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In re McPherson

United States District Court, D. Nevada

November 19, 2014

In re GARY PHILLIP MCPHERSON, Debtor.
v.
BANK OF AMERICA, N.A., Defendant GARY PHILLIP MCPHERSON, Plaintiff,

For Gary P. McPherson, Plaintiff: Sheryl Serreze, LEAD ATTORNEY, Reno Law Group LLC, Reno, NV.

For Bank of America NA, Defendant: Jennifer W. Arledge, Richard Dreitzer, LEAD ATTORNEYS, Wilson Elser Moskowitz Edelman & Dicker LLP, Las Vegas, NV.

ORDER

ROBERT C. JONES, United States District Judge.

This is an adversary proceeding, ( see Adv. No. 13-ap-05057-BTB), arising out of Plaintiff's Chapter 13 bankruptcy case, ( see In re McPherson, No. 13-bk-50685-BTB). Defendant Bank of America, N.A. (" BOA") has asked the Court to withdraw the reference of the adversary proceeding. For the reasons given herein, the Court denies the motion.

I. LEGAL STANDARDS

The Supreme Court long ago ruled that a judge not afforded the protections of life tenure and irreducible salary given to judges under Article III of the Constitution, such as a bankruptcy judge, cannot enter final judgments on matters traditionally decided by Article III judges. See Dunmore v. United States, 358 F.3d 1107, 1114 (9th Cir. 2004) (citing N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982)). Congress amended the Bankruptcy Code to conform to this ruling, distinguishing " core" bankruptcy proceedings from " non-core" proceedings. Id. Congress has enumerated what it considers to be core proceedings, see id . (citing 28 U.S.C. § 157(b) (2)), but it has not enumerated non-core proceedings, see id . " Non-core" proceedings are those that " do not depend on the Bankruptcy Code for their existence and . . . could proceed in another court." Id. (citing Sec. Farms v. Int'l Bhd. of Teamsters, 124 F.3d 999, 1008 (9th Cir. 1997)).

A bankruptcy court may hear and finally determine bankruptcy cases under Title 11 and proceedings arising under Title 11 or arising in a case under Title 11. See 28 U.S.C. § 157(b) (1). A bankruptcy court may hear a non-core proceeding but must submit proposed findings of fact and conclusions of law to the district court for final determination de novo. § 157(c) (1). The Ninth Circuit has adopted the Fifth Circuit's reasoning in distinguishing three types of proceedings: (1) those " arising under" Title 11; (2) those " arising in" a case under Title 11; and (3) those " related to" a case under Title 11, which are the three categories of cases over which district courts have subject matter jurisdiction pursuant to 28 U.S.C. § 1334(b):

28 U.S.C. § 157(b) defines core proceedings as ones " arising under title 11, or arising in a case under title 11, " and gives a nonexhaustive list of types of core proceedings. " Arising under" and " arising in" are terms of art. They are two of the three categories of cases over which district courts have jurisdiction under 28 U.S.C. § 1334(b). The third category includes cases " related to" a case under title 11. As the Fifth Circuit has explained,
Congress used the phrase " arising under title 11" to describe those proceedings that involve a cause of action created or determined by a statutory provision of title 11 . . . . The meaning of " arising in" proceedings is less clear, but seems to be a reference to those " administrative" matters that arise only in bankruptcy cases. In other words, " arising in" proceedings are those that are not based on any right expressly created by title 11, but nevertheless, would have no existence outside of the bankruptcy.
The court concluded: " If the proceeding does not invoke a substantive right created by the federal bankruptcy law and is one that could exist outside of bankruptcy it is not a core proceeding; it may be related to the bankruptcy because of its potential effect, but . . . it is an 'otherwise related' or non-core proceeding."

In re Eastport Assoc., 935 F.2d 1071, 1076-77 (9th Cir. 1991) (citations omitted) (quoting In re Wood, 825 F.2d 90, 96-97 (5th Cir. 1987) (footnotes omitted)).

Upon motion or sua sponte a district court may withdraw, in whole or in part, any case or proceeding under § 157. 28 U.S.C. § 157(d). A district court must upon timely motion withdraw a proceeding if it 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." Id. The party moving for withdrawal has the burden of persuasion. See In re First Alliance Mortg. Co., 282 B.R. 894, 902 (C.D. Cal. 2001).

Although a bankruptcy court may not finally determine non-Title 11 issues, the presence of such an issue alone does not mandate withdrawal of the reference. In re Vicars Ins. Agency, 96 F.3d 949, 953 (7th Cir. 1996). Rather, withdrawal is mandatory only " in cases requiring material consideration of non-bankruptcy federal law." Sec. Farms, 124 F.3d at 1008. Put differently, " mandatory withdrawal is required only when those issues require the interpretation, as opposed to mere application, of the non-title 11 statute, or when the court must undertake analysis of significant open and unresolved issues regarding the non-title 11 law." Id. at 954. Permissive withdrawal is allowed, however, " for cause shown, " 28 U.S.C. ยง 157(d), which a district court determines by considering " the efficient use of judicial resources (which is enhanced when noncore ...


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