Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-00792/USCOURTS-cand-5_06-cv-00792-0/pdf.json

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

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United States District Court

For the Northern District of California

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ORDER GRANTING McCUDDEN'S MOTION TO WITHDRAW BANKRUPTCY REFERENCE—No. C-06-00792 RMW

JAH

United States District Court

For the Northern District of California

E-FILED on 5/23/06

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

In re ENTERPRISE BROADCASTING

CORPORATION,

Debtor.

JOHN W. RICHARDSON, Trustee in

Bankruptcy,

Plaintiff,

v.

RICHARD McCUDDEN,

Defendant.

No. C-06-00792 RMW

ORDER GRANTING McCUDDEN'S

MOTION TO WITHDRAW BANKRUPTCY

REFERENCE

[Re Docket Nos. 1, 4, 5]

Richard McCudden moves this court to withdraw the reference of trustee John

Richardson's complaint to the bankruptcy court. For the reasons given below, the court grants the

motion.

I. BACKGROUND

In June 2003, Enterprise Broadcasting Corporation ("EBC") filed a voluntary petition

under Chapter 7, which became Bankruptcy Case No. 03-53622 and was assigned to Judge Arthur

Weissbrodt. Richardson became trustee of the bankruptcy estate. Two years later, Richardson

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For the Northern District of California

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1

 This motion was, inexplicably, not transmitted to the district court until February 3, 2006.

ORDER GRANTING McCUDDEN'S MOTION TO WITHDRAW BANKRUPTCY REFERENCE—No. C-06-00792 RMW

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filed a complaint against the principals of EBC (Jean Shrader, Don Shrader, and Richard

McCudden) and a backer (Michael Pegram), which became Adversary Proceeding No. 05-05330. 

On September 7, 2005, McCudden moved to dismiss the complaint or, in the alternative, for a

more definite statement. On November 8, 2005, there was a hearing before Judge Weissbrodt on

McCudden's motion to dismiss. The next day, McCudden filed a motion to withdraw the

reference to the bankruptcy court.1 On November 21, 2005, Judge Weissbrodt denied McCudden's

motion to dismiss. On November 28, 2005, McCudden answered the complaint. 

II. ANALYSIS

Title 28 U.S.C. § 157(d) governs withdrawal of matters from the bankruptcy court, and

provides in full: 

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 laws of the United States regulating

organizations or activities affecting interstate commerce.

Mandatory withdrawal (the second sentence) is not at issue here, as the torts claims against

McCudden are state-law ones for breach of fiduciary duty and fraud. Permissive withdrawal (the

first sentence) gives district courts the authority to withdraw a reference to the bankruptcy court

"for cause shown" and upon either the district court's own motion (presumably at any time) or

"timely motion of any party." 

A. Cause

Whether cause exists is a matter generally left to the district court's discretion. In re

Cinematronics, 916 F.2d 1444, 1451 (9th Cir. 1990). In determining whether cause exists, a

district court should 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 (5)

other related factors. Sec. Farms v. Int'l. B'hd of Teamsters, 124 F.3d 999, 1008 (9th Cir. 1997). 

The delay and cost factor does not strongly favor either result; motions to dismiss have been ruled

upon in the bankruptcy court, but McCudden raises the possibility that he (or another party) might

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2

 Some blame with lack of efficiency at this point lies with McCudden. He did not comply with

Fed.R.Bankr.P. 7012(b)'s requirement that his answer state whether he consented to a bankruptcy

judge entering final judgment on his claims, which has led to the inefficiency of this court

considering his motion after some proceedings before Judge Weissbrodt. However, it is possible at

this point that an appeal from the bankruptcy court would result in inefficient, repetitive

consideration of this matter by both the bankruptcy court and this court. 

3

 McCudden and Richardson appear to agree that Richardson's claims against McCudden are

partly core and partly non-core, and the court will assume this to be the case. 

ORDER GRANTING McCUDDEN'S MOTION TO WITHDRAW BANKRUPTCY REFERENCE—No. C-06-00792 RMW

JAH 3

seek review of any bankruptcy court decision before the district court. Nor does efficiency

strongly favor either result at this juncture.2

 As the claims asserted by Richardson could have

been brought as an original matter in the district court, uniformity of bankruptcy administration is

not endangered by trying those claims here. The court has some concern about forum-shopping;

that McCudden filed his motion to withdraw the reference the day after Judge Weissbrodt heard

McCudden's motion to dismiss suggests that McCudden did not feel argument before Judge

Weissbrodt went well and that McCudden would rather have a different judge decide this matter. 

One last factor that should be considered is that McCudden attempted to preserve his right to a

jury trial by including a demand for one in his answer, and that unless he has waived that right by

making an untimely motion to withdraw the reference, withdrawal is mandatory for the non-core

claims3

 against McCudden. See Cinematronics, 916 F.2d at 1451.

B. Timeliness

Failure to object to the bankruptcy court's jurisdiction in a timely manner constitutes

implied consent to the resolution of the controversy. See In re Mann, 907 F.2d 923, 926 (9th Cir.

1990). There is little Ninth Circuit caselaw on what constitutes timeliness under 28 U.S.C.

§ 157(d). "A motion to withdraw is timely if it was made as promptly as possible in light of the

developments in the bankruptcy proceeding." Security Farms, 124 F.3d at 1007 n.3 (9th Cir.

1997) (internal quotation marks omitted). Another district court granted a motion to withdraw a

reference two months into an adversary proceeding before the bankruptcy court. See In re

Addison, 240 B.R. 47, 50 (C.D. Cal.1999) (withdrawing reference largely on efficiency grounds). 

Given that little has transpired in the bankruptcy court, the court will exercise its discretion to

deem McCudden's motion to withdraw timely. 

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4

 Pegram and Richardson have filed a stipulation to dismiss Pegram from the adversary proceeding.

ORDER GRANTING McCUDDEN'S MOTION TO WITHDRAW BANKRUPTCY REFERENCE—No. C-06-00792 RMW

JAH 4

C. Scope of withdrawal

All remaining parties4 to the adversary proceeding agree that there is substantial overlap

between the claims against McCudden and the claims against the Shraders and that it would be

wasteful and inefficient to withdraw the reference only as to the claims against McCudden. The

court agrees.

III. ORDER

For the foregoing reasons, the court grants McCudden's motion and withdraws the reference

to the bankruptcy court of Adversary Proceeding No. 05-05330. The remainder of that action will

be handled before this court as Case No. C-06-00792 RMW.

DATED: 5/23/06

RONALD M. WHYTE

United States District Judge

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United States District Court

For the Northern District of California

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ORDER GRANTING McCUDDEN'S MOTION TO WITHDRAW BANKRUPTCY REFERENCE—No. C-06-00792 RMW

JAH 5

Notice of this document has been electronically sent to:

Counsel for plaintiff:

Jesse F. Ruiz jfr@robinsonwood.com 

Counsel for defendants:

Gary Redenbacher Gary@RedBrownLaw.com 

Maureen Ann Harrington mharrington@mghhsf.com 

Counsel are responsible for distributing copies of this document to co-counsel that have not

registered for e-filing under the court's CM/ECF program.

Copies of this order will be sent to:

The Honorable Arthur S. Weissbrodt

United States Bankruptcy Court for the Northern District of California

280 South First Street 

San Jose, CA 95113 

USBC Manager-San Jose 

United States Bankruptcy Court for the Northern District of California

280 South First Street , Room 3035 

San Jose, CA 95113 

Dated: 5/23/06 /s/ 

Chambers of Judge Whyte

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