In re Commercial Financial Services, Inc.
| Citation | 252 BR 516 |
| Decision Date | 21 August 2000 |
| Docket Number | Bankruptcy No. 98-05162-R,98-05166-R. Adversary No. 99-0009-R. |
| Parties | In re COMMERCIAL FINANCIAL SERVICES, INC., and CF/SPC NGU, Inc., Debtors. Rocky J. Snider, James Lemieux, Mary Dodson, Pamela Soeten, Barbara Orr, and Ella F. Garcia, on behalf of themselves and all others similarly situated, Plaintiffs, v. Commercial Financial Services, Inc., Defendant. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Northern District of Oklahoma |
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Mitchell M. McCune/Jed Penney, McCune & Penney, P.C., Tulsa, OK, for plaintiffs.
Larry M. Wolfson, Jerry L. Switzer, Jr., Jenner & Block, Chicago, IL, Neal Tomlins, Ronald E. Goins, Tomlins & Goins, Tulsa, OK, Jay Geller, Law Office of Jay S. Geller, Portland, ME, for defendant.
Defendant Commercial Financial Services, Inc. ("CFS") is a debtor in possession in a chapter 11 bankruptcy case that was initiated by CFS on December 11, 1998. CFS was authorized to operate its business of servicing credit card debt pursuant to 11 U.S.C. §§ 1107 and 1108, and in fact operated such business as a going concern until June 23, 1999. On January 8, 1999, CFS terminated approximately 1400 of its 3800 employees. On June 23, 1999, CFS terminated all but approximately 140 of its remaining employees and ceased operations.
On January 15, 1999, Plaintiffs (employees who were terminated on or about January 8, 1999) filed in this Court a "Complaint — Class Action" asserting claims on behalf of themselves and all others similarly situated, alleging that CFS violated the Workers Adjustment and Retraining Notification Act, 29 U.S.C. § 2101, et seq. (the "WARN Act"). A jury demand was indorsed upon the Complaint.
On February 2, 1999, Plaintiffs filed their "First Amended Complaint — Class Action" ("Amended Complaint"), to join plaintiffs who were terminated after January 8, 1999, and on or before February 8, 1999, and again demanded a jury trial.
On February 22, 1999, CFS filed a motion to dismiss the Amended Complaint, contending that the filing of the Plaintiffs' Amended Complaint violated the automatic stay and that Plaintiffs were not entitled to use the adversary proceeding vehicle to assert their claims against the estate. On August 19, 1999, the Court entered an order denying CFS's motion to dismiss. The Court determined that pursuant to 28 U.S.C. § 959(a) (hereinafter "Section 959(a)"), Plaintiffs were authorized to sue a debtor in possession for "Facts or transactions in carrying on business" without obtaining leave of the bankruptcy court. 28 U.S.C. § 959(a). Thus, Plaintiffs did not need to obtain the Court's approval, by virtue of a motion to modify automatic stay or otherwise, before commencing this action.
On December 27, 1999, the Court entered an order certifying this proceeding as a class action.
On January 31, 2000, Plaintiffs' counsel filed 1,498 separate requests for payment of administrative expenses, one on behalf of each of the class members. Each class member requests compensation in an unliquidated amount for the WARN Act violations alleged in the Amended Complaint and further seeks a determination that his or her claim is an administrative priority claim.
On February 25, 2000, CFS filed its Motion to Strike Plaintiff's sic Jury Demand ("Motion to Strike Jury Demand") (Docket # 50). On March 27, 2000, Plaintiffs filed their Objection and Response in Opposition to CFS's Motion to Strike Jury Demand (Docket # 55). On April 7, 2000, CFS filed its Memorandum in Support of its Motion to Strike Plaintiffs' Jury Trial Demand (Docket # 60), and on April 25, 2000, Plaintiffs, with the Court's leave, filed a Surreply (Docket # 69).
On April 12, 2000, Plaintiffs filed a Motion to Withdraw the Reference and Brief in Support Thereof (the "Motion to Withdraw Reference") (Docket # 61). CFS responded to the Motion to Withdraw Reference on April 27, 2000 (Docket # 70).
