Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-00139/USCOURTS-casd-3_16-cv-00139-0/pdf.json

Nature of Suit Code: 423
Nature of Suit: Bankruptcy Withdrawal 28 USC 157
Cause of Action: 28:0157(d) Motion for Withdrawal of Reference

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

In Re:

TAC FINANCIAL, INC. 

Debtor.

Case Nos.: 

3:15-cv-02681-GPC-NLS

3:16-cv-00139-GPC-NLS

ORDER GRANTING DEFENDANTS 

REMAR’S AND FRAGER’S 

MOTIONS TO WITHDRAW THE 

REFERENCE

CHRISTOPHER R. BARCLAY, 

TRUSTEE,

Plaintiff,

v.

ROY H. EDER; REMAR 

INVESTMENTS, L.P.; MICHAEL 

RAYMOND FRAGER; FRASER 

SISSON ASSOCIATES; CENTAURUS 

FINANCIAL, INC.; RELIASTAR LIFE 

INSURANCE COMPANY; and DOES 1 

through 20,

Defendants.

3:15-cv-02681-GPC-NLS [ECF No. 2]

3:16-cv-00139-GPC-NLS [ECF No. 1]

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Defendants Remar Investments, L.P. (“Remar”) and Michael Frager and FSA 

Integrated LLC [erroneously sued as Fraser Sisson Associates] (collectively “Frager” or

“Frager Defendants”) filed separate motions to withdraw the reference. Defendants Remar 

and Frager seek to withdraw the reference to the bankruptcy court with respect to an 

adversary proceeding commenced by Plaintiff Christopher R. Barclay, as Chapter 7 Trustee 

for TAC Financial, Inc. (the “Trustee”) against Remar and others for claims arising out of 

the allegedly fraudulent conveyance of a life insurance policy from TAC Financial, Inc. 

(the “Debtor”) to Defendant Roy H. Eder and subsequent transferees, including Remar. 

Any party wishing to oppose the motion had until February 19, 2016 with respect to 

Remar’s motion and February 26, 2016 with respect to Frager’s motion to respond. On 

February 26, 2016, Trustee filed a statement of non–opposition to both motions. The Court 

deems Defendants’ motions suitable for disposition without oral argument pursuant to 

Civil Local Rule 7.1(d)(1). Having reviewed Defendants’ motions and the applicable law, 

and for the reasons set forth below, the Court GRANTS Defendants’ motions to withdraw 

the reference.

FACTUAL BACKGROUND

On or about February 8, 2013, the Debtor submitted an application to ReliaStar Life 

Insurance Company (“ReliaStar”) for a “key man” life insurance policy in the face amount 

of $5 million insuring the life of Eder1, designating that the owner of the policy would be 

Debtor and that the source of funds to pay the policy premiums would be the Debtor. (AP 

Compl. ¶ 22.) The application was signed by and listed the Debtor’s insurance 

agents/brokers as Michael Frager and Michael Sisson. (Id. ¶ 23) On or about June 6, 2013, 

ReliaStar issued its Policy No. AD20577953 (“the Policy”) to the Debtor. (Id. ¶ 25.) The 

Policy listed “TAC Financial Services” the owner of the policy (id. ¶ 27), insured the life 

of Roy Eder and provided for a death benefit of $5 million (id. ¶ 26). 

 

1 Defendant Roy Eder was the Chief Executive Officer of the Debtor until approximately 

July 18, 2014. (Id. ¶ 2.) 

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On or about June 14, 2013, the Debtor faxed to ReliaStar an Electronic Funds 

Transfer (“EFT”) authorization, signed by Steve Hong on behalf of the Debtor, which 

authorized ReliaStar to debit the Debtor’s bank account to pay the premiums of the 

Debtor’s Policy. (Id. ¶ 28.) Thereafter the monthly premium payments were made by the 

Debtor through direct debit of the Debtor’s bank account. (Id.) 

On December 27, 2013, ReliaStar sent a notice to the Debtor that the EFT payment 

for the payment of the monthly premium had been returned by the Debtor’s bank as unpaid 

due to insufficient funds. (Id. ¶ 29.) By a letter dated February 13, 2014, ReliaStar 

informed the Debtor that the Policy had lapsed effective February 13, 2014. (Id.) On or 

about March 24, 2014, the Debtor submitted to ReliaStar an application to reinstate the 

Debtor’s Policy, which was signed by the Debtor through Eder as the Debtor’s CEO and 

Michael Frager as the Debtor’s agent. (Id. ¶ 31.) By a letter dated April 3, 2014, ReliaStar 

informed the Debtor the application to reinstate had been approved and that a premium 

payment was due June 14, 2014. (Id. ¶ 32.)

