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In re Aden

United States District Court, Ninth Circuit

April 26, 2013

In re: DANNY W. ADEN and ROZELL J. ADEN, Debtors.
v.
JEREMY GUGINO, TRUSTEE, Appellee. DANNY WAYNE ADEN and ROZELL J ADEN, Appellants, In re: JUDITH CLARICE SATHER, Debtor. JUDITH CLARICE SATHER, Appellant,
v.
JEREMY GUGINO, TRUSTEE, Appellee.

MEMORANDUM DECISION AND ORDER

B. LYNN WINMILL, Chief District Judge.

INTRODUCTION

Before the Court is the parties' Joint Motion to Approve Compromise of Controversy and Withdraw the Reference (Dkt. 31). For the reasons discussed below, the Court will deny the motion to withdraw the reference and will deny without prejudice the parties' request that this Court vacate its November 29, 2012 Decision (Dkt. 20).

BACKGROUND

A fuller recitation of the facts in this case can be found in the Court's November 29, 2012 Decision. A brief synopsis, along with facts that developed after that decision, follows.

The debtors in this consolidated case purchased various annuity contracts before filing bankruptcy. At the time they filed their petitions, the debtors had not yet selected any particular payout option under their annuity contracts. The debtors argued that the annuities - or at least a portion of their prospective proceeds - were exempt under Idaho Code § 41-1836.

The debtors lost this argument in bankruptcy court, but then won the issue on appeal to this Court. Based on the relevant state exemption statute, Idaho Code § 41-1836, this Court held that creditors cannot reach into the future to claw back annuity payments that have not yet been made to the annuitant. The trustee appealed this decision to the Ninth Circuit.

While this appeal was pending, the parties agreed upon a settlement and the trustee has agreed to conditionally withdraw his appeal.[1] The settlement is contingent upon court approval. Within this joint motion, the parties ask the Court to do three things: (1) withdraw the reference to the bankruptcy courts in both Sather and Aden; (2) approve the compromise; and (3) vacate this Court's November 29, 2012 decision.

ANALYSIS

A. The Request to Withdraw the Reference

The Court will deny the parties' request to withdraw the reference in both cases as the parties have not shown "good cause" for such a withdrawal.

Although district courts have original jurisdiction over cases arising under the Bankruptcy Code, 28 U.S.C. § 1334(b), they may refer these cases to the bankruptcy judges for the district. See 28 U.S.C. § 157(a). District courts also have the authority to withdraw the reference to bankruptcy court. 28 U.S.C. § 157(d). Withdrawal may be mandatory if "resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organization or activities affecting interstate commerce, " or permissive upon "timely motion of any party, for cause shown." Id. The parties here suggest that good cause exists to permissively withdraw the reference.

In determining whether cause exists, district courts consider (1) the efficient use of judicial resources, (2) delay and costs to the parties, (3) uniformity of bankruptcy administration, (4) the prevention of forum shopping, and other related factors. Security Farms v. Int'l Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers, 124 F.3d 999, 1008 (9th Cir. 1997). Courts should also determine whether "core" or "non-core" issues predominate. Withdrawing the reference typically enhances efficiency where non-core issues predominate. Id.

The parties have not engaged in a point-by-point discussion of any of the above factors and they have not meaningfully explained why this Court should withdraw the reference to determine a core matter.[2] Instead, the parties explain, in general terms, that "time is of the essence" because one of the debtors has terminal cancer. The parties also point out that unless the reference is withdrawn, the compromise will have to be approved by two bankruptcy judges (Judge Myers in Sather and Judge Pappas in Aden ) who could reach different decisions. Finally, the parties also say ...


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