice to refile
when the claims in the adversary proceeding are ready for trial.
BACKGROUND
The debtor in the underlying bankruptcy action, Renewable Energy Development
Corporation (REDCO), filed for relief under Chapter 7 of the United States Bankruptcy Code on

1

While the court has not yet explicitly ruled on the Trustee’s Motion to Substitute Party
(Dkt. No. 9), the court recognizes that Elizabeth R. Loveridge was appointed Trustee of the
bankruptcy estate on August 7, 2012. Accordingly, the court grants the Trustee’s Motion and
substitutes Ms. Loveridge as the Trustee in this proceeding.

December 30, 2011. George B. Hofmann was then appointed as the Chapter 7 Trustee.
REDCO’s general business model was to negotiate packages of contract and leasehold rights to
develop solar and wind energy projects. REDCO also hired contractors to implement these
projects. On January 30, 2012, Mr. Hofmann received an Order from the bankruptcy court
authorizing the sale of substantially all of REDCO’s assets to Sustainable Power, LLC. But this
sale did not include twelve Lease Option Agreements that REDCO had previously negotiated
with various landowners in San Juan County, Utah. These option contracts were included in a
group of assets called the Blue Mountain assets.
The legal status of the Lease Option Agreements was somewhat unclear. The contracts
granted REDCO an exclusive option that could be exercised over a period of three years to lease
and obtain easements on property owned by the San Juan County landowners for the
development of renewable energy projects. In exchange for the grant of the option, REDCO
agreed to pay $1,000 to each of the landowners within thirty days after the Lease Option
Agreements were executed. It appears that REDCO never gave the landowners the $1,000
payments. But the Lease Option Agreements also stated that the landowners had to provide
REDCO with notice and an opportunity to cure before the landowners could exercise any of their
rights or remedies under the Agreements, including any right to terminate. The Trustee alleges
that none of the landowners provided REDCO with notice or an opportunity to cure any alleged
deficiencies under the Agreements.
According to Defendants Tony Hall, Ellis-Hall Consultants, LLC (Ellis-Hall) and Summit

2

Wind Power, LLC (Summit Wind)2 (collectively, the Hall Parties), Mr. Hofmann contacted them
around January 5, 2012, seeking their expertise to evaluate REDCO’s assets. Mr. Hofmann
allegedly asked the Hall Parties to travel to southern Utah to conduct due diligence on the Lease
Option Agreements and to report back to him. The Hall Parties contend that Mr. Hofmann
ultimately encouraged them to submit bids to purchase the Blue Mountain assets. Because Mr.
Hall and Ellis-Hall believed that the Lease Option Agreements failed for lack of consideration,
they submitted to Mr. Hoffman a low bid of $3,000 for REDCO’s remaining assets. The Hall
Parties believe that Mr. Hofmann then used this bid to generate interest in the project and obtain
a higher bid from another company, Cedar City Wind Holdings, LLC (CCW).
On February 28, 2012, Mr. Hofmann filed a motion to approve the sale of the Blue
Mountain assets to CCW. Mr. Hofmann claims that the Hall Parties never objected to this sale
and that they did not appear at the auction that was held on March 21, 2012. The prevailing
bidder at the auction was CCW, who submitted a winning bid of $210,000. The bankruptcy
court approved this sale at a hearing held on March 22, 2012.
Mr. Hofmann alleges that, at some point in either February or March 2012, the Hall
Parties contacted the landowners who had signed the Lease Option Agreements with REDCO
and advised them that the Agreements were void because REDCO never paid the agreed fee of

2

In the Complaint filed in Adversary Proceeding 12-2225, Mr. Hofmann alleges that
Ellis-Hall and Summit Wind are both controlled by Tony Hall. (Dkt. No. 1 in Case No. 122225.) In its Answer, Counterclaim, and Third-Party Complaint, Summit Wind states that its
principal and sole owner is Kimberly Ceruti, who is also a minority owner and Executive
Director of Ellis-Hall. (Dkt. No. 23 in Case No. 12-2225.) Ms. Ceruti joined Summit Wind’s
responsive pleading in the adversary proceeding as a Counterclaimant and Third-Party Plaintiff.
For purposes of this Order, the court distinguishes Ms. Ceruti from the Hall Parties, although the
Hall Parties include Summit Wind.
3

$1,000. Mr. Hofmann believes that the Hall Parties then entered into new agreements with some
of the landowners. As a result of these actions, Mr. Hofmann contends that CCW refused to
close on the sale of the Blue Mountain assets that the bankruptcy court had approved. On March
23, 2012, Mr. Hofmann sent a cease and desist letter to Mr. Hall and Kimberly Ceruti asserting
that they were violating the automatic stay. Mr. Hofmann then filed a Motion for Order to Show
Cause why Tony Hall, Ellis-Hall, and certain landowners should not be held in contempt of the
automatic stay provisions of the Bankruptcy Code. On April 12, 2012, the bankruptcy court held
a hearing in which it withdrew and struck the Trustee’s Motion.
On May 28, 2012, Mr. Hofmann commenced an adversary proceeding against the Hall
Parties and several landowners3 who had allegedly executed new agreements with the Hall
Parties in violation of the automatic stay. Mr. Hofmann included four causes of action in his
Complaint: 1) declaratory judgment that the Lease Option Agreements were valid and part of the
bankruptcy estate; 2) declaratory judgment that any agreements entered into between the
landowners and the Hall Parties violated the automatic stay and were void; 3) damages for
violating the automatic stay; and 4) damages for tortious interference with economic relations.
Summit Wind and Ms. Ceruti filed a Counterclaim and Third-Party Complaint asserting a
number of claims against Mr. Hofmann and his law firm: breach of fiduciary duty, malpractice,
breach of contract, tortious interference with contract and prospective economic advantage,
unjust enrichment, conversion, and declaratory relief stating that the Lease Option Agreements
were void and disqualifying Mr. Hofmann and his law firm from acting as Trustee in the

