United States District Court, W.D. Missouri.
In re MAMTEK US, INC., Debtor.
BRUCE COLE and NANETTE COLE, Defendants. BRUCE E. STRAUSS, TRUSTEE, Plaintiff,
REPORT AND RECOMMENDATION TO THE DISTRICT COURT ON
MOTION TO WITHDRAW THE REFERENCE
Honorable Dennis R. Dow United States Bankruptcy Judge
matter comes before the Court on the Motion for Withdrawal of
the Reference Pursuant to 28 USC §157(d) (the
“Withdrawal Motion”) filed by Bruce Cole and
Nanette Cole. The Motion has been fully briefed. For the
following reasons, the Court recommends that the Withdrawal
Motion be denied. First, the Bankruptcy Court has subject
matter jurisdiction over the dispute involving the Coles
since the outcome most certainly affects the administration
of the bankruptcy estate. Secondly, the Coles have consented
to the Bankruptcy Court's exercise of jurisdiction.
Third, the Coles have failed to meet their burden of proving
that their Withdrawal Motion is timely, and that cause exists
to grant it. Additionally, no jury demand is pending because
the Coles' request was untimely, and therefore, denied by
the Bankruptcy Court. Finally, judicial economy is best
served by leaving the matter in the Bankruptcy Court given
the Court's familiarity with the complex facts and
issues, and the need to interpret its own orders.
and Procedural Background
Cole was the president and CEO of Mamtek U.S., Inc. (the
“Debtor”), and Nanette Cole is his wife. On
December 15, 2011, several creditors filed an involuntary
petition under Chapter 7 against Mamtek. Bruce Strauss was
appointed Trustee of the Debtor's bankruptcy estate.
2012, the Trustee filed an adversary proceeding against the
Coles in which he sought, among other things, avoidance of
fraudulent and preferential transfers. The Trustee also moved
for a temporary restraining order and injunctive relief to
prevent the Coles from disposing of the proceeds from the
sale of their residence in Beverly Hills, California (the
the Coles' consent, this Court entered a TRO on June 15,
2012, which provided in part that the Proceeds were to be
paid to a California escrow company pending further order of
the Court. On June 18, 2012, this Court entered another
order, stipulated to by the Trustee and the Coles (the
“Stipulated Order”). It provided, in relevant
part, that the June 15 order would “remain in force and
effect until final judgment is entered in this adversary
proceeding” and that the escrow agent would retain the
Proceeds “until final judgment is entered in this
adversary proceeding, at which time the Court shall enter an
order directing the disposition of such proceeds.” In
August, 2013, this Court granted the Trustee summary judgment
on Counts I and II of his Complaint concerning fraudulent and
preferential transfers. The Coles appealed. Treating the
Bankruptcy Court's summary judgment order as proposed
findings of fact and conclusions of law, the District Court
entered judgment against both of the Coles on Count I (an
avoidance of a $904, 167 fraudulent transfer), and against
Bruce Cole on Count III (an avoidance of a $360, 000
preferential transfer). The Eighth Circuit Court of Appeals
affirmed the judgment.
February of 2016, the Trustee filed a motion in the
Bankruptcy Court to dismiss the remaining counts in the
adversary proceeding; the motion was granted. The Coles
subsequently filed motions to alter, amend or clarify the
process by which they could seek an order directing the
disbursement of the Proceeds to pay certain taxes. This Court
denied the Coles' motions, and the Coles appealed to the
District Court. Applying a de novo standard of
review, the District Court affirmed (the “Adversary
Trustee, as judgment creditor, served the Coles with written
discovery in aid of execution. Thus began a flurry of
pleadings, accusations and disputes. The District Court
ultimately entered a show cause order directing the parties
to address whether it had subject matter jurisdiction to
resolve the discovery dispute.
January, 2017, the District Court entered an order concluding
that the discovery dispute was “related to” the
bankruptcy proceeding within the meaning of 28 U.S.C.
§157(a) (the “Discovery Order”). The Court
reasoned that the outcome of the dispute could conceivably
impact the administration of the Debtor's estate. As a
result, Judge Laughrey referred the dispute to the Bankruptcy
afterwards, the Coles filed a motion in this Court seeking a
ruling that they were entitled to a homestead exemption of
$175, 000 in the proceeds from the sale of their residence,
and directing the Trustee to pay them that amount. They filed
a jury demand months later which was denied by this Court
because it was untimely.
their Withdrawal Motion, the Coles seek the withdrawal of the
reference for the entire adversary proceeding, or
alternatively, for two state law claims: 1) confirmation of
the Coles' California homestead exemption and disbursal
of the Proceeds to them, and 2) payment of federal and state
taxes from the Proceeds pursuant to the Stipulated Order. The
Trustee has opposed the Withdrawal Motion.
Report, the Court will not address the Coles' request to
withdraw the reference for the entire adversary proceeding
because, as noted above, all counts have either been
adjudicated or dismissed. The Court will focus its
recommendation on the Coles' request to withdraw the
reference with respect to the disputes surrounding their
homestead exemption and disbursement of the Proceeds.
States district courts have original jurisdiction over all
“cases under title 11” and related proceedings.
28 U.S.C. §§1334(a), (b). Pursuant to 28 U.S.C.
§157(a), each district court may provide that any or all
cases under title 11 and any proceedings “arising
under” or “arising in” or “related
to” a case under title 11 shall be referred to the
bankruptcy judges for the district. In the Western District
of Missouri, all bankruptcy cases and related proceedings are
automatically referred to the bankruptcy court by standing
order. Section 157(d) provides that “[t]he District
Court may withdraw, in whole or in part, in a case or
proceeding referred under ...