Development Specialists, Inc. v. Akin Gump Strauss Hauer & Feld LLP
462 B.R. 457
S.D.N.Y.2011Background
- Coudert Brothers LLP filed Chapter 11; Development Specialists, Inc. (DSI) as Plan Administrator pursued thirteen adversary actions against ten law firms seeking recovery for unfinished business and a fraudulent conveyance claim against Dechert.
- DSI claims firms earned fees on matters former Coudert partners took with them (unfinished business) under state partnership and contract law; a separate fraudulent conveyance claim targets Dechert.
- Bankruptcy Court denied motions to dismiss in 2009; Stern v. Marshall (2011) later altered constitutional framework for bankruptcy adjudication.
- Firms moved to withdraw the bankruptcy reference and abstain; court must apply Orion factors in light of Stern to determine whether final adjudication is proper in Bankruptcy Court or in District Court.
- Court grants withdrawal of the reference, denies abstention, and sets procedural path for potential summary judgment on state-law issues; consents and public/private rights issues are central to the analysis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether withdrawal of the bankruptcy reference is appropriate post-Stern. | DSI argues Stern changes the constitutional framework requiring withdrawal. | Firms argue Orion factors weigh against withdrawal and consent issues are insufficient. | Withdrawal granted. |
| Whether the Firms consent to final adjudication affects withdrawal. | DSI contends no valid consent to final adjudication by Bankruptcy Court. | Firms contend implied/express consent via conduct or pleadings. | No valid consent found; withdrawal still warranted. |
| Whether abstention is appropriate. | DSI opposes abstention to avoid duplicative proceedings. | Abstention could align with efficiency and state-law focus. | Abstention denied. |
| Whether Orion factors align with Stern to favor efficiency and uniformity. | DSI views Stern as limiting final adjudication power in Bankruptcy Court. | Firms urge preservation of bankruptcy adjudicative efficiencies. | Factors favor withdrawal for efficiency and uniformity. |
Key Cases Cited
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (public/private rights test governs finality in bankruptcy adjudication)
- Marathon Pipe Line Co. v. Northern Steel Co., 458 U.S. 50 (1982) (public rights doctrine and Article III concerns in bankruptcy jurisdiction)
- Granfinanciera S.A. v. Nordberg, 492 U.S. 33 (1989) (private rights vs. public rights in bankruptcy contexts; Seventh Amendment concerns)
- Roell v. Withrow, 538 U.S. 580 (2003) (consent to final adjudication by non-Article III tribunals)
- In re Orion Pictures Corp., 4 F.3d 1095 (1993) ( Orion test for withdrawing bankruptcy reference; core/non-core relevance to withdrawal decision)
- Parmalat Capital Finance Ltd. v. Bank of America Corp., 639 F.3d 572 (2011) (circuit-based framework for related-to bankruptcy proceedings and withdrawal analysis)