3

The landowners are: SSP, a trust of which Scott Rasmussen is the Trustee; Clay and
Diane Christiansen; Richard Francom; and Stephen and Bonnie Meyer.
4

underlying bankruptcy.
Around the same time, Mr. Hofmann filed a second motion to sell the Blue Mountain
assets after he had negotiated a new agreement with CCW to sell the assets for $105,000, or half
of CCW’s original bid. The Hall Parties and several landowners, the Christiansens and Mr.
Francom, filed objections to the Trustee’s motion. These parties argued that the Lease Option
Agreements automatically terminated when REDCO failed to pay the $1,000 option payment.
The bankruptcy court heard the Trustee’s Second Sale Motion and the Honorable Judge
William T. Thurman issued his ruling from the bench on June 20, 2012. (See Dkt. No. 25 in
Case No. 12-2225.) Judge Thurman considered the question of whether the Lease Option
Agreements were still valid even though REDCO had failed to pay the consideration for the
options. He found that, considering the contract as a whole, and because none of the landowners
gave REDCO any written notice of default, the Lease Option Agreements did not automatically
terminate. As a result, Judge Thurman ruled that the Trustee could sell the Blue Mountain assets
to CCW “free and clear of all liens, claims, interests and any other encumbrances of any nature.”
(Hr’g Tr. 17, June 20, 2012, Dkt. No. 148 in Case No. 11-38145.) But Judge Thurman also made
clear that it was “not incumbent upon the Court to make detailed findings that the trustee [had]
absolute clear and unequivocal title to the Blue Mountain assets” since the court only needed to
consider whether the estate had “sufficient interest in the property to convey it.” (Id. at 25.) He
emphasized that he was not quieting title to the lease options, but simply authorizing the Trustee
to sell whatever interest the estate had in those assets: “I’m only authorizing the trustee to sell
whatever he’s got as-is, where-is, if-is.” (Id.)
On July 20, 2012, Mr. Hall and Ellis-Hall moved to withdraw the reference of the
5

adversary proceeding from the bankruptcy court. Ms. Ceruti and Summit Wind later joined this
motion. These four parties also submitted requests for a jury trial of the claims in the adversary
proceeding.
ANALYSIS
Ms. Ceruti and the Hall Parties argue that withdrawal of the bankruptcy reference is
mandated for two reasons. First, they contend that there is cause for withdrawal under 28 U.S.C.
§ 157(d) because they have made a demand for a jury trial. Second, the Defendants assert that
the bankruptcy court does not have the constitutional authority to issue a final ruling on the
claims and counterclaims in the adversary proceeding because these claims must be decided by a
tribunal created under Article III of the United States Constitution. The court agrees that the
Defendants may insist on a jury trial for some of their claims, but finds that there is no reason to
withdraw the bankruptcy reference until these claims are ready for trial. The court disagrees with
the Defendants’ Article III argument and holds that the bankruptcy court has authority to issue a
final ruling on the causes of action that are the subject of the Defendants’ motion..
To give some context to the claims at issue in this suit, the court first reviews a brief
history of the relationship between bankruptcy courts and Article III courts.
I.

Legal Background on the Authority of the Bankruptcy Courts
The Bankruptcy Reform Act of 1978 created bankruptcy courts as adjuncts to the district

court for each judicial district. Pub. L. No. 95-598, 92 Stat. 2549 (1978). The Act provided that
the new bankruptcy courts would be presided over by bankruptcy judges appointed by the
President and confirmed by the Senate for fourteen-year terms. In 1982, the Supreme Court held
that this grant of bankruptcy jurisdiction to independent courts composed of judges who did not
6

have life tenure or other Article III protections was unconstitutional. Northern Pipeline Constr.
Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982). In response to the Court’s ruling, Congress
enacted the Bankruptcy Amendments and Federal Judgeship Act of 1984. Pub. L. No. 98-353,
98 Stat. 333 (1984). This Act vested jurisdiction over bankruptcy actions in the Article III
district courts, but allowed the district courts to refer cases and proceedings to the bankruptcy
judges for the district. The Act provided that a 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.” 28 U.S.C. § 157(d).
The 1984 Act divided the types of issues that a bankruptcy court may hear into two
categories: core and non-core proceedings. See 28 U.S.C. § 157(b). The statute provides a nonexclusive list of core proceedings for which the bankruptcy judge may enter final orders and
judgments. The statute also states:
A bankruptcy judge may hear a proceeding that is not a core proceeding but that is
otherwise related to a case under [Title 11, the primary source of bankruptcy law
in the United States Code]. In such proceeding, the bankruptcy judge shall submit
proposed findings of fact and conclusions of law to the district court, and any final
order or judgment shall be entered by the district judge after considering the
bankruptcy judge’s proposed findings and conclusions and after reviewing de
novo those matters to which any party has timely and specifically objected.
28 U.S.C. § 157(c)(1). Notwithstanding this provision, parties may consent to allow a
bankruptcy judge to enter final judgments on non-core proceedings if they wish. See 28 U.S.C.
§ 157(c)(2). Bankruptcy judges have the authority to determine “whether a proceeding is a core
proceeding . . . or is a proceeding that is otherwise related to a case under title 11.” 28 U.S.C.
§ 257(b)(3).
The Supreme Court has issued two decisions interpreting the 1984 Act that provide the
7

crux of the analysis for the issues currently before the court. In 1989, the Court held in
Granfinanciera, S.A. v. Nordberg that defendants in a fraudulent conveyance action brought by
the trustee retained a right to a trial by jury under the Seventh Amendment of the United States
Constitution. 492 U.S. 33 (1989). While fraudulent conveyance actions are listed as core
proceedings under 28 U.S.C. § 157(b)(2)(H), the Court found that these actions are matters of
private rather than public right because they are “quintessentially suits at common law that more
nearly resemble state-law contract claims.” Id. at 56. Based on this reasoning, the Court held
that, notwithstanding Congress’s designation of fraudulent conveyance actions as the sort of
bankruptcy issues for which bankruptcy judges could issue final judgments, this designation
could not trump a party’s Seventh Amendment right to request a jury trial. But the Court
emphasized that its ruling applied only to parties who had not submitted claims against the
bankruptcy estate, since these types of fraudulent conveyance actions did not arise “as part of the
process of allowance and disallowance of claims,” and were not integral to the restructuring of
debtor-creditor relations. Id. at 58. And, importantly, the Court highlighted that it was not
addressing the question of “whether the Seventh Amendment or Article III allows jury trials in
such actions to be held before non-Article III bankruptcy judges subject to the oversight provided
by the district courts pursuant to the 1984 Amendments.” Id. at 64. In other words, while the
Court held that a jury trial was required in certain circumstances, the Court was silent as to
whether a bankruptcy court could issue final judgments on dispositive motions in these cases or
whether the bankruptcy court could conduct the jury trial itself.4

