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Irvin v. Faller

United States District Court, W.D. Kentucky, Bowling Green Division

May 7, 2015

JOE MICHAEL IRVIN, LARRY E. ROGERS, SCOTT HAMMOND, SAMUEL J. TARTER, JAMIE ROGERS, DAVID F. SMITH, ROSE TARTER, JOEY HOOVER, and CARLA GRIDER, PLAINTIFFS
v.
JAMES S. FALLER, II, DEFENDANT

Decided May 6, 2015

For Joe Michael Irvin, Larry E. Rogers, Scott Hammond, Samuel J. Tarter, Jamie Rogers, David F. Smith, Rose Tarter, Joey Hoover, Carla Grider, Plaintiffs: Scott A. Bachert, LEAD ATTORNEY, Kerrick Bachert PSC, Bowling Green, KY.

For James S. Faller, II, Defendant: Michael W. McClain, LEAD ATTORNEY, McClain DeWees PLLC, Louisville, KY.

For James S. Faller, II, Debtor: Michael W. McClain, LEAD ATTORNEY, McClain DeWees PLLC, Louisville, KY.

Memorandum Opinion and Order

Joseph H. McKinley, Jr., Chief United States District Judge.

This matter is before the Court on a motion by Defendant James S. Faller, II, to withdraw reference of this adversary proceeding from the bankruptcy court pursuant to 28 U.S.C. § 157(d) [DN 1]. Fully briefed, this matter is ripe for decision. For the following reasons, the Motion to Withdraw Reference is DENIED.

I. Background

Prepetition, Plaintiffs filed defamation and abuse of process claims against Defendant, James S. Faller, II, in Russell Circuit Court.[1] The cases were consolidated and tried before a jury on November 5, 2013. Plaintiffs obtained jury awards of both compensatory and punitive damages against Defendant. Shortly thereafter, and prior to the state court entering final judgment on those jury awards, Defendant filed a voluntary petition for relief pursuant to Chapter 7 of the Bankruptcy Code on November 20, 2013. Pursuant to 11 U.S.C. § 362(a), the filing of Defendant's bankruptcy petition stayed the state court proceedings against him. Plaintiffs initiated this adversary proceeding on February 7, 2014, seeking determination that the judgments awarded by the jury in state court are non-dischargeable under 11 U.S.C. § 523(a)(6) for " willful and malicious injury." [2]

II. Applicable Law

Federal district courts have jurisdiction over bankruptcy actions under 28 U.S.C. § 1334. See 28 U.S.C. § 1334(a) (granting jurisdiction over " all cases under title 11," i.e., the bankruptcy petition itself), (b) (granting jurisdiction over " all civil proceedings arising under title 11, or arising in or related to cases under title 11" ). Section 157(a) provides a referral process, under which the 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." 28 U.S.C. § 157(a). The Western District of Kentucky, by Local Rule 83.12, has provided for such reference to the Bankruptcy Court. See LR 83.12.

Section 157(d) provides that " [t]he 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." 28 U.S.C. § 157(d) (emphasis added).[3] Thus, a court may grant a party's motion for discretionary withdrawal of reference if (1) the motion was " timely," and (2) the movant has shown " cause." Id. Withdrawal of the reference is the exception to the general rule that bankruptcy matters should be adjudicated in bankruptcy court. Official Comm. of Unsecured Creditors of Appalachian Fuels, LLC v. Energy Coal Res., Inc. (In re Appalachian Fuels, LLC), 472 B.R. 731, 748 (E.D. Ky. 2012).

III. Discussion

Defendant seeks for this Court to withdraw reference of this adversary proceeding from the Bankruptcy Court pursuant to 28 U.S.C. ยง 157(d). Plaintiffs contend the Court should deny Defendant's Motion to Withdraw Reference because (1) the motion was not timely filed and (2) Defendant has not shown cause to warrant withdrawal of the reference. Defendant contends that this Court is a more appropriate forum for the adversary proceeding to be tried because (1) the circumstances underlying the alleged debts that Plaintiffs seek to have declared non-dischargeable are non-core matters and (2) Defendant intends to seek relief from the automatic stay to challenge the jury verdicts in the state court ...


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