In re Butler

         CHAPTER 7 No. 17-11217-FJB

          MEMORANDUM OF DECISION

          WILLIAM G. YOUNG, DISTRICT JUDGE.

         I. INTRODUCTION

         "[J]urors are the life's blood of our third branch of government." Marchan v. John Miller Farms, Inc., 352 F.Supp.3d 938, 947 (D.N.D. 2018). Here, the defendants in a bankruptcy adversary case, Robert E. and Leslie A. Bateman (collectively, the "younger Batemans") and the Town of Sebago, Maine rsebago"), sought to withdraw the reference of that case to the Bankruptcy Court. Mot. Withdraw Reference Bankruptcy Ct. 1-7 ("Mot. Withdraw"), ECF No. I.^[1] Because this case invokes quintessential jury questions and waiting to withdraw the reference would slow the flow of the very "life's blood of our third branch of government," the Court GRANTED the younger Batemans and Sebago's motion. See Marchan, 352 F.Supp.3d at 947.

         II. BACKGROUND

         Thomas R. and Katherine E. Bateman (collectively, the "elder Batemans," or, collectively with the younger Batemans, the "Batemans") filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Massachusetts (the "Bankruptcy Court") on April 5, 2017. Chapter 11 Voluntary Pet. Individual, In re Bateman, Ch. 7 No. 17-11217-FJB (Bankr. D. Mass. Apr. 5, 2017) ("In re Bateman"), ECF No. 1. Pursuant to the United States Trustee and the elder Batemans' stipulation, the Bankruptcy Court converted the case into a Chapter 7 proceeding on February 5, 2018, Proceeding Mem./Order, In re Bateman (Feb. 5, 2018), ECF No. 134, and appointed Joseph G. Butler ("Butler") as Chapter 7 Trustee the next day, Certificate Appointment, In re Bateman (Feb. 6, 2018), ECF No. 135.

         On January 2, 2019, Butler filed a verified adversary complaint against the younger Batemans and Sebago. Verified Adversary Compl. Avoid & Recover Fraudulent Transfer & Inj. Relief ("Adv. Compl."), In re Bateman (Jan. 2, 2019), ECF No. 188, Butler v. Bateman (In re Bateman) ("Adv. Proc"), Adv. Proc. No. 19-01001, ECF No. 1. The adversary complaint alleges that the elder Batemans fraudulently transferred their Sebago vacation home to the younger Batemans through Sebago after Sebago enforced a real estate tax lien on the vacation home. Adv. Compl. 1. The adversary complaint demands damages from the allegedly fraudulent transfer or rescission of the transaction. Adv. Compl. ¶¶ 62-63, 71-72, 79-80, 90-91. On January 31, 2019, the younger Batemans answered the adversary complaint and demanded trial by jury. Answer & Jury Demand Defs. Robert E. Bateman & Leslie A. Bateman, Adv. Proc, ECF No. 34. On March 1, 2019, Sebago moved to dismiss the adversary complaint, which Butler opposed. Sebago's Mot. Dismiss Verified Compl. Avoid & Recover Fraudulent Transfer & Inj. Relief Incorporated Mem. Law, Adv. Proc, ECF No. 39; Pl.'s Opp'n Sebago's Mot. Dismiss Verified Compl. Avoid & Recover Fraudulent Transfer & Inj. Relief, Adv. Proc., ECF No. 44.^[2]

         On March 8, 2019, the younger Batemans moved to withdraw the reference to the Bankruptcy Court. Mot. Withdraw 1. The younger Batemans and Butler fully briefed the motion, and the Court heard argument on the motion on March 25, 2019. See Opp'n Chapter 7 Trustee Defs. Robert E. Bateman & Leslie A. Bateman's Mot. Order Withdrawing Reference Bankruptcy Ct. 10-17 ("Butler's Opp'n"), ECF No. 1; Reply Defs. Robert E. Bateman & Leslie A. Bateman Opp'n Chapter 7 Trustee Mot. Order Withdrawing Reference Bankruptcy Ct. 18-23 ("Reply"), ECF No. 1. At the motion hearing, Sebago orally joined the younger Batemans' motion. After hearing argument, the Court GRANTED the younger Batemans' motion. Electronic Clerk's Notes, ECF No. 8. This memorandum explains the Court's reasoning.

         III. ANALYSIS

         The Court granted the motion for an order withdrawing the reference because the Seventh Amendment to the United States Constitution entitles the younger Batemans and Sebago to a jury trial. See Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 40-42 (1989); Riley v. Wolverine, Proctor & Schwartz Ltd. (In re Wolverine, Proctor & Schwartz, LLC), 404 B.R. 1, 2-3 (D. Mass. 2009) (O'Toole, J.). Withdrawal of the reference at this stage of the litigation also avoids this Court's de novo review of the Bankruptcy Court's findings of fact and conclusions of law on Sebago's motion to dismiss, an efficient use of limited judicial resources. See DeGiacomo v. Holland & Knight, LLP (In re Inofin, Inc.), Chapter 7 No. 11-11010-JNF, Civ. A. No. 14-10483, 2014 WL 1795575, at *2-3 (D. Mass. May 2, 2014) (Gorton, J.) ("Inofin I").

         A. Standard of Review

         Butler's adversary complaint alleged bankruptcy court jurisdiction with citation to sections 157(b) and 1334(b) of chapter 28 of the United States Code, which authorize the bankruptcy courts to hear cases arising out of chapter 11 of the United States Code. Adv. Compl. ¶ 4. This Court's Local Rule 201 provides that any such cases "shall be referred" to the Bankruptcy Court, thereby implementing sections 157(b) and 1334(b).

         Even so, section 157(d) allows the Court to withdraw the reference "on timely motion of any party, for cause shown." Congress intended for district courts to withdraw the reference to bankruptcy courts only where "essential to preserve a higher interest." Agin v. Sam Hill, LLC, No. 14-CV-12885, 2014 WL 6773727, at *2 (D. Mass. Dec. 2, 2014) (Casper, J.) (quoting Weiss v. Lockwood, 499 B.R. 392, 393 (D. Mass. 2013) (Gorton, J.)) .

         Although section 157(d) does not define "cause," courts hold that cause to withdraw the reference obtains where withdrawal would further the "goals of [1] promoting uniformity in bankruptcy administration, [2] reducing forum shopping and confusion, [3] fostering the economical use of the debtors' and creditors' resources, and [4] expediting the bankruptcy process." Federal Trade Common v. American Inst. for Research & Dev., 219 B.R. 639, 647 (D. Mass. 1998) (Ponsor, J.) (quoting Gray v. Solvay Polymers, Inc. (In re Dooley Plastic Co., Inc.), 182 B.R. 73, 80 (D. Mass. 1994) (Lindsay, J.)); see also Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 999 (5th Cir. 1985)). Other sessions of this Court have thus ruled that "[c]ause to withdraw a reference exists where a party has a right to a trial by jury and does not consent to having that trial in the bankruptcy ...