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In re Afroditi Ledstrom

United States District Court, District of Nevada

April 22, 2015

In re AFRODITI LEDSTROM, Debtor,
v.
1531 LVBS, LLC, a Nevada limited liability company, LV CABARET SOUTH, LLC, a Nevada limited liability company, et al., Defendants. YVETTE WEINSTEIN, Trustee, et al., Plaintiffs, Bankr. No. 12-11672-MKN Bankr. Adv. 14-01082-MKN

ORDER DENYING DEFENDANTS’ MOTION FOR WITHDRAWAL OF THE REFERENCE TO THE BANKRUPTCY COURT (#1)

JENNIFER A. DORSEY, UNITED STATES DISTRICT JUDGE

Currently before the Court is Defendant 1531 LVBS, LLC’s motion for withdrawal of the reference for adversary proceeding Case No. 14-01082-MKN to the Bankruptcy Court.[1] The motion is virtually identical to those previously denied in Case Nos. 14-cv-569 and 14-cv-900.[2] 1531 LVBS argues that I must withdraw the reference to the bankruptcy court because its action is not a core proceeding under 28 U.S.C. § 157(b) and also because 1531 LVBS has requested a jury trial and has not consented to the jurisdiction of the bankruptcy court. I decline to withdraw the reference because the bankruptcy court is far more familiar with this long-pending matter and has yet to determine whether 1531 LVBS’s adversary proceeding is a core or non-core matter.

Discussion

Article III courts have “original but not exclusive jurisdiction of all civil proceedings arising under tittle 11, or arising in or related to cases under title 11.”[3] 28 U.S.C. § 157(a) permits district courts to refer “any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11.” Under this district’s local rule 1001(1), section 157(a) matters are referred to the bankruptcy court automatically.

Upon referral, the bankruptcy court’s jurisdiction differs depending on whether the proceeding is properly characterized as core or non-core. For core proceedings-whose existence depends on the bankruptcy laws, and which are defined in section 157(b)(2)-the bankruptcy court may issue final orders, subject to the district court’s appellate review.[4] By contrast, for non-core proceedings-those whose existence does not depend on the bankruptcy laws and which could proceed in another court-the bankruptcy court may issue findings of fact and law, subject to an Article III court’s de novo review.[5] Thus, even when a bankruptcy court determines that claims are non-core, it may issue proposed findings of fact upon which the district court can base its final judgment.[6]

A. Permissive Withdrawal of the Reference Remains Premature.

1531 LVBS argues that the reference must be withdrawn because its adversary proceeding currently pending the bankruptcy court is not one over which the bankruptcy court has jurisdiction.[7]Section 157(d) provides that I may withdraw “any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown.”[8] I ascertain “cause” by considering “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.”[9]

A fair consideration of the permissive withdrawal factors counsels against withdrawal of the reference at this time. 1531 LVBS’s motion for withdrawal is virtually identical to its motions in two other cases-14-cv-569 and 14-cv-900, both of which I denied as unripe because the Bankruptcy Court had not yet determined whether the adversary proceeding is a core proceeding under 28 U.S.C. § 157(b).[10] 1531 LVBS does not indicate that the Bankruptcy Court has yet determined this case involves non-core issues. This matter and the related bankruptcy case at Bankr. No. 12-11672-MKN are complex, multi-party matters that have been pending long enough to permit Judge Nakugawa to gain substantial familiarity with the issues. Permitting the bankruptcy court presently to retain this matter will conserve judicial resources and minimize costs to the parties.

B. LVBS’s Request for a Jury Trial and Decision not to Consent to the Bankruptcy Court’s Jurisdiction Do not Presently Warrant Withdrawal Under 28 U.S.C. § 157(d).

1531 LVBS also argues that it has demanded a jury trial and not consented to the Bankruptcy Court’s jurisdiction, which is required for that court to conduct a jury trial.[11] The Seventh Amendment preserves a right to jury trial in suits at common law[12] and is “preserved to the parties inviolate.”[13] To determine whether a jury trial is necessary, a court must consider whether the cause of action “was tried at law at the time of the founding or is at least analogous to one that was”[14] and if so, evaluate “whether the particular trial decision must fall to the jury in order to preserve the substance of the common-law right as it existed in 1791.”[15]

Under 28 U.S.C. § 157(e), “If the right to a jury trial applies in a proceeding that may be heard under this section by a bankruptcy judge, the bankruptcy judge may conduct the jury trial if specially designated to exercise such jurisdiction by the district court and with the express consent of all the parties.” But even where, as here, the criteria for the bankruptcy court’s exercise of jurisdiction would not satisfy Section 157(e), the bankruptcy court need not immediately relinquish jurisdiction; “[i]nstead, the bankruptcy court is permitted to retain jurisdiction over the action for pre-trial matters.”[16] Additionally, “even if a bankruptcy court were to rule on a dispositive motion, it would not affect a party’s Seventh Amendment right to a jury trial, as these motions merely address whether trial is necessary at all.”[17]

I note again that the bankruptcy court has not determined whether the proceeding is core or non-core-let alone whether 1531 LVBS may have stated claims over which it has the right to a jury trial. For these reasons, as well as the reasons articulated above, I conclude that the matter is best left in the hands of the bankruptcy court at this time, and that the bankruptcy court should continue to adjudicate all matters preceding an actual jury trial before it relinquishes jurisdiction to this court.

Conclusion

Accordingly, IT IS HEREBY ORDERED that Defendants’ Motion for Withdrawal of the Reference (Doc. 1) is DENIED without prejudice.


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