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Firstenergy Solutions Corp. v. Bluestone Energy Sales Corp.

United States District Court, N.D. Ohio, Eastern Division

July 30, 2019




         This matter comes before the Court upon the Motion (ECF DKT #1) of Defendant Bluestone Energy Sales Corp. for Withdrawal of Bankruptcy Reference of the Adversary Proceeding (18-5100) filed by Plaintiff FirstEnergy Solutions Corp. For the following reasons, the Motion is denied and the captioned Miscellaneous Case is terminated and removed from the Court's active docket.

         I. BACKGROUND

         On October 10, 2016, Bluestone and FirstEnergy entered into a Coal Purchase Agreement, under which Bluestone agreed to purchase coal and pay for it as the coal was sold to third parties. FirstEnergy claims that Bluestone breached the Agreement by failing to make the “final payment” by March 7, 2017.

         On March 31, 2018, FirstEnergy filed its Chapter 11 Voluntary Petition in Bankruptcy. In December 2018, FirstEnergy commenced this Adversary Proceeding against Bluestone, asserting one claim for Turnover of Estate Property under Section 542 of the Bankruptcy Code and one claim for Breach of Contract.

         Bluestone moved to dismiss the Turnover Claim. Following briefing and oral argument, the Bankruptcy Court denied the Motion to Dismiss.

         Bluestone filed its Answer and then filed for Withdrawal of the Reference of the Adversary Proceeding to the United States District Court. The Bankruptcy Court ordered discovery to continue while the District Court hears and considers Bluestone's Motion.

         First, Bluestone insists that the issues raised in the Adversary Proceeding are not core proceedings as contemplated by 28 U.S.C. § 157. Second, Bluestone contends that it is entitled to a jury trial under the Seventh Amendment of the United States Constitution, it has made a jury demand; and does not consent to a jury trial in the Bankruptcy Court. Third, Bluestone argues that judicial economy and efficiency favor the immediate transfer of the Adversary Proceeding to the District Court, including both the Breach of Contract Claim and the Turnover Claim.


         28 U.S.C. § 157

         28 U.S.C. § 157(d) of the Bankruptcy Code authorizes the District Court to “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.” In the absence of a determination that resolution of a proceeding requires consideration of both Title 11 and other federal law regulating organizations or activities that affect interstate commerce, withdrawal of reference to the bankruptcy court is discretionary. Id. In the instant matter, neither party has alleged any of the factors requiring mandatory withdrawal; therefore, withdrawal of the reference is discretionary and dependent upon a showing of cause.

         Neither the Bankruptcy Code nor the Sixth Circuit has defined “cause.” However, several courts have formulated a non-exhaustive list of factors for the District Court to consider. These factors include: judicial economy; uniformity in bankruptcy administration; reducing forum-shopping and confusion; conserving debtor and creditor resources; expediting the bankruptcy process; whether jury trial has been requested; and whether the proceeding is core or non-core. Corzin v. Harvey (In re Commercial Maint. & Repair, Inc.), No. 5:06-MC-46, 2007 WL 2815211 at *1 (N.D.Ohio Sept. 26, 2007). The policy consideration weaving through these decisions is that “the ‘cause' requirement for permissive withdrawal reflects congressional intent to have bankruptcy proceedings adjudicated in bankruptcy court unless rebutted by a contravening policy.” Holland v. LTV Steel Co., Inc., 288 B.R. 770, 774 (N.D.Ohio 2002). District courts must be mindful that “withdrawal of a reference is not intended to be an ‘escape hatch' from bankruptcy court into district court” and relief should be granted “only in a limited class of proceedings.” Holland, 288 B.R. at 772-73. The moving party bears the burden of demonstrating that the reference should be withdrawn. In re Commercial Maint. & Repair, 2007 WL 2815211 at *1.

         Core or Non-Core Proceeding

         Pursuant to 28 U.S.C. § 157(b)(3), “[t]he bankruptcy judge shall determine, on the judge's own motion or on timely motion of a party, whether a proceeding is a core proceeding under this subsection or is a proceeding that is otherwise related to a case under title 11.” (Emphasis added). “The question of whether a proceeding is core or non-core is appropriately decided by the bankruptcy court, and it is a central question to the determination of a motion to withdraw ...

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