Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-02071/USCOURTS-cand-3_07-cv-02071-0/pdf.json

Parties Involved:
Betta Products, Inc
Plaintiff
DSS
Defendant
Distribution Systems and Services, Inc
Defendant

Document Text:

United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

BETTA PRODUCTS, INC., the Debtor in

Possession, and the Betta Products

Litigation Trust,

Plaintiffs,

 v.

DISTRIBUTION SYSTEMS AND SERVICES,

INC., aka DSS,

Defendant. 

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Case No. 07-2071 SC

ORDER DENYING

DEFENDANT'S MOTION TO

WITHDRAW REFERENCE

I. INTRODUCTION

Presently before the Court is a motion by Defendant

Distribution Systems and Services, Inc. ("Defendant" or "DSS") to

Withdraw Reference of the Adversary Proceeding from Bankruptcy

Court to U.S. District Court. See Mot. to Withdraw, Docket No. 5. 

Plaintiffs Betta Products, Inc. and the Betta Products Litigation

Trust ("Plaintiffs" or "Betta") opposed the motion and Defendant

filed a reply. See Docket Nos. 11, 16. 

For the reasons discussed herein, the Court DENIES

Defendant's Motion to Withdraw Reference from Bankruptcy Court.

II. BACKGROUND

Betta filed for Chapter 11 bankruptcy protection in 2003. 

See Brinkman Decl., ¶ 5. Soon thereafter, DSS filed a general

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unsecured claim against the bankruptcy estate. See Request for

Judicial Notice ("RJN"), Docket No. 15, Ex. 7. On May 17, 2004,

the Bankruptcy Court confirmed Betta's Chapter 11 Reorganization

Plan. See RJN, Ex. 8. Approximately one year later, Betta filed

its Original Complaint in the Bankruptcy Court that began an

adversarial proceeding against DSS to recover inventory allegedly

withheld by DSS. See id., Ex. 2. On May 13, 2005, DSS filed an

Answer to Betta's Original Complaint, however, DSS did not demand

a jury trial in its Answer. See id., Ex. 3. The parties then

proceeded to arbitrate the contract claims asserted by Betta. See

Brinkman Decl., ¶¶ 11-16, 19-22. Concurrently, Betta received

permission to amend its Original Complaint and filed an Amended

Complaint on February 22, 2007. See RJN, Ex. 4. On March 5,

2007, DSS filed its Answer to the Amended Complaint and included a

demand for a jury trial. See id., Ex. 5. In response, Betta

filed a motion to strike DSS's jury demand and the Bankruptcy

Court issued a ruling on June 5, 2007 concluding that DSS's demand

for a jury trial in its Answer to the Amended Complaint did not

revive its right to a jury. See Docket No. 18, Second RJN, 3.

DSS moves for discretionary withdrawal of reference under 28

U.S.C. § 157(d) so the District Court can conduct a jury trial on

the claims asserted by Betta in its Amended Complaint. See Mot.

to Withdraw, 1.

III. LEGAL STANDARD

Federal Rule of Civil Procedure 38 applies to a party's right

to a jury trial. Under Rule 38(b): 

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Any party may demand a trial by jury of any issue triable of

right by a jury by (1) serving upon the other parties a

demand therefor in writing at any time after the commencement

of the action and not later than 10 days after the service of

the last pleading directed to such issue, and (2) filing the

demand as required by Rule 5(d).

Under Rule 38(d), "[t]he failure of a party to serve and file a

demand as required by this rule constitutes a waiver by the party

of trial by jury." In the Ninth Circuit, "the presentation of a

new theory does not constitute the presentation of a new issue on

which a jury trial should be granted under F. R. Civ. P., Rule

38(b).” Trixler Brokerage Co. v. Ralston Purina Co., 505 F.2d

1045, 1050 (9th Cir. 1974). If "the issues in the original

complaint and the amended complaint turn on the same matrix of

facts," a party's failure to demand a jury trial in response to

the original complaint waives its right to a jury trial on the

claims in the amended complaint. Las Vegas Sun, Inc. v. Summa

Corp., 610 F.2d 614, 620 (9th Cir. 1979).

