In re EquiMed, Inc., Civ. No. H-00-3487. Bankruptcy No. 00-1-1147-PM. Adversary No. 00-1469-PM.
| Decision Date | 12 February 2001 |
| Docket Number | Civ. No. H-00-3487. Bankruptcy No. 00-1-1147-PM. Adversary No. 00-1469-PM. |
| Parties | In re EQUIMED, INC., Debtor. Keystone Oncology, LLC, Plaintiff, v. Merrill Cohen, Chapter 7 Trustee for EquiMed, Inc.: Treatment Centers Limited Partnership and PFG Capital Corporation, Defendants. |
| Court | U.S. District Court — District of Maine |
Guy S. Neal, Brown & Wood LLP, Washington, DC, for plaintiff.
Matthew Ralph Goldman, Baker & Hostetler, LLP, Cleveland, OH, for defendant.
Joyce A. Kuhns, Saul Ewing, LLP, for Treatment Centers Ltd. and PFG Capital Corp.
Bankruptcy proceedings involving EquiMed, Inc. ("EquiMed") were commenced on February 4, 2000 when certain creditors filed an involuntary petition in bankruptcy in the United States Bankruptcy Court for the District of Maryland. In re EquiMed, Inc., Bankruptcy No. 00-1-1147-PM. Merrill Cohen was thereafter appointed Trustee for the bankruptcy estate of the debtor EquiMed. On April 27, 2000, the Trustee filed in the Bankruptcy Court an adversary proceeding naming as defendants some 89 persons and entities. Adversary No. 00-1180-PM (the "Trustee Adversary Proceeding").
On May 2, 2000, this Court entered an Order withdrawing reference of the EquiMed bankruptcy case with respect to all matters which the proposed settlement in the related Rahman action1 had designated for Bankruptcy Court review and with respect to the Trustee Adversary Proceeding. As withdrawn, that case has been docketed herein as In re EquiMed, Inc., Civil No. H-00-1216 (the "EquiMed case"). In its Memorandum and Order of July 24, 2000 entered in the Rahman case, in the EquiMed case and in Civil No. H-00-1469, this Court, inter alia, denied motions seeking to vacate its Order withdrawing from the Bankruptcy Court reference of the Trustee Adversary Proceeding. In re EquiMed, Inc., 2000 WL 1074304 (D.Md.2000). In that same Memorandum and Order, this Court also denied a motion filed by Dr. Douglas R. Colkitt seeking to withdraw reference of the entire bankruptcy case. Id. at *6.
On August 31, 2000, Keystone Oncology, LLC ("Keystone") filed a complaint in the EquiMed bankruptcy case which was docketed therein as Adversary No. 00-1469 (the "Keystone Adversary Proceeding"). In that action, Keystone primarily sought a declaratory judgment determining which party had a sublease interest in certain real property located at 775 South Arlington Avenue, Harrisburg, Pennsylvania (the "Premises"). Named as defendants in the Keystone Adversary Proceeding are EquiMed's Trustee Merrill Cohen, Treatment Centers Limited Partnership ("Treatment Centers") and PFG Capital Corporation ("PFG").2
The Trustee has now filed in this Court a motion to withdraw reference of the Keystone Adversary Proceeding and to consolidate that case with Civil No. H-00-1216. The Trustee contends that the Keystone Adversary Proceeding and the Trustee Adversary Proceeding should be consolidated for reasons of judicial economy and because common legal and factual issues are involved in the two cases.
In support of his motion, the Trustee has submitted a memorandum of law and various exhibits. An opposition to the Trustee's motion has been filed by Keystone and a separate opposition has been jointly filed by Treatment Centers and PFG. Memoranda and exhibits in support of and in opposition to the pending motion to withdraw reference have been submitted by the parties.
The Court has now had an opportunity to review the parties' submissions and has determined that no hearing is necessary for a decision. See Local Rule 105.6. For the reasons stated herein, the Trustee's motion to withdraw reference of the Keystone Adversary Proceeding and to consolidate that case with Civil No. H-00-1216 will be denied.
