In re Baldwin-United Corp.
| Decision Date | 27 September 1985 |
| Docket Number | Civ. A. No. C-1-85-1295. |
| Citation | 57 BR 751 |
| Parties | In re BALDWIN-UNITED CORPORATION, Debtors and Debtors in Possession. |
| Court | U.S. District Court — Southern District of Ohio |
John Michael Clear, Bryan, Cave, McPheeters & McRoberts, St. Louis, Mo., and Daniel W. Hammer, Thompson, Hine & Flory, Cleveland, Ohio, for Edward D. Jones & Co.
Drinker, Biddle & Reath, Philadelphia, Pa., for W.H. Newbold's Sons & Co., Inc.
Faegre & Benson, Minneapolis, Minn., for Piper, Jaffray & Hopwood, Inc.
Gaston, Snow, Beekman & Bogue, New York City, for PaineWebber Group, Inc.
Esanu, Katsky, Korins & Siger, New York City, for Planco, Inc.
Bryan, Cave, McPheeters & McRoberts, St. Louis, Mo., for Stifel, Nicolaus & Co., Inc.
Waller, Landsen, Dortch & Davis, Nashville, Tenn., for J.C. Bradford & Co.
Donald R. Gardner, Keating, Muething, Cincinnati, Ohio, O'Melveny & Myers, Washington, D.C., O'Melveny & Myers, New York City, for Baldwin-United Corp.
This matter is before this Court on a motion for mandatory withdrawal, pursuant to 28 U.S.C. § 157(d), of this Court's reference to the bankruptcy court of some contingent, unliquidated claims filed in the bankruptcy court against Baldwin-United Corporation and D.H. Baldwin Company.1 The moving parties, (hereinafter "claimants"), include Edward D. Jones & Co. (doc. 1), and W.H. Newbold's Sons & Co., Inc., Piper, Jaffray & Hopwood, Inc., Paine Webber Group, Inc., Rotan Mosle, Inc., Planco, Inc., Stifel, Nicolaus & Co., Inc., and J.C. Bradford & Co. (doc. 2). The debtors filed a memorandum in opposition (doc. 3), and the claimants filed a reply (doc. 4). A hearing was held September 19, 1985. After examining all of the submissions as well as relevant statutes, legislative history, and case law, we conclude that the motion must be denied. Our rationale is set forth below.
The specific matter now before us involves only one small piece of the complex Chapter 11 proceeding which began with the filing of an involuntary petition against Baldwin on September 26, 1983 in the Bankruptcy Court for the Southern District of Ohio. The Baldwin Chapter 11 proceedings involve approximately $9 billion in assets, $14 billion in claims and more than 8,000 claimants. Moving parties in this matter are some of the broker-dealers who marketed single premium deferred annuities (SPDAs) for some insurance company subsidiaries of Baldwin. They are also among the defendants in a multidistrict litigation proceeding consolidated in the Southern District of New York, In re Baldwin-United Corporation (Single Premium Deferred Annuities Litigation), MDL Nos. 581, M 21-35, (hereinafter MDL 581). MDL 581 is a class action by about 100,000 purchasers of SPDAs against several broker-dealers alleging violations of federal securities law in connection with the sale of the SPDAs and seeking recovery of lost interest. The first of the over 100 suits consolidated in MDL 581 was filed three days after the filing of the Baldwin Chapter 11 proceedings.
All of the moving parties here except Rotan Mosle, Inc. and Stifel, Nicolaus & Co., Inc. filed proof of claims in the bankruptcy proceeding on or before the bar date of July 24, 1984, seeking recovery from Baldwin on theories of indemnity and contribution, should they incur any liability in MDL 581 and any similar actions that might be filed in the future (Doc. 3 at 1, 8). Paine Webber's proof of claim by itself totalled approximately $700 million. It is the liquidation of these claims that the moving parties seek to have withdrawn from the bankruptcy court pursuant to 28 U.S.C.A. § 157(d) (West Supp.1985).
Section 157 of the Bankruptcy Amendments and Federal Judgeship Act of 1984 provides that district courts may refer bankruptcy cases and related matters to the bankruptcy judges for the district. 28 U.S.C.A. § 157(a). In the Southern District of Ohio this has been done by a general order of reference. See In re The Bankruptcy Amendments and Federal Judgeship Act of 1984, No. MS-1-84-152 (S.D. Ohio, July 30, 1984). Section 157 further provides that the district court may withdraw a case from the bankruptcy court "for cause shown," and that it "shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce." 28 U.S.C.A. § 157(d). The claimants in the instant motion assert that the above-quoted language requires that this Court withdraw the reference to the bankruptcy court of their claims. We disagree.
