In Re: ANNA VLADIMIROVNA ZINKOVA; PACIFIC INTERNATIONAL GROUT Co. a Washington Corporation, Plaintiff, v. PACIFIC INTERNATIONAL GROUT CO., a Washington corporation, and PATRICK J. STEPHENS and BLISS STEPHENS, and the marital community composed thereof, Debtor/Defendant. v. PACIFIC INTERNATIONAL GROUT CO., a Washington corporation, and PATRICK J. STEPHENS and BLISS STEPHENS, and the marital community composed thereof, Counter-Defendants.
C12-778 MJP
UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE
May 21, 2012
Marsha J. Pechman
Background
On July 28, 2005, Plaintiff Pacific International Grout Co. (“PIGCO“) sued Defendant Anna Vladimirovna Zinkova (“Zinkova“) in state court, alleging losses incurred due to Zinkova‘s embezzlement. Zinkova asserted counterclaims against PIGCO and Patrick Stephens. On November 10, 2011, PIGCO filed a motion for summary judgment and a hearing was set for December 9, 2011. (Adv. Proceeding, Dkt. No. 13 at 80.)
On November 28, 2011, Zinkova filed a voluntary petition for bankruptcy under Chapter 13 of Title 11 in the United States Bankruptcy Court for the Western District of Washington (“Bankruptcy Court“), which stayed the state court litigation. (In re Zinkova, Ch. 13 Case No. 11-23688-KAO (W.D. Wash. 2012), Dkt. No. 1.) On December 1, 2011, PIGCO filed a complaint with the Bankruptcy Court, seeking a determination of non-dischargeability as to PIGCO‘s claims against Zinkova in the state court litigation. (See Pacific Int‘l Grout Co. v. Zinkova, (In re Zinkova), Adv. No. 12-2130 (W.D.Wa. 2012), Dkt. No. 1.) The Adversary Proceeding was assigned to the Bankruptcy Court under Adversary Case No. 11-2130. On January 13, 2012, Zinkova filed an answer in the Adversary Proceeding, asserting counterclaims against PIGCO and Stephens identical to those in the state court litigation. (Adv. Dkt. No. 5.)
Analysis
District courts have discretion to refer “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” to the
In the Ninth Circuit, courts consider the following in determining whether cause exists to withdraw the reference: the efficient use of judicial resources, delay and costs to the parties, uniformity of bankruptcy administration, the prevention of forum shopping and other related factors, and whether the claims at issue are core or non-core. Secruity Farms v. International Brotherhood of Teamsters, et.al., 124 F.3d 999, 1008 (9th Cir. 1993). “Core proceedings are actions by or against the debtor that arise under the Bankruptcy Code in the strong sense that the Code itself is the source of the claimant‘s right or remedy, rather than just the procedural vehicle for the assertion of a right covered by some other body of law, normally state law.” Matter of U.S. Brass Corp., 110 F.3d 1261, 1268 (7th Cir.1997). In non-core proceedings—proceedings that are not core but are “otherwise related to a case under title 11,”
Here, Plaintiff moves to withdraw the reference of the adversary complaint because (1) the counterclaims Zinkova asserts are not core bankruptcy matters, but instead based on state
Second, judicial efficiency would be served by withdrawing the reference. An important consideration in determining whether to withdraw the reference is “the efficient use of judicial resources, delay and cost to the parties.” Vacation Village, Inc. v. Clark County, Nevada, 497 F.3d 902, 914 (9th Cir. 2007). Here, the Bankruptcy Court will not be able to make a final determination in the Adversary Proceeding given that Zinkova‘s counterclaims are non-core. Instead, the Bankruptcy Court will have to submit a recommendation for the District Court‘s de novo review. See Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 75 (1982)(finding “Art. III bars Congress from establishing legislative courts to exercise jurisdiction over all matters related to those arising under the bankruptcy laws.“) Since the district court will necessarily review this action, the Court finds judicial efficiency warrants a single proceeding in the district court. Since Zinkova‘s counterclaims are based on state law and judicial efficiency will be served if proceedings are held before a district court, the Court GRANTS Plaintiff‘s motion to withdraw the reference.
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The Court GRANTS Plaintiff‘s motion to withdraw the reference of the adversary action and to remove the action to the District Court.
The clerk is ordered to provide copies of this order to all counsel.
Dated this 21st day of May, 2012.
Marsha J. Pechman
United States District Judge