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Budsberg v. Spice

United States District Court, W.D. Washington, Tacoma

September 6, 2017

BRIAN BUDSBERG, Plaintiff,
v.
TED SPICE, et al., Defendants. Adversarial No. 17-04010 BDL Bankruptcy No. 13-46104 BDL

          ORDER DENYING MOTION TO WITHDRAW THE REFERENCE

          ROBERT J. BRYAN UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Defendant Ted Spice's Motion for Withdrawal of the Reference of Adversary Proceeding. Dkt. 1. The Court has considered the pleadings filed regarding the motion and the remaining record.

         This case is an adversarial proceeding arising from a bankruptcy case filed on September 26, 2013 by Mark L. Dubois and Donna Dubois relating to interests in real property located in Pierce and Kitsap Counties. Dkt. 1-1. The properties at issue here may have belonged, at least in part, to Donna Dubois's mother, who is now deceased. Id. Defendant Spice now moves for withdrawal of the reference to U.S. Bankruptcy Court. Dkt. 1-1. For the reasons provided below, the motion should be denied.

         I. FACTS

         This case is an adversarial proceeding filed on January 27, 2017 by Brian L. Budsberg, the bankruptcy Trustee for the bankruptcy Estate of Mark L. Dubois and Donna Dubois, and asserts claims against Defendant Spice “for a determination as to the extent and validity of his interest in real property of the Estate as well as for approval, under 11 U.S.C. § 363(h), of a sale [of] the co-owner's [interest] in real property which is part of the bankruptcy estate . . .” Dkt. 1-1, at 27-35. On January 31, 2017, Defendant Spice filed a “Declaration of Ted Spice Claiming Homestead Exemption and Notice Regarding Third Party Conflicting Property States and Pending State Court Appeals Cases.” Dkt. 1-1, at 3. Counsel appeared for Defendant Spice on March 20, 2017. Id. Defendant Spice answered and asserted counter claims against Mark and Donna Dubois for breach of contract, conversion, unjust enrichment, fraudulent inducement, tortious interference with existing business contracts, tortious interference with existing business relationships, violations of Washington's Consumer Protection Act, embezzlement, “alienated property of the deceased, ” negligent misrepresentation, breach of fiduciary duty, violations of Washington's Fraudulent Transfers Act, and “non-compliance with 11 U.S.C. § 363 (h)(4)” related to the Dubois' alleged attempts to transfer, assign or sell the properties at issue. Dkt. 1-1, at 4 and 37-54. The bankruptcy court has held status hearings in the case, the last of which was on July 11, 2017; the next status hearing is set for September 20, 2017. Dkt. 1-1, at 4.

         The parties' dispute over real properties, including the ones at issue here, began shortly after Donna Dubois filed a case in 2010 to probate her mother's estate Estate of Doris E. Mathews, Pierce County, Washington Superior Court case number 10-4-00037-5. Dkt. 1-1, at 8. Lengthy state court proceedings in various cases ensued. Id.

         After Donna and Mark Dubois declared bankruptcy in 2013, Defendant Spice filed a proof of claim against them in December of 2015 and again in June of 2016, related, in part, to the real property at issue here. Dkt. 1-1, at 11.

         In February of 2017, (just after this adversarial proceeding was filed) Defendant Spice filed a case in a state court against the Estate of Doris Mathews, Donna Dubois, Mark Dubois, and the Doris Elaine Mathew Living Trust. Spice v. Estate of Doris E. Mathews, Pierce County, Washington Superior Court case number 17-2-06511-6. The amended complaint in that case asserts claims for fraud, “agent acting without authority, ” violation of “RCW 11.76, ” “failure to provide funds for litigation and development costs, ” waste, and violation of Washington's Consumer Protections Act all related to the real property in Pierce County at issue here. Dkt. 1-1, at 118-137; Spice v. Estate of Doris E. Mathews, Pierce County, Washington Superior Court case number 17-2-06511-6.

         After a status conference with the Bankruptcy Court on July 11, 2017, Defendant Spice filed this motion to withdraw the reference on July 21, 2017. Dkt. 1-1, at 7-18. The Trustee has responded and opposes the motion. Dkt. 1-1, at 67-69. Defendant Spice replied (Dkt. 1-1, at 93-97) and the motion is ripe for decision.

         II. DISCUSSION

         This case was referred to the U.S. Bankruptcy Court for the Western District of Washington pursuant to 28 U.S.C. § 157 (a). Under Local Rule W.D. Wash. 87 (a), all bankruptcy cases are automatically referred to the bankruptcy judges of this district. Pursuant to Local Rule W.D. Wash. Bankr. 5011-1, a party may move to withdraw the reference. Rule 5011-1 further provides that, “[t]he district court may in its discretion grant or deny the motion in whole or in part, and may make such orders as it deems appropriate for the orderly disposition of the case or proceeding.” Section 157 (d) governs when a district court must withdraw the reference of a case to the bankruptcy court and when it may withdraw the reference. Sec. Farms v. Int'l Bhd. of Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1008 (9th Cir. 1997)(citing 28 U.S.C. § 157(d)). As the moving party, Defendant Spice has the burden to show that withdrawal of the reference is warranted. See In re Ponce Marine Farm, Inc., 172 B.R. 722 (D. Puerto Rico 1994).

         The mandatory withdrawal of the reference provision in 28 U.S.C. § 157 (d), provides in part, “[t]he 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.” Defendant Spice makes no showing that the mandatory withdrawal provision of § 157 (d) applies. The claims raised here are state law claims or are claims under title 11. There is no showing that resolution of the proceeding will require consideration of federal laws aside from the bankruptcy provisions.

         The permissive withdrawal of the reference provision in § 157 (d) provides, “[t]he 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). Accordingly, a motion to withdraw must be timely: that is it must be “made as promptly as possible in light of the developments in the bankruptcy proceeding.” Sec. Farms, at 1007, n. 3. Further, “[i]n determining whether ‘cause' exists, a district court should 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, at 1008.

         Defendant Spice's motion to withdraw the reference was not timely filed. His motion was filed six months after this adversarial case was filed. See Laine v. Gross, 128 B.R. 588, 589 (D. Me. 1991) (motion to withdraw the reference was untimely when filed over six months after the need for withdrawal became apparent). The subject matter of the adversarial case was not new to Defendant Spice; legal wrangling over the subject properties between Defendant Spice and the debtors (and ...


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