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IN RE UAL CORP.

United States District Court, Northern District of Illinois


April 22, 2003

IN RE UAL CORP.

The opinion of the court was delivered by: James Zagel, District Judge

OPINION

The United States moves this court to withdraw the reference in In re UAL Corp., Case Number 02 B 48191, pursuant to 28 U.S.C. § 157(d), so that I can consider its accompanying motion to modify the automatic stay. This motion concerns a third-party complaint filed by the United States against UAL arising out of a personal injury action involving a UAL employee, Larry Hoover, who filed an action against the United States (Case Number 01 C 2372) for personal injuries arising from a motor vehicle accident at O'Hare International Airport — a United States Postal Service vehicle collided with the UAL vehicle Mr. Hoover was driving. Thereafter, the United States filed a third-party complaint against UAL asserting claims for negligent spoliation of evidence and for contribution under the Illinois Joint Tortfeasor Contribution Act, 740 ILCS 100/0.01 et seq. Subsequently, UAL filed for relief under Chapter 11 of the Bankruptcy Code and, by operation of the automatic stay, all litigation in the Hoover case was stayed. The United States seeks modification of the automatic stay to allow litigation in the Hoover case to proceed in front of Judge Schenkier, who has managed this case thus far and has a fully-briefed motion by UAL to dismiss the United States' contribution and spoliation claims in front of him.

UAL emphasizes that the United States is not seeking to withdraw the reference of its spoliation of evidence and contribution claims. Rather, the United States is seeking withdrawal of the reference of its motion to modify the automatic stay, and UAL argues that this is inappropriate because the question has not yet been brought in front of the Bankruptcy Court, and therefore, there is no objection giving rise to a contested matter which would be ripe for a withdrawal motion. UAL argues that because the modification of the automatic stay is a core proceeding (see 28 U.S.C. § 157(b)(2)(G)), it must first be presented to the Bankruptcy Court. In short, UAL argues that the United States has jumped the gun. UAL asserts that the United States should have either first moved to lift the automatic stay in the Bankruptcy Court and then moved for withdrawal if there was objection, or filed a proof of claim in the Bankruptcy Court and then moved for withdrawal of its spoliation of evidence and contribution claims. The United States' response to this argument, as I interpret it, is that even if it had gone through either of these procedures, the parties would have ended up in exactly the same place as they are now, only in a more roundabout and inefficient way. This motion appears to be the United States' way of getting from point A to point B more directly since UAL's position on whether the Hoover case should be allowed to proceed in front of Judge Schenkier seems quite clear. Based on the arguments presented in its opposition to this motion, particularly those against withdrawal of the reference of the United States' third-party claims, it appears that UAL would oppose modification of the automatic stay, regardless of which court is making that decision.

I think I have discretion to address the question of withdrawing the reference and decide the matter of lifting the stay without prior presentation of the question of the stay to the Bankruptcy Judge. I think I have the discretion not to do so since the application of mandatory withdrawal (for personal injury torts) may well not apply here — an issue which is intertwined with the resolution of a personal injury action is not, for that reason alone, a personal injury tort action. Contribution claims and spoliation issues are, with some regularity, tried apart from the underlying tort action. The claims are not personal injury tort claims.

Obviously, only a District Court can decide whether to withdraw the reference but here the purpose of withdrawal is simply to have me decide whether to lift the stay. In the context of this large, complicated bankruptcy proceeding (which has been pending for some time) involving an ongoing enterprise which plays a not insignificant role in the national economy, I exercise my discretion to deny, without prejudice, the motion to withdraw in order to permit the United States to ask the Bankruptcy Court to lift the stay. The United States is right that this is a "belabored process" but, as is sometimes the case, the belabored process is the better one as it is here. It is clearly more efficient here to have the Bankruptcy Judge resolve this issue before it is presented to me.

20030422

© 1992-2003 VersusLaw Inc.



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