Keystone presently operates the Greater Harrisburg Cancer Center (the "Center") which is located at the Premises in Harrisburg, Pennsylvania. Treatment Centers and PFG are together the owner of the Premises (hereinafter referred to jointly as "the Landlord"). Keystone claims to be the sublessee of the Premises which had earlier been sublet to EquiMed. According to Keystone, the Landlord consented in February of 1999 to the transfer of EquiMed's interest in the Premises to Keystone. However, although having earlier indicated that it would approve the transfer, the Landlord in May of 1999 advised EquiMed that it was not approving EquiMed's subletting of the Premises to Keystone. In the complaint filed by it in the Adversary Proceeding, Keystone has asked the Bankruptcy Court to declare that it is entitled to continued possession of the Premises pursuant to the terms of the EquiMed sublease and to further declare that the EquiMed sublease does not constitute property of EquiMed's bankruptcy estate.
Litigation of the Keystone Adversary Proceeding is well under way in the Bankruptcy Court. A pretrial conference was held on November 2, 2000, and dates were set for the completion of discovery and for a trial of the case. The discovery deadline has now been extended by consent until March 15, 2001, and the deadline for the submission of dispositive motions has been set for April 13, 2001. The trial has been scheduled for June 7, 2001.3 According to Keystone, the trial is scheduled to last less than one-half day.
Pursuant to Scheduling Order II entered by this Court on November 29, 2000 in Civil No H-00-1216, depositions and all other discovery in the Trustee Adversary Proceeding must be completed by August 31, 2001. Motions for summary judgment or other substantive motions must be filed by September 10, 2001, and a pretrial conference has been scheduled in the EquiMed case for September 20, 2001. No trial date has been set pending the filing by the parties of dispositive motions and the scheduling of a hearing on such motions.
In his motion to withdraw reference and to consolidate, the Trustee asserts that determination of the ownership of the leasehold interest in the Premises is integral to both the Keystone Adversary Proceeding and the Trustee Adversary Proceeding. The Trustee argues that for the efficient administration of the debtor's bankruptcy estate, there must be a consistent determination of that issue. In the Trustee Adversary Proceeding, he has sought to avoid and recover for the estate of the debtor EquiMed fraudulent transfers of property, and it is argued that the sublease under which Keystone is operating the Center was fraudulently transferred away from the debtor. The Trustee maintains that common issues of fact and law are before the Court both in the Keystone Adversary Proceeding and in the Trustee Adversary Proceeding, and he asks that following withdrawal of reference of the Keystone Adversary Proceeding, the two matters be consolidated pursuant to Bankruptcy Rule 7042 and Rule 42(a) of the Federal Rules of Civil Procedure.
Keystone, Treatment Centers and PFG all oppose the Trustee's motion. They claim that the Trustee has not shown proper cause for withdrawal of the Keystone Adversary Proceeding. According to these three parties, the case is well under way in the Bankruptcy Court. They maintain that withdrawal and consolidation would inordinately delay a determination of the issues raised by Keystone's complaint, with resulting prejudice to each of them.
The parties agree that the Keystone Adversary Proceeding is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A). As the Trustee himself previously argued in opposing withdrawal of reference of the Trustee Adversary Proceeding, a core bankruptcy proceeding is best resolved in a bankruptcy court. In re EquiMed, Inc., 2000 WL 1074304 at *6. In that case, this Court determined that the circumstances were unique and exceptional. Id. Here, the matters raised by Keystone's complaint relate to a property interest claimed to be owned by the debtor and by others, matters traditionally handled by a bankruptcy judge.
This is clearly not a case in which mandatory withdrawal is warranted. Therefore, this Court, in exercising its discretionary power to withdraw reference of all or any part of a bankruptcy case, must comply with 28 U.S.C. § 157(d), which provides in pertinent part as follows:
The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. (Emphasis added).
On the record here, this Court, in the exercise of its discretionary authority, concludes that the Trustee has not shown cause for withdrawal of reference of the Keystone Adversary Proceeding. The Trustee has not convinced the Court that withdrawal of that case would promote judicial economy and the economic use of the parties' resources. Although on three prior occasions the Trustee has opposed withdrawal of reference of all or parts of the EquiMed bankruptcy case, he is alone here in requesting that this Court rather than the Bankruptcy Court should address the issues raised by Keystone's complaint. All three of the other parties in the Keystone Adversary Proceeding claim that the issues raised should be more appropriately decided by Judge Mannes in the Bankruptcy Court.
It is apparent that litigation of the issues in the Keystone Adversary Proceeding are well under way, and that these issues will be decided in the Bankruptcy Court much sooner than if the Trustee's motion to withdraw reference was granted and the two cases were consolidated. Interrogatories and requests for documents have been served and answered. The deadline for completion of...
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