United States District Court, M.D. Alabama, Northern Division
MEMORANDUM OPINION AND ORDER
KEITH WATKINS UNITED STATES DISTRICT JUDGE.
court has in place a standing order that refers all
bankruptcy cases and related proceedings to the United States
Bankruptcy Court for the Middle District of Alabama. Unless
this court withdraws the reference of jurisdiction to the
bankruptcy court, jurisdiction over bankruptcy cases and
related proceedings resides with the bankruptcy court. Before
the court is Defendant's Motion to Withdraw the Reference
(Doc. # 1), filed pursuant to 28 U.S.C. § 157(d). This
motion is due to be denied at this time.
Defendant is Jeanne McCallan, wife of Timothy McCallan.
Timothy McCallan (McCallan) has been here before, and this
court has previously described his egregious conduct
vis-à-vis this court at length. In a nutshell,
McCallan has willfully failed to comply with the bankruptcy
court's orders to account for the whereabouts of the more
than $100 million he stole from 30, 000 victims. McCallan has
repeatedly lied to the bankruptcy court, and more than one
attorney has been suspended or disbarred from more than one
state for their role in his fraud.Defendant, McCallan's
wife, is alleged to have received fraudulent transfers of
more than $10 million of the missing $100 million her husband
has yet to account for. (Bankr. Adv. P. No. 18-03084, Doc. #
claims that under Stern v. Marshall, 131 S.Ct. 2594
(2011), the bankruptcy court has no jurisdiction over
Trustee's fraudulent conveyance claims. (Doc. # 1, at 2.)
Many a law review article has pondered the parameters of
Stern, and whether fraudulent conveyance claims fall
within its boundaries. For now, the Supreme Court has deferred
deciding whether fraudulent conveyance claims are indeed
Stern claims. However, even assuming they are, a
bankruptcy court is permitted to “issue proposed
findings of fact and conclusions of law to be reviewed de
novo by the district court.” Exec. Benefits Ins.
Agency v. Arkison, 134 S.Ct. 2165, 2168 (2014). This
court agrees with the way the Southern District of Florida
handled a similar post-Stern case:
This case is in its early stages. Leaving adjudication of
this case with the Bankruptcy Court means that the discovery
issues, settlement conferences, and motion practice will be
supervised in this adversary proceeding most efficiently by
the same court that is currently supervising the other
adversary proceedings filed in connection with the bankruptcy
estate. Given these considerations, [Defendant] has not
established cause for immediate withdrawal of the reference.
[Defendant] is entitled to a trial by jury for all issues so
triable. [Defendant's] right to a jury trial is deemed
preserved. [Defendant] does not consent to the Bankruptcy
Court conducting a jury trial in this proceeding. As a
result, the Bankruptcy Court may not try any issues as to
[Defendant] that are triable by a jury. The reference as to
this adversary proceeding shall be withdrawn as to
[Defendant] if and when this matter is ready for trial. The
reference of this adversary proceeding shall remain with the
Bankruptcy Court as to all pretrial matters, including
dispositive motions such as motions for summary judgment. A
court may wait until the case is ready to go to trial before
withdrawing the reference because allowing the bankruptcy
court to resolve pretrial issues and enter findings of fact
and recommendations of law on dispositive issues is
consistent with Congress' intent to let expert bankruptcy
judges determine bankruptcy matters to the greatest extent
possible. See also Stein v. Miller, 158 B.R. 876,
880 (S.D. Fla. 1993) (the defendants were not entitled to
have dispositive motions decided by the district court,
despite the withdrawal of the reference for the purpose of
In re Rothstein, Rosenfeldt, Adler, P.A., No.
11-62172, 2012 U.S. Dist. LEXIS 31578, at *13-15, (S.D. Fla.
Mar. 9, 2012) (cleaned up). The bankruptcy court is
well-equipped to handle this case up to the eve of trial.
Over the last five years, Defendant has attended
McCallan's hearings in the bankruptcy court on at least
six occasions. (Bankr. Adv. P. No. 18-03084, Doc. # 1, at 3.)
Additionally, this adversary proceeding is one of nine
McCallan-related proceedings currently pending before the
bankruptcy court. (Doc. # 3, at 3.) Leaving this case with
the bankruptcy court would allow discovery issues, motion
practice, and settlement conferences to be supervised
efficiently by the same court that is currently supervising
the other adversary proceedings filed in connection with
McCallan. Bankruptcy courts have been around for a very long
time, and for good reason. Indeed, although written more than
a century ago, the following may well apply here:
Courts could not tolerate, and this court would be far from
encouraging, any practices by which bankrupt debtors could
convert their property into money on the eve of failure and
deliver it over to wives . . . hoping thus to evade the
powers of the bankruptcy tribunals. Under such circumstances,
the wife should be regarded as agent of the husband, and
In re Eddleman, 154 F. 160, 161-162 (W.D. Ky. 1907).
bankruptcy court and the Trustee in this case are commended
for diligently handling McCallan's “extraordinary
case of fraud on a massive scale that was perpetrated . . .
on thousands of victims.” (No. 11-3007, Doc. # 361, at
2.) To the extent that the bankruptcy court may not dispose
of a pretrial matter, such as a dispositive motion, that
matter is referred to the bankruptcy court for a Report and
Recommendation. Defendant's right to a jury trial is
reasons above, it is ORDERED that Defendant's Motion to
Withdraw the Reference (Doc. # 1) is DENIED at this time.
Defendant may move to withdraw the reference when the case is
ready for trial. The bankruptcy court shall enter a Report
and Recommendation as to findings of fact and conclusions of
law on any dispositive pretrial matters.
case shall remain open until further order of the court.