United States District Court, W.D. Washington, Seattle
EDMUND J. WOOD, Plaintiff,
RESTAURANT GROUP INC., Defendant.
ORDER ON MOTION TO WITHDRAW THE REFERENCE
Honorable Richard A. Jones United States District Judge.
matter comes before the Court on Defendant Restaurant Group,
Inc. (RGI) Motion to Withdraw the Reference. Dkt. # 1-1.
Plaintiff has not filed a response in this case but indicated
in proceedings before the Bankruptcy Court that he did not
object to the Motion. Id. at 11. For the reasons
stated below, the Court GRANTS IN PART AND DENIES IN
PART RGI's Motion and REFERS
this case to the Bankruptcy Court for all pretrial
proceedings in accordance with this Order.
Edmund J. Wood, the Chapter 7 Trustee for the estate of
Parlor Bellevue LLC (the “Parlor Bellevue” or
“Debtor”), brought an adversary proceeding
against RGI seeking to avoid and recover certain alleged
fraudulent transfers. Dkt. # 1-1 at 5. RGI answered the
complaint on July 26, 2018. Id. RGI simultaneously
filed a jury demand and a Notice Regarding Final Adjudication
and Consent indicating its non-consent to the Bankruptcy
Court entering final orders and judgment in the Proceeding.
Id. RGI then filed this motion, which is now before
the Court. Dkt. # 1.
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 has the authority to withdraw the
reference in whole or in part, sua sponte or on
motion of any party, for cause shown. 28 U.S.C. §
first argues that its demand for a jury trial
“necessitates” that the reference be withdrawn.
Id. at 8. The Court does not necessarily agree, as
the demand for a jury trial does not necessitate automatic
withdrawal of the reference. Sigma Micro Corp. v.
Healthcentral.com, 504 F.3d 775, 787-788 (9th Cir.
2007); see also Flores v. Gray Servs. LLC, No.
CV-14-01075-PHX-DGC, 2014 WL 4179888, at *2 (D. Ariz. Aug.
18, 2014) (“The fact that a jury trial has been
demanded is not alone sufficient to require withdrawal of the
reference.”). Accordingly, to the extent RGI's
motion requests mandatory withdrawal, the Motion is
Court turns to whether there is otherwise cause for
withdrawal of the reference. A bankruptcy court's
statutory authority to enter judgment in a particular
proceeding depends on whether that proceeding is a
“core proceeding” under § 157. §
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). 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). Bankruptcy courts
“may enter appropriate orders and judgments” in
core proceedings. 28 U.S.C. § 157(b)(1). 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). Bankruptcy courts must submit proposed findings
of fact and conclusions of law to the district court for de
novo review in non-core proceedings. 28 U.S.C. §
157(c)(1). The Ninth Circuit's decision in In Re
Bellingham Ins. Agency, Inc. recognized that fraudulent
conveyance claims are defined as “core” under
§ 157(b), but nonetheless “cannot be adjudicated
by non-Article III judges.” 702 F.3d 553, 561 (9th Cir.
2012); see also Exec. Benefits Ins. Agency v.
Arkison, 573 U.S. 25, 35 (2014) (so-called
Stern claims are permitted “to proceed as
non-core within the meaning of § 157(c)”).
for the fraudulent conveyance claims in this case, the Court
may treat these traditionally core claims as non-core because
RGI did not consent to adjudication before the Bankruptcy
Court. In re Nw. Territorial Mint, LLC,
C16-01895-JCC, 2017 WL 568821, at *3 (W.D. Wash. Feb. 13,
2017) (finding that fraudulent conveyance claims are non-core
if both parties do not consent to adjudication by bankruptcy
court). 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.
Court finds that partial withdrawal is warranted in this
case. References to Bankruptcy Courts “promote[ ]
judicial economy and efficiency by making use of the
[Courts'] unique knowledge of Title 11 and familiarity
with the actions before them.” In re
Healthcentral.com, 504 F.3d at 787-88 (citing City
Fire Equip. Co., Inc. v. Ansul Fire Prot. Wormald U.S.,
Inc., 125 B.R. 645, 649 (N.D. Ala. 1989) (en banc)).
Permitting pretrial matters to be held in the bankruptcy
court is thus an efficient use of judicial resources, given
its familiarity with this case and expertise. Withdrawal for
purposes of conducting a jury trial may also promote
efficiency because a single proceeding in the district court
could avoid unnecessary costs implicated by the district
court's de novo review of bankruptcy determinations.
Sec. Farms, 124 F.3d at 1008-1009.
such, an efficient allocation of judicial resources would
allow the bankruptcy court to maintain jurisdiction over
pretrial matters. “Only by allowing the bankruptcy
court to retain jurisdiction over the action until trial is
actually ready do we ensure that our bankruptcy system is
carried out.” In re Healthcentral.com, 504
F.3d at 778 (citing Disbursing Agent of Murray F.
Hardesty Estate v. Severson (In re Hardesty), 190 B.R.
653, 657 (D. Kan. 1995)). Delaying the effective date of
withdrawal (by referring all pretrial matters to the
bankruptcy court) will not give rise to any undue costs or
delays, even if the Court is ultimately called upon to make a
final judgment, “given the efficiencies of having the
bankruptcy court deal with the issues in the first
instance.” In re Heller Ehrman LLP,
464 B.R. 348, 360 (N.D. Cal. 2011). The fourth factor,
prevention of forum shopping, is not addressed in the
briefing and does not appear to be a pressing issue in this
case. In any event, this factor does not appear to be
relevant as only this Court has “the power to enter
final judgment” on this proceeding. Everett v. Art
Brand Studios, LLC, 556 B.R. 437, 445-46 (N.D. Cal.
2016) (citing In re Tamalpais Bancorp, 451 B.R. 6, 8
(N.D. Cal. 2011)).
reasons stated above, the Court the Court GRANTS IN
PART AND DENIES IN PART RGI's Motion. Dkt. #
1-1. The Court will WITHDRAW the reference
for purposes of holding a jury trial before this Court, if