4

The Tenth Circuit has since ruled that jury trials must be conducted by the district court.
In re Kaiser Steel Corp., 911 F.2d 380, 392 (10th Cir. 1990).
8

The Court addressed the question of the authority of bankruptcy courts to issue final
judgments in the 2011 case of Stern v. Marshall, 131 S. Ct. 2594 (2011). The facts of Stern
involve the bankruptcy estate of Vickie Lynn Marshall, who was better known to the public as
Anna Nicole Smith. Vickie was involved in a long-running dispute with E. Pierce Marshall, who
was the son of Vickie’s husband, J. Howard Marshall II, a man believed to have been one of the
richest people in Texas. While J. Howard was still alive, Vickie filed suit against Pierce in Texas
state probate court asserting that Pierce had fraudulently induced J. Howard to sign a living trust
that did not include her. After J. Howard’s death, Vickie filed a petition for bankruptcy. Pierce
then filed a complaint and a proof of claim in the bankruptcy proceeding alleging that Vickie had
defamed him and seeking damages from her estate. Vickie filed a counterclaim against Pierce in
which she made the same allegations that she had previously filed in state court—namely, that
Pierce had tortiously interfered with the inheritance she expected from J. Howard. Eventually,
the Texas state court ruled in Pierce’s favor while the bankruptcy court ruled in favor of Vickie.
The bankruptcy court’s determination was appealed all the way to the Supreme Court.
The Supreme Court held that, while the bankruptcy court had statutory authority to enter a
final judgment on a state law counterclaim under 28 U.S.C. § 157(b)(2)(C), the bankruptcy court
was nevertheless without constitutional authority to enter such a judgment under Article III. The
Court found that Vickie’s claim was “a state law action independent of the federal bankruptcy
law and not necessarily resolvable by a ruling on [Pierce’s] proof of claim in bankruptcy.” Id. at
2611. Stated another way, Vickie’s state tort action existed “without regard to any bankruptcy
proceeding.” Id. at 2618. Because her claim was so remotely connected to the underlying
bankruptcy action, the Court ruled that an Article III court was required to enter final judgment.
9

Before reaching its decision, the Court considered whether the bankruptcy court’s
authority to enter final judgment on Vickie’s counterclaim could be saved by the public rights
exception, under which Congress may permissibly vest factfinding for public rights in a nonArticle III court. The Court noted that “it is still the case that what makes a right ‘public’ rather
than private is that the right is integrally related to particular federal government action.” Id. at
2613. In its analysis, the Court referenced its discussion of public and private rights in
Granfinanciera and held that the public rights exception did not apply in either case: “Vickie’s
counterclaim—like the fraudulent conveyance action in Granfinanciera—does not fall within
any of the varied formulations of the public rights exception.” Id. at 2614.
Given this analogy, several courts have interpreted the decision in Stern to apply to a
wide variety of state law claims, such as fraudulent conveyance actions, that arise in a bankruptcy
context but can more accurately be seen as private and not public rights. As a result, these courts
have held that bankruptcy courts lack authority to enter final judgments on these claims. See,
e.g., In re Heller Ehrman LLP, 2011 WL 6179149 (N.D. Cal. Dec. 13, 2011) (“By likening the
claim [in Stern] explicitly to the fraudulent conveyance claims in Granfinanciera, this Court
believes that Stern clearly implied that the bankruptcy court lacks constitutional authority to enter
final judgment on the fraudulent conveyance claims presented here . . . .”); Adelphia Recovery
Trust v. FLP Grp., Inc., 2012 WL 264180 (S.D.N.Y. Jan. 30, 2012) (finding that a fraudulent
transfer claim was beyond the bankruptcy court’s final adjudicatory power because it involved a
private right, its adjudication would not necessarily be decided by ruling on a third party proof of
claim, and the Defendants had not consented to final adjudication by the bankruptcy court).
But this reading of Stern is a broad one, implying that bankruptcy courts cannot enter
10

final judgments on any claims that could be subject to a proper jury request under
Granfinanciera. Many courts have adopted a much narrower interpretation of Stern by pointing
to the Supreme Court’s own characterization of the breadth of its ruling: “We do not think the
removal of counterclaims such as Vickie’s from core bankruptcy jurisdiction meaningfully
changes the division of labor in the current statute; we agree with the United States that the
question presented here is a narrow one.” Stern, 131 S. Ct. at 2620.
The Honorable Robert D. Drain, a bankruptcy judge for the Southern District of New
York, has elaborated on the reasoning behind the narrow interpretation. Judge Drain noted that,
even after Granfinanciera’s characterization of fraudulent conveyance actions as private rights,
“by far the majority of courts after Granfinanciera continued to hold that bankruptcy courts had
the power to issue a final judgment in fraudulent transfer proceedings as core matters.”
Kirschner v. Agoglia (In re Refco Inc.), 461 B.R. 181, 190 (Bankr. S.D.N.Y. 2011). While
acknowledging that it was likely that “the majority in Stern would have concluded, if asked, that
a bankruptcy judge lacks the power to issue a final order or judgment on a fraudulent transfer
claim,” Judge Drain noted that the other express rationales for the majority’s decision, which are
summarized by Justice Scalia in his concurrence,5 “argue differently. They are . . . entirely
consistent with the role of fraudulent transfer and other statutory avoidance claims under the
Bankruptcy Code . . . and with the clear majority of holdings after Marathon and Granfinanciera
that bankruptcy courts have the constitutional power to issue final judgments on statutory
5

