Sergent v. McKinstry, 7:11-cv-00129

Black Diamond Mining Co. went into Chapter 11, with a liquidating trust created to pursue its estate claims, including those against Sergent and the A&M Defendants.
Sergent allegedly self-dealt and mismanaged Black Diamond pre-petition, seeking royalties, commissions, and loans from the estate.
A&M served as turnaround managers/CRO and CFO under court-approved engagement, later enabling Black Diamond to reject the failed Consulting & Sales and Royalty Agreements.
The BD Unsecured Creditors Trust, as representative of the estate, sued Sergent and the A&M Defendants in state court, leading to removal to federal court.
Bankruptcy Court abstained from Sergent Claims (mandatory abstention) and retained A&M Claims, then the case was split, with Sergent Claims in state court and A&M Claims in bankruptcy court.
Plaintiff sought to withdraw the reference; the court held abstention premature and addressed jury-trial rights, ultimately deciding both Sergent and A&M claims implicate a jury trial.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are the Sergent and A&M claims core or non-core?	Sergent argues non-core status invalidates final judgment by bankruptcy court.	Court should treat both as core; A&M as core; Sergent as core but constitutionally limited.	A&M core; Sergent core but not subject to final bankruptcy-court judgment.
Does mandatory abstention apply to the Sergent Claims?	Sergent Claims are non-core and should be tried in state court.	Supplemental jurisdiction allows federal adjudication; abstention not required.	Mandatory abstention does not apply; district court may exercise supplemental jurisdiction.
Is withdrawal of the reference appropriate at this time?	Withdrawing would promote efficiency and unify proceedings.	Premature due to unfinished pretrial matters and need for trial-ready posture.	Withdrawal denied without prejudice; case remains in bankruptcy court pending trial readiness.
Does the plaintiff have a jury-trial right on Sergent and A&M claims?	Granfinanciera test shows right to jury for legal claims; both sets seek monetary relief.	Burdens of fiduciary-duty claims are equitable; surcharge theories may limit jury trial.	Plaintiff has jury trial right on Sergent gross negligence; A&M claims also largely legal; overall right preserved.

Stern v. Marshall, 131 S. Ct. 2594 (Supreme Court 2011) (constitutional limits on core designation for counterclaims in bankruptcy)
In re Iridium Operating LLC, 285 B.R. 822 (Bankr. S.D.N.Y. 2002) (district court should evaluate core vs non-core before withdrawal)
Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (Supreme Court 2002) (monetary relief is equitable only in specific contexts)
Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (Supreme Court 1989) (two-step law-vs-equity test for jury trial rights in bankruptcy)