General American Communications Corp. v. Landsell (In Re General American Communications Corp.)General American Communications Corp. v. Landsell (In Re General American Communications Corp.)
ORDER
Nо objections having been received, and upon a review by me in accordance with Rule 9033 of the Rules of Practice and Procedure in Bankruptcy, the decision of the United States Bankruptcy Court in the above-captioned matter and the findings of fact and conclusions of law therein are accepted by this Court. So ordered.
INTRODUCTION
A. Abstention; Rule 5011(c) Stay; and, Relief From § 362 Automatic Stay.
Defendants move 3 for: discretionary abstention from hearing the above referenced adversary proceedings under 28 U.S.C. § 1334(c)(1) 4 and Rules of Practice and Procedure in Bankruptcy Rule 5011(b); 5 a stay of the adversary proceedings under Rule 5011(c); 6 and, relief from automatic stay under 11 U.S.C. § 362(d). 7
We recommend the District Court for the Southern District of New York deny abstention because, inter alia, Defendants’ state court action against GACC was commenced in violation of 11 U.S.C. § 362 and is void ab initio. Thus, there is no pending state court action to abstain from. We deny Defendants’ request for a Rule 5011(c) stay because continued delay of these adversary proceedings prejudices the administration of GACC’s bankruptcy estate. We also deny Defendants’ request for relief from the automatic stay under 11 U.S.C. § 362(d) because they failed to sustain their burden of proof of entitlement.
GACC seeks summary judgment on Defendants’ affirmative defenses and counterclaims on seven points: this Court has subject matter jurisdiction over these adversary proceedings and Defendants’ counterclaims; an interlocutory default judgment rendered by a Texas State Court in Defendants’ post-petition lawsuit against GACC does not bar these adversary proceedings; the judgment entered in a Federal District Court action against the partnerships also binds Defendants as limited partners; Defendants’ fraud counterclaims must be dismissed; Defendants’ counterclaims of breach of contract, defective merchantability and declaratory judgment are barred by res judicata; and, GACC is entitled to summary judgment on its claims against Defendants.
Generally, we are not inclined to address summary judgment motion when there is a pending recommendation to the District Court to deny abstention because the rejection of our recommendation may render the summary judgment decision advisory. In the proceeding sub judice, however, we reach the summary judgment issue on our subject matter jurisdiction, in personam jurisdiction, and whether these proceedings may be “core” or “related to” because we are required to make such determinations under 28 U.S.C. § 157(b)(3) and because our experience has been that the District Court usually requests our comments.
We grant GACC summary judgment against Defendants’ affirmative defense of lack of subject matter and in personam jurisdiction over GACC’s proceedings because we have subject matter jurisdiction and nationwide in personam jurisdiction over Defendants.
We determine GACC’s proceedings against Defendants are “core” because GACC’s causes of action against Defendants accrued post-petition, thus we have the power to enter a final Order. Defendants have not filed proof of claims, thus, we will honor Defendants’ jury demands in these proceedings. We accept Defendants’ position that we have subject matter jurisdiction and core powers to enter a final Order on their counterclaim and we likewise determine a trial by jury is appropriate on Defendants’ counterclaims.
As an alternative to our “core” determination, GACC’s and Defendants’ proceedings are “related to” GACC’s bankruptcy because the outcome has a significant impact on GACC’s ability to pay its creditors. In this event, we recommend the District Court withdraw our reference over these proceedings because of Defendants’ jury demand and try these proceedings in the District Court before a jury.
We do not reach summary judgment on the following issues until, and unless, the District Court accepts our recommendation to deny abstention and determine these proceedings are “core”: whether the judgment entered in a Federal District Court action against the partnerships also binds Defendants as limited partners; whether Defendants’ counterclaims of fraud and breach of contract, defective merchantability, and declaratory judgment are barred by res judicata; or, whether GACC is entitled to summary judgment on its cause of action against Defendants.
BACKGROUND 8
Prior to bankruptcy, GACC was engaged in the business of structuring, packaging, and promoting tax advantaged investments. In 1982, GACC packaged and promoted private placement offerings of interests in three limited partnerships engaged in television programing to produce and market certain “Felix the Cat” videotape programs; namely, 1982 GAC Video Production Series — Texcat Associates (Texcat); 1982 GAC Vidеo Production Series — Texcat Associates II (Texcat II); and, 1982 GAC Video Production Series — Astrocat Associates (Astrocat) (Texcat, Texcat II and As-trocat are collectively referred to as Partnerships).
The limited partnership interests were securities sold by the distribution of a document titled “Private Placement Memoran
After the Partnerships were fully subscribed, GACC entered into agreements with the Partnerships whereby the Partnerships would acquire from First Performance Television Corp. the rights to produce the video programs (“Rights Acquisition Agreements”) and Viewtek Corp. would produce the Video Programs for the Partnerships on a turnkey basis (“Production Facilities Agreement”). Upon completion of the video programs, each of the Partnerships would enter into an agreement with Telefeatures Corp. granting Telefeatures the right to distribute the video programs for free and pay television.
Under the terms of the Rights Acquisition Agreements and Production Facilities Agreements, the Partnerships agreed to pay for the rights to produce the video programs by making a cash payment upon the closing of the Partnerships, with the balance made by the execution of three promissory notes рayable to GACC.
The first two notes were to be paid within one or two years, respectively, of the closing of the Partnerships (“Short Term Notes”). The Short Term Notes made by Texcat were in the amounts of $188,900 due April 30, 1983 and $165,700 due on April 30, 1984. The Short Term Notes were to be paid by the Partnerships from capital contributions of the Limited Partners.
The third promissory note (“Production Note”), 9 was due on December 31, 1999 in the amount of $2,847,750. The Production Note was to be paid by the Partnerships by paying GACC a percentage of any gross receipts from the distribution of the video programs. The Production Note was secured by an “Assignment of Gross Receipts” and “Irrevocable Authority” in favor of GACC and an “Assignment and Security Agreement” granting GACC a security interest in, and general lien upon, the video program, together with copyrights and products derived from the use and exploitation of the video program. The Production Note was a recourse obligation which had to be paid even if revenues derived from video program distributions were insufficient to satisfy the obligations.
As each of the Defendants became limited partners, they executed an assumption agreement whereby each personally as-, sumed, severally, a primary obligor status to pay when due their portion of the unpaid principal amount of the Production Note. The limited partners’ share was calculated according to each limited partner’s pro rata ownership share in the Partnership, together with 12% interest per annum over three years from the date of the Production Note.
After the Partnerships were fully subscribed and closed, a dispute arose among the general partners, GACC’s president and GACC’s affiliates concerning, inter alia, the Partnerships’ refusal to enter into the distribution agreements with Telefea-tures. Defendants’ claim GACC never intended to fully perform, the tapes were not produced timely, and their quality was below that represented by GACC. Additionally, patent infringement litigation ensued over the rights of distribution.
Thereafter, the Partnerships failed and refused to honor demand for payment on the Short Term Notes. Texcat failed to pay the second Short Term Note ($165,700 due on April 30, 1984). GACC exercised it option under the Assignment and Security Agreement and accelerated the payment of the Texcat Production Note.
