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In re Kelley

United States District Court, D. Colorado

June 27, 2016

In re IRA E. KELLEY, and ROSE M. KELLY, Debtors.
v.
METRO COLLECTION SERVICE, INC., Defendant/Third-Party Plaintiff, IRA E. KELLEY, ROSE M. KELLEY, STEVEN D. KILGORE, SHERRON R. KILGORE, SAMUEL J. SMITH, and NANETTE M. LAFRANCE, Plaintiffs,
v.
THE ESTATE OF MARCUS DEAN GROSSENBACH, Third-Party Defendant.

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION TO WITHDRAW REFERENCE

          Marcia S. Krieger Chief United States District Judge

         THIS MATTER comes before the Court on the Defendant/Third-Party Plaintiff Metro Collection Service, Inc.’s Motion to Withdraw Reference and Request for Trial by Jury (#1). The Plaintiffs filed a Response to the motion, which can be found at Docket #111 in Bankruptcy Case No. 14-01501-EEB. No response or opposition has been filed by the Estate of Marcus Dean Grossenbach (Mr. Grossenbach).

         I. Background

         In July 2013, the Debtors filed a voluntary petition for bankruptcy protection under Chapter 7 of the United States Bankruptcy Code. In October 2013, the Debtors were granted a discharge under 11 U.S.C. § 727, and the case was closed. Thereafter, the Debtors, along with other named Plaintiffs, initiated this adversary proceeding against Metro Collection Service, Inc. (Metro), Marcus Grossenbach, and John Doe.[1] The adversary proceeding complaint alleges the following facts.

         Each of the named Plaintiffs hired the Law Offices of Sharon Grossenbach to file a Chapter 7 bankruptcy case. They each entered into a fee agreement with Ms. Grossenbach. The fee agreement provided that a portion of the fee was to be paid before the bankruptcy petition was filed and that the remainder of the fee was to be paid after the bankruptcy petition was filed. Sharon Grossenbach passed away in November 2013.

         Marcus Gossenbach, Sharon Grossenbach’s son worked at her Law Office as office administrator. After his mother’s death, Mr. Grossenbach (who is not an attorney) and John Doe formed a “bankruptcy petition preparer company” known as Grossenbach and Tree, which they claimed was the successor company to the Law Offices of Sharon Grossenbach. Mr. Grossenbach began to “aggressively” pursue the Plaintiffs for payment of fees owed to Ms. Grossenbach. Mr. Grossenbach and John Doe hired Metro to collect on the debts.

         The Plaintiffs allege that Metro knew or should have known that they were attempting to collect on pre-petition debts that were subject to automatic stay and/or discharge injunctions. The Plaintiffs assert claims that the Defendants’ actions in collecting and attempting to collect on the pre-petition debts violated the automatic stay and/or the discharge injunction issued in each of their respective bankruptcy cases.

         During the pendency of this adversary proceeding, Mr. Grossenbach passed away. The Plaintiffs then withdrew their claims against Mr. Grossenbach and John Doe, leaving only claims against Metro. The Plaintiffs seek to enjoin Metro from collecting on the debts, and request an award of actual damages, including disgorgement of all fees paid post-petition, as well as punitive damages.

         Metro filed a Third-Party Complaint against the Estate of Mr. Grossenbach asserting claims based upon Colorado law. The Third-Party Complaint alleges that when Ms. Grossenbach died, Mr. Grossenbach was appointed the personal representative of her estate. Mr. Grossenbach, doing business as Grossenbach and Tree, assigned 64 accounts involving unpaid attorney fees owed to Sharon Grossenbach to Metro. It alleges that Mr. Grossenbach represented to Metro that he had the right to collect on the debts, that he was assigning his rights and interests in the accounts, and that at no time did he advise Metro that the assigned debts may have been subject to bankruptcy or discharge. Metro asserts claims for (1) negligent misrepresentation in that Mr. Grossenbach knowingly misrepresented that he had the right to collect on the debts and that Metro detrimentally relied on his misrepresentations; and (2) fraud in the inducement in that Metro relied on Mr. Grossenbach’s misrepresentations when accepting the assignment of the 64 accounts. Metro demands a jury trial on its claims and seeks actual damages and attorney fees.

         The Third-Party Complaint also alleges that Metro filed a claim in the probate action administering Mr. Grossenbach’s estate and that it has received a Notice of Disallowance of Claims, pursuant to Colo. Rev. Stat. 15-12-806. It is not clear whether Metro has sought any reconsideration of the denial of its claim.

         Pursuant to 28 U.S.C. § 157(d), Metro moves to withdraw (#1) the automatic reference of this matter to the Bankruptcy Court.

         II. Analysis

         Under the Bankruptcy Amendments and Federal Judgeship Act of 1984, district courts have original jurisdiction over bankruptcy cases and related proceedings. 28 U.S.C. § 1334(a), (b); see also Wellness Intern. Network, Ltd. V. Sharif, 135 S.Ct. 1932, 1939-40 (2015). But “[e]ach district court may provide that any or all” bankruptcy cases and related proceedings “shall be referred to the bankruptcy judges for the district.” § 157(a). This Court has generally referred bankruptcy cases and related proceedings to the Bankruptcy Court.

         When a district court refers a case to a bankruptcy judge, that judge’s statutory authority depends on the classification of the matter as a “core proceeding” or a “non-core proceeding.” §§ 157(b)(2), (4). Congress has identified as “core” a nonexclusive list of 16 types of proceedings, § 157(b)(2), in which bankruptcy courts can enter judgment. § 157(b)(1). In non-core proceedings, bankruptcy courts may “hear and determine” such proceedings, and “enter appropriate orders and judgements, ” only “with the consent of all the parties to the proceeding.” § 157(c)(2). Absent ...


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