United States District Court, W.D. Washington, Seattle
ORDER DENYING MOTION TO WITHDRAW THE
C. COUGHENOUR UNITED STATES DISTRICT JUDGE.
matter comes before the Court on Plaintiff's motion to
withdraw the reference (Dkt. No. 1). Having thoroughly
considered the parties' briefing and the relevant record,
the Court finds oral argument unnecessary and hereby DENIES
the motion for the reasons explained herein.
Territorial Mint (Mint) filed for Chapter 11 bankruptcy on
April 1, 2016. (Dkt. No. 10-1 at 2.) Shortly thereafter, the
bankruptcy court appointed Mike Calvert (Defendant) as the
bankruptcy estate's Chapter 11 trustee. (Id.)
Medallic Art Company, LLC (Plaintiff) claims that Defendant
wrongfully assumed exclusive control of Plaintiff's
assets and property (Disputed Properties) when the estate was
formed. (Id.) These assets include personal and
intellectual property found on land that was shared to some
extent between Plaintiff and Mint. (Id.) Mr. Hansen
owns 50% of Plaintiff, and was the principal Debtor of the
bankruptcy estate until Defendant replaced him.
filed an adversary proceeding in bankruptcy court on August
12, 2016. (Id. at 3.) Plaintiff brought causes of
action for (1) accounting and breach of contract, (2)
injunctive relief, (3) conversion and damages, and (4)
declaratory relief. (Id. at 3-4.) Defendant
counterclaimed for (1) substantive consolidation, (2) alter
ego, (3) fraudulent transfer, and (4) unjust enrichment.
(Id. at 5-6.)
objects to having its claims decided in a bankruptcy court,
and now brings this motion to withdraw the reference, arguing
that it has a right to a jury trial on all of its causes of
action and Defendant's counterclaims. (Dkt. No. 1 at
Standard of Review
to Local Civil Rule 87(a), “all cases under Title 11,
and all proceedings arising under Title 11 or arising in or
related to a case under Title 11” are automatically
referred to the bankruptcy court. W.D. Wash. Local Civ. R.
87(a). A district court, sua sponte or on motion of
any party, has the authority to withdraw the reference in
whole or in part for cause shown. 28 U.S.C. § 157(d).
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). There
is no exact definition of a core proceeding, although, 28
U.S.C. § 157(b)(2)(B) provides a non-exhaustive list.
In re Cinematronics, Inc., 916 F.2d 1444, 1449 (9th
Cir. 1990). In core proceedings, bankruptcy courts “may
enter appropriate orders and judgments.” 28 U.S.C.
§ 157(b)(1). Actions concerning the administration of
the bankruptcy estate are core proceedings. 28 U.S.C. §
157(b)(2)(A) and (O). A non-core proceeding is an
“action that do[es] not depend on bankruptcy laws for
[its] existence and that could proceed in another
court.” Security Farms v. Int'l Bhd. of
Teamsters, 124 F.3d 999, 1008 (9th Cir. 1997). 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. Id. at 1008-09.
determining whether the claims are core or non-core, district
courts 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.” Id. The presence
of a jury demand may be cause for withdrawal of the
reference. “If the right to a jury trial applies . . .
the bankruptcy judge may conduct the trial if specifically
designated to exercise such jurisdiction by the district
court and with the express consent of all the
parties.” 28 U.S.C. § 157(e). Bankruptcy
courts cannot conduct jury trials on non-core matters without
the consent of the parties. In re Cinematronics,
Inc., 916 F.2d at 1451. However, the demand for a jury
trial does not necessitate automatic withdrawal of the
reference. Sigma Micro Corp. v. Healthcentral.com,
504 F.3d 775, 787-88 (9th Cir. 2007). Ultimately, district
courts have discretion to determine whether the moving party
has shown sufficient cause to justify withdrawing the
reference. In re Cinematronics, Inc., 916 F.2d at
Consideration of the Factors
Whether the Claims are Core or Non-core
factor favors denying the motion because the majority of
claims and counterclaims invoke substantive rights created by
federal bankruptcy law or that could not exist outside of
bankruptcy proceedings. See In re Harris Pine Mills,
44 F.3d 1431, 1435 (9th Cir. 1995).
Plaintiff's Causes of Action
Breach of Contract
Plaintiff allegedly agreed to lease, license, and sublease
different parts of the Disputed Properties to Mint prior to
the bankruptcy. (Dkt. No. 2 at 13.) Plaintiff further claims
Defendant breached its contract by consolidating the Disputed
Properties into the bankruptcy estate. (Id.)
Plaintiff essentially argues that Defendant breached a
contract binding the estate and now improperly possesses the
breach of contract claim is a core proceeding because it
concerns “the administration of the estate.” 28
U.S.C. § 157(b)(2)(A) and (O); In re Harris,
590 F.3d 730, 738 (9th Cir. 2009) (holding state law breach
of contract claims were core proceedings under subsections
(A) and (O) because the claims were inextricably intertwined
with the trustee's sale of assets.). Furthermore,
bankruptcy courts may evaluate rights to future payments to
bankruptcy estates. In re Kincaid, 917 F.2d 1162,
1165 (9th Cir. 1990) (“determining the nature and
extent of the property of the estate is also a fundamental
function of a bankruptcy court . . . [and] fundamental to the
administration of a bankruptcy case”). As in In re
Harris, Plaintiff's breach of contract claim is
inextricably intertwined with the bankruptcy proceedings and
concerns the administration of the estate. Therefore, it is a
seeks to permanently enjoin Defendant from denying Plaintiff
access to its records, its property, and Mint employees.
(Dkt. No. 10-1 at 6.) In order to grant relief, the court
must first determine whether the property belongs to
Plaintiff or the bankruptcy estate.
the nature and extent of the property in the estate is a role
reserved for bankruptcy courts. See In re Kincaid.
917 F.2d at 1165. Therefore, ...