On April 1, 1983, GACC sued the Partnerships and general partners in Federal District Court for the Southern District of New York. Defendants (Limited Partners) were not named in this suit. The Partnership and their general partners answered
The District Court action continued for six years, until GACC discovered the apparent intervening insolvency of some of the general partners, and disputed the authority of some of the general partners to continue to represent the Partnership in the District Court action. This questionable authority was brought to the attention of the District Court by GACC’s (and other plaintiffs’) motion to dismiss the Defendants’ counterclaims. The District Court determined the Partnerships had been dissolved under their respective partnership agreements. The District Court’s Order gave the Partnerships 60 days to reconstitute and appear financially responsible with successor general partners; failing that, the Court further ordered it would treat GACC’s (and other plaintiffs’) motion to dismiss as a motion for summary judgment. The district court indicated it would grant the motion and would dismiss with prejudice the Partnerships’ and general partners’ counterclaims. The Partnerships failed to reconstitute and elect successor general partners. In July’ 1989, the District Court entered judgment for GACC against each of the Partnerships and Tex-cat for the full principal amount of the Production Notes, together with accrued interest for a total amount of $4,132,046.50. The District Court also dismissed with prejudice the Partnerships’ counterclaims. No appeal was taken from the District Court Judgment. Defendants claim they were not parties to the District Court action.
GACC filed a petition for Chapter 11 relief, 11 U.S.C. §§ 101, et seq., in October, 1983.
After bankruptcy, Defendants (and other similarly situated investors) obtained a February 5, 1988 “Interlocutory Default Judgment” against GACC and others from a Texas State District Court of Dallas County (State Court action). The Texas State Court action was filed in 1987 by Defendants against GACC and the Partnerships. The Texas State Court Judge declared the Assumption Agreements signed by the limited partners of Texcat were procured by fraud and were null and void, and Defendants were not parties to the District Court action. The Texas State Court found fraud by GACC; failure of consideration and material breach of conditions; and violation of Texas Securities Laws 10 and Deceptive Trade Practices Act. 11
After the District Court Judgment was entered, GACC commenced these adversary proceedings to enforce the Assumption Agreements executed by Defendants.
Defendants answered by general denial of all of GACC’s allegations and demanded a trial by jury.
Defendants raised 11 affirmative defenses, including: lack of personal and subject matter jurisdiction; failure to comply with Rule 8(a); and, the February 5, 1988 “In
Defendants assert 6 counterclaims against GACC which are prefaced with a statement that we have subject matter and personal jurisdiction, their counterclaims are core matters, and venue is proper in our District. Defendants’ counterclaims are based on Texas securities laws, Texas deceptive trade practice laws, common law fraud, breach of contract, and failure of consideration.
Defendants filed their requests for abstention, Rule 5011(c) stay, and relief from the automatic stay after GACC filed its motion for summary judgment. Oral arguments were heard on November 16, 1990 and the matter was taken under advisement.
ARGUMENTS OF PARTIES
A.Abstention.
Defendants claim the interests of justice will be best served if we abstain because this adversary proceeding requires extensive discovery of complicated factual issues which will take time to develop. Defendants also say this proceeding raises complicated issues of State law that are more properly determined by a State Court rather than a Bankruptcy Court. Defendants state the Texas Court is very familiar with the present issues and is prepared to act quickly on the matter. Furthermore, Defendant Prati states he would be particularly prejudiced because he has no connection to the New York forum. Finally, Defendants charge GACC with abusive forum shopping because of its delay in notifying the Texas Court of GACC’s bankruptcy.
GACC counters that the issues are not solely of Texas law, rather, the Assumption Agreements, which are the basis of GACC’s claims against Defendants, are guarantees of a note executed in New York in payment of services to be rendered in New York. Moreover, GACC argues the Assumption Agreеments states New York is the choice of law. Assuming arguendo Texas law does apply, GACC pleads the issues do not involve matters of public concern, nor are they extremely complex or involve unsettled issues of State Law. Instead, the issues involve enforcement of a contract of guaranty, breach of contract, fraud, and misrepresentations. GACC says the Texas State Court action only involved the entry of a default judgment and the Texas State Court has little, if any, familiarity with the substantive issues and, in any event, has been dormant for three years. GACC further says that Defendants commenced the Texas Court action in violation of § 362, thus the Texas Court litigation is void. According to GACC, the resolution of these proceedings will have a significant impact on GACC’s estate because the only remaining assets of GACC are certain Short Term Notes and the Production Notes and these proceedings are the only means available to GACC to enforce judgment and pay its creditors.
B. Rule 5011(c) Stay.
Defendants argue we should invoke a Rule 5011(c) stay pending the disposition on our abstention recommendation to the District Court because without the stay GACC “will be able to continue to harass Prati ... (and) drain Prati’s limited resources. ...”
GACC counters that a Rule 5011(c) stay is inappropriate in the event we should recommend against abstention. Moreover, Defendants’ claims of GACC’s harassment by discovery or draining Defendants’ resources are unfounded.
C. Relief From Automatic § 362 Stay.
In the event we were to recommend abstention to the District Court, and assuming
arguendo
the District Court were to adopt such a recommendation, Defendants claim abstention constitutes “cause” under § 362(d)(1)
12
for relief from the automatic
GACC did not respond to Defendants’ request for relief from stay.
ISSUES PRESENTED
I.Abstention.
A. Mandatory.
1. Waived by Defendants; or,
2. Not present because of our subject matter jurisdiction.
B. Discretionary.
1. Not recommended because there is no pending state court proceeding against GACC, i.e., Defendants’ post-petition Texas State Court Action against GACC is void ab initio; or,
2. The issues are of the kind routinely addressed by Bankruptcy Courts and do not involve unsettled questions of State Law; or,
3. No evidence Texas State Court may timely adjudicate this proceeding faster than the Bankruptcy Court.
C.Rule 5011(c) Stay.
Not applicable because of negative recommendation on discretionary abstention.
II. Relief From Automatic Stay.
Cause not shown by Defendants.
III. Summary Judgment.
A. Generally.
B. Subject Matter Jurisdiction.
1. Core and related to proceedings.
2. Jury Demand.
C. In Personam Jurisdiction.
DISCUSSION
I. Abstention.
A. Mandatory Abstention.
Although Defendants have conceded that mandatory abstention under 28 U.S.C. § 1334(c)(2) 13 is not appropriate because of our Federal subject matter jurisdiction over these proceedings, 14 Defendants have not formally withdrawn their F.R.Civ.P.Rule 12(b)(1) affirmative defense. Additionally, as discussed infra, Defendants maintain their objection to GACC’s request for entry of summary judgment against Defendants’ F.R.Civ.P.Rule 12(b)(1) affirmative defense. In view of Defendants’ contradictory stance and as an exercise of caution, we quickly eliminate mandatory abstention. 15
B. Discretionary Abstention.
With mandatory abstention out of the way, Defendants request we recommend to the District Court that it would be appropriate to grant permissive abstention under 28 U.S.C. § 1334(c)(1) 16 in the interest of comity with state courts and respect for State law.
