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Century Capital Group, LLC v. Gunn

United States District Court, W.D. Kentucky, Louisville Division

February 22, 2017

CENTURY CAPITAL GROUP, LLC, et al., Plaintiffs,
TROY A. GUINN, et al., Defendants.


          David J. Hale, Judge United States District Court

         In 2011, Plaintiffs Century Capital Group and Richard Mills sued Defendant Troy Guinn in Jefferson County, Kentucky Circuit Court over a “business dispute.” (D.N. 6-1, PageID # 48) In January 2014, the Jefferson Circuit Court entered judgment against Guinn. (Id.) Two months later, in March 2014, the plaintiffs filed suit against Guinn and Robin Campbell in Jefferson Circuit Court alleging fraudulent conveyances from Guinn to Campbell in violation of state law and “seeking to collect on the judgment against Guinn from Campbell's assets.” (Id., PageID # 50) Meanwhile, also in March 2014, Guinn filed a Chapter 7 bankruptcy petition in the U.S. Bankruptcy Court for the Western District of Kentucky. (Id., PageID # 49)

         On March 7, 2016, the plaintiffs filed their first amended complaint in Jefferson Circuit Court, adding Medical Consulting Solutions (MCS), Accident Assistance Today (AAT), Innovative Health Care Solutions, Integrity Health Care Solution, T&C Neuromax Global and “Does 1-25” as defendants. (Id.) One week later, on March 15, 2016, the trustee for Guinn's bankruptcy estate “initiated an adversary proceeding by filing a Complaint” against Campbell, MCS, AAT, and RST Medical Services, seeking to avoid and recover fraudulent transfers under 11 U.S.C. §§ 544, 548, and 550, as well as Kentucky state law. (Id.) The defendants removed the second case from Jefferson Circuit Court to this Court on March 18, 2016. (D.N. 1; D.N. 14, PageID # 123) “The bankruptcy case remains open and is pending in the Bankruptcy Court.” (D.N. 6-1, PageID # 49)

         Defendants Robin Campbell, Medical Consulting Solutions, LLC (“MCS”), Accident Assistance Today, LLC (AAT), Innovative Health Care Solutions, LLC, and Integrity Health Care Solutions, LLC have moved to dismiss the instant complaint. (D.N. 6) The defendants argue that the plaintiffs' complaint and trustee's action are targeting the same alleged fraudulent transfers from Guinn to Campbell. (Id., PageID # 50) The plaintiffs then moved for the Court to abstain pursuant to 28 U.S.C. § 1334(c)(2) or, alternatively, consolidate the instant action with the bankruptcy case before adjudicating the motion to dismiss. (D.N. 8) The plaintiffs also filed a motion to stay the motion to dismiss pending adjudication of the motion for abstention. (D.N. 9) Next, the defendants filed a motion to refer the matter to bankruptcy court. (D.N. 12-1) In response, the plaintiffs argue that the Court should first address its motion for abstention, and the matter should be referred to bankruptcy court only if the Court determines that this matter is appropriate for federal courts. (D.N. 14, PageID # 124) Finally, the plaintiffs filed a motion for a status conference, “at which or after which Plaintiffs would be prepared to offer arguments on the pending motions and clarify any procedural complexities.” (D.N. 19, PageID # 135)


         The defendants ask the Court to refer this matter to bankruptcy court under Local Rule 83.12. (D.N. 12, PageID # 110) That rule provides, in relevant part, that

[t]he following cases and proceedings are referred to the Bankruptcy Court judges for the District:
(1) Cases, matters and proceedings in cases, under the Bankruptcy Act pending in the Bankruptcy Court on July 9, 1984; . . . [and]
(4) All actions for removal of claims under 28 U.S.C. §1452(a) and (b) that relate to bankruptcy cases, except proceedings involving tort claims for personal injury or wrongful death. . . .

LR 83.12. The defendants argue that pursuant to LR 83.12, the claims at issue “are to be referred automatically to the bankruptcy court for the district.” (D.N. 12-1, PageID # 112) The plaintiffs respond that the motion for abstention should be considered first. (D.N. 14, PageID # 124) If the motion for abstention is granted, the plaintiffs assert, the motion for referral is moot. (Id.) However, if the motion for abstention is denied, the plaintiffs do not object to referring the matter to the bankruptcy court. (Id.)

         “‘Mandatory abstention under section 1334(c)(2) is not jurisdictional' and, thus, the Court first must address whether it has jurisdiction over this matter before addressing whether abstention is proper.” Tomassi v. MDS, Inc., No. 5:12-CV-00201-TBR, 2013 WL 1636435, at *1 (W.D. Ky. Apr. 16, 2013) (quoting Robinson v. Mich. Consol. Gas Co., 918 F.2d 579, 584 (6th Cir. 1990)). Section 1334 provides that district courts have original jurisdiction over bankruptcy proceedings arising under title 11. See 28 U.S.C. § 1334(a). However, section 1334(b) states that “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. § 1334(b). Section 157 “sets forth procedures by which district courts may refer cases to the bankruptcy judges for their districts.” K & B Capital, LLC v. Ogden, No. CIV.A.5:05 CV 72 R, 2005 WL 1799735, at *1 (W.D. Ky. July 26, 2005). Section 157(a) states that a “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.” Irvin v. Faller, 531 B.R. 704, 706 (W.D. Ky. 2015) (citing LR 83.12).

         The Sixth Circuit has held that a bankruptcy court has jurisdiction under § 1334(b) if the matter is “related to” the bankruptcy. Id. at 500 (citing Mich. Emp't Sec. Comm'n v. Wolverine Radio Co., Inc., 930 F.2d 1132, 1141 (6th Cir. 1991)). A matter is “related to” a bankruptcy if “the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.” Id. (quoting Wolverine Radio, 930 F.2d at 1142).

         The defendants state, and the plaintiffs do not dispute, that the issue of fraudulent transfers is “related to” Guinn's bankruptcy case. Therefore, the Court finds that this matter is “related to” the bankruptcy case and thus ...

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