United States District Court, E.D. Pennsylvania
E.K. PRATTER United States District Judge.
Portnoy; Samantha Portnoy; Zachary Portnoy; Altchem
Environmental Services, Inc.; Samzach Partners, L.P.;
Sam-Zachary Partners, LLC; BF Services, L.P.; Maxis
Construction Group; Danielle Portnoy as co-trustee of the
Revocable Deed of Trust of Danielle M. Portnoy; Danielle
Portnoy as custodian for Zachary Portnoy and Samantha
Portnoy; and Danielle Portnoy as Trustee of the SamZach
Irrevocable Trust (“Movants”) move for
withdrawal of the above-captioned consolidated adversary
proceeding reference, Adv. Pro. No. 16-248, pursuant to 28
U.S.C. § 157(d) and Local Bankruptcy Rule 5011-1. The
Court will deny Movants' Motion without prejudice because
Movants have not met their burden to show cause why this
Court should withdraw the consolidated adversary proceeding
at this stage of the litigation.
Factual and Procedural History
consolidated adversary proceeding at issue consists of three
adversary proceedings filed in, or removed to, the United
States Bankruptcy Court for the Eastern District of
Pennsylvania in connection with Debtor Barry Portnoy's
July 30, 2014 Chapter 7 bankruptcy petition. The three
proceedings are each premised on a similar set of facts.
First Bank (“Republic Bank”) and Robert Holber,
Chapter 7 Trustee of the Estate of Barry Portnoy (the
“Trustee, ” and together with Republic Bank,
“Plaintiffs”) allege that Mr. Portnoy
fraudulently transferred real estate and other assets,
facilitated sham mortgages, took deliberate actions to cloud
title to his assets, and used companies he controlled to hide
personal assets so that he could appear, on paper, to be
insolvent. Plaintiffs allege Mr. Portnoy took these actions
in order to avoid repaying over $2 million of loans extended
to him (or companies controlled by him) by Republic Bank on
which he had defaulted. The allegations concern alleged
first adversary proceeding involves two state court
complaints (“Republic Bank's First
Proceeding”). Republic Bank first filed suit on October
30, 2014 against Danielle Portnoy; Samantha Portnoy; Zachary
Portnoy; Danielle Portnoy as co-trustee of the Revocable Deed
of Trust of Danielle M. Portnoy; Danielle Portnoy as
custodian for Zachary Portnoy and Samantha Portnoy; Danielle
Portnoy as Trustee of the SamZach Irrevocable Trust; Altchem
Environmental Services, Inc.; Samzach Partners, L.P.;
Sam-Zachary Partners, LLC; BF Services, L.P.; and Maxis, Inc.
alleging: (i) fraudulent transfer, (ii) unjust enrichment,
(iii) civil conspiracy, and (iv) equitable relief to impose a
constructive trust and attach assets. Republic Bank next
filed suit on August 18, 2015 against Maxis Construction
Group, Inc. alleging: (i) fraudulent transfer, (ii) unjust
enrichment, and (iii) equitable relief to impose a
constructive trust and attach assets. The Defendants'
answers to both state court complaints included jury trial
demands. On November 16, 2016, Plaintiffs removed the
Bank's First Proceeding to bankruptcy court. See
Republic First Bank d/b/a Republic Bank v. Altchem
Environmental Servs., Inc., Adv. Pro. No. 16-409.
second adversary proceeding involves Republic Bank's
adversary complaint filed in bankruptcy court on January 30,
2015 against Mr. Portnoy containing four denial of discharge
claims pursuant to 11 U.S.C. § 727(a)(2)-(5)
(“Republic Bank's Second Proceeding”).
See Republic First Bank d/b/a Republic Bank v.
Portnoy, Adv. Pro. No. 15-37. There is a pending motion
for summary judgment in Republic Bank's Second
third adversary proceeding involves the Trustee's
adversary complaint filed in bankruptcy court on July 29,
2016 against Movants, Mr. Portnoy, Frederick Robinson, and
Linda Robinson alleging: (i) fraudulent transfer pursuant to
the Pennsylvania Uniform Fraudulent Transfer Act
(“PUFTA”), 12 Pa. C.S. § 5104, (ii)
fraudulent transfer pursuant to PUFTA, Pa. C.S. § 5105,
(iii) avoidance of fraudulent conveyances pursuant to 11
U.S.C. § 548(A)(1)(A), (iv) avoidance of fraudulent
conveyances pursuant to 11 U.S.C. § 548(A)(1)(B), (v)
recovery of avoided transfers pursuant to 11 U.S.C §
550, (vi) disallowance of all claims pursuant to 11 U.S.C
§ 502(D), (J), (vii) turnover of property of estate
pursuant to 11 U.S.C § 542, (viii) unjust enrichment,
and (ix) conspiracy (“Trustee's Proceeding”).
See Holber v. Portnoy, Adv. Pro. No. 16-248. While
Movants did not assert their right to a jury trial when
answering the Trustee's adversary complaint, the
bankruptcy court entered a stipulation in January 2017 by
which the court deemed Movants (and Mr. Portnoy) to have
requested a jury trial.
bankruptcy court consolidated these three adversary
proceedings into Adv. Pro. No. 16-248 on December 20, 2016.
Movants moved on March 27, 2017 for withdrawal of the thus
consolidated adversary proceeding reference to this Court.
157(d) of 28 U.S.C. authorizes district courts to
“withdraw, in whole or in part, any case or proceeding
referred under this section [to the Bankruptcy Court], on its
own motion or on timely motion . . . for cause shown.”
28 U.S.C. § 157(d). Withdrawal of a reference is at the
discretion of the district court unless “resolution of
the proceeding requires consideration of both title 11 and
other laws of the United States regulating organizations or
activities affecting interstate commerce, ” in which
case withdrawal is mandatory. 28 U.S.C. § 157(d);
Nw. Inst. of Psychiatry, Inc. v. Travelers Indem.
Co., 272 B.R. 104, 107 (E.D. Pa. 2001).
court's exercise of discretion to withdraw is guided by
whether (i) the underlying proceeding involves
“core” or “non-core” claims, and (ii)
any party has asserted a right to a jury trial to which it is
constitutionally entitled. Shubert v. Law Offices of Paul
J. Winterhalter, 531 B.R. 546, 550 (E.D. Pa. 2015);
Feldman v. ABN AMRO Mortg. Grp. Inc., 515 B.R. 443,
446 (E.D. Pa. 2014).
Third Circuit Court of Appeal has also identified five
factors for courts to consider when determining whether cause
exists to withdraw a reference: (i) the promotion of
uniformity in bankruptcy administration, (ii) the reduction
of forum shopping and confusion, (iii) the economical use of
the parties' resources, (iv) expediting the bankruptcy
process, and (v) the timing of the motion for withdrawal.
In re Pruitt, 910 F.2d 1160, 1168 (3d Cir. 1990).
The party seeking to withdraw the reference bears the burden
to show cause. Feldman, 515 B.R. at 452.