Discretionary abstention under 28 U.S.C. § 1334(c)(1) states:
In contrast to mandatory abstention, section 1334(c)(1) is derived from former 28 U.S.C. § 1471(d) which, in turn, was a statutory response to concerns articulated in Thompson v. Magnolia Petroleum Co.,309 U.S. 478 ,60 S.Ct. 628 ,84 L.Ed. 876 (1940)....
Given the genesis of section 1334(c)(1), it is not surprising that the primary determinant for the exercise of discretionary abstention is whether there exist unsettled issues of state law. See, e.g., Matter of Boughton,60 B.R. 373 (N.D.Ill.1986); Harley Hotels, Inc. v. Rain’s International Ltd.,57 B.R. 773 (M.D.Pa.1985). However, this is not the only factor warranting consideration. Abstention may be appropriate in the “interest of justice,” or “in the interest of comity ... or respect for state law.” 28 U.S.C. § 1334(c)(1). To some extent, this statutory provision may summarize and incorporate federal non-bankruptcy abstention doctrines found in Railroad Commission v. Pullman Co.,312 U.S. 496 ,61 S.Ct. 643 ,85 L.Ed. 971 (1941), Younger v. Harris,401 U.S. 37 ,91 S.Ct. 746 ,27 L.Ed.2d 669 (1971), and Burford v. Sun Oil Co.,319 U.S. 315 ,63 S.Ct. 1098 ,87 L.Ed. 1424 (1943). See In re DeLorean Motor Co.,49 B.R. 900 (Bkrtcy.E.D.Mich.1985).
Earle Industries, Inc. v. Circuit Engineering, Inc. (In re Earle Industries, Inc.),
Appropriate circumstances for discretionary abstention include:
[i]n cases presenting a federal constitutional issue which might be mooted or presented in a different posture by a state court determination of pertinent state law.
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... where there have been presented difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case at bar.
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... absent good faith, harassment, or a patently invalid state statute, federal jurisdiction has been invoked for the purpose of restraining state criminal proceedings.
Colorado River Water Conservation District v. United States,
To the three exceptional circumstances identified in
Colorado, supra,
the doctrine of
Thompson v. Magnolia,
A court of bankruptcy has an exclusive and nondelegable control over the administration of an estate in its possession. But the proper exercise of that control may, where the interests of the estate and the parties will best be served, lead the bankruptcy court to consent to submission to State courts of particular controversies involving unsettled questions of State property law and arising in the course of bankruptcy administration.
Id. (footnotes omitted).
Once a Federal Court’s jurisdiction attaches to a proceeding, the movant must show exceptional circumstances to justify abstaining from determining that proceeding.
See Bethlehem Contracting Co. v. Lehrer/McGovern Inc.,
The United States Supreme Court made the following remark on discretionary abstention:
In some cases, the probability that any federal adjudication would be effectively advisory is so great that this concern alone is sufficient to justify abstention, even if there are no pending state proceedings in which the question could be raised.... The various types of abstention are not rigid pigeonholes into which federal courts must try to fit cases. Rather, they reflect a complex of considerations designed to soften the tensions inherent in a system that contemplates parallel judicial processes.
Pennzoil Company v. Texaco, Inc.,
Recently, the Second Circuit thoroughly examined abstention in
De Cisneros v. Younger,
There are several traditional categories of abstention. See Younger v. Harris,401 U.S. 37 , 43-57 [91 S.Ct. 746 , 750-756,27 L.Ed.2d 669 ] (1971) (pending state criminal proceeding); Burford v. Sun Oil Co.,319 U.S. 315 , 317-34 [63 S.Ct. 1098 , 1098-1108,87 L.Ed. 1424 ] (1943) (abstentiоn appropriate to avoid interference with attempts to establish coherent state policy and issues of peculiarly local concern); Railroad Comm’n v. Pullman Co.,312 U.S. 496 , 498 [61 S.Ct. 643 , 644,85 L.Ed. 971 ] (1941) (federal court should abstain to avoid unnecessary resolution of a constitutional issue that might be mooted by state court construction of a state law). In Colorado River the Supreme Court held that abstention may be called for in cases involving ‘exceptional circumstances’ that do not fit neatly within the above enumerated categories. See424 U.S. at 817 [96 S.Ct. at 1246 ]. This doctrine was more fully developed in Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp.,460 U.S. 1 [103 S.Ct. 927 ,74 L.Ed.2d 765 ] (1983). It now requires examination of six factors: (1) assumption of jurisdiction over a res; (2) inconvenience of the forum; (3) avoidance of piecemeal litigation; (4) order in which the actions were filed; (5) the law that provides the rule of decision; and (6) protection of the federal plaintiff’s rights.
In analyzing these factors, the Supreme Court admonishes that no single factor is necessarily decisive, and that the test ‘does not rest on a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction.’ Moses H. Cone,460 U.S. at 16 [103 S.Ct. at 937 ]; see also Colorado River,424 U.S. at 818-19 [96 S.Ct. at 1246-47 ],... [T]he absence of [state court’s] jurisdiction over a res, and the convenience of the federal forum both point toward exercise of federal jurisdiction. See Bethlehem Contracting Co. v. Lehrer/McGovern Inc.,800 F.2d 325 , 327 (2d Cir.1986).
The basis of the district court’s decision to abstain is the third factor — avoidance of piecemeal litigation. Because the state and federal issues are ‘inextricably linked,’ the risk of such adjudication is real in this case and the district court properly abstained from allowing litigation to proceed in installments. See General Reinsurance Corp. v. CIBA-GEIGY Corp., 853 F.2d 78 , 81 (2d Cir.1988)....
The fourth factor looks at the chronological order in which the actions were filed. Here, the first state suit preceded the federal action by three months, and were the test a race to the courthouse, this factor would favor abstention. But the inquiry is not so simplistic; the relative progress of the federal and state proceedings must be carefully examined. See Moses H. Cone,460 U.S. at 21 [103 S.Ct. at 939 ]; Bethlehem Contracting Co.,800 F.2d at 328 ; Arkwright-Boston [Manufacturers Mut. v. City of New York], 762 F.2d [205] at 211 [(2d Cir.1985)]....
