IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA
September 26, 2006
IN RE: GGC, LLC,
GGC, LLC, PLAINTIFF,
INDUSTRIAL RISK INSURERS, WESTPORT INSURANCE ORPORATION, GE INSURANCE SOLUTIONS, AS SUCCESSOR TO INDUSTRIAL RISK INSURERS, AND AON RISK SERVICES, INC., OF PENNSYLVANIA, DEFENDANTS.
The opinion of the court was delivered by: Ambrose, Chief District Judge.
Bkcy. No. 05-21071 MBM
Adv. No. 06-02381 MBM
OPINION and ORDER OF COURT
Pending is a Motion to Withdraw the Reference filed by Defendants, Industrial Risk Insurers, Westport Insurance Corporation, and GE Insurance Solutions, named as successor to Industrial Risk Insurers (collectively referred to as "IRI Defendants"). (Docket No. 1). Plaintiff, GGC, LLC has filed a Brief in Opposition to the same. (Docket No. 4). The issue is now ripe for review.
In February of 2005, certain of Plaintiff's creditors filed an Involuntary Petition in the United States Bankruptcy Court for the Western District of Pennsylvania at No. 05-21071, against Plaintiff under Chapter 7 of the Bankruptcy Code. See, On March 14, 2005, the Bankruptcy Court issued an order converting the case from Chapter 7 to Chapter 11. On April 25, 2006, Plaintiff initiated an adversary proceeding, at No. 06-2381, to assert claims*fn1 against various insurers arising out of a storm that occurred on September 17, 2004. On June 30, 2006, IRI Defendants filed the Motion for Withdrawal of Reference in the bankruptcy court. The Motion was filed in this Court on July 5, 2006. (Docket No. 1).
IRI Defendants' Motion to Withdraw the Reference of Adversary Proceeding is made pursuant to 28 U.S.C. §157(d). (Docket No. 1, p. 1). Section 157(d) provides:
[t]he district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or own timely motion of a party, for cause shown... 28 U.S.C. §157(d). Normally, I would deny the motion as premature so that the bankruptcy court could determine, in the first instance, whether the proceeding should be characterized as a core or a non-core proceeding. 28 U.S.C. §157(b)(3). It is not necessary to do that in this case, however. IRI Defendants contend that "cause" exists, in part, because Plaintiff conceded in its Complaint that the action is a non-core proceeding and that Plaintiff does not consent to the entry of final orders for judgments by the bankruptcy court.*fn2 According to Plaintiff's Complaint, this is a true statement. See, Docket No. 1-2, ¶3. Thus, it appears to be undisputed that the adversary proceeding is properly characterized as a non-core proceeding. Therefore, I need not send the case back to the bankruptcy court to make a determination on whether the proceeding is a non-core proceeding, as such an exercise would be futile.
Noting that this is a non-core issue, I will continue with the analysis of whether to withdraw the reference. In determining whether "cause" exists to withdraw the reference, a district court should consider the following factors:
1. Promoting uniformity of bankruptc y administration;
2. Reducing forum shopping and confusion; 3. Fostering economical use of debtor/creditor resources;
4. Expediting the bankruptcy process; and
5. The timing of the request for withdrawal.
In re Pruitt, 910 F.2d 1160, 1168 (3d Cir. 1990). IRI Defendants argue that because this is a non-core proceeding and Plaintiff does not consent to a final determination of the issues by the bankruptcy court, the five factor Pruitt test "weighs dramatically in favor of the Insurers." Docket No. 1-4, p. 5. I disagree with IRI Defendants.
With regard to the first factor, I agree with Plaintiff that the uniformity of the bankruptcy administration will be furthered by remaining in bankruptcy court, even though this is a non-core proceeding. The underlying bankruptcy has been with the bankruptcy judge since February 1, 2005. As of September 25, 2006, there were no less than 646 docket entries in the underlying bankruptcy. Consequently, the bankruptcy judge has an intimate knowledge of the case, the parties, and the insurance coverage at issue in this case. Furthermore, I disagree with IRI Defendants that claims in the adversary action are "too remote." (Docket No. 1, p. 5). To the contrary, the insurance proceeds are potentially the largest asset of the estate. Thus, I find that the first factor weighs in favor of leaving the case with the bankruptcy court.
The remaining factors similarly counsel against withdrawing the reference. Involving this Court in the proceeding could only serve to confuse the matter. Allowing the bankruptcy court, who is most familiar with the case, the parties, and the issues, to keep the case until it is trial ready, is plainly in the interest of the debtor and IRI Defendants since it will be proceeding before the same judge that is handling the underlying bankruptcy case, up until trial. See, In re Formica Corp., 305 B.R. 147 (S.D. N.Y. 2004).
Furthermore, there is a fully briefed Motion to Dismiss pending in the adversary proceeding. Since the bankruptcy judge is familiar with the parties and the issues, it stands to reason that permitting him to rule on the motion would expedite the case. For this same reason, pretrial management of the case will be handled most efficiently by the bankruptcy court.
Finally, as IRI Defendants admit, the adversary proceeding is at the earliest stage. (Docket No. 1, p. 6). Contrary to IRI Defendants' theory, however, I find this weighs in favor of not withdrawing the reference. Dispositive motions, one of which is currently pending, may resolve the matter. "Courts have...recognized that it serves the interests of judicial economy and efficiency to keep an action in Bankruptcy Court for the resolution of pre-trial, managerial matters, even if the action will ultimately be transferred to a district court for trial." In re Enron Corp., 295 B.R., 21, 28 (S.D.N.Y. 2003), citing In re Kenai Corp., 136 B.R. 59, 61 (S.D.N.Y. 1992); In re Enron Power Marketing, 318 B.R. 273 (S.D.N.Y 2004). Moreover, if the case is amenable to settlement, the bankruptcy judge would be better suited to advance that possibility. Thus, I find this fact weighs against withdrawing the reference.
I agree with my esteemed college, Judge Lancaster, when he stated that "[i]t is appropriate, efficient, and logical that withdrawal of the reference...can be deferred until the case is trial ready." American Capital Equip., LLC, et al. v. Skinner Engine Co., et al., 325 B.R. 372, 378 (W.D. Pa. 2005), citing In re Northwestern Institute of Psychiatry, Inc., 268 B.R. 79, 84 (Bky. E.D. Pa. 2001). Accordingly, I find that the Motion to Withdraw is not warranted until the case is trial-ready.
AMBROSE, Chief District Judge.
ORDER OF COURT
AND NOW, this 26th day of September, 2006, after careful consideration of the submissions of the parties an d for the reasons set forth in the Op inio n accom pany ing this Order, it is ordered hat the Motion to W ithdraw the R eference (Docke t No . 1) is denied, without prejudice. IRI Defendants are not precluded from refiling the Motion wh en, and if, the case becomes trial ready. This case be marked "CLOSED" forthwith.
Do ne tta W. Am brose, Chief U. S. District Judge
PC HON. M. BRUCE MCCULLOUGH, CJ