In re: Corotoman, Inc.

Filing 9

MEMORANDUM OPINION AND ORDER directing that the 1 Motion to Withdraw Reference is granted; all pending motions in this matter are terminated. Signed by Judge Irene C. Berger on 9/24/2021. (cc: counsel of record; any unrepresented party) (btm)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
IN RE: COROTOMAN, INC.,
Debtor.
COROTOMAN, INC.,
Appellant,
v.

CIVIL ACTION NO. 2:21-mc-00120

CENTRAL WEST VIRGINIA REGIONAL
AIRPORT AUTHORITY, INC., et al.,
Appellees.
MEMORANDUM OPINION AND ORDER
The Court has reviewed the Motion to Withdraw Reference and Memorandum in Support
(Document 1), Corotoman, Inc.’s Opposition to Motion for Withdrawal of the Reference to 28
USC § 157(d) (Document 4), Defendants’ Reply to Corotoman, Inc.’s Opposition to Motion for
Withdrawal of the Reference to 28 U.S.C. § 157(d) (Document 8), and all attendant documentation.
For the reasons stated herein, the Court finds that the motion to withdraw reference to the
bankruptcy court should be granted.
FACTUAL AND PROCEDURAL BACKGROUND
On March 29, 2019, the Plaintiff, Corotoman, Inc. (Corotoman), filed its Petition for
bankruptcy in the Bankruptcy Court for the Southern District of West Virginia. 1 Corotoman filed
a Complaint against the Central West Virginia Regional Airport Authority (Airport Authority) on
1 Case number 2:19-bk-20134.

September 24, 2019, as an adversary proceeding in the Bankruptcy Court. 2 The Complaint
alleged that the Airport Authority breached its contract, good-faith and fair dealing, and its quasicontract relating to alleged thirty-five foot overblast requirements contained in a Settlement
Agreement entered into between Corotoman and the Airport Authority on July 5, 2012.
On September 23, 2020, Corotoman filed a First Amended Complaint, adding Bailey &
Wyant PLLC; L.R. Kimball & Associates, Inc.; Central Contracting, Inc.; and Dyno Nobel, Inc.
as Defendants. The First Amended Complaint asserts the following claims: (1) breach of contract
against the Airport Authority; (2) breach of good faith and fair dealing against the Airport
Authority; (3) breach of quasi-contract/unjust enrichment against the Airport Authority; (4)
declaratory judgment against the Airport Authority seeking a determination that the Settlement
Agreement is a valid contract; (5) negligence against the Airport Authority; (6) negligent
misrepresentation against the Airport Authority; (7) fraud against the Airport Authority; (8) civil
conspiracy against the Airport Authority, Bailey & Wyant, and L.R. Kimball; (9) tortious
interference against Bailey & Wyant and L.R. Kimball; and (10) trespass against the Airport
Authority, L.R. Kimball, Central Contracting, and Dyno Nobel.
On September 28, 2020, Bailey & Wyant waived service of the Amended Complaint. On
October 26, 2020, Dyno Nobel filed a motion to dismiss the Amended Complaint. On November
25, 2020, Bailey & Wyant filed a motion to dismiss the Amended Complaint. Corotoman
responded to the motions to dismiss. The Bankruptcy Court held a hearing on the motions to
dismiss on February 10, 2021.

2 Case number 2:19-ap-02013.

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On January 11, 2021, the Defendants consented to an amended scheduling order. On
February 19, 2021, the Airport Authority filed a motion for leave to file crossclaims against Bailey
& Wyant. On March 5, 2021, Bailey & Wyant filed a response in opposition to the Airport
Authority’s motion. On April 14, 2021, the Bankruptcy Court held a hearing and granted the
Airport Authority’s motion, and crossclaims were filed against Bailey & Wyant on April 22, 2021.
Bailey & Wyant filed a motion to dismiss the Airport Authority’s crossclaims on May 27, 2021.
On April 30, 2021, Bailey & Wyant filed a motion for entry of a Second Amended
Scheduling Order, which extended all pending pre-trial deadlines and the trial date by five months.
The Court granted Bailey & Wyant’s motion on March 14, 2021. The parties have been engaging
in discovery and taking depositions. Subsequent to taking depositions, Corotoman filed a motion
for partial summary judgment regarding the issue of contract formation.
On September 14, 2021, the Bankruptcy Court entered an Order denying all pending
motions to dismiss and the pending motion for summary judgment without prejudice, in view of
the motion to withdraw the reference to the Bankruptcy Court. In so ordering, the Bankruptcy
Court further stated, “The Court had taken under advisement the motions listed as numbers one
through five and was prepared to issue rulings in the coming days.” (Adversary Proceeding
Document 202 at 1.)
The Defendants now jointly move the District Court pursuant to 28 U.S.C. § 157(d) to
withdraw the automatic referral of the adversary proceeding to the Bankruptcy Court. The
Defendants’ motion was filed on September 2, 2021. The Plaintiff filed a response in opposition
on September 14, 2021. A reply was filed on September 21, 2021. The matter is ripe for
consideration.
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DISCUSSION
The Defendants argue that the reference to the Bankruptcy Court should be withdrawn
because the state law claims are “non-core” and the withdrawal does not interfere with the uniform
administration of bankruptcy law.

