The opinion of the court was delivered by: MARK FILIP, District Judge
MEMORANDUM OPINION AND ORDER
On October 11, 2004, the Plan Administrator (the "Plan
Administrator"), on behalf of the Post-Consummation Estate (the
"CFC Estate") of the Finance Company Debtors, brought an
adversary proceeding (the "Adversary Proceeding") in the U.S.
Bankruptcy Court for the Northern District of Illinois (the
"Bankruptcy Court") seeking the avoidance and recovery of alleged
preferential transfers to Lone Star RV Sales, Inc. (the
"Defendant"). The Defendant now moves pursuant to
28 U.S.C. § 157(d) to withdraw the reference of the Adversary Proceeding from
the Bankruptcy Court to this Court. (D.E. 1 (the "Motion").) As
explained below, numerous reasons dictate that it would be
imprudent to withdraw the reference in this core bankruptcy
matter at the present time. Accordingly, the Motion is denied
without prejudice. I. Background
On December 17, 2002 (the "Petition Date"), Conseco Finance
Corp. and Conseco Finance Servicing Corp. filed for protection
under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court.
After the Petition Date, additional subsidiaries filed petitions
for relief under Chapter 11 of the Bankruptcy Code. On September
9, 2003, the Bankruptcy Court entered an order confirming the
Finance Company Debtors' Sixth Amended Joint Liquidating Plan of
Reorganization Pursuant to Chapter 11 of the United States
Bankruptcy Code (the "Plan"); the Plan became effective on
September 15, 2003.
Pursuant to the Plan, the Plan Administrator was appointed for
the purpose of overseeing the liquidation and administration of
certain of the estate assets. According to the Plan, any and all
avoidance actions were assigned to the CFC Estate. The Plan
Administrator is authorized to pursue such actions for the
benefit of the CFC Estate and therefore for the benefit of the
affected creditor constituencies.
On November 15, 2003, the Bankruptcy Court entered an order
approving optional pretrial mediation procedures from which all
preference defendants had the opportunity to opt out. The CFC
Estate has settled approximately 150 of the preference actions.
Over 150 such actions remain, with the majority of such cases
(including the Adversary Proceeding) scheduled for mediation
within the next two months. (Defendant did not opt out of the
mediation process.) The Bankruptcy Court has been tending to
pre-trial matters for the various preference actions in a uniform
fashion which appears to maximize the chances for equal treatment
of the cases.
The Plan Administrator commenced the instant Adversary
Proceeding in the Bankruptcy Court against the Defendant. In the
Adversary Proceeding, the Plan Administrator has brought three claims, pursuant to 11 U.S.C. §§ 547(b) and 550, seeking
the avoidance and recovery of allegedly preferential transfers to
the Defendant. With respect to the allegedly preferential
transfers, the Plan Administrator maintains that during the
90-day period immediately preceding the Petition Date, one or
more of the Finance Company Debtors made payments (the
"Payments") totaling $81,642.06 to the Defendant. (Id., Ex. A.
¶ 11.) The Defendant admits that the Payments were made, but
denies that such Payments were preferential transfers. (Id.)
Section 157(d) of the United States Code empowers a district
court to withdraw a proceeding from the bankruptcy court on its
own motion or on timely motion of any party, and to have the
proceeding heard in the district court if there is "cause shown"
for the removal. 28 U.S.C. § 157(d). This portion of section
157(d) provides for what is known as "permissive
withdrawal,"*fn1 and it reflects "a presumption that
Congress intended to have bankruptcy proceedings adjudicated in
the bankruptcy court unless rebutted by a contravening policy."
Allard v. Benjamin (In re DeLorean Motor Co.), 49 B.R. 900,
911-12 (Bankr. E.D. Mich. 1985).
The Bankruptcy Code does not define "cause shown." Moreover,
"nothing in the legislation or otherwise indicates what may
constitute cause." Lawrence P. King, Symposium on Bankruptcy:
Jurisdiction and Procedure under the Bankruptcy Amendments of
1984, 38 Vand. L. Rev. 675, 696 (1985). In Holland Am. Ins. Co.
v. Roy, one of the seminal and first cases analyzing § 157(d),
the Fifth Circuit observed that "cause" is not a meaningless
term, and thus a district court's decision to hear a case "which
will adjudicate the rights of the debtors and its creditors . . . must be based on a sound, articulated
foundation." 777 F.2d 992
, 998 (5th Cir. 1985). The Fifth Circuit
further instructed that
considerations of judicial economy also bear on the
decision to withdraw the reference or refer to the
bankruptcy court. The district court should consider
the goals of promoting uniformity in bankruptcy
administration, reducing forum shopping and
confusion, fostering the economical use of the
debtors' and creditors' resources, and expediting the
Id. at 999. But, whether the claim is core or non-core is the
"most important" factor, In re Burger Boys, Inc., 94 F.3d 755,
762 (2d Cir. 1996), and a "district court considering whether to
withdraw the reference should first evaluate whether the claim is
core or non-core, since it is upon this issue that questions of
efficiency and uniformity will turn." In re Orion Pictures
Corp., 4 F.3d 1095
, 1101 (2d Cir. 1993).
