United States District Court, N.D. Alabama, Southern Division
THOMAS E. REYNOLDS, duly authorized and appointed Trustee of the Bankruptcy Estate of Forest Energies, LLC, Plaintiff,
v.
CATERPILLAR, INC., et al., Defendants.
MEMORANDUM OPINION AND ORDER
ABDUL
K. KALLON UNITED STATES DISTRICT JUDGE
The
court has for consideration Thompson Tractor Co., Inc.'s
Motion to Dismiss or, Alternatively, for Withdrawal or
Abstention, doc. 1 in 2:18-mc-01655-AKK, and Caterpillar,
Inc.'s Motion to Withdraw the Bankruptcy Court Reference,
doc. 1 in 2:18-mc-01707-AKK, which Thomas E. Reynolds, the
Trustee of the bankruptcy estate of Forest Energies, LLC,
opposes, docs. 6 in 2:18-mc-01655-AKK; 3 in
2:18-mc-01707-AKK. The motions arise out of an adversary
proceeding the Trustee filed against Caterpillar and Thompson
Tractor, alleging breach of warranty related to certain
equipment manufactured by Caterpillar that Forest Energies
purchased from Thompson Tractor. Docs. 1 in
2:18-mc-01655-AKK; 1-1 in 2:18-mc-01655-AKK; 1-19 in
2:18-mc-01707-AKK. After careful consideration of the
parties' briefs and the relevant law, and for the reasons
discussed below, the court finds that the motions are due to
be denied.
District
courts have “original and exclusive jurisdiction of all
cases under title 11” of the Bankruptcy Code and
“original but not exclusive jurisdiction of all civil
proceedings . . . arising in or related to cases under title
11.” 28 U.S.C. §§ 1334(a)-(b). However,
district courts may refer “any or all proceedings
arising under title 11 or arising in or related to a case
under title 11” to the Bankruptcy Court. Id.
at § 157(a). Pursuant to that authority, this court
entered a general order referring all such cases and
proceedings to the bankruptcy judges for this district.
See July 16, 1984 Order, available at
https://www.alnd.uscourts.gov/general-orders-reference-bankruptcy-court;
Bank United v. Manley, 273 B.R. 229, 234 n.10 (N.D.
Ala. 2001). The district court's reference to the
bankruptcy court is not absolute, however, and, relevant
here, “[t]he district court may withdraw, in whole or
in part, any case or proceedings referred under this section,
on its own motion or on timely motion of any party, for cause
shown.” 28 U.S.C. § 157(d).
Turning
now to Thompson Tractor's and Caterpillar's
contentions, Thompson Tractor first argues that the
bankruptcy court does not have subject matter jurisdiction
over the claims asserted in the adversary proceeding because
they do not arise under Title 11 or arise in a case under
Title 11. Doc. 1 in 2:18-mc-01655-AKK at 3-4. But, the
bankruptcy court has jurisdiction over proceedings related to
cases under Title 11. See 28 U.S.C. § 1334(b).
And, “‘[a]n action is related to bankruptcy if
the outcome could alter the debtor's rights, liabilities,
options, or freedom of action (either positively or
negatively) and which in any way impacts upon the handling
and administration of the bankrupt estate.'”
Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.),
910 F.2d 784, 788 (11th Cir. 1990) (quoting Pacor, Inc.
v. Higgins, 743 F.2d 984, 994 (3rd Cir. 1984)). In other
words, a civil proceeding is related to bankruptcy if
“‘the outcome of the proceeding could conceivably
have an effect on the estate being administered in
bankruptcy.'” Id. Here, the claims
asserted in the adversary proceeding arose prior to Forest
Energies' bankruptcy petition, and they are the property
of the Chapter 7 bankruptcy estate. See doc. 1-1 in
2:18-mc-01655-AKK at 1-4. Therefore, the outcome of the
proceeding will affect the administration of the bankruptcy
estate by potentially impacting the amount available for
distribution to creditors. Consequently, this court and the
bankruptcy court have jurisdiction over the claims asserted
in the adversary proceeding.
Next,
Thompson Tractor and Caterpillar assert that the court should
withdraw the reference because the adversary proceeding is
not a core proceeding. Docs. 1 in 2:18-mc-01655-AKK at 4;
1-19 in 2:18-mc-01707-AKK. While the nature of the claims is
relevant to the decision whether to withdraw the reference to
the bankruptcy court, the “mere fact a bankruptcy
proceeding is not a core proceeding is not a sufficient
reason to grant a motion for the withdrawal of the
reference.” Birgans, 2012 WL 600339 at *3
(quotation and alteration in original omitted). See also
H&W Motor Express Co., 343 B.R. 208, 215 (N.D. Iowa
2006). Accordingly, even assuming the adversary proceeding is
not a core proceeding, that is not adequate cause to warrant
withdrawal of the reference to the bankruptcy
court.[1]
Caterpillar
also argues that withdrawal of the reference is warranted in
light of Thompson's jury demand. Doc. 1-19 in Case No.