On or about June 9, 2014, Eder was diagnosed with brain cancer. (Id. ¶ 33.) On or 

about June 9, 2014, the Debtor made a premium payment to ReliaStar. (Id. ¶ 34.) On June 

24, 2014, the Debtor submitted to ReliaStar a new EFT authorization to debit the Debtor’s 

bank account to pay the premiums, which was signed by Steve Hong on behalf of the 

Debtor. (Id. ¶ 35.) Thereafter, the monthly premiums were made by the Debtor through 

direct debit of the Debtor’s bank account. (Id.) 

On July 1, 2014, Michael Frager sent a fax to ReliaStar instructing ReliaStar to 

change the beneficiaries under the Debtor’s Policy according to an attached Beneficiary 

Designation Form, which was signed by Eder on behalf of Debtor and changed the 

beneficiaries of the policy from the Debtor to members of Eder’s family. (Id. ¶¶ 37–38.) 

On or about July 8, 2014, the Division of Neurosurgery at Scripps Clinic Torrey 

Pines issued a letter stating that Eder has been diagnosed with cancer for which prognosis 

is terminal. (Id. ¶ 40.) On July 11, 2014, Frager faxed to ReliaStar a Transfer of Ownership 

form dated June 27, 2014, which provided for the transfer of ownership of the Debtor’s 

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Policy from the Debtor to Eder. (Id. ¶ 41.) The Transfer of Ownership form was signed 

on behalf of the Debtor, as the current owner, by Eder as Chairman and CEO and by Eder 

on behalf of himself as the new owner. (Id.) In a letter dated July 15, 2014, ReliaStar 

confirmed that the ownership of the policy had been changed from the Debtor to Eder, 

effective June 27, 2014. (Id. ¶ 42.) The Debtor continued to pay the premiums on the 

Policy after the transfer of ownership. (Id. ¶ 43.)

On October 2, 2014, ReliaStar made a distribution under the Policy to Eder in the 

amount of $250,000.00. (Id. ¶ 44.) On or about December 11, 2014, Eder sold the Policy 

to Remar for a purchase price of $1,950,000.00. (Id. ¶ 45.) By a letter from ReliaStar to 

Remar dated December 15, 2014, ReliaStar confirmed the change in ownership of the 

Policy from Eder to Remar, effective December 10, 2014. (Id. ¶ 46.) 

PROCEDURAL HISTORY

The Debtor filed a voluntary bankruptcy petition on January 15, 2015. (Id. ¶ 15.) 

On August 11, 2015, the Trustee filed this adversary proceeding pursuant to Federal Rule 

of Bankruptcy Procedure 7069 against Eder, Remar and others to recover the Debtor’s Key 

Man Life Insurance Policy or the value of the Debtor’s Policy from Remar as a fraudulent 

transfer under 11 U.S.C. §§ 548, 550, and the value of all transfers by Eder to subsequent 

transferees of the $1.9 million received by Eder from Remar for the Policy and the 

$250,000 advance received by Eder from ReliaStar under 11 U.S.C. § 550. (See In re TAC 

Financial, Inc., Adv. No. 15–AP–90145–CL7 (“AP”).) Defendants Remar, Frager and 

others filed Answers and timely demands for jury trials.2 Neither consent to having the 

 

2 Remar seeks judicial notice of excerpts of answers filed in the adversary proceeding by 

Defendants Remar (Ex. 1), Eder (Ex. 2), Centaurus Financial, Inc. (Ex 3), Michael Frager 

(Ex. 4) and FSA Integrated LLC (Ex. 5). (RJN, ECF No. 1–3.) Under Federal Rule of 

Evidence 201(b), a district court may take notice of facts not subject to reasonable dispute 

that are capable of accurate and ready determination by resort to sources whose accuracy 

cannot reasonably be questioned. Fed. R. Evid. 201(b); see also Lee v. City of Los Angeles, 

250 F.3d 668, 689 (9th Cir. 2001) (noting that the court may take judicial notice of 

undisputed matters of public record), overruled on other grounds by Galbraith v. County 

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bankruptcy court conduct the jury trial. 

On December 1, 2015, Remar filed a motion to withdraw the reference on the basis 

that Remar is entitled to have this matter decided by an Article III judge and does not 

consent to have the matter decided by a bankruptcy judge and on the additional ground that 

other defendants (if not Remar itself) are entitled to and have preserved their right to trial 

by a jury. (Remar Mot., Case No. 15–cv–2681, ECF No. 1.) On January 20, 2016, Frager 

also filed a motion to withdraw the reference on similar grounds. (Frager Mot., Case No. 

16–cv–0139, ECF No. 1.) On February 26, 2016, the Trustee filed a non–opposition to 

withdrawal of the reference with respect to its claims against both Remar and Frager. 

