United States District Court, D. Massachusetts
ORDER DENYING MOTION TO WITHDRAW REFERENCE
ALLISON D. BURROUGHS U.S. DISTRICT JUDGE.
was allegedly a general and financial manager of J&T
Enterprises, Inc. d/b/a Omni Foods Supermarket
(“J&T”), which sponsored an employee welfare
benefit plan covered by the Employee Retirement Income
Securities Act (“ERISA”). The Secretary of Labor
(“Plaintiff”) contends that Defendant was the
J&T plan fiduciary and his ERISA violations resulted in
unpaid medical claims for plan participants. On December 6,
2016, Defendant initiated a chapter 13 bankruptcy proceeding
that is pending in the U.S. Bankruptcy Court for the District
of Massachusetts. See In re Avedisian, No. 16-14630
(Bankr. D. Mass. Dec. 6, 2016). Plaintiff has filed a proof
of claim in the bankruptcy case, and, on December 4, 2017,
filed an adversary complaint asserting that the debt arising
out of Defendant's ERISA violations should be found
non-dischargeable “for fraud or defalcation while
acting in a fiduciary capacity” under 11 U.S.C. §
523(a)(4). See In re Avedisian, No. 17-01150 (Bankr.
D. Mass. Dec. 4, 2017). On December 18, 2017, Plaintiff filed
a civil complaint against Defendant and J&T in this Court
to hold Defendant and J&T liable for the aforementioned
ERISA violations and, among other things, enjoin Defendant
from serving as a plan fiduciary and appoint an independent
fiduciary to administer J&T's plan. See Acosta v.
J&T Enters., Inc., No. 17-cv-12488 (D. Mass. Dec.
18, 2017). Plaintiff now moves for this Court to withdraw the
adversary complaint under 28 U.S.C. §157(d) and
consolidate it with the civil action pending in this Court.
[ECF No. 1].
U.S.C. § 157(d) describes the circumstances for
mandatory or discretionary withdrawal of the reference to the
bankruptcy court. The district court shall withdraw a
proceeding “if the court determines that resolution of
the proceeding requires consideration of both title 11 and
other laws of the United States regulating organizations or
activities affecting interstate commerce.” Id.
Here, the parties agree that the resolution of the adversary
proceeding hinges on the application of ERISA. Mandatory
withdrawal is only appropriate, however, “if the court
can make an affirmative determination that resolving the
claims will require substantial and material
consideration” of ERISA. Parkview Adventist Med.
Ctr. v. Cent. Me. Healthcare Corp., 2016 WL 730719, at
*2 (D. Me. Feb. 23, 2016) (internal quotation marks and
citation omitted). “This standard is met if resolving
the proceeding would require a court to make a significant
interpretation or engage itself in the intricacies of
[non-bankruptcy] federal law, and is not met where resolving
the case would require only simple or routine application of
[non-bankruptcy] federal law to new facts.”
Id. (internal quotation marks and citation omitted).
Here, Plaintiff has not met its burden to show that the
application of ERISA in this case will require
“substantial and material” consideration
non-bankruptcy federal law. The central issue appears to be
whether Defendant was a functional fiduciary, if not a named
fiduciary, of the J&T plan. Although applying ERISA's
functional definition of a fiduciary likely requires more
factual and legal analysis than identifying a named
fiduciary, Plaintiff fails to show that this case will
require anything more than applying ERISA's functionary
fiduciary principles to the facts of the case. Thus,
mandatory withdrawal is not required.
U.S.C. § 157(d) also permits the district court to
withdraw a proceeding, in whole or in part, “on timely
motion of any party . . . for cause shown.” A motion is
timely “if it was made as promptly as possible in light
of the developments in the bankruptcy proceeding” or,
in other words, “at the first reasonable
opportunity.” United States v. Kaplan, 146
B.R. 500, 503 (D. Mass. 1992) (quoting In re
Baldwin-United Corp., 57 B.R. 751, 753-54 (S.D. Ohio
1985)). Even if the motion were treated as timely filed,
Plaintiff has not shown cause for withdrawal.
in this circuit have emphasized that withdrawal “is an
exception to the general rule that bankruptcy proceedings
should be adjudicated in the bankruptcy court unless
withdrawal [is] essential to preserve a higher
interest.” Martinez v. Scotiabank De P.R., 484
B.R. 536, 538 (D.P.R. 2012) (quoting In re Dooley Plastic
Co., 182 B.R. 73, 90-81 (D. Mass. 1994)).
“Withdrawal, even discretionary withdrawal, is
permitted in only a limited number of circumstances.”
Id. (quoting United States v. Kaplan, 146
B.R. 500, 503 (D. Mass. 1992)). The burden is on the party
seeking withdrawal to make a “clear showing of
cause.” Id. Some courts in this circuit have
held that “with respect to core bankruptcy matters, the
party seeking withdrawal must overcome the presumption that
bankruptcy courts, and not district courts, should determine
core matters, ” id. (quoting Kelley v.
JPMorgan Chase & Co., 464 B.R. 854, 861 (D. Minn.
2011)), while others analyze whether the underlying matter
“is core or non-core” as the first step in
evaluating the totality of the circumstances for cause.
In re Tinney, 2008 WL 3200722, at *2 (D.R.I. Aug. 6,
2008); see In re Jackson Brook Inst., Inc., 280 B.R.
779, 782 (D. Me. 2002) (“In determining judicial
economy, courts weigh the preponderance of ‘core'
versus ‘noncore' claims.”). Aside from the
core versus noncore determination, a district court examining
the existence of cause considers “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.” In re
Lacey, 2011 WL 5117767, at *7 (Bankr. D. Mass. Oct. 27,
2011) (quoting In re First Alliance Mortg. Co., 282
B.R. 894, 902-02 (CD. Cal. 2001)).
the parties agree that the underlying action, which seeks the
determination of the dischargeability of a particular debt,
is a core proceeding. Cf. 28 U.S.C. § 157(b)
(core proceedings include “determinations as to the
dischargeability of particular debts”). The parties
also agree that the same legal and factual issues that are
central to the civil action are also at the forefront of the
adversary proceeding. Moreover, there is no dispute that
maintaining concurrently pending matters in the Bankruptcy
Court and the District Court is an inefficient use of time
and resources for both the parties and the courts. Plaintiff
has not shown, however, that it should be the District Court
that moves forward with this matter, at least in the first
instance, where the underlying action is plainly a core
bankruptcy proceeding and discovery in the bankruptcy case is
set to close in less than one month. Although there is an
additional party named and other relief sought in the civil
action, the Court expects that the Bankruptcy Court's
determination of the dischargeability question will resolve
key issues in the civil action, given that the additional
named party is Defendant's employer, J&T. Following
the Bankruptcy Court's determination, Plaintiff can still
proceed with the civil action as to the few remaining issues,
if any exist. To conserve resources and avoid the duplication
of efforts, this Court will STAY the civil action,
Acosta v. J&T Enters., Inc., No. 17-cv-12488 (D.
Mass. Dec. 18, 2017), pending the Bankruptcy Court's
resolution of the adversary proceeding. Accordingly, the
motion for withdrawal of the reference [ECF No. 1] is