Some courts have additionally supported a narrow reading of Stern on the grounds that
Justice Scalia, while joining in the judgment, did not adopt the reasoning of the Chief Justice’s
plurality opinion. See, e.g., Burtch v. Seaport Capital, LLC (In re Direct Response Media, Inc.),
2012 WL 112503 (Bankr. D. Del. Jan. 12, 2012) (“[A] majority of the justices did not adopt the
rationale of Chief Justice Roberts’ opinion, giving impetus to a narrow interpretation.”).
11

avoidance claims.” Id. at 191.
In the two years since Stern has been decided, a large number of courts have written
opinions applying Stern to various aspects of bankruptcy proceedings. Having carefully
reviewed this voluminous case law, it is clear that the courts have not reached any general
consensus about how to interpret the Supreme Court decision. Even within the same judicial
district, opinions about the case often differ wildly. Compare Weisfelner v. Blavatnik (In re
Lyondell Chem. Co.), 467 B.R. 712, 721 (S.D.N.Y. 2012) (holding that Judge Drain’s reasoning
in the In re Refco, Inc. case discussed above “runs directly contrary to the clear language of
Stern”) with Walker, Truesdell, Roth & Assocs. v. Blackstone Grp., L.P. (In re Extended Stay,
Inc.), 466 B.R. 188, 202 (S.D.N.Y. 2011) (“Stern does not affect the ability of the bankruptcy
court to rule on state law fraudulent conveyance claims.”).
The Tenth Circuit has not yet issued any guidance on the issue. Within the District of
Utah, only the Honorable Ted Stewart has addressed Stern’s reach. See In re C.W. Min. Co.,
2012 WL 4882295 (D. Utah Oct. 15, 2012); In re Rock Structures Excavating, Inc., 2013 WL
1284969 (D. Utah Mar. 27, 2013). Judge Stewart read Stern narrowly and held that the Supreme
Court decision does not preclude a bankruptcy court from entering final judgment in a fraudulent
conveyance action. In re Rock Structures Excavating, Inc., 2013 WL 1284969, at *5. Judge
Stewart also noted that the majority of district and bankruptcy courts within the Tenth Circuit to
consider Stern have adopted a narrow view of the case. Id. (citing examples).
The court considers below the implications of Stern for the Defendants’ pending Motion
to Withdraw the Reference. But the court first addresses whether the Defendants have a right to
a jury trial on any of their counterclaims or the claims asserted against them.
12

II.

The Defendants’ Right to a Jury Trial
A. Existence of the Right
The Seventh Amendment provides that the right to a trial by jury shall be preserved in

suits at common law where the controversy exceeds twenty dollars. U.S. Const. amend. VII. As
discussed above, the Supreme Court held in Granfinanciera that a party maintained her right to a
jury trial for certain matters that arose during a bankruptcy proceeding even if the bankruptcy
court had the statutory authority to hear those matters. Granfinanciera, 492 U.S. at 64. The
Court used a three-part analysis to determine which claims could be the subject of a proper jury
demand. First, a court must “compare the statutory action to 18th-century actions brought in the
courts of England prior to the merger of the courts of law and equity.” Id. at 42. Second, a court
must “examine the remedy sought and determine whether it is legal or equitable in nature.” Id.
As the Court noted, “[t]he second stage of this analysis is more important than the first.” Id. If
these two factors indicate that a party is entitled to a jury trial, a court must decide “whether
Congress may assign and has assigned resolution of the relevant claim to a non-Article III
adjudicative body that does not use a jury as a factfinder.” Id.
The claims and counterclaims at issue in this case present a mix of legal and equitable
actions. Applying the first prong of the test stated above, some of the claims are clearly
examples of actions that historically would be tried by a jury. For example, the Trustee’s action
for tortious interference with economic relations is a tort that was recognized at common law.
See W. Prosser, Handbook of the Law of Torts §§ 128-30 (4th ed. 1971). Actions sounding in
tort were considered legal before the merger of the courts of law and equity and are therefore
subject to a proper jury demand. See Curtis v. Loether, 415 U.S. at 189, 195 (1974). Similarly,
13

the counterclaims for malpractice, breach of contract, tortious interference with contract and
prospective economic advantage, and conversion are legal actions. In contrast, actions for breach
of fiduciary duty historically were considered equitable. See, e.g., In re Evangelist, 760 F.2d 27,
29 (1st Cir. 1985) (“Actions for breach of fiduciary duty, historically speaking, are almost
uniformly actions ‘in equity,’ carrying with them no right to trial by jury.”). And the proper
characterization of actions for unjust enrichment is unclear. See In re Light Cigarettes Mktg.
Sales Practices Litig., 751 F. Supp. 2d 183, 190 (D. Me. 2010) (comparing courts holding that an
action for unjust enrichment is an equitable claim with courts ruling that the proper
characterization of these claims depends on the remedy requested).
The second prong of the Granfinanciera analysis instructs the court to look at the nature
of the relief sought. Here, both parties seek mostly compensatory damages for their claims, a
remedy which is legal in nature. The Trustee seeks to recover the damages caused by the
Defendants’ alleged interference with the sale of the Lease Option Agreements, while Ms. Ceruti
and Summit Wind argue that the Trustee’s actions injured them by an amount in excess of
$500,000. The nature of the requested remedy supports the Defendants’ demand for a jury trial
on the claims for tortious interference, malpractice, breach of contract, and conversion.
Ms. Ceruti and Summit Wind also seek compensatory damages for their breach of
fiduciary duty claim. While historically this claim has been treated as an equitable one, the
Supreme Court stated that the nature of the remedy is a more important consideration than the
historical treatment of a claim. See Granfinanciera, 492 U.S. at 42. And at least one district
court has noted that, for certain equitable claims seeking legal remedies, the nature of the remedy
is determinative of the right to a jury trial even if the courts of equity once issued the same type
14

of legal relief. See, e.g., Addington v. US Airline Pilots Ass’n, 2009 WL 413610, at *4 (D. Ariz.
Feb. 18, 2009) (noting that “[i]t is of no moment that as a matter of historical practice, courts of
equity would grant monetary awards against trustees who breached their fiduciary duties”
because it is “the general character of the remedy that guides [the Seventh Amendment] analysis,
not the niceties of eighteenth-century chancery.”). Taken together, therefore, the first two prongs
of the Granfinanciera test indicate that Ms. Ceruti and Summit Wind have a right to have their
claim for breach of fiduciary duty decided by a jury.
Similarly, a jury may hear the parties’ claims seeking declaratory relief.6 Both the Trustee
and the Defendants seek declaratory judgment that the Lease Option Agreements were either
valid or invalid. To ascertain whether the Defendants may properly request a jury determination
on this issue, the court must consider the overall context of the case: “Declaratory relief may be
legal or equitable depending on the basic nature of the underlying issues.” United States v. New
Mexico, 642 F.2d 397, 400 (10th Cir. 1981). Although the Defendants stress that such a
judgment hinges on a court’s interpretation of state contract law and its application to the option
contracts, this fact alone is not dispositive of the Defendants’ right to a jury trial. A bankruptcy
judge is frequently charged with resolving disputes involving state law, and such determinations
are necessary to the judge’s ability to manage central aspects of a bankruptcy case, such as the
determination of what property belongs to the estate.
But looking at the overall nature of the case, the declaratory judgment claims were not