LEGAL STANDARD

Under the Bankruptcy Amendments and Federal Judgeship Act of 1984, district 

courts have original jurisdiction in bankruptcy cases and may refer to bankruptcy judges 

two statutory categories of proceedings: “core” proceedings and “non–core” proceedings. 

See generally 28 U.S.C. § 157. “In general, a ‘core proceeding’ in bankruptcy is one that 

‘invokes a substantive right provided by title 11 or . . . a proceeding that, by its nature, 

could arise only in the context of a bankruptcy case.’” In re Gruntz, 202 F.3d 1074, 1081 

(9th Cir. 2000) (citing In re Wood, 825 F.2d 90, 97 (5th Cir. 1987). “‘Non–core 

proceedings’ are those not integral to the restructuring of debtor–creditor relations and not 

 

of Santa Clara, 307 F.3d 1119, 1125-26 (9th Cir. 2002). A court may take judicial notice 

of its own files and of documents filed in other courts. Reyn’s Pasta Bella, LLC v. Visa 

USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (taking judicial notice of documents 

related to a settlement in another case that bore on whether the plaintiff was still able to 

assert its claims in the pending case); Burbank–Glendale–Pasadena Airport Auth. v. City 

of Burbank, 136 F.3d 1360, 1364 (9th Cir. 1998) (taking judicial notice of court filings in 

a state court case where the same plaintiff asserted similar and related claims); Hott v. City 

of San Jose, 92 F. Supp. 2d 996, 998 (N.D. Cal. 2000) (taking judicial notice of relevant 

memoranda and orders filed in state court cases). The Trustee does not object to Remar’s 

request. The Court finds that these documents are part of public record and thus their 

accuracy cannot reasonably be questioned. Accordingly, the Court hereby takes judicial 

notice of Exhibits 1–5. (RJN, Exs. 1–5, ECF No. 1–3.) 

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involving a cause of action arising under title 11.” Id. See also 28 U.S.C. § 157(b)(2) 

(providing non-exhaustive list of matters that constitute “core proceedings”). In core 

proceedings, a bankruptcy judge “may hear and determine . . . and enter appropriate orders 

and judgments,” subject to the district court’s traditional appellate review. § 157(b)(1). In 

non–core proceedings—those that are “not . . . core” but are “otherwise related to a case 

under title 11,” § 157(c)(1)—final judgment must be entered by the district court after de 

novo review of the bankruptcy judge’s proposed findings of fact and conclusions of law, 

ibid., except that the bankruptcy judge may enter final judgment if the parties consent, 

§ 157(c)(2).

The power to withdraw reference of a case from bankruptcy court is granted to a 

district court by 28 U.S.C. § 157(d), which provides that the district court “may withdraw, 

in whole or in part, any case or proceeding referred, on its own motion or on timely motion 

of any party, for cause shown.” The Ninth Circuit has stated that the court should consider 

“the efficient use of judicial resources, delay and costs to the parties, uniformity of 

bankruptcy administration, the prevention of forum shopping, and other related factors.”

Sec. Farms v. Int’l Bhd. of Teamsters, 124 F.3d 999, 1008 (9th Cir. 1997) (citing In re 

Orion Pictures Corp., 4 F.3d 1095, 1101 (2d Cir. 1993)). The Second Circuit stated in In 

re Orion Pictures Corp.:

A district court considering whether to withdraw the reference should 

first evaluate whether the claim is core or non–core, since it is upon this 

issue that questions of efficiency and uniformity will turn . . . once a 

district court makes the core/non–core determination, it should weigh 

questions of efficient use of judicial resources, delay and costs to the 

parties, uniformity of bankruptcy administration, the prevention of 

forum shopping, and other related factors.

4 F.3d 1095, 1101 (2d Cir.1993). One such related factor is whether a party has a right to 

jury trial, because the bankruptcy court is not entitled to conduct a jury trial on non–core 

matters without the consent of the parties. See In re Cinematronics, Inc., 916 F.2d 1444, 

1451 (9th Cir. 1990).

//

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DISCUSSION

Defendants Remar and Frager—as well as the other defendants in the adversary 

proceeding—have requested a jury trial and have not agreed to have a jury trial conducted 

by the bankruptcy court. The Ninth Circuit has determined that bankruptcy courts cannot 

preside over jury trials in non–core matters without the consent of all parties. In re 

Cinematronics, 916 F.2d at 1451. Further, under 28 U.S.C. § 157(c)(1), a bankruptcy judge 

hearing a non–core proceeding must submit proposed findings of fact and conclusions of 

law to the district court, and the district court is required to review de novo those matters 

to which a party timely and specifically objects. Thus, any non–core claims must 

ultimately come before the district court. “Denying withdrawal in the pre–trial stages of a 

non–core proceeding only to accept it on a later date for the purpose of hearing the jury 

trial or reviewing the bankruptcy court’s findings would unnecessarily consume judicial 

resources.” Gens v. Colonial Sav., F.A., No. 11-CV-05526 RMW, 2012 WL 993713, at 

*2 (N.D. Cal. Mar. 23, 2012). Withdrawal therefore turns on whether the Trustee’s claims 

are core or non–core bankruptcy proceedings. Id.