The Defendants further argue that withdrawal promotes

judicial economy and efficient use of the parties’ resources because bankruptcy courts do not have
the authority to issue a final judgment in a proceeding arising under state common law. Lastly,
the Defendants assert that the parties have a right to a jury trial, which cannot be provided by the
Bankruptcy Court.
The Plaintiff argues that the Defendants’ motion to withdraw the reference to the
Bankruptcy Court for the adversary proceeding is untimely and that they have failed to show cause
for filing an untimely motion. The Plaintiff asserts that the Defendants have been actively
litigating this matter for almost a year, and the matter itself has been pending for almost two years.
The Plaintiff further argues that the Defendants engaged in discovery within the Bankruptcy Court
and have, therefore, waived their rights to seek permissive withdrawal. The Plaintiff further
argues that judicial economy favors keeping the adversary proceeding in the Bankruptcy Court,
because the Bankruptcy Court has devoted considerable time and resources to this matter and has
extensive knowledge about the proceedings and issues. Lastly, the Plaintiff argues that the
Bankruptcy Court should retain jurisdiction of all pretrial matters.
In reply, the Defendants assert that the matter is not untimely because many of the
Defendants have yet to file an answer to the Amended Complaint. Instead, the Defendants have
been waiting for a ruling on the filed motions to dismiss. Thus, very little substantive activity has
occurred since the case was initiated, and the motion for withdrawal is timely.
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The Southern District of West Virginia’s local rules declare that “all proceedings arising
under Title 11 or arising in or related to a case under Title 11, are referred to the Bankruptcy Court
for disposition.” L.R. Civ. P. 83.13 (citing 28 U.S.C. § 157(a)). The Court may, however,
withdraw a reference “on its own motion or on timely motion of any party, for cause shown.” 28
U.S.C. § 157(d). The moving party bears the burden to demonstrate cause. In re Albertson, 535
B.R. 662, 666-67 (S.D. W. Va. 2015).
Six relevant factors courts examine when assessing whether to withdraw a reference for
cause include:
(1) whether the proceeding is core or non-core; (2) the uniform
administration of bankruptcy law; (3) promoting judicial economy;
(4) the efficient use of the parties' resources; (5) the reduction of
forum shopping; and (6) the preservation of the right to a jury trial.
In re U.S. Airways Group, Inc., 296 B.R. 673, 682 (E. D. Va. 2003). While not dispositive, “the
first factor – whether the matter is core or non-core – generally is afforded more weight than the
others.” In re O’Brien, 414 B.R. 92, 98 (S. D. W. Va. 2009). The Court notes, however, that
“[s]imply because the proceeding presents questions of state law does not necessarily mean that
the proceeding is non-core or otherwise beyond the jurisdiction of the bankruptcy courts.”
Blackshire v. Litton Loan Servicing, L.P., 2009 WL 426130 *2 (S. D. W. Va. 2009) (Goodwin, C.
J.) (not reported). Instead, to distinguish a core proceeding from a non-core one, courts should
evaluate whether:
(1) the claims are specifically identified as core proceedings under
28 U.S.C. § 157(b)(2).; (2) the claims existed prior to the filing of
the bankruptcy case; (3) the claims are based entirely on state law or
otherwise existed independently from title 11; and (4) the parties’
rights or obligations are significantly affected by the outcome of the
bankruptcy proceedings.
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Id.
For non-core proceedings, bankruptcy courts cannot enter final judgment, but instead
submit proposed findings of fact and conclusions of law to the district court. See Wellness Int’l
Network, Ltd. v. Sharif, 575 U.S. 665, 670-71 (2015) (citing 28 U.S.C. § 157). “Article III
prevents bankruptcy courts from entering final judgment on claims that seek only to augment the
bankruptcy estate and would otherwise exist without regard to any bankruptcy proceeding.” Id.
(quoting Stern v. Marshall, 564 U.S. 462, 495 (2011)) (internal quotation marks omitted).
The Court must first determine whether the motion to withdraw the reference was timely
filed. “If the motion is not made in a timely manner, the parties’ rights under § 157(d) are deemed
waived.” In re Mahlmann, 149 B.R. 866, 869 (N.D. Ill. 1993). Timeliness is gauged from the
moment the moving party was first aware that nonbankruptcy laws must be dealt with in resolving
the case. Id. “Courts have varied widely in the amount of delay a moving party is permitted
between learning of grounds for withdrawal and actually filing a motion to withdraw before the
motion is deemed untimely.” Id. 3 The motion for withdrawal of the reference to the Bankruptcy
Court was filed just under one year from when the First Amended Complaint was filed. However,
many of the Defendants have yet to file an answer to the First Amended Complaint.
Given the procedural posture of the case, the Court finds that the motion was timely. All
newly added Defendants have yet to file their answers or to assert substantive defenses. The
Defendants in this case filed motions to dismiss, which have not been ruled upon. The motions