The substantive law to be applied, the fifth factor.... When the applicable substantive law is federal, abstention is disfavored (sic), though the inverse proposition will not alone support a surrender of federal jurisdiction. See Moses H. Cone,460 U.S. at 26 [103 S.Ct. at 942 ]; General Reinsurance Corp.,853 F.2d at 82 ; Lumbermens [Mut. Casualty Co. v. Connecticut Bank & Trust Co.] 806 F.2d [411,] at 415 [(2d. Cir.1986)]. Yet, if federal law is not implicated, and the governing state law involves ‘a novel state law theory,’ a stronger argument may be made for abstention. See Telesco v. Telesco Fuel and Masons’ Materials, Inc.,765 F.2d 356 , 363 (2d Cir.1985).... We have held nonetheless that ‘[although the absence of federal issues does not require the surrender of jurisdiction, it does favor abstention where the “bulk of the litigation would necessarily revolve around the state-law ... rights of [numerous] ... parties.” ’ General Reinsurance Corp.,853 F.2d at 82 (quoting Moses H. Cone,460 U.S. at 23 n. 29 [103 S.Ct. at 941 n. 29]).... Finally, we address the sixth factor, whether the rights ... will be adequately protected in the state proceedings. Were there is a threat ... this factor would weigh heavily in favor of exercising federal jurisdiction, see Bethlehem Contracting Co.,800 F.2d at 328—
De Cisneros v. Younger, supra,
Rounding out the discretionary concerns is judicial deference:
Complementing the doctrine of abstention is the closely related doctrine of judicial deference that exists between federal courts: a later filed cаse can be stayed in favor of an earlier proceeding between the same parties ... to avoid duplicative litigation. Landis v. North American Co.,299 U.S. 248 , 254,57 S.Ct. 163 , 165,81 L.Ed. 153 (1936). In truly exceptional circumstances involving control by state courts over a res or property, a plainly inconvenient federal forum and the existence of piecemeal litigation, federal cases may be dismissed in favor of concurrent state court proceedings. Colorado River Water Conservation District, supra,424 U.S. 800 ,96 S.Ct. 1236 ,47 L.Ed.2d 483 . But such situations are extremely rare.
In re Martin-Trigona,
Where, however, a plaintiff invokes the exclusive jurisdiction of a Federal Court and there are claims which may only be determined by a Federal Court, abstention is not appropriate and
Colorado River’s
purpose of avoiding piecemeal litigation is not advanced.
Medema v. Medema Builders, Inc.,
In the proceedings, sub judice, the facts do not permit a recommendation for the exercise of discretionary abstention.
First, there is no present State Court action pending against GACC from which these proceedings may be abstained. Defendants’ Texas State Court action against GACC was commenced after GACC filed its bankruptcy petition and is void
ab initio
as a violation of the Bankruptcy Code’s automatic stay under § 362.
Kalb v. Feurstein,
Assuming
arguendo
Defendants were unaware of GACC’s bankruptcy, lack of such knowledge is irrelevant because the violation is self-executing. Section 362 does not require notice be given.
Fields v. Demint,
Again assuming
arguendo
Defendants were ignorant of GACC’s bankruptcy, and although not articulated by Defendants, we find GACC’s delayed announcement of its bankruptcy to the Tеxas State Court until after that Court’s pre-trial dismissal of Defendants’ actions against GACC’s affiliates and non-dismissal against GACC of a de minimus nature (5 months), and on these facts does not rise to the level of being “stealthily silent” to enable us to invoke the rare equitable exception to § 362.
See, In re Smith Corset Shops, Inc.,
Assuming
arguendo
the District Court rejects our ruling that the Texas State Court action is void against GACC and finds it is a proper place for these proceedings to be abstained to, a second ground for denial of discretionary abstention is that Bankruptcy Courts routinely address the kinds of State law issues the parties have brought before us. The cases relied upon by Defendants for their proposition that Bankruptcy Courts have “repeatedly” abstained on these kinds of issues are easily distinguishable by non-objection of the parties,
Balcom Technologies, Inc. v. Lamoureux (In re Farm-Rite, Inc.),
A third ground for denying discretionary abstention is that Defendants have not demonstrated why the issues before us involve unsettled questions of law in either Texas or New York. Moreover, Defendants failed to show any evidence that these proceedings can be timely adjudicated in the State fоrum, or that the State forum could adjudicate these proceedings more quickly than we could.
C. RULE 5011(c) STAY.
Bankruptcy Rules of Practice and Procedure in Bankruptcy Rule 5011(c), Withdrawal and Abstention from Hearing a Proceeding, provides:
(c) Effect of Filing of Motion for Withdrawal or Abstention. The filing of a motion for withdrawal of a case or proceeding or for abstention pursuant to 28 U.S.C. § 1334(c) shall not stay the administration of the case or any proceeding therein before the bankruptcy judge except that the bankruptcy judge may stay, on such terms and conditions as are proper, proceedings pending disposition of the motion. A motion for a stay ordinarily shall be presented first to the bankruptcy judge. A motion for a stay or relief from a stay filed in the district court shall state why it has not been presented to or obtained from the bankruptcy judge. Relief granted by the district judge shall be on such terms and conditions as the judge deems proper.
We deny Defendants’ request for a Rule 5011(c) stay because of our recommendation that discretionary abstention is not appropriate. Moreover, the issues involved are neither novel nor complex.
II. Automatic Stay.
11 U.S.C. § 362(d)(1) states:
On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay — (1) for cause, including the lack of adequate protection of an interest in property of such party in interest ...
Defendants seek our permission to continue their post-petition State Court action against GACC with an ultimate goal in obtaining a judgment against GACC. Defendants are unsecured creditors whose rights, if any, are contingent on the successful outcome of a lawsuit against GACC.
The sole ground for cause advanced by Defendants toward entitlement to relief from stay is their belief that the automatic stay was invoked after their Texas State Court action had been commenced against GACC. The fallacy of Defendants position is quite clear. They believed that the automatic stay had to be affirmatively invoked by GACC before it would be effective against them. As the name suggests, however, the automatic stay is automatic and requires no affirmative act by a bankrupt debtor other than the filing of a petition.
The undisputed evidence shows GACC had filed its petition for bankruptcy relief prior to the Texas State Court action. We determined supra, the Texas State Court action is void ab initio against GACC because Defendants failed to seek relief from the automatic stay before initiating their lawsuits. No other ground being offered by Defendants, Defendants failed to carry their burden of proof for relief from the automatic stay. 11 U.S.C. § 362(g).
III. Summary Judgment.
A. Generally.
To prevail on a motion for summary judgment, the movant must satisfy the criteria set forth in F.R.Civ.P. 56 as made applicable by Rules of Practice and Procedure in Bankruptcy Rule 7056. F.R.Civ.P. 56 provides in part:
[T]he judgment sought shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
See, Celotex Corp. v. Catrett,
The primary purpose for granting a summary judgment motion is to avoid unnecessary trials where no genuine issue of material fact is in dispute.
Farries v. Stanadyne/Chicago Div.,
If the presentation by the nonmoving party in support of its version of the facts is such that the Court could not properly direct a verdict against it in a jury trial, or enter a judgment in favor of the moving party notwithstanding a verdict favorable to the nonmoving party, the motion for summary judgment may not properly be granted.
Eastman Machine Company, Inc., supra
at 473, citing
Anderson v. Liberty Lobby, Inc.,
In remanding the case in Anderson, supra, so the correct standards under Rule 56 could be applied, the Supreme Court directed:
[Tjhe judge must ask himself (herself) not whether he (she) thinks the evidence unmistakenly favors one side or the other but whether a fair minded jury could return a verdict for the plaintiff on the evidence presented. The mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff. The judge’s inquiry, therefore, unavoidably asks whether reasonable jurors could find by a preponderance of the evidence that the plaintiff is entitled to a verdict — ‘whether there is (evidence) upon which a jury can proceed to find a verdict for the party producing it....’
Anderson, id.,
Thus, the function of a Bankruptcy Court when considering a motion for summary judgment is not to resolve disputed issues of fact but only to determine whether there is a genuine issue to be resolved.