2:18-mc-01707-AKK. This contention is unavailing.
“Federal courts have universally held that ‘a
Seventh Amendment jury trial right does not mean the
bankruptcy court must [] give up jurisdiction and that the
case must be transferred to the district court.'”
In re Tate, 2019 WL 320488, at *9 (quoting In re
Healthcentral.com, 504 F.3d 775, 787 (9th Cir. 2007)).
Thus, while the nature of the proceeding and Thompson's
jury demand weigh in favor of withdrawing the reference to
the bankruptcy court, they are not sufficient by themselves
to warrant withdrawal.[2]
Caterpillar
further contends that withdrawal of the reference is
appropriate in this case because it will not detract from
uniformity in administration of the bankruptcy estate and is
not motivated by forum shopping considerations. Doc. 1-19 in
Case No. 2:18-mc-01707-AKK at 6. But, Caterpillar has not
cited anything to support its conclusory allegation regarding
forum shopping. Therefore, the court does not weigh that
factor in deciding whether to withdraw the reference to the
bankruptcy court. And, because the claims asserted in the
adversary proceeding arose prior to Forest Energies'
bankruptcy petition, they are the property of the Chapter 7
bankruptcy estate. See doc. 1-1 in Case No.
2:18-mc-01707-AKK at 1-4. Therefore, resolution of the claims
will affect the administration of the bankruptcy estate, and
the nexus between the adversary proceeding and administration
of the bankruptcy estate weighs in favor of declining to
withdraw the reference.
Finally,
Thompson Tractor contends that the court should exercise its
discretion to abstain from hearing this adversary proceeding
because it involves only questions of state law, it is
feasible to sever the claims from the bankruptcy proceeding,
and the defendants are non-debtor parties. Doc. 1 in
2:18-mc-01655-AKK at 4. “[F]ederal courts have a strict
duty to exercise the jurisdiction that is conferred upon them
by Congress, ” Quackenbush v. Allstate Ins.
Co., 517 U.S. 706, 716 (1996), and Thompson Tractor has
not shown the existence of any “exceptional
circumstances” that could make abstention appropriate
in this case, see Morgan v. Melissa Land Taylor Mgmt.
Trust (In re Land), 2013 WL 414448, at *7 (Bankr. N.D.
Ala. Jan 30, 2013)). In any event, because the court declined
to withdraw the reference to the bankruptcy court, the
decision whether to abstain from hearing the adversary
proceeding should be made by the bankruptcy judge in the
first instance. Thompson Tractor is free to raise this issue
with Judge Mitchell.
Based
on the foregoing, Thompson Tractor's and
Caterpillar's motions, docs. 1 in Case No.
2:18-mc-01655-AKK and 1 in 2:18-mc-01707-AKK, are
DENIED. The Clerk is
DIRECTED to close these files.
---------
Notes:
[1] As the parties seeking withdrawal of
the reference, Thompson Tractor and Caterpillar bear the
burden of demonstrating adequate cause for withdrawal. In
re Tate, 2010 WL 320488, at *8 (S.D. Ala. Jan. 19, 2010)
(citing In re Peanut Corp. of America, 407 B.R. 862,
864 (W.D. Va. 2009); In re Morrison, 409 B.R. 384,
386 (S.D. Tex. 2009). Cause, which is not defined in the
statute, “is not an empty requirement, ” In
re Simmons, 200 F.3d 738, 741 (11th Cir. 2000) (citing
In re Parklane/Atlanta Joint Venture, 927 F.2d 532,
536 (11th Cir. 1991)), and a debtor “has a right to the
continued benefit of bankruptcy jurisdiction absent a showing
of cause for withdrawal, ” In re Parklane, 927
F.2d at 536. To determine whether cause exists, courts in
this Circuit “consider such goals as advancing
uniformity in bankruptcy administration, decreasing forum
shopping and confusion, promoting the economical use of the
parties' resources, and facilitating the bankruptcy
process.” In re Simmons, 200 F.3d at 742
(quoting In re Parklane, 927 F.2d at 536 n.5).
“Additional factors that may be considered include: (1)
whether the claim is core or non-core; (2) efficient use of
judicial resources; (3) a jury demand; and (4) prevention of
delay.” Birgans, (quoting In re
Price, 2007 WL 2332536, at *2 (M.D. Ala. Aug. 13,
2007)).
[2] Caterpillar also argues that
withdrawal of the reference with promote judicial economy and
efficiency because, in light of Thompson's jury demand
and indication that it will not consent to the bankruptcy
court's entry of a final order in the adversary
proceeding, this court will ultimately have to decide any
dispositive motions and preside over a potential jury trial.
Doc. 1-19 in Case No. 2:18-mc-01707-AKK at 6-7. And,
Caterpillar contends that having the adversary proceeding
heard in one forum from start to finish would benefit the
parties and the court. Doc. 4 in Case No. 2:18-mc-01707-AKK
...