In re C-TC 9th Avenue Partnership
| Decision Date | 13 February 1995 |
| Docket Number | 94-91114.,Misc. No. 3278 to 3280. Adv. No. 94-91113 |
| Parties | In re C-TC 9th AVENUE PARTNERSHIP, Debtor. C-TC 9th AVENUE PARTNERSHIP, Plaintiff, v. NORTON COMPANY, Defendant. NORTON COMPANY, Plaintiff, v. C-TC 9th AVENUE PARTNERSHIP, a General Partnership, Richard A. Cabral, Individually and as a Partner of C-TC 9th Avenue Partnership, and Donald W. Stone, Sr., Individually, Defendants. NORTON COMPANY, Plaintiff, v. C-TC 9th AVENUE PARTNERSHIP, a General Partnership, Richard A. Cabral, Individually and as a Partner of C-TC 9th Avenue Partnership, Timmons Corporation, Individually and as a Partner of C-TC 9th Avenue Partnership, Manpac, Inc., G.F. Glass Products, Inc., Albany Cogeneration Associates, and Inventory Management Control, Inc., Defendants. |
| Court | U.S. District Court — Northern District of New York |
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Certilman, Balin Law Firm, East Meadow, NY (Michael D. Brofman, of counsel), for CTC 9th Ave. Partnership.
DeGraff, Foy Law Firm, Albany, NY (Robert Rock, of counsel), for Norton Co.
The present case comes before the Court on Norton Company's motion for withdrawal of reference, abstention and remand of an adversary proceeding to the state court. These motions arise out of C-TC 9th Avenue Partnership's bankruptcy proceedings now pending before the bankruptcy court.
On June 6, 1988, Norton Company (hereinafter "Norton") and C-TC 9th Avenue Partnership (hereinafter "debtor") entered into a Real Estate Purchase Agreement. Under this agreement, Norton agreed to sell and debtor agreed to purchase a certain real property situated in the City of Watervliet and a Town of Colonie, New York (hereinafter "Property"). The conveyance of the Property closed on June 30, 1988 and the debtor gave Norton a short term note in the amount of $879,902.20 due on July 19, 1988 and a long term note in the amount of $2,850,000.00. The debtor also gave Norton a mortgage against the Property in order to secure repayment of that indebtedness.
The debtor, for reasons that are not relevant to the instant inquiry, failed to make any of the payments required by the short and long term notes, and therefore, in November of 1988, Norton commenced an action on the short term note and a mortgage foreclosure action in New York State Supreme Court, Albany County. That litigation proceeded until the Appellate Division, Third Department, issued its decision directing that Norton be allowed to conclude the foreclosure of its mortgage lien and severed the counterclaims of the debtor and Norton's action on the short term note.
On May 9, 1994, the debtor filed its voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq. Shortly thereafter, the debtor commenced the first of the two adversary proceedings captioned above, alleging seventeen new claims against Norton and removed the existing state court action to the Bankruptcy Court. Norton then moved for dismissal of the Chapter 11 case and also for alternative relief including relief from the automatic stay so as to permit Norton to conclude its foreclosure action. Bankruptcy Judge Stosberg has not ruled on Norton's pending motion but has determined that the motion and the two adversary proceedings should be tried together.
In its Answer to the first adversary proceeding, Norton raised, as its first three affirmative defenses, abstention and withdrawal of the reference and stated that it would be making the present motion. Norton, in its Rule 9027(e)(3) Statement, denied that the removed state court actions are core matters and stated that it did not consent to the entry of a final order or judgment by the Bankruptcy Judge in those actions. Norton also raised a jurisdictional argument and, further, stated that its motion to dismiss should be determined before proceeding with discovery and trial on the adversary proceedings.
Presently before the Court is Norton's motion seeking withdrawal of the reference to the Bankruptcy Judge of the Chapter 11 case and the two adversary proceedings pursuant to 28 U.S.C. § 157(d); abstention pursuant to 28 U.S.C. § 1334(c)(1) and (2); and remand of adversary proceeding no. 94-91114 to the New York State Supreme Court pursuant to 28 U.S.C. § 1452(b). The Court will address the reliefs sought by Norton in seriatim.
The statutory mechanism by which bankruptcy cases and other civil proceedings may be referred to the bankruptcy court is provided in 28 U.S.C. §§ 157-158. Section 157(a) states that: "each district court may provide that any and all cases under title 11 and any and 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." Pursuant to this section, this court routinely refers bankruptcy cases within this district to the bankruptcy court.