Anderson, supra,
at 2509-11;
Knight v. U.S. Fire Insurance Co.,
On a motion for summary judgment our responsibility is to determine whether there are issues of fact to be tried, not to try issues of fact.
Chittenden Trust Company v. Ford Motor Company et al. (In re Burlington Lincoln-Mercury, Inc., d/b/a Southside Lincoln-Mercury),
Slip Op., AP # 87-0045, Case # 86-00145, Jan. 20, 1988, Conrad, B.J. As our Second Circuit stated in
Donahue v. Windsor Locks Board of Fire Commissioners,
Moreover, in determining whether a genuine issue has been raised, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. United States v. Diebold, Inc.,369 U.S. 654 , 655,82 S.Ct. 993 ,8 L.Ed.2d 176 (1962) (per curiam); Quinn v. Syracuse Model Neighborhood Corporation,613 F.2d 438 , 445 (2d Cir.1980). Therefore, not only must there be no genuine issue as to the evidentiary facts, but there must also be no controversy regarding the inferences to be drawn from them. Schwabenbauer v. Board of Education,667 F.2d 305 , 313 (2d Cir.1981); Accord Anderson v. Liberty Lobby, Inc.,477 U.S. 242 ,106 S.Ct. 2505 , 2513,91 L.Ed.2d 202 (1986).
Chittenden Trust Co., supra, at 11, citing Donahue, id. See, Celotex Corp., supra.
The party moving for summary judgment has the burden of clearly establishing no relevant facts are in dispute.
Celotex Corp., supra,
Once a party has met its initial burden, the opposing party must set forth specific facts showing that there is a genuine issue for trial and that the disputed fact is material.
Posey v. Skyline Corp.,
Finally, in determining whether there is a genuine issue of any material fact we must view the evidence in a light most favorable to the party opposing the motion.
United States v. Diebold, Inc.,
F.R.Civ.P. 56 also imposes the dual burden on the movant to establish the absence of disputed material fact and that summary judgment is warranted as a matter of law.
Boazman v. Economics Laboratory, Inc.,
The standаrd for a summary judgment mirrors the standard for a directed verdict under F.R.Civ.P. 50(a).
Anderson, supra,
The record in a summary judgment proceeding includes more than a complaint and an answer. The Court must go beyond the mere pleading of the parties and consider all of the admissible evidence set forth in the papers and all inferences reasonably drawn from such evidence to determine whether there is a genuine issue for trial.
Matter of Esposito,
B. Subject Matter Jurisdiction.
1. Core and Related to Proceedings.
A Rule 12(b)(1) challenge to our subject matter jurisdiction does not place the burden of proof upon the movant. Rather, the burden remains upon the party asserting we have jurisdiction by a preponderance of the evidence. Additionally, a
We are entitled to review not only the pleadings but also matters outside the pleadings, including affidavits and documents before us, for competent evidence to resolve factual disputes about the existence of jurisdiction to hear an action.
See, Land v. Dollar,
The United States Supreme Court’s holding in
Northern Pipeline Co. v. Marathon Pipe Line Co.,
28 U.S.C. § 1334
20
and 28 U.S.C. § 157,
21
respectively, define the source of our sub
a) A case under Title 11;
b) A civil proceeding arising under Title 11;
c) A civil proceeding arising in a case under Title 11; and
d) A civil proceeding related to a case under Title 11.
Taxel v. Commercebank (In re World Financial Services Center, Inc.),
Under 28 U.S.C. § 157(a), the District Court may provide that any or all cases under Title 11 and any or all proceedings arising in or related to a case under Title 11 may be referred to Bankruptcy Judges for the District. By Order dated July 10, 1984, the Honorable Robert J. Ward, Acting Chief Judge for the United States District Court for the Southern District of New York, made a blanket reference of all bankruptcy matters to the Bankruptcy Judges of this District.
The distinction between core and non-core is important in at least one respect, that being a Bankruptcy Court’s ability to enter a final Order. 28 U.S.C. §§ 157(c)(1) and (2) provide that a Bankruptcy Judge may hear non-core proceedings that are otherwise related to a case under Title 11, but may not enter a final Order or judgment without the consent of the parties. Instead, the Bankruptcy Judge must submit proposed findings of fact and conclusions of law for the District Court’s de novo review. In a core matter we may enter a final Order. In some proceedings, we may determine the circumstances are appropriate for us to find that the parties consented to the entry of a final order despite the absence of an express consent.
The distinction between core and non-core should not be confused with our power to hear the matter. We have subject matter jurisdiction regardless of its core or non-core status.
See, In re WEFCO, Inc.,
“Core” is not defined, nor is it limited to the fifteen nonexclusive categories contained in 28 U.S.C. § 157(b)(2). Some Courts have confined themselves to a narrow approach in ascertaining the scope of what matters may be core, while others have taken a more expansive approach.
See, Atlas Fire Apparatus, Inc. v. Beaver (In re Atlas Fire Apparatus, Inc.),
The mere characterization of an adversary proceeding within the core terms of 28 U.S.C. §§ 157(b)(2)(A)-(0) will not be dispositive of whether the proceeding is core.
Taxel v. Commercebank (In re World Financial Services Center, Inc.), supra,
We are ever mindful of Marathon’s plurality holding and Article III proscriptions:
[T]he ‘adjunct’ bankruptcy courts created by the Act [1978, 28 U.S.C. § 1471] exercise jurisdiction behind the facade of a grant to the district courts, and of exercising powers far greater than those lodged in the adjuncts approved in either Crowel [Crowel v. Benson,285 U.S. 22 ,52 S.Ct. 285 ,76 L.Ed. 598 (1932)] or Raddatz [U.S. v. Raddatz,447 U.S. 667 ,100 S.Ct. 2406 ,65 L.Ed.2d 424 (1980)].
Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.,
[T]he constitutional ability of an adjunct bankruptcy court to determine state law issues is to be determined by the nature and extent of control by Article III courts and whether there is a nexus between the proceeding involving a state law cause of action and the bankruptcy estate.
Lessor v. A-Z Associates (In re Lion Capital Group),
Marathon only invalidated the jurisdiction of the bankruptcy court to make final determinations in mattеrs that could have been brought in a district court or a state court (i.e., ‘related proceedings’)_ [I]n no way did Marathon implicate the jurisdiction of the bankruptcy courts in other matters within the ‘traditional’ bankruptcy jurisdiction. The Court’s invalidation of the jurisdictional grant was on separability grounds, not on the grounds that bankruptcy courts could not adjudicate traditional bankruptcy matters.
Salomon v. Kaiser (In re Kaiser),
The majority of Courts have held a party’s post-petition contract dispute with a debtor-in-possession is a core matter under 28 U.S.C. §§ 157(b)(2)(A) “matters concerning the administration of the estate,” (b)(2)(E) “orders to turn over property of the estate,” or, (b)(2)(0) “other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor creditor....”
