469 B.R. 35
Bankr. D. Idaho2012Background
- Debtors Valle filed Chapter 7; Stanbroughs filed a proof of claim before any distribution plan.
- Stanbroughs sought nondischargeability under §523(a)(2),(4),(6) and asserted RICO and Idaho Racketeering Act claims in an adversary proceeding.
- Stanbroughs filed two amended complaints with no jurisdictional change and demanded jury trial for racketeering claims.
- Debtors moved to strike the jury trial demand on grounds that filing a proof of claim waived jury rights under Langenkamp v. Culp.
- Stanbroughs withdrew their proof of claim to secure a jury trial; Debtors objected to withdrawal, arguing it cannot restore the right or affect disclosure.
- Court overrulings/approvals: (i) withdrawal issue not dispositive; (ii) Stanbroughs lack Seventh Amendment jury right in nondischargeability proceedings; (iii) grant of Motion to Strike; Objection to withdrawal overruled.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether withdrawal of a claim under Rule 3006 is allowed as of right. | Valle: right of withdrawal as of right. | Valle: claim withdrawal under Rule 3006 triggers equitable jurisdiction, not a waiver; withdrawal does not restore jury rights. | Withdrawal permitted; does not affect jury right question. |
| Whether the Stanbroughs have a Seventh Amendment jury trial right in a §523(a) nondischargeability proceeding. | Valle: underlying claims are nondischargeable and jury rights may be implied. | Stanbroughs: they have a right to a jury trial for underlying RICO claims. | No Seventh Amendment right to a jury trial in nondischargeability proceeding. |
| Whether the determination of liability and damages in the underlying RICO claims is so integrated with bankruptcy to permit a non-Article III tribunal to resolve it without a jury. | Stanbroughs: underlying liability/damages are legal and entitle jury. | Bankruptcy court can adjudicate dischargeability and related liabilities; no jury needed. | Liability/damages are integral to dischargeability; no jury required. |
Key Cases Cited
- Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989) (two-part test for jury trial involving public/private rights; public rights exception)
- Langenkamp v. Culp, 498 U.S. 42 (1990) (claims procedures and jury trial waiver in bankruptcy context)
- Hashemi, 104 F.3d 1122 (9th Cir. 1997) (nondischargeability proceedings lack jury trial right; underlying claims may be legal)
- Kennedy (In re Kennedy), 108 F.3d 1015 (9th Cir. 1997) (bankruptcy court may liquidate underlying state claims as part of dischargeability)
- Sasson v. Sokoloff (In re Sasson), 424 F.3d 864 (9th Cir. 2005) (reaffirmed Kennedy; interplay of dischargeability and liability; not always require jury)
- Locke v. United States Trustee (In re Locke), 205 B.R. 592 (9th Cir. BAP 1996) (nondischargeability proceeding lacks jury where liability/damages are integral to discharge issue)