United States District Court, D. Nebraska
IN THE MATTER OF SKYLINE MANOR, INC., a Nebraska nonprofit corporation, Debtors.
JOHN BARTLE; ROBERT L. RYNARD, SR.; DANA WADMAN-HUTH; REBECCA BARTLE; DANE STARBUCK; RYNARD ENTERPRISES, INC., a/k/a RYNARD ENTERPRISES, LLC; BVM MANAGEMENT INC., a/k/a BETHANY VILLAGE MANAGEMENT; BETHANY VILLAGE APARTMENTS, INC.; BETHANY VILLAGE APARTMENTS - NEW CASTLE, INC.; AMERICARE COMMUNITIES III, LLC; and BVM LAKESHORE, LLC, Defendants. RON ROSS, Trustee, Plaintiff,
FINDINGS AND RECOMMENDATIONS TO THE UNITED STATES
L. SALADINO, CHIEF JUDGE
matter is before the court on the motion by defendants John
Bartle, Rebecca Bartle, Robert Rynard, Sr., BVM Management,
Inc., a/k/a Bethany Village Management, Bethany Village
Apartments, Inc., Bethany Village Apartments - New Castle,
Inc., Americare Communities III, LLC, BVM Lakeshore, LLC, and
Rynard Enterprises, Inc., a/k/a Rynard Enterprises, LLC, to
withdraw the reference of this adversary proceeding (Fil. No.
82), and the response by the trustee (Fil. No. 86). Howard T.
Duncan represents the movants, and T. Randall Wright and
Brandon R. Tomjack represent the plaintiff.
debtor in this case is a nonprofit corporation operating a
“continuing care community” with facilities for
independent living, assisted living, and skilled care. It
filed a Chapter 11 bankruptcy petition on May 8, 2014, and
operated as a debtor in possession. However, the bankruptcy
court subsequently found cause, including gross mismanagement
of the debtor and conflicts of interest between the
debtor's operating officers and certain vendors, to
appoint Ron Ross as trustee of the debtor's bankruptcy
estate. On May 6, 2016, the trustee filed this adversary
proceeding against certain current and former officers and
directors of the debtor, certain entities related to those
officers and directors, the debtor's former general
counsel, and certain entities related to the debtor. This
lawsuit seeks to avoid allegedly fraudulent transfers and
recover the proceeds for the benefit of the bankruptcy
estate; recover money damages for breach of fiduciary duties,
waste, violation of applicable standards under the Nebraska
Nonprofit Corporation Act, and legal malpractice; and recover
certain unauthorized distributions of the debtor's funds
from the debtor's directors. Most of the defendants now
move to have the adversary proceeding withdrawn from the
bankruptcy court and tried in the district court.
movants filed this motion to withdraw the reference of this
adversary proceeding under 28 U.S.C. § 157(d) for cause
because the trustee's claims involve
“non-core” matters which require adjudication of
state-law claims. These causes of action are not created by
any provision of the Bankruptcy Code and they would exist
outside of the bankruptcy case. Essentially, the movants are
raising the question of the bankruptcy court's authority
to decide this adversary proceeding under Stern v.
Marshall, 564 U.S. 462 (2011).
United States District Court for the District of Minnesota
has addressed the issue of withdrawal of the reference for
Stern questions, and its explanation is applicable
Under the bankruptcy statutes:
[T]he district courts of the United States have
“original and exclusive jurisdiction of all cases under
title 11.” Congress has divided bankruptcy proceedings
into three categories: those that “aris[e] under title
11”; those that “aris[e] in” a Title 11
case; and those that are “related to a case under title
11.” District courts may refer any or all such
proceedings to the bankruptcy judges of their district . . .
. District courts also may withdraw a case or proceeding
referred to the bankruptcy court “for cause
Stern v. Marshall, 131 S.Ct. 2594, 2603 (2011)
(quoting 28 U.S.C. §§ 1334(a), 157(a), (d)). In
this District, all bankruptcy cases and proceedings are
automatically referred to the bankruptcy judges. Bankruptcy
Local Rule 1070-1.
judges may hear and enter final judgments in “all core
proceedings arising under title 11, or arising in a case
under title 11.” “Core proceedings include, but
are not limited to” 16 different types of matters . . .
Stern, 131 S.Ct. at 2603-04 (quoting 28 U.S.C.
§§ 157(b)(1), (b)(2)(C), 158).
bankruptcy judge determines that a referred “proceeding
. . . is not a core proceeding but . . . is otherwise related
to a case under title 11, ” the judge may only
“submit proposed findings of fact and conclusions of
law to the district court.” It is the district court
that enters final judgment in such cases after reviewing de
novo any matter to which a party objects. Id. at
2604 (quoting 28 U.S.C. § 157(c)(1)).
Stern v. Marshall, the Supreme Court held that
section 157(b)'s grant of authority to a bankruptcy court
to “hear and determine . . . and . . . enter
appropriate orders and judgments, ” on
“counterclaims by the estate against persons filing
claims against the estate, ” violated Article III of
the United States Constitution when the state law claims
would not be “completely resolved in the bankruptcy
process of allowing or disallowing claims.” 131 S.Ct.
at 2611. Therefore, “some claims labeled by Congress as
‘core' may not be adjudicated by a bankruptcy court
in the manner designated by § 157(b).” Exec.
Benefits Ins. Agency v. Arkison (In re Bellingham), 134
S.Ct. 2165, 2172 (2014).
re Bellingham, decided by the Supreme Court in June
2014, explained that if a so-called Stern claim
“satisfies the criteria of § 157(c)(1)” in
that it is “related to a case under title 11, ”
then “the bankruptcy court simply treats the claims as
non-core: The bankruptcy court should hear the proceeding and
submit proposed findings of fact and conclusions of law to
the district court for de novo review and entry of
judgment.” 134 S.Ct. at 2173. . . .
motion to withdraw the reference to the bankruptcy court in
this case is based on 28 U.S.C. § 157(d), which states:
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. The
district court shall, on timely motion of a party, so
withdraw a proceeding if the court determines that resolution
of the proceeding requires consideration of both title 11 and