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In re Foresight Applications & Systems Technologies, LLC

United States District Court, D. Colorado

April 22, 2015



MARCIA S. KRIEGER, Chief District Judge.

THIS MATTER comes before the Court on the Defendant NHM Interest, LLC's Motion to Dismiss Proceeding with Prejudice or, In the Alternative, To Withdraw the Reference (#2).[1] The Plaintiff/Debtor Foresight Applications & Systems Technologies, LCC filed a Response (#6) to the motion, and the Debtor replied (#13).

The Debtor initiated this adversary proceeding in the United States Bankruptcy Court for the District of Colorado, seeking to avoid and recover a pre-petition transfer to the Defendant in the amount of $562, 500. The Debtor asserts two alternative claims to recover the payment. It either seeks to recover the sums paid under 11 U.S.C. § 547(b) as a preferential payment, or under 11 U.S.C. § 548 as a fraudulent transfer.

Although the District Court has original and exclusive jurisdiction in bankruptcy matters, this matter was automatically referred to the Bankruptcy Court pursuant to 28 U.S.C. § 157 and D.C.COLO.LCivR 84.1. Now, pursuant to 28 U.S.C. § 157(d), the Defendant requests that the automatic reference be withdrawn because it has a Seventh Amendment right to a jury trial on the fraudulent transfer claim which cannot be fulfilled in the Bankruptcy Court.

Section 157(d) provides that the Court may withdraw its reference of a case or proceeding, in whole or in part, on motion by a party "for cause shown."[2] It is undisputed that the Defendant has a right to a jury trial[3] on the claims asserted in this action. See Granfinanciera, S.A. v. Nordberg , 492 U.S. 33, 64 (1989); Langenkamp v. Culp , 498 U.S. 42, 44-45 (1990). There is no evidence of record indicating that the Defendant has waived its right to a jury trial. Because the Bankruptcy Court in this district is not authorized to conduct jury trials, preservation of such right requires withdrawal of an adversary proceeding to the district court. See In re Kaiser Steel Corp. , 911 F.2d 380, 392 (10th Cir. 1990) ("Where the seventh amendment requires a jury trial to be held in bankruptcy, that trial must take place in the district court, sitting in its original jurisdiction in bankruptcy.").[4] Thus, the Court finds that cause to withdraw the automatic reference has been shown.

The Debtor argues that the interests of judicial economy dictate that any withdrawal of the reference should be delayed. Indeed, the Court notes that some courts have permitted a reference to stand during the pendency of pretrial proceedings. See, e.g., In re Kirk E. Douglas, Inc. , 170 B.R. 169, 170 (D.Colo. 1994); Centrix v. Nat'l Union Fire Ins. Co. , 2011 WL 63505 (D.Colo. Jan. 7, 2011); Centrix v. Sutton , 2009 WL 1605826 (D.Colo. June 8, 2009). The Court agrees that the Bankruptcy Court, with its knowledge of Title 11 and familiarity with this case, should oversee the pretrial proceedings of the matter until it is ready for trial. This can be accomplished be either delaying the withdrawal of reference or by withdrawing the adversary proceeding, in part.

The Court elects the latter approach, withdrawing the adversary proceeding only for purposes of a jury trial. In this way, the Bankruptcy Court will otherwise retain its authority to supervise and resolve of all pretrial matters, including dispositive motions.[5] See In re M & L Business Mac. Co., Inc. , 159 B.R. 932, 934 (D.Colo. 1993) (defendant's right to jury trial not disturbed by allowing bankruptcy judge to oversee pre-trial supervision of case); In re , 504 F.3d 775, 787 (9th Cir. 2007) (resolution of dispositive motions by bankruptcy court does not diminish a party's right to a jury trial, as these motions merely address whether a trial is necessary at all).

A Final Pretrial Conference will be scheduled before this Court once dispositive motions have been determined or upon the request of the parties if no dispositive motions are filed. Counsel are instructed to jointly contact chambers within 10 days after the determination of all dispositive motions, or the passing of any dispositive motions deadline without the filing of a dispositive motion, in order to set the Final Pretrial Conference. Counsel shall meet and confer sufficiently in advance of the Final Pretrial Conference to jointly prepare a Proposed Final Pretrial Order, in accordance with the format and procedures as set forth in the forthcoming Trial Preparation Order.

For the forgoing reasons, the Motion to Dismiss or, In the Alternative, to Withdraw the Reference, is GRANTED, IN PART, AND RESERVED, IN PART. The automatic reference of this proceeding to the Bankruptcy Court is WITHDRAWN only for purpose of conducting a jury trial. The Bankruptcy Court shall retain jurisdiction over the adversary proceeding for supervision and resolution of all pretrial matters.

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