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Walker v. Mclemore

United States District Court, M.D. Tennessee, Nashville Division

July 25, 2017

CHARLES E. WALKER Plaintiff,
v.
JOHN C. MCLEMORE, Defendant.

          OPINION AND ORDER DENYING DEBTOR'S MOTION FOR WITHDRAWAL OF REFERENCE PURSUANT TO 28 U.S.C. § 157(d)[#1], DENYING DEBTOR'S EMERGENCY MOTION FOR A STAY OF THE BANKRUPTCY PROCEEDINGS [#6] AND DISMISSING ACTION

          HONORABLE GERSHWIN A. DRAIN UNITED STATES DISTRICT JUDGE

         I. Introduction

         Presently before the Court is Charles E. Walker's (“Debtor”) Motion for Withdrawal of Reference, filed on June 28, 2017. On July 11, 2017, the Chapter 11 Trustee of the Debtor's estate, John C. McLemore (“Trustee”), filed his objection to the Debtor's Motion for Withdrawal of Reference. Also, before the Court is the Debtor's Emergency Motion for a Stay of the Bankruptcy Proceedings, filed on July 21, 2017. The Debtor seeks an order from this Court staying the proceedings in the Debtor's Chapter 11 bankruptcy action pending this Court's decision on the Debtor's Motion for Withdrawal of Reference. The Trustee has likewise filed an objection to the Debtor's Motion for a Stay. For the reasons that follow, the Court declines to withdraw the order of reference. As such, the Debtor's Emergency Motion for Stay will be denied as moot.

         II. Facts

         The Debtor initiated his bankruptcy case on February 29, 2016 by filing a voluntary petition for Chapter 11 relief in the Bankruptcy Court for the Western District of Tennessee. On April 21, 2016, the Bankruptcy Court for the Western District of Tennessee transferred the matter to the Bankruptcy Court for the Middle District of Tennessee because the Debtor was not domiciled in the Western District.

         On July 13, 2016, the Bankruptcy Court ordered that a Chapter 11 trustee be appointed to manage Debtor's bankruptcy estate. On August 1, 2016, John C. McLemore was appointed to serve as the Chapter 11 Trustee for the estate of Charles E. Walker.

         On March 6, 2017, the Trustee filed his original plan of reorganization. Debtor objected to the Trustee's plan of reorganization and raised various constitutional and federal law issues in his objections. The Bankruptcy Court conducted a contested confirmation hearing on June 11, 2017. At the hearing, the Bankruptcy Court asked the Trustee to make one alteration to the plan, specifically to add a provision stating that, upon the effective date of the plan, the Debtor could work in any manner he saw fit, borrow money, purchase and sell property, or engage in other financial activity so long as the Debtor's activity did not adversely impact the value of the property of the estate. The Trustee therefore amended his plan to include the Bankruptcy Court's suggested language. On June 14, 2017, the Bankruptcy Court entered an order confirming the trustee's amended plan of reorganization.

         Thereafter, the Trustee moved to sell six of the Debtor's properties, which the Bankruptcy Court granted over the Debtor's timely objections. An auction for the sale of the six properties is scheduled to occur on July 26, 2017.

         III. Law & Analysis

         The Debtor argues that withdrawal of the bankruptcy reference is mandatory under 28 U.S.C. § 157(d) because the Debtor raised constitutional challenges in his objections to the Trustee's reorganization plan. Conversely, the Trustee argues that Debtor has failed in his burden demonstrating that withdrawal of the reference is mandatory under 28 U.S.C. § 157(d). The Court agrees with the Trustee.[1]

         Title 28 U.S.C. § 157(d) governs mandatory withdrawal of the reference to the bankruptcy court. It states in relevant part that:

The district shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceedings requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.

28 U.S.C. § 157(d). In In re White Motor Corp., 42 B.R. 693, 703-04 (N.D. Ohio 1984), the court stated what has become the litmus test for determining whether the reference must be withdrawn:

Section 157(d) must therefore be read to require withdrawal not simply whenever non-Code federal statutes will be considered but rather only when such consideration is necessary for the resolution of a case or proceeding. The preceding analysis of legislative history and the Code's structure demonstrates the importance of the observations during the House debate that section 157(d) was not intended to become an “escape hatch through which most bankruptcy matters will be removed to the district court, ” and in the Senate debate that district courts “should not allow a party to use this provision to require withdrawal where such are not material to the resolution of the proceeding.” Consequently, in light of the Congressional goal of having expert bankruptcy judges determine complex Code matters to the greatest extent possible, [the ...

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