See, Ben Cooper, Inc. v. The Insurance Company of the State of Pennsylvania (In re Ben Cooper, Inc.), supra,
As for the Bankruptcy Court’s related jurisdiction, in
Turner v. Ermiger (In re Turner),
There is no suggestion that the proceeds would be turned over to the trustee, or accounted for to [trustee], and the judgment below orders [landlord] to pay damages directly to [debtor]. Failure to recover on the claim could not increase [debtor’s] exemption claim under § 522(d) of the Codе since [debtor’s] exemptions had already exhausted the estate. On these facts, there is no showing that [debtor’s] action against [landlord] had any ‘significant connection’ with [debtor’s] bankruptcy case. It therefore falls outside the scope of § 1471(b), 23 which allows the district courts to conduct civil proceedings ‘related to’ cases under Title 11.
Id.,
The Third Circuit provides us with the popular definition of a “related to” jurisdiction which appears to be broader in scope than Turner’s “significant connection:”
The usual articulation of the test for determining whether a civil proceeding is related to a bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy_ An action is related to bankruptcy if the outcome could alter the debtor’s rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankruptcy estate.
In re Pacor, Inc. v. Higgins,
There is merit to GACC’s position that its action against Defendants is core. Although GACC’s and Defendants’ agreements were entered into pre-petition, GACC’s cause of action against Defendants accrued post-petition. The GACC causes of action against Defendants are based on the Production Notes or the Assumption Agreements executed by Defendants as Limited Partners. The Production Notes were not due and payable until December 31,1999 and could be accelerated under the terms of the Assignment and Security Agreement if the Partnerships defaulted on one of the Short Term Notes to GACC. The Texcat Partnership did not default on its obligation under the Short Term Notes until April 30, 1984, when it failed to pay the second of the Short Term Notes. Thus, it was not until April 30, 1984, six months after GACC had filed a petition for bankruptcy, that the GACC causes of action accrued against Defendants because it was then, and only then, that GACC could accelerate the due date on the Production Notes. As post-petition causes of action, we find this proceeding is “core” because it concerns the administration of the estate. The enforcement of the Assumption Agree
As an alternative to our core determination, we have “related to” jurisdiction over these actions. GACC’s causes of action are related to because their outcome has a significant impact on its bankruptcy. GACC’s causes of action are the sole remaining source of income for its bankruptcy estate.
2. Jury Demand.
Assuming the District Court accepts our recommendation that discretionary abstention is not appropriate and as long as these proceedings are before the District Court, the District Court must next determine whether it agrees with our determination that these proceedings are core because Defendants have not submitted proofs of claim in GACC’s bankruptcy case.
The importance of whether these proceedings are “core,” “related to,” or “non-related to” can not be underscored enough when it comes to the issue of whether the Bankruptcy Court or the District Court is the appropriate place to conduct a trial by jury-
Presently, there is no jury rule under Part V Courts and Clerks, Part VII Adversary Proceedings, or Part IX General Provisions of the Bankruptcy Rules that is comparable to Federal Rules of Civil Procedure Rules 38 and 39. 24
The United States Supreme Court has given us guidance in determining when a Bankruptcy Court may conduct a jury trial. A trial by jury may be conducted in Bank
In the proceeding
sub judice,
Defendants have not filed proof of claims. Thus, if the District Court accepts our recommendation of non-abstention and also accepts our recommendation that these proceedings are “core,” then the Bankruptcy Court may conduct a trial by jury.
Perino v. Cohen (In re Cohen),
If, however, the District Court determines GACC’s and Defendants’ causes of action are “relate to,” we recommend our reference be withdrawn and these proceedings be tried before a jury in the District Court.
There are three scenarios where the Bankruptcy Court ought not entertain a timely general demand for a trial by jury: First, where there is a core matter and the defendants have submitted proof of claims against the bankruptcy estate; Second, in the absence of 28 U.S.C. § 157(c)(2) consent to our jurisdiction and final determination over “non-core related” matters; or, Third, despite any efforts by the parties to confer consent to our jurisdiction over non-pendant or non-ancillary “non-core non-related” matters where Bankruptcy Courts are powerless to enter a final Order. Our refusal to entertain a jury demand in the first situation is governed by Langenkamp, supra. Our refusal in the second situation is in the exercise of our discretion to avoid a useless application of our judicial resources when the District Court should hear and determine the proceeding with finality. 25 Our refusal in the third situation is the result of our lack of subject matter jurisdiction.
C. In Personam Jurisdiction.
Although Defendants failed to reply to GACC’s motion for summary judgment on this issue, one of Defendants affirmative defenses is that we lack in personam jurisdiction over them. We need not be detained long here because we have a “Federal Question” and nationwide service of process under Rules of Practice and Procedure in Bаnkruptcy Rule 7004. 26
The presence of a Federal Question requires that we apply a Federal “minimum contact” test rather than a State “minimum contact” test. Title 11 provides us with the Federal question.
Assuming
arguendo
GACC’s proceedings are merely “related to,” we would still reject Defendants’ inclusion of a rеquirement that it be amendable to process under a State law “minimum contact” test. Although such a test may be appropriate in a diversity action, a “related to” matter is ancillary to the underlying Federal question of the bankruptcy action. Thus, we still have the presence of a Federal Question and a Federal “minimum contact” rule applies.
Chemical Bank v. Grisby’s World of Carpet, Inc. (In re WWG Industries, Inc.),
Nationwide service of process is provided for a Bankruptcy Court under Bankruptcy Rules of Practice and Procedure in Bankruptcy, Rule 7004. Thus, we reject Defendants’ affirmative defenses that we lack personal jurisdiction over this Federal
CONCLUSION
We recommend the District Court for the Southern District of New York deny abstention because, inter alia, Defendants’ Texas State Court action against GACC was commenced in violation of 11 U.S.C. § 362 and is void ab initio. Thus, there is no pending State Court action to abstain from. We deny Defendants’ request for a Rule 5011(c) stay because continued delay of these adversary proceedings prejudices the administration of GACC’s bankruptcy estate. We also deny Defendants’ request for relief from the automatic stay under 11 U.S.C. § 362(d) because they failed to sustain their burden of proof of entitlement.
We grant summary judgment on the issue of our subject matter jurisdiction, in personam jurisdiction, and whether these proceedings may be “core” or “related to” because we are required to make such determinations under 28 U.S.C. § 157(b)(3) and because our experience has been that the District Court usually requests our view.
We grant GACC summary judgment against Defendants’ affirmative defense of lack of subject matter and in personam jurisdiction over GACC’s proceedings because we have subject matter jurisdiction and nationwide in personam jurisdiction over Defendants and the presence of a “Federal Question” under § 1334.
We determine GACC’s proceedings against Defendants are “core” because GACC’s causes of action against Defendants accrued post-petition, thus we have power to enter a final Order and a trial by jury is appropriate because Defendants have not filed proof of claims in GACC’s bankruptcy case. We accept Defendants’ position that we have subject matter jurisdiction and core power to enter a final Order on their counterclaim. We likewise determine a trial by jury is appropriate on Defendants’ counterclaims.
As an alternative to our core determination, GACC’s and Defendants’ proceedings are “related to” GACC’s bankruptcy because the outcome of such proceedings has a significant impact on GACC’s ability tо pay its creditors. In this event, however, we recommend the District Court withdraw our reference over these proceedings because of Defendants’ jury demand, and try these proceedings in the District Court before a jury.
