In re Woods

• Decision Date: 15 August 2014
• Docket Number: No. 13bk39194.,13bk39194.
• Parties: In re Kent Allen WOODS, Debtor.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois

517 B.R. 106

In re Kent Allen WOODS, Debtor.

No. 13bk39194.

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

Signed Aug. 15, 2014.

517 B.R. 108

Shelly A. DeRousse, Esq., Freeborn & Peters LLP, Marty Denis, Esq., Barlow, Kobata & Denis LLP, Chicago, IL, for Debtor.

James A. McGurk, Esq., John C. Legutki, Esq., Chicago, IL, for Movant, Leticia Zaragoza.

ORDER

TIMOTHY A. BARNES, Bankruptcy Judge.

This matter coming before the court on the Motion of Leticia Zaragoza for Relief from the Automatic Stay Pending Arbitration (the “Motion ”) [Docket No. 102], brought by Leticia Zaragoza (the “Movant ”) in the above-captioned bankruptcy case; the court having jurisdiction over the subject matter and the parties having appeared at the hearing that occurred on August 5, 2014 (the “Hearing ”); the court having considered the Motion, the filings with respect thereto, each of the parties' arguments at the Hearing, and each of the parties' respective supplemental filings and as further set forth in a Memorandum Decision to be issued with respect to this Motion wherein the court finds that the Motion is not well taken;

NOW, THEREFORE, IT IS HEREBY ORDERED:

The Motion is DENIED without prejudice to the Movant's ability to reassert the request, if appropriate, should the circumstances underlying the request have changed materially.

MEMORANDUM DECISION

The matter before the court is the Motion of Leticia Zaragoza for Relief from the Automatic Stay Pending Arbitration (the “Motion ”), brought by Leticia Zaragoza (the “Movant ”). At the outset, the Movant challenges this court's constitutional authority to hear the matters before it. While it is without question that this court has the authority to hear the Motion itself, the Movant attempts to establish grounds for the Motion in showing that the underlying action—a presently pending arbitration matter before the Chicago Board of Trade (the “CBOT ”)—lies outside of this court's authority. The Movant misapprehends the import of recent Supreme Court decisions regarding the constitutional authority of the bankruptcy courts, and that argument is fundamentally flawed. Further, even had the Movant been able to establish a challenge to this court's authority on such grounds, the Movant mistakes a lack of constitutional authority to hear an underlying matter as sufficient grounds for relief from stay. Finding no other grounds in the Motion to grant relief from stay, the court denies the Motion.

JURISDICTION

The federal district courts have “original and exclusive jurisdiction” of all cases under title 11 of the United States Code (the “Bankruptcy Code ”). 28 U.S.C. § 1334(a). The federal district courts also have “original but not exclusive jurisdiction” of all civil proceedings arising under title 11 of the United States Code, or arising in or related to cases under title 11. 28 U.S.C. § 1334(b). District courts may, however, refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).

A bankruptcy judge to whom a case has been referred may enter final judgment on any core proceeding arising under the

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Bankruptcy Code or arising in a case under title 11. 28 U.S.C. § 157(b)(1). Motions to terminate, annul, or modify the automatic stay are core proceedings arising under title 11, in which the bankruptcy court is empowered to enter orders. 28 U.S.C. § 157(b)(2)(G) ; In re Mahurkar Double Lumen Hemodialysis Catheter Patent Litig., 140 B.R. 969, 976–77 (N.D.Ill.1992) ; In re Quade, 482 B.R. 217, 221 (Bankr.N.D.Ill.2012) (Barnes, J.), aff'd, 498 B.R. 852 (N.D.Ill.2013).

This court's constitutional authority has, in part, been challenged by the Movant, and will be discussed in more detail below.

PROCEDURAL HISTORY

This matter has a somewhat complex procedural history. On July 23, 2014, the Motion came on for hearing. At that hearing the Movant failed to appear and prosecute the Motion. As a result, the Motion was denied both on the merits as the Motion failed to provide grounds and for want of prosecution. See Local Rule 9013–1(H) of the Local Rules of the United States Bankruptcy Court for the Northern District of Illinois (the “Local Rules ”) (“If a movant fails to present the motion at the time set for presentment, the court may, in its discretion, deny the motion.”).