6

While the court wishes to be precise on this point, the court is aware that it is unlikely
that a jury will decide the claims for declaratory judgment, since these claims appear to involve
purely legal determinations that may be decided on a dispositive motion. The court discusses
below whether a bankruptcy court may properly issue a final judgment on such a motion.
15

brought to determine whether the Lease Option Agreements were properly part of the REDCO
estate. The option contracts, whether they are valid or not, have already been sold. The reduced
price for which CCW purchased the Agreements reflects the fact that the validity of the option
contracts was uncertain when they were sold. The outcome of the declaratory judgment claims
will not make the Lease Option Agreements any more or less a part of the bankruptcy estate, and
the claims are therefore distinct from the type of actions a trustee might bring to augment a
bankruptcy estate. Instead, the declaratory judgment claims here support the parties’ additional
claims for tortious and other injuries that have traditionally been decided in courts of law with
the option of a jury as factfinder. Indeed, the claims for declaratory judgment are central to the
resolution of the remaining legal causes of action. As a result, the declaratory judgment claims
are legal in nature and the Defendants may properly request that a jury determine any factual
issues necessary to the resolution of these claims.
The only relief the parties seek that could be deemed equitable in nature is Ms. Ceruti and
Summit Wind’s request for the restitution of legal fees that they paid to the Trustee’s law firm.
The Supreme Court has described restitution as an equitable remedy. Tull v. United States, 481
U.S. 412, 424 (1987) (holding that an action for disgorgement of improper profits, a type of
restitution, is “traditionally considered an equitable remedy.”). But the Seventh Circuit has noted
that the Supreme Court did not state that restitution was an exclusively equitable remedy, and
found that “restitution is a legal remedy when ordered in a case at law.” Reich v. Continental
Gas Co., 33 F.3d 754, 756 (7th Cir. 1994). In any event, the Supreme Court also held in Tull that
the Constitution requires a jury to decide issues common to legal and equitable claims: “[I]f a
legal claim is joined with an equitable claim, the right to jury trial on the legal claim, including
16

all issues common to both claims, remains intact.” Tull, 481 U.S. at 425 (citation omitted).
Because the facts underlying Ms. Ceruti and Summit Wind’s claim for unjust enrichment overlap
and intertwine with the other issues in the counterclaims, the right to a jury trial extends to the
unjust enrichment claim regardless of whether the court views the claim as inherently legal or
equitable.
There are two remaining causes of action for which the court finds that the Defendants
are not entitled to a jury trial. First, Ms. Ceruti and Summit Wind seek a declaratory judgment
that Mr. Hofmann and his firm are disqualified from acting as Trustee and counsel for Trustee in
the REDCO bankruptcy. This cause of action is moot because Ms. Loveridge was appointed the
Chapter 7 Trustee of the REDCO bankruptcy estate on August 7, 2012.
Second, the Trustee has brought a cause of action for violation of the automatic stay
under 11 U.S.C. § 362(k). The Trustee seeks an award of actual damages to the estate, as well as
punitive damages for a willful violation of the stay. Under the first two prongs of the
Granfinanciera test, the Trustee’s claim would appear to be legal in nature. This cause of action
lacks any history in the courts of 18th-century England, but the requested relief is for money
damages, both compensatory and punitive. This remedy points toward the courts of law rather
than the courts of equity. See In re Glenn, 359 B.R. 200, 203 (Bankr. N.D. Ill. 2006).
But the court must also apply the third prong of Granfinanciera and ask whether
“Congress may assign and has assigned” the matter to the bankruptcy court. Granfinanciera, 492
U.S. at 42. Since Congress may deny jury trial rights to claimants litigating under statutory
causes of action where public rights are litigated, the court must determine whether the Trustee’s
claim for violation of the automatic stay is a public right or a private right. In re Gonzalez, 2010
17

WL 3395677, at *2 (Bankr. D.P.R. Aug. 23, 2010). While there is a “dearth of law on this
issue,” the court agrees with a number of courts who have addressed the question and finds that
“the rights created by section 362(k)(1) are so fundamental to our bankruptcy system that they are
appropriately resolved by a bankruptcy judge sitting without a jury and that they should,
therefore, be viewed as ‘public rights’ as that term is used in Granfinanciera.” Glenn, 359 B.R.
at 204-05; see also Gonzalez, 2010 WL 3395677; Gordon v. Friedman’s Inc. (In re Gordon), 209
B.R. 414 (Bankr. D. Miss. 1997). As a result, Congress has permissibly assigned the resolution
of this claim to the bankruptcy court and the Defendants are not entitled to a jury trial on the
issue of whether they violated the automatic stay.
The third prong of the Granfinanciera test does not affect the Defendants’ right to a jury
trial for the other claims and counterclaims that the court discussed above. Unlike the cause of
action under 11 U.S.C. § 362(k), the claim for tortious interference and the counterclaims against
the Trustee are more properly viewed as private rights. Like the fraudulent conveyance actions
discussed in Granfinanciera, the tortious interference claims and counterclaims “constitute no
part of the proceedings in bankruptcy but concern controversies arising out of it.”
Granfinanciera, 492 U.S. at 56 (citation omitted). Congress may not remove a party’s right to a
jury trial for these state-created causes of action merely because they are closely intertwined with
a bankruptcy action.
The court has carefully considered whether it has drawn an appropriate distinction
between the Trustee’s claim for violation of the automatic stay and the Trustee’s claim for
tortious interference with economic relations. The allegations supporting these two claims and
the requested relief are nearly identical. But while Congress clearly intended for a trustee to have
18

