The opinion of the court was delivered by: Katharine S. Hayden, U.S.D.J.
International Benefits Group, Inc. ("IBG" or "debtor") filed a voluntary petition for Chapter 11 bankruptcy on July 22, 2004, which was converted to a Chapter 7 bankruptcy case on June 21, 2005. The bankruptcy court appointed plaintiff Jonathan Kohn ("Kohn") as the trustee in the Chapter 7 case. On March 21, 2006, Kohn filed an adversary proceeding in the bankruptcy court, asserting various state law claims arising from an alleged breach of contract with the debtor. The alleged breach of contract occurred prior to the bankruptcy filing.
Defendants Haymount Limited Partnership, LP, Westminster Associates II, Inc., Haymount Corporation, John Clark, and Edward J. Miller, Jr. have brought a motion to withdraw the reference to the United States Bankruptcy Court so the case may be heard by this Court. Kohn has not opposed the motion. For the reasons that follow, the Court will grant the defendants' motion to withdraw the reference to the bankruptcy court.
According to the complaint, in September 2002 defendant Haymount Limited Partnership, LP ("Haymount") entered into an agreement with IBG, pursuant to which IBG would attempt to find lenders to finance Haymount's planned development of 1,700 acres in Virginia. (Complaint ¶¶18-20.) Under the terms of that contract, if Haymount procured a loan with a lender that IBG provided, Haymount would pay IBG a $3,000,000 "loan fee." (Complaint ¶¶24-25.) In November 2002, IBG introduced Haymount to defendant American Property Consultants, Ltd. ("APC"). (Complaint ¶ 30.) IBG explained to Haymount that APC "was a source of financing, but was not in the business of financing projects directly." (Complaint ¶ 33.) IBG states that it had a "justifiable expectation" that it would be paid its fee under the contract if APC introduced Haymount to a lender that financed the development project. (Complaint ¶ 34.) In late 2003, APC introduced Haymount to General Motors Acceptance Corporation ("GMAC"). (Complaint ¶ 37.) In July 2004, Haymount closed on a loan through GMAC to finance the development project, and paid a commission to APC.. (Complaint ¶ 60.) Haymount never paid a fee or commission to IBG.. (Complaint ¶ 61.) IBG filed for bankruptcy on July 22, 2004. (Complaint ¶ 57.)
Kohn, the trustee in bankruptcy, filed a five-count complaint on March 21, 2006, alleging breach of contract and unjust enrichment against Haymount Limited Partnership, LP, Westminster Associates II, Inc., Haymount Corporation, John Clark, and Edward J. Miller, Jr. ("the Haymount defendants"), as well as tortious interference, common law conspiracy, and statutory civil conspiracy against all defendants.
According to 28 U.S.C. § 157(a), "[e]ach district court may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district." This Court has referred all proceedings arising under Title 11 to the bankruptcy court pursuant to a standing order of reference dated July 23, 1984. However, according to 28 U.S.C. § 157(d) that reference is subject to both permissive withdrawal and mandatory withdrawal, as follows:
The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.
28 U.S.C.A. § 157(d) (emphasis added).
Defendants argue for permissive withdrawal and contend that the Court should withdraw the reference to the bankruptcy because "[t]his is a 'non-core' proceeding that requires substantial and material consideration of non-bankruptcy state law." (Moving Brief at 3.) In addition, defendants argue, "considerations of judicial economy, uniformity of bankruptcy administration, and the prevention of forum shopping weigh in favor of proceeding in the District Court." (Id.)
Before the Court can order a permissive withdrawal from the bankruptcy court, cause must be shown. In re Pruitt, 910 F.2d 1160, 1168 (3d Cir. 1990). The most important factor for the Court to consider in deciding whether to withdraw a reference to the bankruptcy court for cause is whether or not the claim is a core proceeding or a non-core proceeding. In re Burger Boys, Inc., 94 F.3d 755, 762 (2d Cir. 1996). Although 28 U.S.C. § 157 does not precisely ...