Fishing Vessel Owners Marine Ways Inc et al v. United States Small Business Administration et al

Filing 5

ORDER granting Defendant's 1 Motion to Withdraw Reference. Signed by Judge Richard A. Jones.(MW)

HONORABLE RICHARD A. JONES

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

9
10
11
12
13

FISHING VESSEL OWNERS MARINE
WAYS, INC., and SEATTLE MACHINE
WORKS,

No. 2:20-cv-01016-RAJ
ORDER GRANTING MOTION FOR
WITHDRAWAL OF REFERENCE

Plaintiffs,
v.

14
15
16
17

UNITED STATES SMALL BUSINESS
ADMINISTRATION and JOVITA
CARRANZA, in her capacity as Administrator
for the United States Small Business
Administration,

18
Defendants.

19
20

I.

21
22

INTRODUCTION

This matter comes before the Court on Defendants’ Motion to Withdraw the

23

Reference. Dkt. # 1-1 at 6-15. Plaintiffs filed a response disagreeing with Defendants

24

arguments but do not oppose the motion. Dkt. # 1-1 at 18-19. For the reasons stated

25

below, the Court GRANTS the motion.
II. LEGAL STANDARD

26
27
28

“All cases under Title 11, and all proceedings arising under Title 11 or arising in
ORDER – 1

1

or related to a case under Title 11” are automatically referred to the bankruptcy court.

2

W.D. Wash. Local Civ. R. 87(a). An adversarial proceeding in bankruptcy court may be

3

withdrawn for reference pursuant to 28 U.S.C. § 157(d):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. The district court shall, on timely motion of a party, so withdraw a
proceeding if the court determines that resolution of the proceeding requires
consideration of both title 11 and other laws of the United States regulating
organizations or activities affecting interstate commerce.

4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

28 U.S.C. § 157(d).
A bankruptcy court’s statutory authority to enter judgment in a particular
proceeding depends on whether that proceeding is a “core proceeding” under Section
157(b)(1). Thus, in assessing whether cause is shown, a district court “should first
evaluate whether the claim is core or non-core, since it is upon this issue that questions of
efficiency and uniformity will turn.” In re Orion Pictures Corp., 4 F.3d 1095, 1101 (2d
Cir. 1993). Non-core matters are “[a]ctions that do not depend on bankruptcy laws for
their existence and that could proceed in another court.” Sec. Farms v. Int’l Bhd. of
Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1008 (9th Cir. 1997).
Once a district court determines whether the claims are core or non-core, the Ninth
Circuit instructs district courts to consider “the efficient use of judicial resources, delay
and costs to the parties, uniformity of bankruptcy administration, the prevention of forum
shopping, and other related factors.” Sec. Farms, 124 F.3d at 1008 (citing In re Orion
Pictures Corp., 4 F.3d at 1101). Where non-core issues predominate, withdrawal may
promote efficiency because a single proceeding in the district court could avoid
unnecessary costs implicated by the district court’s de novo review of non-core
bankruptcy determinations. Sec. Farms, 124 F.3d at 1008–09. District courts have
discretion to determine whether the moving party has shown sufficient cause to justify
granting a motion to withdraw the reference. In re Cinematronics, Inc., 916 F.2d at 1451;
In re Temecula Valley Bancorp, Inc., 523 B.R. 210, 215 (C.D. Cal. 2014).
ORDER – 2

III. DISCUSSION

1

Plaintiffs Fishing Vessel Owners Marine Ways, Inc. and Seattle Machine Works

2
3

(collectively “Plaintiffs”) brought an adversary proceeding against Defendants United

4

States Small Business Administration (“SBA”) and Jovita Carranza, in her capacity as

5

Administrator for the SBA, (collectively “Defendants”) in the United States Bankruptcy

6

Court of the Western District of Washington (“Bankruptcy Court”). Dkt. # 1-1 at 18.

7

Plaintiffs claim, among other things, that the SBA exceeded its statutory authority or

8

acted arbitrarily or capriciously in violation of the Administrative Procedures Act

9

(“APA”) when it issued an emergency rule excluding bankrupt entities from the

10

Paycheck Protection Program (“PPP”). Id. at 7. Plaintiffs assert that the Bankruptcy

11

Court has statutory and constitutional jurisdiction to determine these claims. Id. at 18.

12

Plaintiffs claim that the APA claims are “statutorily ‘core’ pursuant to 28 U.S.C.

13

§ 157(b)(2)(A) because they arise in [a] matter concerning the administration of this

14

bankruptcy, and therefore, the Bankruptcy Court has subject matter jurisdiction.” Id. at

15

18.

16

Defendants claim that Congress had explicitly delegated authority to the SBA

17

Administrator to issue rules excluding bankrupt entities through the Coronavirus Aid,

18

Relief, and Economic Stimulus (“CARES”) Act and Small Business Act. Id. at 7. They

19

argue that resolving the dispute requires the interpretation of new non-bankruptcy law,

20

specifically, the CARES Act, and the emergency rules issued by the SBA as authorized

21

by the CARES Act. Id. Such a question involving interpretation of non-bankruptcy law,

22

they assert, “should be heard and resolved in the district court.” Id. at 14.

23

The Court finds agrees and finds that withdrawal is warranted in this case. The

24

primary issue here is whether the SBA overstepped its authority in excluding bankrupt

25

entities from the PPP. This is a non-core matter that requires interpretation of non-

26

bankruptcy law, and as such, should be adjudicated in the district court. The Court

27

therefore grants the motion.

28

ORDER – 3

IV. CONCLUSION

1
2
3
4

Based on the foregoing reasons, the Court GRANTS Defendants’ Motion for
Withdrawal of Reference. Dkt. # 1-1 at 6-15.
DATED this 4th day of November, 2020.

5

A

6
7

The Honorable Richard A. Jones
United States District Judge

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

ORDER – 4