These matters are now fully briefed and ripe for adjudication.
CFS contends that by filing this adversary proceeding in this Court and by filing requests for administrative expenses, Plaintiffs have asserted claims against the estate, and thus waived any right to a jury trial that they may have had.
Plaintiffs' argument in favor of their jury trial right is five-fold. They contend that: (1) the last sentence of Section 959(a) guaranties post-petition claimants a jury trial; (2) Plaintiffs' requests for payment of administrative expenses are not "claims;" (3) WARN Act claims are "statutory torts" analogous to personal injury tort claims over which the bankruptcy court does not have "core" jurisdiction pursuant to Section 157(b)(5) of title 28 of the United States Code, and personal injury claimants are entitled to a jury trial in all events pursuant to Section 1411 of title 28; (4) by virtue of the 1994 amendments to the Bankruptcy Code, this Court has the power to conduct jury trials, and Plaintiffs consent to this Court conducting a jury trial; and (5) the Bankruptcy Code, to the extent that it denies Plaintiffs a jury trial, is unconstitutional.
In response, CFS argues that the rule that persons who assert claims against the estate waive their right to a jury trial is not dependent upon the prepetition or postpetition nature of the claim; that Plaintiffs further waived their jury trial rights by failing to timely move to withdraw the reference to the district court; and that Section 959(a) does not afford Plaintiffs a jury trial right because they commenced their action against the estate in Bankruptcy Court. Further, CFS states that it does not consent to a jury trial in this Court.
With respect to the Plaintiffs' Motion to Withdraw Reference, Plaintiffs claim that because their jury trial right will be lost if this Court exercises equitable jurisdiction over this proceeding (because CFS does not consent to a jury trial in the Bankruptcy Court), the District Court must withdraw the reference of this adversary proceeding. CFS argues that Plaintiffs' Motion to Withdraw Reference is not timely and that cause does not exist to withdraw the reference, again because Plaintiffs have waived their right to jury trial by asserting claims against the bankruptcy estate. The parties magnify these arguments in the same manner as presented in the pleadings filed in connection with the Motion to Strike Jury Demand. Thus, the Court considers the Motion to Withdraw Reference and the Motion to Strike Jury Demand in tandem and makes the following findings and conclusions in connection with the Motion to Strike Jury Trial Demand and the following recommendation to the District Court in connection with the Motion to Withdraw Reference.
The Court has jurisdiction of this "core" proceeding by virtue of 28 U.S.C. §§ 1334; 157(a) and (b)(2)(B) and (O); and Miscellaneous Order No. 128 of the United States District Court for the Northern District of Oklahoma: Order of Referral of Bankruptcy Cases effective July 10, 1984, as amended.
Bankruptcy court jurisdiction is set forth in 28 U.S.C. § 157. Bankruptcy court jurisdiction exists only to the extent that power is conferred upon, or "referred to," the bankruptcy court by the district court. See 28 U.S.C. § 157(a). The District Court has referred to the bankruptcy courts in this district all bankruptcy cases and proceedings to the full extent permitted by Section 157(a). See In the Matter of Rules of Court, Miscellaneous No. M-128, specifically the orders dated July 10, 1984 ("Order of Referral of Bankruptcy Cases") and April 11, 1985 ("District Court Rules for Bankruptcy Practice and Procedure," such rules hereinafter cited as "Rule B — ___"). Further, the District Court has designated to the bankruptcy courts in this district the power to conduct jury trials to the extent permitted by 28 U.S.C. § 157(e). See In the Matter of Rules of Court, Miscellaneous No. M-128 dated June 21, 1995 ("Order Amending District Court Rule for Bankruptcy Practice and Procedure B-14 `Jury Trials'").
Plaintiffs' sole alleged "`cause' for the Motion to Withdraw Reference is that CFS objects to the Bankruptcy Judge conducting a jury trial in this matter." Motion to Withdraw Reference at 5.
Again, Plaintiffs' specified "cause" is that they...
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