The Court finds that the Trustee’s adversary proceeding against Frager is a non–core 

proceeding. The Trustee’s claims against Frager are premised on state law claims based 

on breach of fiduciary duty. State law claims have been found to be “non-core” where an 

adversary proceeding alleges state law claims with only a potential impact on the 

bankruptcy case and where those claims could have been brought in state court regardless 

of the bankruptcy proceeding. Equipoint Fin. Network, Inc. v. Network Appraisal Servs., 

Inc., No. 09-CV-01252HCAB, 2009 WL 2135873, at *3 (S.D. Cal. July 15, 2009) (citing

In re Eastport Assoc., 935 F.2d 1071, 1076–77 (9th Cir. 1991) (holding suit for declaratory 

judgment could just as easily have been brought in state court, regardless of whether 

Eastport was in bankruptcy, and therefore was not a core proceeding). District courts have 

denied withdrawal of reference where state law claims are necessary to resolve the 

allowance of the defendants’ claims in bankruptcy. See In re Estate Financial, Inc., 2011 

U.S. Dist. LEXIS 102850 (C.D. Cal. Sept. 9, 2011) (finding that counterclaims relating to 

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defendant’s legal services which allegedly led to the ultimate bankruptcy of the plaintiff 

were so closely related that resolution of the state law counterclaims are necessary to 

resolve the allowance of the claim itself). However, this is not such a case and clearly not 

a dispute “which could arise only in the context of a bankruptcy case.” In re Gruntz, 202 

F.3d at 1081. 

The Trustee’s adversary action against Remar seeks to avoid a fraudulent transfer 

under 11 U.S.C. §§ 548 and 550. Statutorily, this is a core proceedings under 28 U.S.C. 

§ 157(b)(2)(H). However, in the Ninth Circuit fraudulent conveyance claims are Stern 

claims—“that is, proceedings that are defined as ‘core’ under § 157(b) but may not, as a 

constitutional matter, be adjudicated as such . . . .” Executive Benefits Ins. Agency v. 

Arkison, 134 S. Ct. 2165, 2172, 189 L. Ed. 2d 83 (2014). The Supreme Court in Arkinson

held that the bankruptcy court must treat Stern claims as if they are non–core and proceed 

under § 157(c)(1). Thus, the Trustee’s fraudulent conveyance claims against Remar must 

be finally adjudicated by the district court absent the consent of all parties. See 

Granfinanciera S.A. v. Nordberg, 492 U.S. 33, 56 (1989) (fraudulent conveyance claims 

are “quintessentially suits at common law” that “constitute no part of the proceedings in 

bankruptcy but concern controversies arising out of it”); see also In Re Bellingham Ins. 

Agency, Inc., 702 F.3d 553 (9th Cir. 2012) (“fraudulent conveyance claims, because they 

do not fall within the public rights exception, cannot be adjudicated by non–Article III 

judges”). 

As noted above, because the Trustee’s claims against Remar and Frager

predominantly non–core or must be treated as non–core, the bankruptcy court may not 

enter final judgment without consent of the parties. Additionally, absent their express 

consent, the bankruptcy cannot conduct a jury trial in the matter. Remar and Frager, as 

well as other defendants in the adversary proceeding, have filed timely jury demands, do 

not consent to a jury trial before the bankruptcy court, and do not consent to the entry of 

final judgment by the bankruptcy judge. Interests in judicial economy support the 

adjudication of the Trustee’s claims against Remar and Frager in district court where they

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would ultimately be tried or from which final judgment would ultimately be rendered. As

the bankruptcy courts may only make recommendations to the district courts in non–core 

proceedings, unnecessary costs can be avoided by a single proceeding in the district court. 

28 U.S.C. § 157(c)(1); see In re Orion Pictures, 4 F.3d at 1101. The Court, for cause 

shown, GRANTS Defendant Remar’s and Frager’s unopposed motions to withdraw the 

reference. 

CONCLUSION

For the reasons set forth above, the Court GRANTS Defendants’ motions to 

withdraw the reference with respect to the Trustee’s adversary proceeding against Remar 

and Frager Defendants. 

IT IS SO ORDERED. 

Dated: June 20, 2016

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