In re Astrocade, Inc.

• Decision Date: 04 December 1987
• Docket Number: Bankruptcy No. 2-82-04677,Adv. No. 2-83-0451.
• Citation: 79 BR 983
• Parties: In re ASTROCADE, INC., Debtor. Craig M. STEWART, Trustee, Plaintiff, v. A.L. STRASBURGER, et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

79 B.R. 983 (1987)

In re ASTROCADE, INC., Debtor.

Craig M. STEWART, Trustee, Plaintiff, v. A.L. STRASBURGER, et al., Defendants.

Bankruptcy No. 2-82-04677, Adv. No. 2-83-0451.

United States Bankruptcy Court, S.D. Ohio, E.D.

December 4, 1987.

Craig M. Stewart, Trustee, Carlile, Patchen, Murphey & Allison, Columbus, Ohio.

Robert J. Sidman, Vorys, Sater, Seymour & Pease, Columbus, Ohio, for A.L. Strasburger, and L. Strasburger and Sons d/b/a Associated Distributing Co.

James C. Carpenter, Carlile, Patchen, Murphey & Allison, Columbus, Ohio, for trustee.

DECISION AND ORDER DENYING MOTIONS TO DISMISS AND TRANSFER; JURY DEMAND TRANSMITTED TO DISTRICT COURT FOR REVIEW OF REFERENCE

DONALD E. CALHOUN, Jr., Bankruptcy Judge.

This matter is before the Court upon the motion of defendants, A.L. Strasburger, L. Strasburger & Sons, d/b/a Associated Distributing Company, and Leroy Strasburger to dismiss the complaint for lack of personal jurisdiction or alternatively, to transfer this case to another district; motion of defendants for determination of core/non-core status and dismissal of case for lack of subject matter jurisdiction; jury demand by the defendants; plaintiff's memorandum contra defendants' motions to dismiss for lack of personal and subject matter jurisdiction; and reply memorandum of defendants in support of their motions to dismiss or to transfer the case and to determine core/non-core status.

The plaintiff is the Court-appointed trustee for Astrocade, Inc. (Astrocade), a debtor in a Chapter 11 case pending in this Court. In that capacity, plaintiff filed this adversary proceeding in which he asserts that Astrocade provided goods and services to the defendants. The plaintiff is seeking to recover the amount of defendant's account with the debtor or, in the alternative, the value of goods and services provided defendants by the debtor. Defendants are all residents of South Carolina.

Defendants filed a motion to dismiss the complaint of the trustee claiming that this Court lacked jurisdiction to hear the subject matter of this adversary proceeding. This Court overruled defendants' motion to dismiss on the basis of the emergency rule adopted to govern the operation of the bankruptcy court system. Defendants then filed a motion for leave to appeal that Order. The United States District Court for the Southern District of Ohio denied the defendants' motion for leave to appeal and remanded the proceeding to this Court. The defendants then filed their answer and defenses to the complaint, along with a demand for a jury trial. The defendants also filed the motions for dismissal and for determination of core/non-core status.

The issues before this Court are:

1.) Does the Court possess personal jurisdiction over the defendants?

2.) Is a change in venue appropriate in this case?

3.) Does the Court possess subject matter jurisdiction over the trustee\'s claims?

4.) Is this matter a core or non-core matter?

5.) Is there a right to a jury trial as demanded by the defendants?

1. Personal jurisdiction

The defendants' position is that personal jurisdiction over non-resident defendants must be determined by the law of the forum state. Defendants maintain that Ohio's "long-arm" statute, Ohio Revised Code § 2307.382 controls, as well as the requirements of due process as established in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L. Ed. 95 (1945).

The scope of in personam jurisiction over nondebtor defendants in bankruptcy proceedings and the question of whether nationwide service of process is authorized has been the subject of much litigation. As under the 1978 Act, see In re Trim-Lean Meat Products, Inc., 11 B.R. 1010 (Bankr.D.Del.1981), it has been held under the 1984 Act that the district court, and its bankruptcy court units, have jurisdiction that extends nationwide over non-resident defendants in any "related to" proceeding despite a lack of "minimum contacts" with the forum in which the district or bankruptcy court is located. In re WWG Industries, Inc., 44 B.R. 287 (D.C.N.D.Ga., 1984). See also In re Coby Glass Products Co., 22 B.R. 961 (Bankr.D.R.I.1982), and Schack Glass Industries Co., Inc., 20 B.R. 967 (Bankr.S.D.N.Y.1982).