Under 28 U.S.C. § 157(d), "[t]he 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." This provision permits discretionary withdrawal of

reference to the Bankruptcy Court upon the District Court's

consideration of a number of factors. "In determining whether

cause exists, a district 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." Security Farms v. Int'l Bhd. of

Teamsters, 124 F.3d 999, 1008 (9th Cir. 1997). Other District

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Courts in this Circuit have considered additional factors

suggested by the Second Circuit, including: whether the claim is

core or non-core, whether the claim is legal or equitable; whether

the claim is triable by a jury; and conservation of estate and

non-debtor resources. Daewoo Motor Am., Inc. v. Gulf Ins. Co.,

302 B.R. 308, 310 (C.D. Cal. 2003), citing Orion Pictures Corp. v.

Showtime Networks, Inc., 4 F.3d 1095, 1101 (2d Cir. 1993). 

IV. DISCUSSION

A. Right to a Jury Trial

By failing to make a jury demand in response to Betta's

Original Complaint, DSS waived its right to a jury trial. Having

reviewed both documents, the Court finds that the issues in the

Original Complaint and the Amended Complaint "turn on the same

matrix of facts." Las Vegas Sun, 610 F.2d at 620. Though Betta

articulated new legal theories for claims against DSS in the

Amended Complaint, including several contract and tort claims, the

Original Complaint described the facts necessary to assert the new

claims. In a relatively recent case, the Ninth Circuit

invalidated a jury demand where there had been no initial request

and "there [was] no significant difference in the facts necessary

to support [the plaintiff's] original ADA claim and those

supporting her new claims." Lutz v. Glendale Union High School,

403 F.3d 1061, 1066 (9th Cir. 2005). Accordingly, when DSS failed

to make a jury demand in response to Betta's Original Complaint,

it waived its right to demand a jury trial in response to Betta's

Amended Complaint.

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B. Discretionary Withdrawal from Bankruptcy Court

Consideration of the factors in Security Farms, 124 F.3d 999,

and Daewoo Motor, 302 B.R. 308, weighs in favor of denying

withdrawal. First, the efficient use of judicial resources

dictates that the case should remain before the Bankruptcy Court. 

The Bankruptcy Court has been dealing with this case for a number

of years and by this point is well versed in the dispute between

Betta and DSS. Second, the Bankruptcy Court would be able to

resolve the dispute more quickly than this Court because summary

judgment motions have already been filed in that proceeding. 

Third, the Bankruptcy Court would also be better suited than this

Court to uniformly administer Betta's bankruptcy case because it

has been managing the process since 2003 and made numerous

rulings. Fourth, denying DSS's motion would prevent any attempts

at forum shopping, though it is unclear why the District Court

would be a better forum for DSS than the Bankruptcy Court. 

Though some of the factors considered in Daewoo Motor weigh

in favor of granting withdrawal, they do not outweigh other

factors. Betta's claims are state law claims which do not depend

on bankruptcy laws for their existence and could proceed in

another court. Thus, they are "non-core." See Security Farms,

124 F.3d at 1008. Further, Betta's claims are legal, rather than

equitable. However, though the claims may have qualified for a

jury trial, as discussed supra part IV-A, DSS waived its right to

a jury trial by failing to demand one in response to Betta's

Original Complaint. 

Having considered all the relevant issues raised by Betta's

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motion to withdraw the reference to Bankruptcy Court, this Court

finds that discretionary withdrawal is not appropriate under 28

U.S.C. § 157(d). 

V. CONCLUSION

For the reasons discussed herein, the Court DENIES

Defendant's Motion to Withdraw Reference from Bankruptcy Court.

IT IS SO ORDERED.

Dated: June 15, 2007

 

UNITED STATES DISTRICT JUDGE

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