Section 157(d) is still relatively new and there is a dearth of judicial opinion interpreting it and defining when withdrawal is mandatory. Nonetheless it is clear that three conditions are impliedly set forth in the above-quoted statutory language and they must be met. See In re Baldwin-United Corp., 47 B.R. 898, 899 (S.D.Ohio 1984). First, the person seeking withdrawal must be a party. There is no dispute that claimants clearly are parties. Second, the motion to withdraw the reference must be timely. Debtors contend that this condition is not met. Finally, "resolution" of the proceeding must require consideration of non-bankruptcy federal statutes regulating interstate commerce. Debtors also argue that this condition is not met. We agree with the debtors on both points, for the reasons set forth below.
In the face of statutory silence regarding when a motion is timely for the purpose of a § 157(d) motion, we must look elsewhere for guidance. Generally, something will be considered timely if it is done at the "first reasonable opportunity." Long Beach Federal Savings & Loan Ass'n v. FHLBB, 189 F.Supp. 589, 611 (S.D.Cal.1960). At the very least, timeliness would require that action be taken without undue delay. In determining whether something is timely, it must be evaluated in the context of the specific situation. A motion in a bankruptcy proceeding must therefore be evaluated in light of the status of those proceedings. In a Chapter 11 reorganization, for example, the determination of whether a motion is timely would turn somewhat on whether a reorganization plan and disclosure statement had already been prepared or approved. If a motion could have been filed earlier and it is filed at a time when it could delay and consequently jeopardize the reorganization, it would not be timely.
This interpretation of timeliness is supported by the admittedly sparse legislative history of the 1984 Bankruptcy Amendments Act. In commenting on § 157, Senator DeConcini said that it was "intended to avoid unnecessary delays and costs" and that the "withdrawal provision should not be allowed to be used by any party for the purpose of delay." 130 Cong. Rec. S7621 (daily ed. June 19, 1984). Moreover, in listing factors that he believed were appropriate for the district court to consider in deciding a mandatory withdrawal motion, Senator DeConcini specifically mentioned the status of the bankruptcy proceedings. Id. Therefore we consider a motion to be timely made if it was made as promptly as possible in light of the developments in the bankruptcy proceeding.
This conclusion is similar to that reached in the only two cases we have seen which discuss the timeliness of a § 157(d) motion. In one, an earlier proceeding related to Baldwin's reorganization, a motion pursuant to § 157(d) was filed in this Court and Judge Walter H. Rice overruled it because he found that it would not be necessary to consider non-bankruptcy federal law, as asserted by movants. In re Baldwin-United Corp., 47 B.R. 898, 900 (S.D.Ohio, 1984). Judge Rice therefore did not address the timeliness issue, but rather instructed the bankruptcy court to conduct an evidentiary hearing on that question. Id. at 899. The bankruptcy court did conduct such a hearing and it concluded that as a matter of fact the motion was untimely. In re Baldwin-United Corp., 43 B.R. 888, 895 (Bankr. S.D.Ohio 1984). According to Judge Newsome:
If they were sincere in their desire to assert their rights under § 157(d), they could and should have acted immediately upon learning that the motion had been filed. Instead, they waited until three days before the motion was to be heard. Their course of conduct leads us to find that the sole reason for filing the motion was to attempt to secure the continuance which they had failed to obtain from this Court.
Id. at 891 (citation omitted).
In another case, the United States District Court for the District of Rhode Island concluded that a petition to withdraw an adversary proceeding from the bankruptcy court was not timely when it was filed about a year after the filing of the complaint and the complaint on its face involved consideration of other United States laws regulating interstate commerce. In re Giorgio, 50 B.R. 327, 329 (D.R.I.1985). According to that court:
The fair intendment of the statute in question is to insure that the request for withdrawal be filed as soon as practicable after it has become clear that "other laws" of the genre described in 28 U.S.C. § 157(d) are implicated, so as to protect the court and the parties in interest from useless costs and disarrangement of the calendar, and to prevent unnecessary delay and the use of stalling tactics. Once it becomes apparent that such an issue is in the case, a party has a plain duty to act diligently — or else, to forever hold his peace.
Id. at 328-29 (citations omitted).
The Giorgio court found that it had been evident from the time the adversary complaint had been filed that its resolution would involve consideration of other federal laws regulating interstate commerce. By waiting about a year before filing the motion to withdraw, the movants were consequently untimely. According to the court, the...
To continue reading
Request your trial