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In re CVAH, Inc.

United States District Court, D. Idaho

December 15, 2016

In re CVAH, INC., Debtor.
v.
U.S. BANK, N.A. and Does 1 -5, Defendants. NOAH G. HILLEN, solely in his capacity as Trustee of the bankruptcy estate of the above-reference Debtor, Plaintiff,

          MEMORANDUM DECISION AND ORDER

          B. Lynn Winmill Chief Judge

         INTRODUCTION

         Pending before the Court is Defendant U.S. Bank, N.A.'s Motion to Withdraw the Reference (Dkt. 1). As explained further below, the Court will grant the motion but will delay withdrawing the reference until the bankruptcy court has prepared proposed findings, conclusions of law, and/or a recommended disposition of the matter.

         BACKGROUND

         In May 2014, CVAH, Inc. filed a Chapter 7 bankruptcy petition. CVAH has virtually no assets and its only creditors are state and federal taxing authorities.

         Roughly one year after CVAH filed its petition, the Trustee initiated approximately 40 separate adversary proceedings seeking to recover payments CVAH (or its principal) had previously made to various entities. These payments, taken together, total around $4 million. The Trustee alleges that these payments were constructively fraudulent and thus seeks to recover the monies for CVAH's bankruptcy estate.

         In his complaint against U.S. Bank, the Trustee alleges three fraudulent-transfer claims. In his first claim for relief, the Trustee invokes 11 U.S.C. § 544(b)(1)[1] as well as the federal Fair Debt Collection Practices Act (FDCPA) in his effort to recover the payments. In his second claim, the Trustee invokes Idaho's fraudulent transfer statutes. In a third claim for relief, the Trustee invokes 11 U.S.C. § 548(a)(1).

         In June 2016, the bankruptcy court ordered U.S. Bank to either: (1) consent to entry of judgment by the bankruptcy court; or (2) move to withdraw the reference. U.S. Bank responded with the pending motion to withdraw the reference.

         In October 2016, the bankruptcy court entered a procedural order in various CVAH adversary proceedings, including this one. See Bankr. Dkt. 25. That order establishes pretrial deadlines, including deadlines for amending the pleadings, adding parties, completing discovery, and filing pretrial motions. Additionally, the bankruptcy court indicated that after resolving pretrial motions, it anticipates following two different tracks, depending on whether the various adversary defendants had timely demanded a jury trial. For those defendants who did not demand a jury trial, the bankruptcy court “anticipates scheduling a status conference to consider, among other things, selection of dates for a prompt trial before this Court [i.e., before the bankruptcy court].” Id. at 4. If, on the other hand, a party had timely requested a jury trial, the bankruptcy court anticipates “referral of this action to the U.S. District Court for trial.” Id.

         U.S. Bank has not demanded a jury trial and is mostly content with the bankruptcy court's plan for handling the matter. But there are two exceptions. First, U.S. Bank asks the Court to withdraw the reference for “any dispositive motion regarding the unsettled federal law question regarding the scope of the FDCPA statute of limitations.” Reply, Dkt. 3, at 5. Second, U.S. Bank asks the Court to withdraw the reference before any bench trial is conducted. Id.

         ANALYSIS

         Federal district courts have original jurisdiction over cases arising under the Bankruptcy Code. 28 U.S.C. § 1334(a). This Court has exercised its authority under 28 U.S.C. § 157(a) to refer all bankruptcy matters to the district's bankruptcy judges. See Apr. 24, 1995 Third Amended General Order. Nevertheless, under 28 U.S.C. § 157(d), this reference is subject to mandatory or permissive withdrawal, depending on the circumstances. See 28 U.S.C. § 157(d). Section 157(d) provides:

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 other ...

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