In re Atlas Automation, Inc.

• Decision Date: 31 August 1984
• Docket Number: Bankruptcy No. 82-00189,Adv. No. 82-0165.
• Citation: 42 BR 246
• Parties: In re ATLAS AUTOMATION, INC., Debtor. ATLAS AUTOMATION, INC., Plaintiff, v. JENSEN, INC., Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Michigan

42 B.R. 246 (1984)

In re ATLAS AUTOMATION, INC., Debtor ATLAS AUTOMATION, INC., Plaintiff, v. JENSEN, INC., Defendant.

Bankruptcy No. 82-00189, Adv. No. 82-0165.

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

August 31, 1984.

Jack K. Segal, Flint, Mich., for debtor.

C. Randall Mitseff, Jeffrey I. Kahan, Detroit, Mich., for Jensen Co.

MEMORANDUM OPINION AND RECOMMENDATION RE: JURISDICTION AND ABSTENTION

ARTHUR J. SPECTOR, Bankruptcy Judge.

JURISDICTION

This is an action commenced May 24, 1982, by the Chapter 11 Debtor-in-Possession against a company which is otherwise a stranger to these proceedings for a money judgment on an alleged account receivable. The defendant counterclaimed and demanded a jury trial¹. The defendant later moved for a dismissal or abstention based upon Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982).

The complaint and the counterclaim are based on contract theories. Unless the Court were to read "orders to turn over property of the estate" or "other proceedings affecting the liquidation of the assets of the estate . . ." to include collection of accounts receivable or actions for breach of contract, this case is not a "core proceeding" as defined by 28 U.S.C. § 157(b)(2). Although money due to a Chapter 11 debtor can certainly be described as "property of the estate" for which the plaintiff is requesting a "turn over" order, and although this is a "proceeding affecting the liquidation of the assets of the estate" in that it is indeed an action to liquidate what at least the debtor perceives to be an asset, to wit: an account receivable, the Court cannot ignore the legislative intent behind the recent enaction of the Bankruptcy Amendments and Federal Judgeship Act of 1984, P.L. 98-353. In light of the fact that this statute was enacted in response to the Supreme Court's holding in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., supra and that that case involved an action similar in legal nature to the case at hand, i.e., a breach of contract action, it is doubtful that Congress intended this type of case to be tried by a bankruptcy court. Thus, although the perimeters of the definition of "turn over property of the estate" and "proceeding affecting the liquidation of the assets of the estate" are yet to be explored, they do not include actions of this type. Therefore, the Court, on its own motion, pursuant to 28 U.S.C. § 157(b)(3), determines that this case is a "proceeding that is otherwise related to a case under title 11."

It appears that this case is "trial ready" since discovery is complete and motions for summary judgment have been denied. On August 17, 1984, the District Court for the Eastern District of Michigan adopted Administrative Order 84-X-00096, which, among other things, states:

". . . in any proceeding in which a demand for a jury trial is made, the Bankruptcy Judge shall determine whether the demand was timely made and if timely made, whether the party has a right to a jury trial. . . .

"If the Bankruptcy Judge determines the demand was timely made and the party has a right to a jury trial, the proceeding shall be administered until it is ready for a final pretrial conference before a District Judge. The Bankruptcy Judge shall also prepare written recommendations concerning the effect of the proceeding upon the disposition of the underlying bankruptcy petition and whether the trial of the proceeding should be expedited."

Since a proper demand for jury trial was timely made, this is not a case which can be tried by the Bankruptcy Court, and therefore this case would have to be transferred to the District Court for trial.

ABSTENTION

Although the Bankruptcy Amendments and Federal Judgeship Act added 28 U.S.C. § 1334(c)(2), which states:

"Upon timely motion of a party in a proceeding based upon a State law claim or State 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 court² 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,"

that section is not effective as to any proceeding, such as this one, which arose from or is related to a case pending on the date of its enactment. 28 U.S.C. § 122(b). However, 28 U.S.C. § 1334(c)(1), which recodified 28 U.S.C. § 1471(d), and which allows the Court to abstain in the exercise of its discretion, is now in effect. Prior thereto, of course, 28 U.S.C. § 1471(d) permitted abstention. Thus, abstention was available as an option to the Bankruptcy Court, albeit on a discretionary basis, at all times, including now.

On January 18, 1983, the defendant moved for an order of abstention. No order granting or denying that motion has yet been entered. The legislative history of former 28 U.S.C. § 1471(d) states that "the subsection recognizes the exigencies that arise in such cases as Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 60 S.Ct. 628, 84 L.Ed. 876 (1940), in which it is more appropriate to have a state court hear a particular matter of state law." H.R. Rep. No. 595, 95th Cong., 1st Sess. 446 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6401. In exercising its discretion in this regard, the...