Core proceedings are those that "directly pertain to the
administration of the debtor-creditor relationship." Am. Comm.
Serv., Inc. v. Wright Mktg., Inc. (In re Am. Comm. Serv., Inc.),
86 B.R. 681, 684 (D. Utah 1988) (citing Northern Pipe Line
Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 71 (1982)).
In a core proceeding, the bankruptcy judge renders the final
decision, subject to appeal to the district court.
28 U.S.C. § 157(b)(1), (c)(2). In contrast, non-core proceedings are
typically state common law actions which may relate only
peripherally to the bankruptcy case. See, e.g., Stallings v.
Kellog (In re Hudson Oil Co.), 68 B.R. 735 (Bankr. D. Kan.
1986). Accordingly, in non-core proceedings, a bankruptcy judge
merely makes recommendations that are subject to de novo review
in the district court. 28 U.S.C. § 157(c)(1).
Given that bankruptcy courts can adjudicate core matters to
final binding judgment and that such cases often involve facts
with which the bankruptcy court is already familiar as well as
legal issues within the bankruptcy court's expertise, precedent
teaches that hearing core matters in a district court raises a material risk of the "inefficient
allocation of judicial resources." In re Orion, 4 F.3d at 1101.
In contrast, the fact that a proceeding is non-core implicates
the weighty considerations of judicial economy and an expedient
bankruptcy process articulated by the Fifth Circuit in Holland.
Indeed, in some cases, withdrawing the reference for non-core
matters avoids unnecessary duplication of judicial
Here, the Defendant admits that the preferential transfer
claims contained in the Adversary Proceeding are core bankruptcy
issues. (D.E. 1, Ex. A. ¶ 2.) Indeed, section 157(b)(2) sets
forth a nonexclusive list of core proceedings, and it explicitly
includes "proceedings to determine, avoid, or recover
preferences." 28 U.S.C. § 157(b)(2)(F). As explained above, the
fact that the Adversary Proceeding is a core proceeding cuts
strongly against permissive withdrawal, at least at this
juncture. Nonetheless, the fact that the claims alleged in the
Adversary Proceeding are core is not dispositive of the
withdrawal analysis. Accord In re Houbigant, Inc.,
185 B.R. 680, 686 (S.D.N.Y. 1995).
The Court finds that the other considerations identified by
precedent also militate against permissive withdrawal. With
respect to judicial economy and uniformity, the Bankruptcy Court
has presided over this case for three years. The Bankruptcy Court
is presiding in a uniform manner over some 150 preference suits,
thus promoting consistency of pretrial rulings. Furthermore, the
Bankruptcy Court has instituted an optional mediation program,
which appears to have facilitated the settlement of over 150
other preference actions in addition to the approximately 150 that remain, and the overwhelming majority of
the remaining cases are scheduled for mediation in the next two
months.*fn3 There is no doubt that the Bankruptcy Court is
in the best position to monitor the progress of this litigation
and ensure a uniform, efficient administration of the bankruptcy
estate and the various preference actions in dispute. See, e.g.,
Bus. Comm., Inc. v. Freeman, 129 B.R. 165, 166 (N.D. Ill. 1991).
The Defendant's Motion also raises concerns identified in
precedent of manipulation and "forum shopping," at least at this
stage of the proceedings, in that the Defendant is seeking to
displace itself from the uniform pretrial administration process
that is already in place and that appears to be functioning
smoothly and efficiently. See, e.g., Holland, 777 F.2d at 999
(discussing concerns of reducing forum shopping, promoting
uniformity, and fostering the economical use of the debtors' and
creditors' resources); accord, e.g., Colliers on Bankruptcy ¶
3.04 (15th ed. rev.). A principal goal of any proceeding
involving a bankrupt estate and its creditors is that there be an
efficient use of the debtors and creditors' resources in efforts
to administer the debtors' estate and resolve any related
litigation. See, e.g., In re Orion, 4 F.3d at 1101 (collecting
cases). The Bankruptcy Court is promoting that goal through,
inter alia, its uniform pretrial rulings and management. To the
extent the Defendant cleaves itself from that process, it raises
the costs for the CFC Estate just to litigate pretrial issues
that may well be independent of the merits of the case; these
costs predictably may skew the substance of settlement
discussions in a way that has no relation to the substance of the
dispute. As discussed, precedent recognizes this risk of
manipulation and forum shopping, and the Defendant has offered no justification for destroying the pretrial efficiencies
for all parties that are being afforded by the Bankruptcy Court's
pretrial management of this and 150 other preference ...