the authority to enforce the automatic stay, which is a fundamental feature of the bankruptcy
scheme that Congress enacted, the court sees no evidence showing that Congress believed that
the remedy it created under 11 U.S.C. § 362(k) for a violation of that stay was inadequate. The
Trustee is certainly free to bring additional causes of action against alleged violators of the stay,
but he cannot do so without implicating a defendant’s right to have a jury decide these issues.
Even if the allegations are identical to the assertions underpinning a claim for violation of the
automatic stay, these additional state-created rights of action “are quintessentially suits at
common law.” Id.
In addition, the importance of the Seventh Amendment right to a jury trial requires that
this right receive primacy where it is implicated: “Where both legal and equitable relief are
sought by a plaintiff, the Seventh Amendment right to a jury trial requires that the legal claims be
tried first, to a jury.” Miles v. Indiana, 387 F.3d 591, 599 (7th Cir. 2004) (citation omitted). For
the same reason that a jury must first decide any factual issues that are common to a plaintiff’s
request for both legal and equitable relief, the court finds that a jury must also first decide any
factual issues that are common to a plaintiff’s private and public rights of action. Because the
Trustee asserted state law causes of action against the Defendants, the bankruptcy court should
not resolve the claim for a violation of the automatic stay until the jury has decided the common
factual issues, if any, that are necessary to resolve both the violation claim and the tortious
interference claim.
The court notes that the same reasoning does not apply to the Defendants’ counterclaims.
An alleged violator of the automatic stay cannot preempt a bankruptcy court’s determination of
the stay issue simply by asserting a number of private rights of action against a trustee that
19

involve common matters. These counterclaims may be tried to a jury, but they should not affect
the timing of the bankruptcy court’s resolution of the trustee’s claim. In contrast, where it is the
trustee who brings both a claim for violation of the automatic stay and additional rights of action,
the Seventh Amendment requires an ordering of the resolution of these claims that allows a jury
to decide any common issues first.
For the reasons stated above, the court finds that the Defendants are entitled to a jury trial
on the Trustee’s claim for tortious interference, as well as the Trustee’s causes of action for
declaratory judgment that support the Trustee’s tortious interference claim. While Congress has
properly assigned the resolution of the Trustee’s claim for violation of the automatic stay to the
bankruptcy judge to be decided without a jury, the bankruptcy court should first allow the jury to
determine any issues that are common to the Trustee’s private rights of action and this public
right. The Defendants also have a right to have their counterclaims heard by a jury. Nothing that
the court has said concerning the Defendants’ right to a jury affects the bankruptcy court’s
authority to issue final judgments on any of these claims during pretrial motions. The court
analyzes below this separate issue of whether the bankruptcy court maintains this authority after
the Supreme Court’s ruling in Stern.
B. Waiver of the Right to a Jury Trial
The Trustee argues that, even if the Defendants have a right to a jury trial under
Granfinanciera, they have waived this right through their participation in the bankruptcy
proceeding. The Tenth Circuit has held that “one who invokes the jurisdiction of the bankruptcy
court by filing a claim with that court or who fails to object to the summary jurisdiction of the
court at the earliest opportunity, thereby consents to such jurisdiction.” O’Dell v. United States,
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326 F.2d 451, 455 (10th Cir. 1964). The Trustee contends that the Defendants have consented to
the bankruptcy court’s jurisdiction by filing objections and contesting the Trustee’s sale of the
Lease Option Agreements.
The court is not persuaded by the Trustee’s argument. Mr. Hall and Ellis-Hall originally
appeared in this case after the bankruptcy court issued an Order to Show Cause why they should
not be held in contempt for violating the automatic stay. These Defendants later objected, twice,
to the Trustee’s request to the bankruptcy court to hold that the option contracts were property of
the bankruptcy estate for purposes of selling these contracts. After the first objection, counsel for
these Defendants admitted that they lacked standing to object to the relevant time frames and
withdrew their objection. (See Minute Entry, May 29, 2012, Bankr. Case No. 11-38145.) After
the second objection, the bankruptcy court ruled that Mr. Hall and Ellis-Hall lacked standing and
could not participate in the evidentiary hearing. (See Minute Entry, June 18, 2012, Bankr. Case
No. 11-38145.) The court finds that an appearance made to defend allegations of violating the
automatic stay followed by a finding that these Defendants lacked standing to voice their
objections is not a valid waiver of the Defendants’ Seventh Amendment right to a jury.
Similarly, Summit Wind has not waived its jury trial rights. Summit Wind is not a party
in the underlying bankruptcy proceeding and it does not appear that Summit Wind filed any
objections to the sale of the Lease Option Agreements. While Summit Wind may have been one
of the Hall Parties who appeared at the evidentiary hearing to contest the Trustee’s Motion to
Approve the Sale, Judge Thurman ruled that all of the Hall Parties lacked standing to participate.
For the reasons stated above, this attempted appearance does not constitute a waiver. As a result,
none of the Defendants’ requests for a jury trial are barred by the Defendants’ actions in the
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bankruptcy proceeding.
C. Timing of the Removal to the District Court
The Defendants argue that, because they are entitled to a jury trial and have timely
demanded the exercise of this right, sufficient cause exists for the court to withdraw the
automatic reference to the bankruptcy court. The Defendants cite the Tenth Circuit case of In re
Latimer for this proposition. 918 F.2d 136 (10th Cir. 1990). But in Latimer, the Tenth Circuit
merely restated its previous holding that jury trials cannot be conducted by the bankruptcy court
and must instead be removed to district court. See In re Kaiser Steel Corp., 911 F.2d 380, 392
(10th Cir. 1990). These cases do not require the immediate withdrawal of the district court’s
reference to the bankruptcy court and the Tenth Circuit has never prevented the bankruptcy court
from supervising discovery and ruling on pretrial motions. Instead, a number of district and
bankruptcy courts have declined to withdraw the bankruptcy reference until a case is ready for
trial. See, e.g., South Valley Health Ctr., LLC v. Johnson (In re South Valley Health Ctr., LLC),
2013 WL 2387678, at *2 (D. Utah May 30, 2013) (unpublished); Rhino Energy LLC v. C.O.P.
Coal Dev. Co. (In re C.W. Mining Co.), 2012 WL 4882295, at *5 (D. Utah Oct. 15, 2012); In re
Kinderknecht, 2011 WL 841141, at *4 (Bankr. D. Kan. Mar. 4, 2011). This approach capitalizes
on the bankruptcy court’s familiarity with the proceedings and ensures that judicial resources are
not wasted. In addition, allowing the bankruptcy court to conduct the pretrial proceedings
alleviates the risks of forum shopping:
Motions to withdraw pose significant risks of forum shopping because a party can
observe the bankruptcy judge’s rulings, and then decide whether to bring the
motion . . . . By waiting to decide the withdrawal motion until the eve of a jury
trial, the district court takes this power out of the hands of the parties.

