IN RE SECURITIES GROUP 1980, Bankruptcy No. 84-431-BK-J-GP
| Decision Date | 23 March 1988 |
| Docket Number | Bankruptcy No. 84-431-BK-J-GP,88-144 Civ-J-12,Adv. No. 85-214. |
| Citation | 89 BR 192 |
| Parties | In re the SECURITIES GROUP 1980, Debtor. Louis LOWIN, Trustee of the Estate of the Securities Group, 1980, Plaintiff, v. DAYTON SECURITIES ASSOCIATES, Defendant and Third-Party Plaintiff, v. Louis LOWIN, Chapter 11 Trustee of the Securities Groups, Counterclaim Defendant and Kenneth T. Kaltman, et al., Third-Party Defendants. |
| Court | U.S. District Court — Middle District of Florida |
George E. Ridge, Jacksonville, Fla., for plaintiff.
Ira Rubin, Dayton, Ohio, for defendant and third-party plaintiff Dayton Sec. Assocs.
Roy Babbitt, New York City, for third-party defendants PM Assocs., et al.
Robert L. Young, Orlando, Fla., for third-party defendants Aircraft Invest. Assocs., et al.
This cause is before the Court on the matter of the Motion for Withdrawal of Reference filed by defendant Dayton Securities Associates and certain third-party defendants (collectively "defendants"), which was transmitted to this Court from the United States Bankruptcy Court for the Middle District of Florida, pursuant to Bankruptcy Local Rule 107, on February 18, 1988. The pleadings transmitted from the Bankruptcy Court include the present motion, defendants' memorandum in support thereof, and plaintiff's memorandum in opposition to the motion. On February 23, 1988, defendants sought a stay on further proceedings in the Bankruptcy Court,1 which the Court denied by an order entered that same day. Defendants subsequently secured permission of the Court to submit a reply brief on the present motion, which was filed herein on March 14, 1988.
The decision whether to withdraw the reference in the present instance turns on the application of the second sentence of 28 U.S.C. § 157(d). Defendants have rested their argument for withdrawal of the reference solely on the ground that resolution of the proceeding requires consideration of both bankruptcy law and federal law regulating organizations or activities affecting interstate commerce.2 A threshold issue in application of § 157(d) is the timeliness of the motion to withdraw the reference. "If a motion for withdrawal of reference is not timely made, it will certainly be held that the provisions of the second sentence of section 157(d) have been waived." 1 Collier on Bankruptcy ¶ 3.012e, at 3-63 (15th ed. 1987). The Court finds that the present motion is not timely made and therefore will deny it.3
The statute does not define timeliness. Bankruptcy Local Rule 107(a) requires that a motion to withdraw proceedings must be filed with the Clerk of the Bankruptcy Court not later than the date set for filing an answer under Bankruptcy Rule 7012, which is thirty days after issuance of the summons, except when a different time is prescribed by the Bankruptcy Court. Although Bankruptcy Local Rule 107(a) became effective January 1, 1987, after the first answer filed by defendants, the Rule applied to the amended answer, counterclaim and third-party complaint filed on July 8, 1987, and the answer, counterclaim and third-party complaint filed on February 8, 1988, in response to the amended complaint.4
Measured against Bankruptcy Local Rule 107(a), defendants' motion to withdraw reference is not timely made. "The request for withdrawal must 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. . . ." In re Giorgio, 50 B.R. 327, 329 (D.R.I.1985). Defendants' counterclaim filed in July 1987 recognized the presence of "other laws" which gave rise to the right to withdraw the reference.5 Failure to assert a right to withdrawal of the reference at that time constituted a waiver of the right. See, e.g., In re IQ Telecommunications, Inc., 70 B.R. 742, 746-47 (N.D. Ill.1987); In re Baldwin-United Corp., 57 B.R. 751, 753-55 (S.D. Ohio 1985); Giorgio, 50 B.R. at 329; In re Baldwin-United Corp., 43 B.R. 888, 894-95 & n. 7 (Bankr. S.D.Ohio 1984); cf. Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 106 S.Ct. 3245, 3257, 92 L.Ed.2d 675 (1986) ().
Defendants appear to rely on two events to trigger a later date from which to measure the timeliness of their motion to withdraw the reference. First, defendants suggest that their counterclaim based on the Racketeer Influenced Corrupt Organizations Act ("RICO") could not be developed until the conclusion of the trial of Charles Agee Atkins in December 1987. Second, defendants imply that the filing of the amended complaint in January 1988, adding a new cause of action, breathed new life into defendants' right to withdraw the reference. The Court does not find either event to be a convincing reason to revive defendants' lapsed right to withdraw the reference.
Defendants were able to intelligently determine that the proceeding could be withdrawn at the time that they asserted the counterclaims and affirmative defenses which relied on federal securities law. Timeliness must be measured from that date. Cf. Kirby v. OMI Corp., 655 F.Supp. 219, 222 (M.D.Fla.1987) (); Lee v. Altamil Corp., 457 F.Supp. 979, 981 (M.D.Fla.1978) (). The subsequent discovery of a viable RICO counterclaim did not extend the period during which a motion for withdrawal of reference could be timely.
Defendants also cannot rely on the amended complaint as a triggering event. The amended complaint added no new grounds for withdrawing the reference, so it does not add to the period for timely filing the motion for withdrawal of the reference. See In re IQ Telecommunications, Inc., 70 B.R. at 746; cf. Wilson v. Intercollegiate (Big Ten) Athletic Ass'n, 668 F.2d 962, 966 (7th Cir.) (), cert. denied, 459 U.S. 831, 103 S.Ct. 70, 74 L.Ed.2d 70 (1982); Clarson v. Southern General Life Ins. Co., 694 F.Supp. 847 (M.D.Fla.1987) (); Adams v. Western Steel Bldgs., Inc., 296 F.Supp. 759, 761-62 (D.Colo.1969) ().
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