3 Citing In re Sevko, Inc., 143 B.R. 114 (N.D. Ill. 1992) (five months timely given special circumstances); In re
Stavriotis, 111 B.R. 154 (N.D. Ill. 1990) (five months not timely); In Matter of Lissner Corp., 115 B.R. 604 (N.D. Ill.
1990) (seven weeks timely); In re IQ Telecommunications, Inc., 70 B.R. 742 (N.D. Ill. 1987) (one year not timely);
Laine v. Gross, 128 B.R. 588 (D. Maine) (six months untimely); In re Securities Group 1980, 89 B.R. 192 (M.D. Fla.
1988) (failure to file motion with answer untimely); Burger King Corp. v. B-K of Kansas, Inc., 64 B.R. 738 (D. Kansas
1986) (ten months was timely); In re Giorgio, 50 B.R. 327 (D. Rhode Island 1985) (six months not timely).

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to dismiss were not argued until February 10, 2021. A stipulation was entered into between the
newly added Defendants and Corotoman, relieving the Defendants from responding to written
discovery until the Bankruptcy Court ruled on the motions to dismiss. Defendants Bailey &
Wyant and the Airport Authority are the only two Defendants to have engaged in discovery, apart
from attending two depositions.
The Court finds that the matters underlying the current adversarial claims should be
classified as non-core. First, the current claims are not specifically identified as core proceedings
under 28 U.S.C. § 157(b)(2), and the claims – all involving West Virginia state law – are capable
of resolution without reference to the Bankruptcy Code. Next, the claims existed prior to the
filing of the bankruptcy case. Lastly, the parties’ rights or obligations will not be significantly
affected by the outcome of the bankruptcy proceeding. The adversary proceeding, at most, would
result in an augmentation of the bankruptcy estate.
Finding that the instant claims involving West Virginia state law are non-core, the Court
will now consider the six factors relevant to withdrawing a reference for cause. The matter is
before the Bankruptcy Court on a reference and will ultimately require submission of proposed
findings of fact and conclusions of law by the Bankruptcy Judge since the adversary proceeding
involves non-core claims. Removing the reference now and, thus, facilitating this Court’s earlier
review, will promote judicial economy and facilitate efficient use of the parties’ resources.
However, the Plaintiff asserts that the motion for withdrawal was filed untimely, given the length
of time for which this matter has been pending. As outlined above, this matter has been pending
before the Bankruptcy Court for approximately two years and has been pending against the moving
Defendants for approximately one year. The Bankruptcy Court has held a hearing regarding the
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motions to dismiss and is familiar with the issues and the parties at this stage. Necessarily,
withdrawal of the reference will require review of these same motions by this Court. Since this
Court will ultimately have to review the material to enter a final judgment in the adversary
proceeding, this dual review is not necessarily dispositive. Therefore, the Court finds that the
prong related to judicial economy and efficient use of the parties’ resources is neutral and does not
weigh in favor of or against withdrawal of the reference.
No questions are presented regarding the uniform administration of bankruptcy law and,
thus, that factor receives no consideration. Finally, there are no facts indicating judicial or forum
shopping, and while somewhat premature, the Court notes that there is already a pending dispute
regarding the parties’ consent to a jury trial before the Bankruptcy Court, as well as an issue of
whether the Bankruptcy Court has the constitutional authority to finally hear and determine the
instant proceeding.
Therefore, considered in the totality, the Court finds that the factors weigh in favor of
withdrawing the reference to the Bankruptcy Court. The adversary proceeding is non-core,
withdrawing the reference facilitates preservation of the parties’ right to a jury trial, and all other
factors are neutral.
CONCLUSION
WHEREFORE, after thorough review and careful consideration, the Court ORDERS that
the Motion to Withdraw Reference (Document 1) be GRANTED.
ORDERS that all pending motions in this matter be TERMINATED.

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Accordingly, the Court

The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and to
any unrepresented party.
ENTER:

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September 24, 2021