In re David Patrick McCRANEY
| Decision Date | 29 September 2010 |
| Docket Number | Adversary No. 10-1006-S.,Bankruptcy No. 13-09-15667-S. |
| Citation | 439 B.R. 188 |
| Parties | In re David Patrick McCRANEY and Kimberly McCraney, Debtors. David Patrick McCraney, Plaintiff, v. High Desert Neurology, Inc., Defendant. |
| Court | U.S. Bankruptcy Court — District of New Mexico |
OPINION TEXT STARTS HERE
COPYRIGHT MATERIAL OMITTED.
William F. Davis, Albuquerque, NM, for Plaintiff.
Clifford C. Gramer, Jr., Albuquerque, NM, for Defendant.
This matter is before the Court in a case removed from the Fourth Judicial District Court, San Miguel County, New Mexico (“State Court” or “Court”) on Plaintiff's Motion to Set Aside Default Judgment (doc 17) and the Objection thereto by Defendant High Desert Neurology, Inc. (“High Desert”). David Patrick McCraney (“Plaintiff”) appears through his attorney William F. Davis & Assoc., P.C. (William F. Davis and Anne D. Goodman). High Desert appears through its attorney Clifford C. Gramer. For the reasons stated below, the Court finds that Plaintiff's Motion is well taken and should be granted.
Plaintiff's Notice of Removal states that this adversary proceeding is both a “related to” case, Doc 1 ¶ 8, and a “core proceeding”, Id. ¶ 10. Whichever the case, Plaintiff consents to entry of final orders or judgments by the Bankruptcy Judge. Id. ¶ 11. High Desert filed a Statement Pursuant to Bankruptcy Rule 9027(e) admitting that this action is a core proceeding. Doc 11.
Bankruptcy Court jurisdiction is established by 28 U.S.C. § 1334, which lists four types of matters over which the district court has bankruptcy jurisdiction: 1) cases “under” title 11 (), 2) proceedings “arising under” title 11 (), 3) proceedings “arising in” a case under title 11 (), and 4) proceedings “related to” a case under title 11 (). Wood v. Wood (In re Wood), 825 F.2d 90, 92 (5th Cir.1987). In the District of New Mexico, all four types have been referred to the bankruptcy court. See 28 U.S.C. § 157(a); Administrative Order, Misc. No. 84-0324 (D. N.M. March 19, 1992).
Jurisdiction is then further broken down by 28 U.S.C. § 157, which grants full judicial power to bankruptcy courts not only over cases “under” title 11 but also over “core” proceedings, § 157(b)(1), but grants only limited judicial power over “related” or “non-core” proceedings, § 157(c)(1). Wood, 825 F.2d at 91; Personette v. Kennedy (In re Midgard Corporation), 204 B.R. 764, 771 (10th Cir. BAP 1997). This core/non-core distinction is important, because it defines the extent of the Bankruptcy Court's jurisdiction and the standard by which the District Court (or Bankruptcy Appellate Panel) reviews the factual findings. Halper v. Halper, 164 F.3d 830, 836 (3rd Cir.1999).
Core proceedings
[1] [2] [3] “Core” proceedings are matters “arising under” and “arising in” cases under title 11. Wood, 825 F.2d at 96; Midgard, 204 B.R. at 771. Matters “arise under” title 11 if they involve a cause of action created or determined by a statutory provision of title 11. Wood, 825 F.2d at 96; Midgard, 204 B.R. at 771. Matters “arise in” a bankruptcy if they concern the administration of the bankruptcy case and have no existence outside of the bankruptcy. Wood, 825 F.2d at 97; Midgard, 204 B.R. at 771. Bankruptcy judges may hear and determine core proceedings and enter final orders and judgments. 28 U.S.C. § 157(b)(1). 28 U.S.C. § 157(b)(2) contains a nonexclusive list of 16 types of core proceedings.
Non-core proceedings
[4] [5] “Non-core” proceedings are those that do not depend on the bankruptcy laws for their existence and that could proceed in another court even in the absence of bankruptcy. Wood, 825 F.2d at 96; Midgard, 204 B.R. at 771. “Proceedings ‘related to’ the bankruptcy include (1) causes of action owned by the debtor which become property of the estate pursuant to 11 U.S.C. § 541, and (2) suits between third parties which have an effect on the bankruptcy estate.” Celotex Corporation v. Edwards, 514 U.S. 300, 307 n. 5, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995). The Tenth Circuit has adopted the widely used Pacor, Inc. v. Higgins 1 test to determine if a proceeding is related: “the proceeding is related to the bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action in any way, thereby impacting on the handling and administration of the bankruptcy case.” Gardner v. United States (In re Gardner), 913 F.2d 1515, 1518 (10th Cir.1990).