We do not reach summary judgment on the following issues until, and unless, the District Court accepts our recommendation to deny abstention and determine these proceedings are “core:” whether the judgment entered in a Federal District Court action against the Partnerships also binds Defendants as the Partnerships’ Limited Partners; whether Defendants’ counterclaims of fraud and breach of contract, defective merchantability, and declaratory judgment are barred by res judicata; or, whether GACC is entitled to summary judgment on its cause of action against Defendants.
DATED at Rutland, Vermont this 26 day of November, 1990.
ORDERS
The Court having this date entered its Recommendation to District Court for the Southern District of New York to not abstain on the above adversary proceedings, It is Ordered that the parties have ten (10) days from the date of docketing and service of our report and recommendation to serve and file their objections in the manner required under Bankruptcy Rules 5011 and 9033(b).
Further, the Court hereby sets a status conference to be held on the above adversary prоceedings on February 13, 1991. DATED at Rutland, Vermont this 26 day of November, 1990.
Notes
. Rules of Practice and Procedure in Bankruptcy Rule 5011 requires a motion for abstention must be heard by the Bankruptcy Judge who shall file a report and recommendation to District Court. See,
Baptist Medical Center of New York v. Singh (In re Baptist Medical Center of New York),
. We have jurisdiction to determine this matter under 28 U.S.C. §§ 1334(b), 157(b), and the general reference to this Court dated July 10, 1984 (Ward, C.J.).
. 28 U.S.C. § 1334, Bankruptcy Cases and Proceedings, provides in part:
(c)(1) Nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.
. Rules of Practice and Procedure in Bankruptcy Rule 5011, Withdrawal and Abstention from Hearing a Proceeding, provides in part:
(b) Abstention from Hearing a Proceeding. Unless a district judge orders otherwise, a motion for abstention pursuant to 28 U.S.C. § 1334(c) shall be heard by the bankruptcy judge, who shall file a report and recommendation for disposition of the motion. The clerk shall serve forthwith a copy of the report and recommendation on the parties to the proceeding. Within 10 days of being served with a copy of the report and recommendation a party may serve and file with the clerk objections prepared in the manner provided in Rule 9033(b). Review of the report and recommendation by the district court shall be governed by Rule 9033.
. Rules of Practice and Procеdure in Bankruptcy Rule 5011, Withdrawal and Abstention from Hearing a Proceeding, provides in part:
(c) Effect of Filling of Motion for Withdrawal or Abstention. The filing of a motion for withdrawal of a case or proceeding or for abstention pursuant to 28 U.S.C. § 1334(c) shall not stay the administration of the case or any proceeding therein before the bankruptcy judge except that the bankruptcy judge may stay, on such terms and conditions as are proper, proceedings pending disposition of the motion. A motion for a stay ordinarily shall be presented first to the bankruptcy judge. A motion for a stay or relief from a stay filed in the district court shall state why it has not been presented to or obtained from the bankruptcy judge. Relief granted by the district judge shall be on such terms and conditions as the judge deems proper.
. 11 U.S.C. § 362(d)(1) states: On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay — (1) for cause, including the lack of adequate protection of an interest in property of such party in interest ...
. For the limited purposes of disposing of Defendants’ and GACC's motions, our background facts are gathered from the parties’ memorandums of law, affidavits, and exhibits.
. Additional Production Notes were made by the other Partnerships to GACC and were identical to the Production Notes made by Texcat, except for the amounts and the dates on which they were due.
. Tex.Rev.Civ.Stat.Ann.Art. 581-33(A)(2) (Vernon 1989 Supp.).
. Texas Deceptive Trade Practices Act, Tex.Bus. & C.Code Ann. § 17.46 (Vernon 1987).
. 11 U.S.C. § 362(d) states: On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay — (1) for cause, including the lack of adequate protection of an interest in property of such party in interest; or (2) with
.28 U.S.C. § 1334(c)(2), Bankruptcy Cases and Proceedings, provides in part:
(2) Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction. Any decision to abstain made under this subsection is not reviewable by appeal or otherwise. This subsection shall not be construed to limit the applicability of the stay provided for by section 362 of title 11, United States Code, as such section applies to an action affecting the property of the estate in bankruptcy.
. Aside from Defendants’ apparent admission in their Memoranda that we have at least "related to" jurisdiction, Defendants' counterclaims averred that we have subject matter jurisdiction and can enter final orders because their counterclaims are core.
. As noted in
In re S.E. Hornsby & Sons Sand and Gravel Co.,
A. A timely motion is made;
B. The proceeding is based solely upon a state law claim or upon a state law cause of action;
C. The proceeding is related to a case under Title 11;
D. The proceeding does not arise under Title 11;
E. The proceeding does not arise in a case under Title 11;
F. The action could not have been commenced in a court of the United States absent jurisdiction under 28 U.S.C. § 1334;
G. An action is commenced in another forum of appropriate jurisdiction; and,
F. The matter can be timely adjudicated in the state forum of appropriate jurisdiction.
. 28 U.S.C. § 1334, Bankruptcy Cases and Proceedings, provides in part:
(c)(1) Nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.
. Under the Act there was a pleading known as "Suggestion of Bankruptcy," which informed others of a debtor’s bankruptcy.
. At this stage of the proceedings, it is not necessary for us to ascertain whether Defendants’ Texas State Court action constitutes a willful violation under § 362(h) because GACC has not moved for § 362(h) damages against Defendants.
. 28 U.S.C. § 157(b)(3), Procedures, provides:
(3) The bankruptcy judge shall determine, on the judge’s own motion or on timely motion of a party, whether a proceeding is a core proceeding under this subseсtion or is a proceeding that is otherwise related to a case under title 11. A determination that a proceeding is not a core proceeding shall not be made solely on the basis that its resolution may be affected by State law.
. 28 U.S.C. §§ 1334(a) and (b), Bankruptcy Cases and Proceedings, provide:
(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11.
(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.
. 28 U.S.C. § 157, Procedures, provides in part:
(a) Each district court may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district.
(b)(1) Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11, referred under subsection (a) of this section, and may enter appropriate orders and judgments, subject to review under section 158 of this title.
(2) Core proceedings include, but are not limited to—
(A) matters concerning the administration of the estate;
(B) allowance or disallowance of claims against the estate or exemptions from property of the estate, and estimation of claims or interest for the purposes of confirming a plan under chapter 11, 12, or 13 of title 11 but not the liquidation or estimation of contingent or unliquidated personal injury tort or wrongful death claims against the estate for purposes of distribution in a case under title 11;
(C) counterclaims by the estate against persons filing claims against the estate;
(D) orders in respect to obtaining credit;
(E) orders to turn over property of the estate;
(F) proceedings to determine, avoid, or recover preferences;
(G) motions to terminate, annul, or modify the automatic stay;
(H) proceedings to determine, avoid, or recover fraudulent conveyances;
(I) determinations as to the dischargeability of particular debts;
(J) objections to discharges;
(K) determinations of the validity, extent, or priority of liens;
(L) confirmations of plans;
(M) orders approving the use or lease of property, including the use of cash collateral;
(N) orders approving the sale of property other than property resulting from claims brought by the estate against persons who have not filed claims against the estate; and
(O) other proceeding affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship, except personal injury tort or wrongful death claims.