28 U.S.C. § 157(d) is a mechanism where the district courts are either forced to or given discretion to withdraw the reference to the bankruptcy court. It is this section upon which Norton relies on to seek mandatory withdrawal of reference of adversary proceeding no. 94-91113. Therefore, the initial question is whether the factual circumstances of adversary proceeding no. 94-91113 mandates the withdrawing of the reference to the bankruptcy court.
In construing this language, courts have reached different results as to its true meaning. In re Kuhlman Diecasting Co., 152 B.R. 310, 311 (D.Kan.1993). The seminal case on the issue is In re White Motor Corp., 42 B.R. 693 (N.D.Ohio 1984), in which the court carefully examined the legislative history of the statute and determined that Congress did not intend for § 157(d) to become "an escape hatch through which most bankruptcy matters will be removed to the district court." Id. at 704. The court concluded that withdrawal is mandatory "only if the court . . . can make an affirmative determination that resolution of the claims will require substantial and material consideration of those non-Code Statutes" which have more than a "de minimis" impact on interstate commerce. Id. at 705. This determination has been followed by a majority of the courts that have considered the issue. See, e.g., In re Kuhlman Diecasting Co., 152 B.R. at 312; In re Lenard, 124 B.R. 101 (D.Colo.1991); In re St. Mary Hospital, 115 B.R. 495 (E.D.Pa. 1990); Hatzel & Buehler Inc. v. Orange & Rockland Utils., Inc., 107 B.R. 34 (D.Del. 1989).
Other courts, however, have determined that the statute should be read liberally, and mandatory withdrawal should be required when resolution of a proceeding requires consideration of both bankruptcy and non-bankruptcy laws. See, e.g., In re IQ Telecommunications, Inc., 70 B.R. 742 (N.D.Ill.1987); In re Anthony Tammaro, Inc., 56 B.R. 999 (D.N.J.1986).
Courts in this circuit have adopted the former and not the latter approach. See In re Horizon Air, Inc., 156 B.R. 369 (N.D.N.Y.1993); In re Adelphi Institute, Inc., 112 B.R. 534 (S.D.N.Y.1990); In re Ionosphere Clubs, Inc., 103 B.R. 416 (S.D.N.Y.1989). In so adopting, courts have attempted to further detail the requirements under Section 157(d). Citing to the leading commentator in bankruptcy law, Judge Sweet in In re Adelphi Institute, Inc. noted that the conjunctive "and" in the mandatory sentence of the said section implied that a matter is not subject to mandatory withdrawal "unless interpretation of both the provisions of Title 11 and other laws of the United States is required for resolution of the controversy." In re Adelphi Institute, Inc., 112 B.R. at 536 (citing 1 Collier on Bankruptcy ¶ 3.01 at 3-61).
On the occasions when the courts have granted motions for mandatory withdrawal, they have done so when complicated interpretive issues, often of first impression, have been raised under non-Title 11 federal laws. In re Adelphi Institute, Inc., 112 B.R. at 537. Thus, in In re Combustion Equipment Assocs., Inc., 67 B.R. 709 (S.D.N.Y. 1986), aff'd, 838 F.2d 35 (2d Cir.1988) and American Telephone & Telegraph Co. v. Chateaugay Corp., 88 B.R. 581 (S.D.N.Y. 1988), the courts were faced with issues of first impression under a relatively new, complex, and recently amended statutes, and for this reason, mandatory withdrawal was granted. Perhaps just as important to the removal determinations in these cases was that the proceedings presented and required resolution of "substantial and material conflicts" between non-title 11 federal laws and the Bankruptcy Code. See In re Combustion, 67 B.R. at 713; Chateaugay Corp., 88 B.R. at 586-88. Of similar effect is Pension Benefit Guaranty Corp. v. The LTV Corp. (In re Chateaugay Corp.), 86 B.R. 33, 38-39 (S.D.N.Y.1987), where issues of first impression under ERISA were "presented in sharp conflict with competing provisions of the Code." See also In re Adelphi Institute, 112 B.R. at 537. In sum, the common theme ringing throughout these cases is that Section 157(d) should not "become an `escape hatch' for matters properly before the bankruptcy court." Id. at 536; In re Johns-Manville Corp., 63 B.R. 600, 603 (S.D.N.Y. 1986).
In the case at bar, Norton has failed to adequately demonstrate that adversary proceeding no. 94-91113 should be subject to mandatory withdrawal. Although there is no dispute that resolution of the proceeding in question will require consideration of both bankruptcy and non-bankruptcy, more specifically CERCLA, laws, it is equally clear that such...
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