22

City Bank v. Compass Bank, 2011 WL 5442092, at *6 (W.D. Tex. Nov. 9, 2011).
The court finds such an approach is appropriate in this matter, especially since the need
for a trial may be obviated if the claims and counterclaims are decided on pretrial motions.
Accordingly, the court holds that the Defendants’ demand for a jury trial does not require the
court to withdraw the reference to the bankruptcy court at this time.
III.

The Bankruptcy Court’s Authority to Issue Final Judgments
The Defendants argue that an additional reason for the court to withdraw the reference in

this case is that, under Stern v. Marshall, the bankruptcy court does not have the authority to
enter final judgments on either the Trustee’s claims or Ms. Ceruti and Summit Wind’s
counterclaims, all of which depend on state law to some degree. The court is not persuaded by
the Defendants’ argument and finds that the Defendants read Stern too broadly. The Defendants’
interpretation would carve out a large category of claims for which a bankruptcy judge could no
longer enter final judgment, even though these claims are closely intertwined with bankruptcy
proceedings and bankruptcy judges have traditionally ruled on them in the past. While there is
admittedly a great deal of uncertainty in this area of law, the court declines to mandate such a
substantial change in bankruptcy practice in the absence of clear guidance from either the
Supreme Court or the Tenth Circuit.
First, the court notes that Stern is not a jurisdictional decision, but one that is focused
only on the bankruptcy court’s authority under Article III to enter final judgment on certain
claims:
Stern makes clear that the issues of jurisdiction and final adjudicative power are
distinct. Consenting to jurisdiction—which everyone agrees the Bankruptcy
Court possesses under the ‘related to’ doctrine enshrined in 28 U.S.C. § 1334—is
23

not the same as consenting to the entry of a final determination by a non-Article
III tribunal . . . .
Dev. Specialists, Inc. v. Akin Gump Strauss Hauer & Feld LLP, 462 B.R. 457, 471 (S.D.N.Y.
2011); see also Walker, Truesdell, Roth & Assocs. v. Blackstone Grp., L.P. (In re Extended Stay,
Inc.), 466 B.R. 188, 201 (S.D.N.Y. 2011) (“Stern is not a decision concerning subject matter
jurisdiction.”). In other words, Stern does not require a district court to withdraw the reference to
a bankruptcy court immediately whenever a Stern-related issue arises. Instead, a bankruptcy
judge can manage pretrial matters and even issue findings of fact and conclusions of law that can
be reviewed de novo by the district court. As a result, the issue presented to the court is the
narrow question of whether the bankruptcy court has authority to resolve pretrial dispositive
motions by entering final judgments or if it must instead issue recommendations to the district
court on these motions.7
There is no question that the bankruptcy court continues to have the authority to enter
judgment on the Trustee’s claim for violation of the automatic stay. As the court discussed
7

The court notes that there is not yet a general consensus as to whether a bankruptcy court
may issue a report and recommendations for claims that are statutorily core matters but that
nevertheless fall outside a bankruptcy court’s authority to issue final judgments under Stern.
Under 28 U.S.C. § 157(c)(1), a bankruptcy court may hear and submit proposed findings of fact
and conclusions of law to the district court, subject to de novo review, in a non-core proceeding.
But the statute does not contain a similar authorization for core proceedings, and courts have
reached differing conclusions about what to do in these instances. Compare Wellness Int’l
Network, Ltd. v. Sharif, 2013 WL 4441926, at *21 (7th Cir. Aug. 21, 2013) (finding that the
order of reference in a bankruptcy proceeding should be withdrawn for core matters that fall
afoul of Stern because there is no statutory authority for the bankruptcy court to issue proposed
findings and conclusions in these circumstances) with Adelphia Recovery Trust v. FLP Grp., Inc.,
2012 WL 264180, at *6 (S.D.N.Y. Jan. 30, 2012) (finding that “Congress’s failure to anticipate
Stern, and provide bankruptcy courts with the explicit power to issue findings of fact and
conclusions of law in core matters, . . . is not dispositive” and allowing the bankruptcy court to
issue a report and recommendations). Because the court finds that there is no Stern problem for
the claims and counterclaims in this action, the court need not address this debate.
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above, the automatic stay is fundamental to the bankruptcy system enacted by Congress. See
Turner v. First Cmty. Credit Union (In re Turner), 462 B.R. 214, 221 (Bankr. S.D. Tex. 2011)
(“Given the central role of the automatic stay in the bankruptcy scheme, the broad effect of the
automatic stay, and the fiduciary duty imposed upon debtors, this Court concludes that
enforcement of the automatic stay fits within the ‘public rights’ exception.”). A bankruptcy court
may not only enter final judgment on a claim for violation of the automatic stay, but it may do so
without a jury.
The harder question is whether Stern imposes any limitations on the bankruptcy court’s
authority to enter final judgment on the remaining claims and counterclaims, especially the
Trustee’s cause of action for tortious interference with economic relations and Ms. Ceruti and
Summit Wind’s actions against the Trustee. The court has found that these claims are private
legal rights that require a jury trial if one is properly demanded. As discussed above, some courts
have interpreted Stern broadly, even to the extent of making its reach coextensive with the
holding in Granfinanciera. In other words, if a claim requires a jury trial because it is not so
central to the bankruptcy scheme that it could be labeled a public right, then these courts hold
that Stern requires an Article III court to enter final judgment on the claim as well. The United
States District Court for the Southern District of New York provides an example of this
reasoning in the context of fraudulent conveyance actions:
The Stern Court compares the claim at issue in Stern to that in Granfinanciera. It
makes no mention of the differing legal contexts. Stern thus leaves no room for a
fraudulent conveyance claim that is somehow a matter of private right in a
Seventh Amendment context, but a matter of public right in an Article III context.
Simply put, fraudulent conveyance claims in Stern and Granfinanciera are matters
of either public or private right; they cannot be both.

