Opinion
21-CV-01337-E Adversary 20-03181
08-02-2021
In re SENIOR CARE CENTERS, LLC, et al.[1], Debtors. v. MICHAEL R. LUKE, Defendant and Third-Party Plaintiff, ALAN D. HALPERIN as Unsecured Creditor Trustee, Plaintiff, v. GRANITE INVESTMENT GROUP, Third-Party Defendant.
John D. Elrod, Greenberg Traurig, LLP Counsel for Plaintiff Agreed to by: J. Mark Chevallier McGuire Craddock Strother PC Counsel for Defendant
Jointly Administered
John D. Elrod, Greenberg Traurig, LLP Counsel for Plaintiff
Agreed to by: J. Mark Chevallier
McGuire Craddock Strother PC Counsel for Defendant
REPORT AND RECOMMENDATION TO DISTRICT COURT PROPOSING THAT IT: (A) GRANT THE PENDING MOTION TO WITHDRAW THE REFERENCE AT SUCH TIME AS THE BANKRUPTCY COURT CERTIFIES THAT LITIGATION IS TRIAL READY; AND (B) DEFER TO BANKRUPTCY COURT THE HANDLING OF ALL PRETRIAL MATTERS
Mickael R. Luke (the “Defendant”) filed a motion to withdraw the reference of the above entitled adversary proceeding on May 28, 2021, at DE # 26 (the “Motion”). The bankruptcy court (Judge Jernigan, the signatory on the Report and Recommendation) conducted a status conference concerning the Motion on July 12, 2021, pursuant to 11 U.S.C. § 105(d); L.B.R. 5011.1. After conferring with counsel for the parties to this proceeding at the status conference, the bankruptcy court submits the following report to the United States District Court:
1. Nature of the Adversary Proceeding.
Alan D. Halperin, as Unsecured Creditor Trustee (the “Trustee”) for Senior Care Centers, LLC, et al. (the “Debtors”) commenced the adversary proceeding in the above-referenced Chapter 11 bankruptcy case on December 2, 2020, by filing the Trustee's Complaint (the “Complaint”). In six counts, the Complaint alleges that in February 2018, Granite Investment Group (“Granite”) caused the Debtors to pay the Defendant $781, 027.40 in satisfaction of Granite's debt to the Defendant (the “Transfer”). The Trustee seeks to avoid and recover the Transfer which was made to the detriment of the Debtors' other creditors. The Trustee alleges that Granite owned, directly or indirectly, a majority interest in the Debtor entities and that it used its controlling ownership to engineer self-serving deals and dividends. The Transfer is the product of this allegedly parasitic relationship.
| Count | Description | Core/Noncore |
| 1 | Avoidance of the Transfer as a constructively fraudulent pursuant to 11 U.S.C. §§ 544(b) and 550 and TUFTA § 24.001 et seq. | Core |
| 2 | Avoidance of the Transfer as actually fraudulent pursuant to 11 U.S.C. §§ 544(b), 550, and 551 and TUFTA § 24.001 et seq. | Core |
| 3 | Avoidance of the Transfer as actually fraudulent pursuant to 11 U.S.C. §§ 548(a)(1)(A) and 550 | Core |
| 4 | Avoidance of Transfer as constructively fraudulent pursuant to 11 U.S.C. §§ 548(a)(1)(B) and 550 | Core |
| 5 | Avoidance of the Transfer as preferential pursuant to 11 U.S.C. §§ 544 and 550 and TUFTA § 24.006(b) | Core |
| 6 | Avoidance of the Transfers as preferential pursuant to 11 U.S.C. §§ 547 and 550 | Core |
2. The Defendant, in his Answer at DE # 21, brought a Third-Party Claim against Granite for breach of an unspecified promissory note that Granite made to the Defendant. The Defendant has referenced the promissory note during hearings before the bankruptcy court and in other pleadings, but his lean Third-Party Complaint lacks further detail.
3. The Trustee did not file a response to the Motion and does not oppose withdrawal of the reference.
Likewise, the third-party defendant Granite did not respond or appear to oppose the Motion.
4. The adversary proceeding has not been stayed pending a determination of the motion to withdraw the reference, pursuant to Federal Rule of Bankruptcy Procedure 5011. A motion to stay the adversary proceeding is not pending.
5. The adversary proceeding involves core matters, but as a litigant in a fraudulent transfer action, the Defendant enjoys the Seventh Amendment right to a jury trial so long as he has not filed a proof of claim. The Defendant has not filed a proof of claim and does not consent to the entry of a final judgment or order by the bankruptcy court, pursuant to 28 U.S.C. § 157(c)(2). Therefore, the bankruptcy court does not believe it can finally adjudicate the claims.
Granfinanciera S.A. v. Nordberg, 492 U.S. 33, 41 (1989).
6. A jury trial has been requested. The parties do not consent to the bankruptcy judge conducting the jury trial, pursuant to 11 U.S.C. § 157(e).
7. The bankruptcy court has entered a scheduling order. A copy of the scheduling order is attached.
8. The parties are not ready for trial.
9. The bankruptcy court recommends that the District Court refer all pre-trial matters to the bankruptcy court and grant the motion to withdraw the reference upon certification by the bankruptcy court that the parties are ready for trial.
10. With regard to such pretrial matters, the bankruptcy court further recommends that, to the extent a dispositive motion is brought that the bankruptcy court determines should be granted and would finally dispose of claims in this Adversary Proceeding, the bankruptcy court should submit a report and recommendation to the District Court for the District Court to adopt or reject.
SCHEDULING ORDER
To promote the efficient and expeditious disposition of the above-captioned adversary proceeding (the “Adversary Proceeding”), the following schedule shall apply to the Adversary Proceeding.
IT IS HEREBY ORDERED that:
1. The discovery planning conference described in Fed.R.Civ.P. 26(f), made applicable by Fed.R.Bankr.P. 7026, shall be deemed to have taken place on April 21, 2021 via telephone conference to discuss entry of the Scheduling Order.
2. In accordance with Bankruptcy Rule 7026(a)(1), the parties disclosures required under such Rule (the “Initial Disclosures”) shall be submitted no later than May 12, 2021.
3. The parties shall have through and including August 27, 2021 to complete non-expert fact discovery.
4. The parties shall provide expert reports (the “Expert Reports”) for an issue on which they bear the burden of proof by September 16, 2021. All reports shall provide the information required by Fed.R.Civ.P. 26(a)(2)(B).
5. Any parties' expert report intended to rebut any other expert report (the “Rebuttal Expert Reports”), shall be provided by October 6, 2021. All reports shall provide the information required by Fed.R.Civ.P. 26(a)(2)(B).
6. Expert depositions, if any, shall be completed by October 20, 2021.
7. All dispositive motions, including motions for summary judgment, shall be filed and served by no later than November 5, 2021.
8. The Court shall enter a subsequent order setting a pretrial conference in this Adversary Proceeding.