Opinion
Civil Action No. 1:11-mc-00138
12-10-2013
GARY D. GUY, Plaintiff, v. FRANKLIN AMERICAN MORTGAGE COMPANY, et al., Defendants.
MEMORAMDUM OPINION AMD ORDER
Pending before the court is the motion to withdraw reference to bankruptcy court filed by defendant Franklin American Mortgage Company ("Franklin"). (Doc. # 1). For reasons expressed more fully below, that motion is GRANTED.
Background
According to the Complaint filed in the Adversary Proceeding, A.P. Case No. 1:10-ap-01005, this case arises out of the alleged predatory lending practices on the part of certain defendants. Specifically, plaintiff Gary D. Guy alleges that "Solution One Mortgage, LLC, and Decision One Mortgage, LLC, solicited the Plaintiff for an unwise high interest loan with an exploding ARM relying upon an inflated appraisal." Complaint ¶ 1. According to Guy, in November 2009, he "responded to a solicitation from the Defendant lender for a consolidation refinancing." Id. at 7. Thereafter, the "Defendant lender arranged for an appraisal well beyond the value of the home." Id. at 8. Guy alleges that defendant relied on an appraisal indicating the market value of his home was in excess of $132,000 when, in reality, the true market value of his home was approximately $91,500. See id. at ¶ 9.
Based on the foregoing, plaintiff filed a complaint, bringing claims for Illegal Mortgage, in violation of West Virginia Code § 31-17-8(m)(8), (Count I), and Unconscionable Inducement (Count II). Named as defendants are Franklin, the lender; Bank of America, NA, the loan servicer; and John Doe Holder, the holder of the loan. See id. at ¶¶ 3-5.
After discovery in the adversary proceeding was closed and dispositive motions had been filed. Franklin filed the instant motion to withdraw, arguing that withdrawal of the reference was necessary because, according to Stern v. Marshall, 131 S. Ct. 2594 (2011), the bankruptcy court does not have constitutional authority to hear and finally determine the non-core complaint filed against Franklin. Instead of filing a response to the motion to withdraw in this court, plaintiff filed a motion to dismiss, both in this court and in the bankruptcy court. Approximately three weeks after filing the motion to dismiss, plaintiff filed a memorandum in opposition to the motion to withdraw reference and in further support of plaintiff's motion to dismiss. That memorandum was filed only in the bankruptcy proceeding and was not docketed in the instant case, 1:11-mc- 00138. The court has, however, fully considered plaintiff's memorandum in ruling on the instant motion.
Analysis
Section 157(d) of the Bankruptcy Code allows district courts to "withdraw, in whole or in part, any case or proceeding referred [to the bankruptcy court], on its own motion or on timely motion of any party, for cause shown." 28 U.S.C. § 157(d). Because "cause" for permissive withdrawal is not explicitly defined in § 157(d), many courts consider a number of factors in deciding whether cause exists to withdraw the reference:
(1) whether the proceeding is core or non-core; (2) the uniform administration of bankruptcy law; (3) promoting judicial economy; (4) the efficient use of the parties' resources; (5) the reduction of forum shopping; and (6) the preservation of the right to a jury trial.Point Service Corp. v. Pritchard Min. Co., No. 3:09-0145, 2010 WL 1410673, *5 (S.D.W. Va. Mar. 31, 2010); Dwyer v. First National Bank, No. 5:08-cv-01269, 5:08-mc-00058, 2009 U.S. Dist. LEXIS 42819, at *9 (S.D.W. Va. May 19, 2009)(Johnston, J.)(quoting Allen v. Nat'l City Mortg. Co., 2:04-mc-188, 2006 U.S. Dist. LEXIS 94819, at *4 (S.D. W. Va. July 13, 2006)(Goodwin, J.)). Generally, the first factor-whether a proceeding is core or non-core-weighs more heavily than the others. In re O'Brien, 414 B.R. 92, 98 (S.D.W. Va. 2009).