(3) The bankruptcy judge shall determine, on the judge’s own motion or on timely motion of a party, whether a proceeding is a core proceeding under this subsection or is a proceeding that is otherwise related to a case under title 11. A determination that a proceeding is not a core proceeding shall not be made solely on the basis that its resolution may be affected by State law....
(4) Non-core proceedings under section 157(b)(2)(B) of title 28, United States Code, shallnot be subject to the mandatоry abstention provisions of section 1334(c)(2).
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(c)(1) A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge’s proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.
(2) Notwithstanding the provisions of paragraph (1) of this subsection, the district court, with the consent of all the parties to the proceeding, may refer a proceeding related to a case under title 11 to a bankruptcy judge to hear and determine and to enter appropriate orders and judgments, subject to review under section 158 of this title.
(d) The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.
.
The Emergency Resolution adopted by Order in the Northern District for the District of New York dealt with the
Marathon, supra,
problems.
. 28 U.S.C. § 1471 was the forerunnеr of present day 28 U.S.C. § 1334.
. F.R.Civ.P. Rule 38, Jury Trial of Right, provides in pertinent parts:
(a) Right Preserved. The right of trial by jury as declared by the Seventh Amendment of the Constitution or as given by a statute of the United States shall be preserved to the parties inviolate.
(b) Demand. Any party may demand a trial by jury of any issue triable of right by a jury by serving upon the other parties a demand therefor in writing at any time after the commencement of the action and not later than 10 days after the service of the last pleading directed to such issue. Such demand may be indorsed upon a pleading of the party.
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(d) Waiver. The failure of a party to serve a demand as required by this rule and to file it as required by Rule 5(d) constitutes a waiver by the party of trial by jury. A demand for trial by jury made as herein provided may not be withdrawn without the consent of the parties.
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F.R.CÍV.P. Rule 39, Trial by Jury or by the Court, provides in pertinent parts:
(a) By Jury. When trial by jury has been demanded as provided in Rule 38, the action shall be designated upon the docket as a jury action. The trial of all issues so demanded shall be by jury, unless (1) the parties or their attorneys of record, by written stipulation filed with the court or by an oral stipulation made in open court and entered in the record, consent to trial by the court sitting without a jury or (2) the court upon motion or of its own initiative finds that a right of trial by jury of some or all of those issues does not exist under the Constitution of the United States.
(b) By the Court. Issues not demanded for trial by jury as provided in Rule 38 shall be tried by the court; but, notwithstanding the failure of a party to demand a jury in an action in which such a demand might have been made of right, the court in its discretion upon motion may order a trial by a jury of any or all issues.
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The Advisory Committee note to Rules of Practice and Procedure in Bankruptcy Rule 7001 notes that Part VII Adversary Proceedings incorporates or adopts most of the Federal Rules of Civil Procedure. Neither F.R.Civ.P. Rule 38, nor 39, is incorporated or adopted in Part VII. The Advisory Committee note to Bankruptcy Rule 7001 lists Bankruptcy Rule 9015 as the comparable rule to F.R.Civ.P. Rules 38 and 39. Bankruptcy Rule 9015 was abrogated in 1987. The Advisory Committee commented in its note to the 1987 Amendment of former Bankruptcy Rule 9015:
Former section 1480 of title 28 preserved a right to trial by jury in any case or proceeding under title 11 in which a jury trial was provided by statute. Rule 9015 provided the procedure for jury trials in bankruptcy courts. Section 1480 was repealed. Section 1411 added by the 1984 amendments affords a jury trial only for personal injury or wrongful death claims, which 28 U.S.C. § 157(b)(5) requires be tried in the district court. Nevertheless, Rule 9015 has been cited as conferring a right to jury trial in other matters before the bankruptcy judges. In light of the clear mandate of 28 U.S.C. § 2075 that the ‘rules shall not abridge, enlarge, or modify any substantive right,' Rule 9015 is abrogated. In the event the courts of appeals or the Supreme Court define a right to jury in any bankruptcy matters, a local rule in substantially the form of Rule 9015 can be adopted pending amendment of these rules.
. Bankruptcy Judge Marro so aptly stated:
It would be an exercise in futility for the Bankruptcy Court to conduct a hearing [on a "non-core related" matter] solely for the purpose of submitting proposed findings and conclusions of law to the District Court only to have this hearing followed by a jury trial on the same issues.
Palmisano v. Briggs (In re Northern Design, Inc.),
. Rules of Practice and Procedure in Bankruptcy Rule 7004, Process; Service of Summons, Complaint, provides in pertinent parts:
(a) SUMMONS; SERVICE; PROOF OF SERVICE. Rule 4(a), (b), (c)(2)(C)(i), (d), (e) and (g)-(j) F.R.Civ.P. applies in adversary proceedings. Personal service pursuant to Rule 4(d) F.R.Civ.P. may be made by any person not less than 18 years of age who is not a party and the summons may be delivered by the clerk to any such person.
(b) SERVICE BY FIRST CLASS MAIL. In addition to the methods of service authorized by Rule 4(c)(2)(C)(i) and (d) F.R.Civ.P., service may be made within the United States by first class mail postage prepaid as follows:
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(3) Upon a domestic or foreign corporation or upon a partnership or other unincorporated association, by mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant.
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(7) Upon a defendant of any class referred to in paragraph (1) or (3) of this subdivision of this rule, it is also sufficient if a copy of the summons and complaint is mailed to the entity upon whom service is prescribed to be served by any statute of the United States or by the law of the state in which service is made when an action is brought against such defendant in the court of general jurisdiction of that state.
(8) Upоn any defendant, it is also sufficient if a copy of the summons and complaint is mailed to an agent of such defendant authorized by appointment or by law to receive service of process, at the agent’s dwelling house or usual place of abode or at the place where the agent regularly carries on a business or profession and, if the authorization so requires, by mailing also a copy of the summons and complaint to the defendant as provided in this subdivision.
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(d) NATIONWIDE SERVICE OF PROCESS.
The summons and complaint and all other process except a subpoena may be served anywhere in the United States.
. F.R.Civ.P. Rule 4(e) provides:
(e) Summons: Service Upon Party Not Inhabitant of or Found Within State. When ever a statute of the United States or an order of court thereunder provides for service of summons, or of a notice, or of an order in lieu of summons upon a party not an inhabitant of or found within the state in which the district court is held, service may be made under the circumstances and in the manner prescribed by statute or order, or, if there is no provision therein prescribing the manner of service, in a manner stated in this rule. Whenever a statute or rule of court of the state in which the district court is held provides (1) for service of a summons, or of a notice, or of an order in lieu of summons upon a party not an inhabitant of or found within the state, or (2) for service upon or notice to such a party to appear and respond or defend in an action by reason of the attachment or garnishment or similar seizure of the party’s property located within the state, service may in either case be made under the circumstances and in the manner prescribed in the statute or rule.