2. Venue

The defendants alternatively seek to have this case tried in a South Carolina Court pursuant to 28 U.S.C. §§ 1412 and 1404(a). The defendants all reside in South Carolina and have no contact with Ohio. The Plaintiff states that the defendants have the burden of proving the necessity for a change of venue, that is, to prove any inconvenience or that the interests of justice would be better served by a transfer to a South Carolina forum.

The Court in this instance views a change of venue as merely shifting the inconvenience from one party to the other. Phillips v. S. Gumpert Co., Inc., 627 F.Supp. 725 (W.D.N.C.1986). Noting that this case has been pending since 1983 and finding that this case was properly filed as to venue under 28 U.S.C. § 1410, the Court believes the interest of justice would not be better served by a transfer of this case to a South Carolina forum. Shapiro v. Merrill Lynch & Co., 634 F.Supp. 587 (S.D.Ohio 1986); Nemmers v. Truesdale, 612 F.Supp. 245 (D.C.Ohio 1985).

3. Subject-matter jurisdiction

Defendants raise the subject matter jurisdiction issue once again in their motion for determination of core/non-core status. While the Court will expound on core/non-core status later in this Order, the issue of subject matter jurisdiction has been ruled on by this Court previously, and defendant's motion for leave to appeal was denied by the District Court. The Court has subject matter jurisdiction in this case.

4. Core/Non-core Status

The defendants moved the Court to determine whether plaintiff's complaint seeking to recover the amount of an alleged account from the defendants constitutes a core or non-core proceeding under 28 U.S.C. § 157. The defendants cite numerous cases where this type of action has been considered a non-core proceeding. Plaintiff argues that this is a core proceeding, and that a determination of whether a proceeding is a core proceeding should not be made solely on whether or not its resolution may be affected by state law.

Resolution of whether the issues before the Court are core or related proceedings requires an analysis of the changes effected by the Bankruptcy Amendments and Federal Judgeship Act of 1984, P.L. 98-353 (BAFJA). Under 28 U.S.C. § 1334, district courts were granted jurisdiction over all cases under title 11, and all civil proceedings arising under title 11, or arising in or related to cases under title 11.

Pursuant to 28 U.S.C. § 157(a), the district courts:

. . . 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.

The United States District Court for the Southern District of Ohio entered an Order on July 31, 1984 which provides for the automatic referral to the Bankruptcy Court of those cases and proceedings pursuant to Section 157(a) of the Act.

The characterization of a related matter as core or non-core determines whether the bankruptcy court is then empowered to enter final orders and judgments pursuant to the reference.

If a matter is determined to be a core proceeding under § 157(b)(2), the bankruptcy court may hear it and render a final determination, subject to appeal. 28 U.S.C. § 157(b)(1). Otherwise, the bankruptcy court may hear a non-core proceeding and submit proposed findings of fact and conclusions of law to the district court, 28 U.S.C. § 157(c)(1); the district court then enters a final order or judgment after it reviews de novo those findings to which any party has timely and specifically objected. By consent, the parties may empower the bankruptcy court to enter a final order or judgment in a non-core proceeding, which order or judgment would then be subject to appellate review by the district court, in the same manner as if it had been entered in a core proceeding. 28 U.S.C. § 157(c).

This new jurisdictional scheme, defining matters according to core/non-core status, was initiated by Congress following the Supreme Court's invalidation of 28 U.S.C. § 1471 in the case of Northern Pipeline Construction Co. v. Marathon Pipeline Company, 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). The Supreme Court struck down § 241(a) of the Bankruptcy Reform Act of 1978 which had expanded the jurisdiction of bankruptcy courts without granting Article III status to bankruptcy judges.

BAFJA lists a non-inclusive series of examples of what is to be considered within the meaning of a core proceeding. Pursuant to 28 U.S.C. § 157(b)(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 interests 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

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