Thereafter, the Movant moved to vacate the order denying the Motion. The Movant professed to be confused as to the scheduling of another motion for relief from stay for a later date, and did not appear. While such an explanation would not in the face of opposition constitute grounds to vacate the original ruling,¹ the Debtor consented and the previous order was vacated.

On August 5, 2014 (the “Hearing ”), the court therefore vacated its initial order granting the Motion and heard the Motion on its merits. Given the additional issues raised in the motion to vacate and at the Hearing, the court permitted each of the parties to supplement the briefing on the matter no later than August 12, 2014. The Movant filed her supplement on August 11, 2014 and the Debtor filed his supplement on August 12, 2014.

In considering the Motion, therefore, the court has considered the Motion itself, the filings with respect thereto, the motion to vacate and the filings with respect thereto, each of the parties' arguments at the Hearing, and each of the parties' respective supplemental filings.

The court has also taken into consideration any and all exhibits submitted in conjunction with the foregoing. Though these items do not constitute an exhaustive list of the filings in the above-captioned bankruptcy case, the court has taken judicial notice of the contents of the docket in this matter. See Levine v. Egidi, No. 93C188, 1993 WL 69146, at *2 (N.D.Ill. Mar. 8, 1993) ; In re Brent, 458 B.R. 444, 455 n. 5 (Bankr.N.D.Ill.2011) (Goldgar, J.) (authorizing a bankruptcy court to take judicial notice of its own docket).

BACKGROUND

While the question before the court is relatively simple, it turns in part on the nature and status of the underlying, pre-bankruptcy arbitration. The pertinent facts are as follows:

Prior to the commencement of the above-captioned bankruptcy case (the “Chapter 11 Case ”) on October 4, 2013 (the “Petition Date ”), the Movant was employed by the Debtor. At some point in 2011, the Movant's employment with the Debtor concluded. The parties dispute the

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manner in which that employment was concluded.

That dispute caused the Movant to commence litigation against the Debtor on June 1, 2012. See Leticia Zaragoza v. Kent Woods et al., Case No. 2012 L 006163 (Cir. Ct. of Cook Cty, Illinois, June 1, 2012) (the “State Court Litigation ”). In apparent response to the State Court Litigation, the Debtor commenced an arbitration matter before the CBOT. See CBOT 12–0031–MA (the “CBOT Arbitration ”). In the CBOT Arbitration, the Movant asserted as a counterclaim her claims against the Debtor from the State Court Litigation. The State Court Litigation was apparently stayed by the commencement of the CBOT Arbitration, which in turn was stayed by the commencement of the Chapter 11 Case.

The parties have strongly differing opinions as to the status of the CBOT Arbitration. The Movant argues that the CBOT is the proper forum to hear her industry-related claims, and that that process will happen in relatively short order. The Debtor, on the other hand, argues that the CBOT Arbitration has been fraught with delay and obstructionist tactics, and that it is an imperfect forum, where what are essentially legal claims will be determined by a panel of laypersons.

Irrespective of the foregoing, the Movant has in fact filed a claim (the “Claim ”) in the bankruptcy case. The Debtor has not asserted any affirmative claims against the Movant in the Chapter 11 Case, but has objected to the Claim, see Debtor's Objection to Claim No. 10–2 Filed by Leticia Zaragoza (the “Claim Objection ”), and the Claim Objection is scheduled for hearing on August 20, 2014. The Movant has not, to date, responded to the Claim Objection.

DISCUSSION

While the matter before the court is, at its essence, a fairly routine question of whether the court should lift the stay to allow a dispute to be resolved in a nonbankruptcy forum, the matter has been complicated by the Movant's contention that the Supreme Court's ruling Stern v. Marshall, 564 U.S. 2, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011) (“Stern ”) holds that this court lacks “jurisdiction” to resolve the Movant's claim. As a result, the court will take up the Movant's Stern challenge before considering the merits of the underlying request.

A. Stern v. Marshall

The Movant argues that the dispute between the parties falls outside of this court's jurisdiction to hear and determine matters under the Supreme Court's ruling in Stern. It appears that the Movant believes this to be the case both because...