1. Whether a proceeding is core or non-core
No bright line clearly divides "core" and "non-core" proceedings. See In re Apex Exp. Corp., 190 F.3d 624, 631 (4th Cir. 1999). However, the United States Court of Appeals for the Fourth Circuit has adopted at least one bright-line rule: when claims that arise pre-petition and are grounded in state law predominate a proceeding, treat that proceeding as "non-core." See id. at 632. Franklin argues that the instant proceeding is non-core and plaintiff does not contend otherwise.
Here, plaintiff has asserted state law causes of action for illegal mortgage and unconscionable inducement and those claims arose prepetition. They do not involve the application of bankruptcy law and are therefore non-core. Because this factor weighs more heavily than the others, see In re O'Brien, 414 B.R. 92, 98 (S.D.W. Va. 2009), the fact that the court finds plaintiff's complaint to be a non-core proceeding weighs heavily in favor of permissive withdrawal.
2. Promoting judicial economy and efficient use of the parties resources
In non-core proceedings, the bankruptcy courts "submit proposed findings of fact and conclusions of law to the district court, for that court's review and issuance of final judgment." Stern v. Marshall, 131 S.Ct. 2594, 2602 (2011). The Bankruptcy Court lacks authority to enter a decision on the merits where the non-core proceeding arises solely under state law and need not be decided to resolve the creditor's claim against the estate. See id.
Pursuant to Stern, because plaintiff's claims must be finally adjudicated by the district court, "a referral to bankruptcy court would result in a duplication of judicial resources whereby the bankruptcy court first would submit its proposed findings of fact and conclusions of law to the district court, and the district court then would review de novo the bankruptcy court's conclusions and enter a final order or judgment." Boyd v. GMAC Mortgage, LLC, No. C 11-5018 PSG, 2012 WL 1424992, *2 (N.D. Cal. Apr. 24, 2012).
For these reasons, promotion of judicial economy, as well as the efficient use of the parties' resources weighs in favor of withdrawing the reference to the bankruptcy court.
3. Preserving the jury trial right
The right to a jury trial is an important right. See Container Recycling Alliance v. Lassman, 359 B.R. 358, 360 (D. Mass. 2007). If the jury trial right can only be fully vindicated by withdrawal of the reference, then there is good cause for withdrawal. Id.; see also In re Cinematronics, Inc., 916 F.2d 1444, 1451 (9th Cir. 1990) ("[W]here a jury trial is required and the parties refuse to consent to bankruptcy jurisdiction, withdrawal of the case to the district court is appropriate.").
In this case, plaintiff demanded a jury trial on all issues and defendants have not consented to a jury trial in the bankruptcy court. Therefore, this factor weighs in favor of withdrawal of the reference.
In its Motion to Withdraw the Reference, Franklin confirmed that it did not consent to the Bankruptcy Court hearing and determining this matter. Motion to Withdraw at p.2.
4. Uniform administration of bankruptcy law
Because the adversary proceeding does not turn on bankruptcy law, it will not affect the uniform administration of bankruptcy law. Accordingly, this factor does not favor allowing the adversary proceeding to remain in bankruptcy court.
5. Reduction of forum shopping
The court concludes that there is no evidence of forum shopping in this matter. Accordingly, the factor of preventing forum shopping does not weigh heavily either way in this case.
Conclusion
For the reasons stated herein, the motion to withdraw the reference to the Bankruptcy Court is GRANTED. The parties are directed to confirm that all pending motions and papers in support and opposition thereof have been filed with this court so that they might be resolved as expeditiously as possible.
For example, plaintiff's response indicates that motions for summary judgment were filed in the Bankruptcy Court but he does not indicate whether they remain pending. Furthermore, it appears that this court will need to rule on the motion to dismiss. However, it is not clear that all the documents related to that motion are a part of the record in this miscellaneous proceeding.
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The Clerk is directed to send copies of this Order to counsel of record and the United States Bankruptcy Court for the Southern District of West Virginia.
It is SO ORDERED this 10th day of December, 2013.
ENTER:
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David A. Faber
Senior United States District Judge