Bankruptcy courts have jurisdiction over non-core proceedings if they are at least “related to” a case under title 11. 28 U.S.C. § 157(c)(1)(“A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11.”) However, unless all parties consent otherwise, 28 U.S.C. § 157(c)(2), bankruptcy judges do not enter final orders or judgments in non-core proceedings. Rather, they submit proposed findings of fact and conclusions of law to the district court, which enters final orders and judgments after de novo review. 28 U.S.C. § 157(c)(1); Federal Bankruptcy Rule 9033. See also Orion Pictures Corporation v. Showtime Networks, Inc. (In re Orion Pictures Corporation), 4 F.3d 1095, 1100-01 (2nd Cir.1993)(discussing Section 157's classification scheme).
28 U.S.C. § 157(b)(2) gives a nonexclusive list of 16 “core proceedings.” The fact that a matter is listed among the “core proceedings” of 28 U.S.C. § 157(b)(2) cannot end the inquiry, however. In Northern Pipeline Construction Co. v. Marathon Pipe Line Company, 458 U.S. 50, 76, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), the United States Supreme Court ruled that Article III of the Constitution “bars Congress from establishing legislative courts to exercise jurisdiction over all matters related to those arising under the bankruptcy laws.” In Marathon, the debtor sought damages for alleged breaches of contract and warranty, misrepresentation, coercion, and duress. Id. at 56, 102 S.Ct. 2858. The Supreme Court distinguished this adjudication of “state-created private rights” from the “restructuring of debtor-creditor relations, which is at the core of the federal bankruptcy power.” Id. at 71, 102 S.Ct. 2858. The Court found that the broad grant of jurisdiction to the bankruptcy courts found in 28 U.S.C. § 1471 (1976 ed., Supp. IV) was unconstitutional because it “impermissibly removed most, if not all, of the ‘essential attributes of the judicial power’ from the Art. III district court” and vested those attributes in the bankruptcy court. Id. at 87, 102 S.Ct. 2858. Congress responded with the current jurisdictional scheme which categorizes matters as either core or non-core. Any determination by the Bankruptcy Court of the core status of a matter should be done with the dictates of Marathon in mind. See Adams v. Grand Traverse Band of Ottawa and Chippewa Indians Economic Development Authority (In re Adams), 133 B.R. 191, 196 (Bankr.W.D.Mich.1991)( )
[6] This removed case is a non-core proceeding. It is an action based only on state law that was commenced prepetition. It is not a “case” under title 11. It does not “arise under” title 11 because it does not involve a cause of action created or determined by a statutory provision of title 11. It does not “arise in” a title 11 case because it does not concern the administration of the bankruptcy case and it has an existence outside of and predating the bankruptcy. It is, however, related to a title 11 case because it “could alter the debtor's rights, liabilities, options, or freedom of action.” Therefore, the Bankruptcy Court has jurisdiction. 28 U.S.C. § 157(c)(1).
Bankruptcy Courts can enter final orders and judgments in non-core proceedings with the parties' consent. 28 U.S.C. § 157(c)(2). In this case, the parties have consented. Therefore, this is a non-core proceeding in which the Bankruptcy Court may enter final orders and judgments. 2
On August 7, 2007, Plaintiff filed a complaint for breach of contract and wrongful discharge (“Complaint”) in the Fourth Judicial District Court, San Miguel County, New Mexico against High Desert and Jerry Williams (“Defendants”). Doc 4-1, p 50. On September 11, 2007, Defendants answered. Doc 4-1, p 42. Also on September 11, 2007, Defendants served their First set of interrogatories and request for production of documents. Doc 4-1, p 40.
On September 25, 2007, Plaintiff served a Subpoena duces tecum requesting that Plaintiff's personnel file be produced by October 5. Doc 4-1, p 38. Defendants objected to production on October 1, 2007, citing an improperly short deadline under state rules. Defendants also sought attorney fees as a sanction for violating the state rule. Doc 4-1, p 33.
On October 3, 2007, Defendant filed a motion to dismiss for failure to state a claim and requested a hearing. Doc 4-1, pp 25 and 31.
On October 23, 2007, Defendants filed a Motion to Compel a response to their First set of discovery. Doc 4-1, p 19. Exhibit A to the Motion to Compel is the discovery set. Doc 4-1, p 22. On the same date they requested a hearing. Doc 4-1, p 17. The court set a hearing for December 11, 2007. Doc 4-1, p 16. On November 7, 2007 Plaintiff filed an Answer to the Motion to Compel. Doc 4-1, p 15. The Answer states:
1) Plaintiff received the interrogatories sent by the Defendant and is currently compiling the discovery requested.
...
To continue reading
Request your trial
-
Narro v. Ford Motor Credit (In re Narro)
...4 F.3d 1095, 1100-01 (2nd Cir. 1993)(discussing Section 157's classification scheme).McCraney v. High Desert Neurology, Inc. (In re McCraney), 439 B.R. 188, 190-92 (Bankr. D. N.M. 2010).5 The Court makes two initial observations. First, a chapter 7 estate is comprised of all legal or equita......
- In re Peter Albert Helmut LIEHR