539 B.R. 1
D.P.R.2015Background
- Chapter 7 trustee Noreen Wiscovitch-Rentas filed an adversary proceeding under 11 U.S.C. § 547 seeking to avoid a $89,862.17 preferential transfer from PMC Marketing Corp. to Glaxosmithkline Puerto Rico, Inc.
- Defendant moved to withdraw the reference to the District Court under 28 U.S.C. § 157(d), asserting it does not consent to a jury trial before a bankruptcy (non-Article III) judge.
- Local Bankruptcy Rule 9015-1 requires unanimous party consent for a jury trial to be conducted by a bankruptcy judge; lack of mutual consent triggers referral to the district court.
- Supreme Court precedents (Granfinanciera, Langenkamp) recognize Seventh Amendment jury rights in preference actions when the defendant has not filed a proof of claim.
- Stern and its progeny (Executive Benefits, Wellness) constrained final adjudication power of bankruptcy judges and require Article III review or de novo district court review for certain matters.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether reference should be withdrawn to district court because defendant refuses consent to jury trial before bankruptcy judge | Trustee implicitly: proceeding is core and properly heard in bankruptcy court | Defendant: Seventh Amendment requires an Article III judge because he did not consent to jury trial before bankruptcy judge under LBR 9015-1 | Withdrawal denied; case remanded to bankruptcy court to produce proposed findings for de novo district review |
| Whether a § 547 preference action is core but nevertheless requires Article III adjudication when jury demanded without consent | Trustee: Preference actions are statutorily core and bankruptcy court can hear them | Defendant: Jury demand + no proof of claim -> Granfinanciera/Langenkamp protect jury right before Article III judge | Court: Preference action remains a core statutory matter, but defendant’s jury right means bankruptcy judge will issue proposed findings/conclusions for district court de novo review (per Executive Benefits) |
| Whether defendant’s refusal to consent alone constitutes "cause" for permissive withdrawal under § 157(d) | Trustee: Refusal alone insufficient; bankruptcy court familiar and efficient for core matters | Defendant: Local Rule 9015-1 requires referral when consent lacking; thus withdrawal warranted | Refusal alone is insufficient to show cause; permissive withdrawal denied |
| Proper procedure post-remand when jury/right issues remain | Trustee: Proceed in bankruptcy court; parties may still consent | Defendant: Case should proceed in Article III court if jury right unresolved | Bankruptcy court will hear matter, issue proposed findings and conclusions; district court will review de novo and enter final judgment; parties may still consent to trial before bankruptcy judge |
Key Cases Cited
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (bankruptcy judges lack Article III power to finally adjudicate certain state-law counterclaims)
- Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014) (Stern claims treated as non-core; bankruptcy judges may submit proposed findings for de novo district review)
- Wellness Int'l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015) (recognizes importance and volume-handling role of bankruptcy judges; discusses Article III structural concerns)
- Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989) (Seventh Amendment jury right applies to fraudulent transfer and preference actions when defendant has not filed a proof of claim)
- Langenkamp v. Culp, 498 U.S. 42 (1990) (clarifies application of Granfinanciera to preference actions and claimants who have not filed proofs of claim)
- In re Orion Pictures Corp., 4 F.3d 1095 (2d Cir. 1993) (endorse core/non-core framework as a first step in permissive withdrawal analysis)