25

In re Lyondell Chem. Co., 467 B.R. 712, 722 (S.D.N.Y. 2012) (emphasis in original).
The court admits the logic of this approach, but finds that a narrower interpretation of
Stern is equally logical. Stern clearly holds that the public rights exception does not save the
bankruptcy court’s authority to finally adjudicate certain actions, such as state law counterclaims
filed by the estate against creditors who assert a proof of claim. But it is not clear whether the
bankruptcy court’s authority could be saved by other factors. Stern does not explicitly state that a
bankruptcy judge cannot enter final judgment on any private right of action, but simply denies
this authority for some private rights of action. And in its decision, the Stern Court discusses a
number of factors besides the public rights exception. For instance, the Court notes that the
parties did not unanimously consent to final adjudication by a non-Article III tribunal. Stern, 131
S. Ct. at 2618. The Court also finds that Vickie’s state law counterclaim would not necessarily
be resolved in ruling on Pierce’s proof of claim. Id. at 2608; see also id. at 2618 (noting that
Vickie’s claim was a state tort action that existed “without regard to any bankruptcy
proceeding.”). As a result, the Court appears to be concerned not only with the distinction
between public and private rights, but also with the question of consent and the determination of
how closely an action is intertwined with the bankruptcy proceeding.
Given the additional factors discussed in Stern, the court adopts a narrow view of that
holding and finds that, even if an action is more appropriately considered to be a private action
for purposes of the Seventh Amendment analysis, such an action may nevertheless be so
intricately intertwined with the bankruptcy proceeding that the bankruptcy court maintains its
authority to enter a final judgment in that action under Article III.
The claims and counterclaims at issue here provide an example of why the court
26

distinguishes its analysis under Stern from its analysis under Granfinanciera. The Trustee’s
claim for tortious interference and the Defendants’ counterclaims are clearly based in state law
and resemble private rights of action. As a result, the Defendants may properly demand a jury
trial under Granfinanciera. But it is also clear that these claims spring directly out of the
bankruptcy proceeding itself. The Trustee’s claims all arise out of conduct that allegedly violated
the automatic stay, which is a creation of bankruptcy law. And the counterclaims relate to the
Trustee’s management of the estate and whether the Trustee maintained an appropriate
relationship with the Defendants while performing these management functions. Even if the
claims are not themselves public rights, on the facts presented here they are closely intertwined
with the public bankruptcy scheme. Given this direct relationship to the bankruptcy proceeding,
the court interprets Stern to allow the bankruptcy judge to retain authority to enter final judgment
on the claims and counterclaims.
The court also notes that the claims at issue here are clearly distinguishable from the state
law counterclaims that Vickie brought against Pierce in Stern. Pierce’s alleged tortious
interference with Vickie’s inheritance preceded the creation of Vickie’s bankruptcy estate and
any actions taken by the bankruptcy court. Her claim against Pierce would have existed
regardless of whether she sought bankruptcy protection. In contrast, all of the claims at issue
here arise out of the management of the bankruptcy estate and the bankruptcy proceedings
themselves.
The court’s ruling accords with the decisions discussed above holding that bankruptcy
courts continue to have the authority to enter final judgment on fraudulent conveyance actions.
Similarly, the court finds itself in agreement with the decisions issued by the Honorable Ted
27

Stewart, who has also held that a narrow interpretation of Stern is appropriate. Finally, the court
follows the Supreme Court’s own statement that its decision in Stern did not “meaningfully
change[] the division of labor” in the current bankruptcy scheme. Stern, 131 S. Ct. at 2620. It is
certainly possible that either the Tenth Circuit or the Supreme Court will at some point issue a
decision inconsistent with this narrow interpretation, but the facts of this case illustrate the
difficulty of reading the Stern decision broadly in the absence of additional clarification. The
causes of action at issue here do not fit neatly into a recognized class of actions, such as
fraudulent conveyance claims, state law counterclaims on a creditor’s proof of claim, or, as noted
above, actions to augment the bankruptcy estate. While the court has relied on existing caselaw
to determine whether the mix of state law and bankruptcy claims in this action require a jury trial
under the Seventh Amendment, the court is hesitant to perform a similarly detailed analysis
under Article III. Such an approach would throw into doubt the bankruptcy court’s ability to
enter final judgment on a wide variety of claims, thereby substantially changing the division of
labor in the bankruptcy statute. The court therefore awaits further guidance before denying the
bankruptcy court’s traditional authority to enter final judgments on additional classes of claims
other than the state law counterclaims explicitly mentioned in Stern.
One final consideration supports the court’s decision on this matter. The court has not yet
addressed whether the claims and counterclaims at issue here are core or non-core claims as
defined by the Bankruptcy Code. While the Trustee asserts that all of the causes of action are
core claims, the parties did not extensively brief this issue. The court has proceeded under the
assumption that the Trustee is correct, but believes that the bankruptcy court has been granted the
authority and is in a better position to determine for itself whether a claim presents a core or a
28

non-core issue. If the bankruptcy court determines that a cause of action is non-core, then the
bankruptcy judge will issue findings of fact and conclusions of law that will be reviewed by the
district court de novo. See 28 U.S.C. § 157(c)(1). As a result, any Stern problem is moot for
matters that are deemed non-core because the bankruptcy court will only issue a report and
recommendations and not a final judgment for these claims. The Defendants’ Motion to
Withdraw the Reference at this stage in the litigation, at least to the extent that the Defendants
seek to withdraw the reference under Stern, has the effect of preempting the bankruptcy’s
determination of whether the issues presented to it are core or non-core. For this reason, the
Defendants’ Motion is also premature.8
CONCLUSION
For the reasons stated above, the Defendants’ Joint Motion to Withdraw the Reference for
Adversary Proceeding 12-2225 (Dkt. No. 2) is DENIED WITHOUT PREJUDICE. The parties
may refile their motion when, and if, any remaining issues are ready to be submitted for a jury
trial. The court GRANTS the Trustee’s Motion to Substitute Party (Dkt. No. 9) and has
substituted Ms. Loveridge as REDCO’s Chapter 7 Trustee in these proceedings.

8

Even though the court finds that the Defendants’ Motion is premature, the court has
addressed the merits of the Defendants’ argument under Stern because of the importance of the
question presented and the likelihood that many, if not all, of the claims and counterclaims at
issue are core matters. See, e.g., Kirk v. Hendon (In re Heinsohn), 231 B.R. 48, 59 (Bankr. E.D.
Tenn. 1999) (holding that a plaintiff’s action against a trustee was a core proceeding).
29

SO ORDERED this 23rd day of September, 2013.
BY THE COURT:

______________________________
ROBERT J. SHELBY
United States District Judge

30