David G. Barger (VSB No. 21652) 

Thomas J. McKee, Jr. (VSB No. 68427) 

J. Gregory Milmoe (admitted pro hac vice) 

Greenberg Traurig, LLP 

1750 Tysons Boulevard, Suite 1000 

McLean, Virginia 22102 

Telephone: (703) 749-1300 

Fax: (703) 749-1301 

Email: mckeet@gtlaw.com 

Counsel to ULX Partners, LLC and UnitedLex Corp.

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE EASTERN DISTRICT OF VIRGINIA 

(Richmond Division)

In re: 

LECLAIRRYAN PLLC, 

 Debtor. 

______________________________________ 

Lynn L. Tavenner, as Chapter 7 Trustee, 

 Plaintiff, 

vs. 

ULX Partners, LLC and UnitedLex Corporation 

 Defendants. 

Chapter 7 

Case No. 19-34574 (KRH) 

 Adv. Pro. No. 20-03142-KRH 

 

DEFENDANTS’ MOTION TO WITHDRAW THE REFERENCE AND 

MEMORANDUM IN SUPPORT THEREOF 

**RELIEF IS SOUGHT FROM A UNITED STATES DISTRICT COURT JUDGE** 

ULX Partners, LLC (“ULXP”) and UnitedLex Corporation (“UnitedLex” and together 

with ULXP, the “Defendants”), by counsel and pursuant to 28 U.S.C. § 157(d), Federal Rule of 

Bankruptcy Procedure 5011(a) and Local Bankruptcy Rule 5011-1, submit this motion (the 

“Motion”) for an order withdrawing the reference of the claims brought against them by Lynn L. 

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2 

Tavenner, as Chapter 7 Trustee (the “Trustee”) of the bankruptcy estate of LeClairRyan, PLLC 

(“LCR” or the “Debtor”). 

INTRODUCTION

 While certain of Trustee’s claims against the Defendants would be considered statutory core 

proceedings under 28 U.S.C. 157(b)(2) for which the Bankruptcy Court can enter a final judgment, 

many are causes of action based upon Virginia common law and statute, premised on alleged 

circumstances or events that predate LCR’s bankruptcy filing, and for which the Trustee seeks more 

than $140M in alleged damages from Defendants. The Defendants have a constitutional right to a 

jury trial for many of these claims, and the Bankruptcy Court cannot conduct a jury trial on such 

claims without the Defendants’ consent. The Defendants have not given, and at this time do not 

intend to give, such consent. Accordingly, the Bankruptcy Court is respectfully not in a position to 

adjudicate these claims to final judgment. Instead, the Bankruptcy Court may hear argument on these 

claims and then make recommended findings of fact and conclusions of law to the District Court. In 

the likely event of an objection to the recommended findings of fact and conclusions of law, the 

District Court would be required to review such recommendations de novo. As the facts at issue with 

respect to the claims for which the Defendants have a right to a jury trial are substantially the same as 

the facts underlying those claims for which there may not be such a right, withdrawing the reference 

to the District Court of all of the claims asserted against the Defendants will promote the orderly and 

efficient resolution the claims and preserve judicial resources. Based on their jury trial rights and the 

risk of duplicative litigation with respect to the same, the Defendants’ request for withdrawal of the 

reference should be granted so that the claims are adjudicated by the District Court. 

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BACKGROUND1

1. LCR was a law firm that was founded in Richmond, Virginia in 1988. In the decades 

that followed, the firm expanded by opening offices and acquiring other law firms across the United 

States. (Complaint ¶ 21.) 

2. In 2018, LCR and UnitedLex, a provider of non-legal and legal support services, 

entered into a joint venture, creating ULXP. (Complaint ¶ 19.) 

3. LCR originally operated as a professional corporation, managed by a board of 

directors. Prior to the creation of ULXP, LCR converted to a professional limited liability company 

and was thereafter managed by a board of managers. (Complaint ¶ 4, 14.) 

4. Shortly following the creation of the joint venture, ULXP began providing LCR with 

non-legal, support services, as outlined in that certain Master Services Agreement, entered into by 

LCR and ULXP as of April 4, 2018 and effective as of or around April 29, 2018 (the “MSA”). LCR 

was to compensate ULXP for the provision of such services as set forth in the MSA. (Complaint ¶¶ 

78, 81, 83-84.) 

5. On September 3, 2019, after alleged years of fundamental issues with its financial 

management, LCR filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code 

in the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division (the 

“Bankruptcy Court”). (Complaint ¶¶ 12, 22.) 

 

1

 The facts are based, in part, upon those alleged in the Complaint, and are referenced solely for 

purposes of the Motion. Defendants do not admit any of the allegations set forth in the Complaint 

at this time and will respond to each allegation when required to file an answer to the Complaint. 

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4 

6. On October 4, 2019, the Bankruptcy Court entered the Order of Conversion of 

Chapter 11 to Chapter 7 (Bankr. Docket No. 140)2 and the Supplemental Order on Conversion 

(Bankr. Docket No. 154), and the Trustee was appointed as the Chapter 7 Trustee for the Debtor. 

(Bankr. Docket No. 175; Complaint ¶ 13.) 

7. On October 23, 2019, the Notice of Meeting of Creditors (Bankr. Docket No. 177) 

was filed with the Bankruptcy Court; among other things, the notice established December 13, 2019 

as the deadline for non-governmental parties to file proofs of claim against the Debtor. Accordingly, 

on December 12, 2019, ULXP filed a proof of claim in the amount of $8,563,288 on account of that 

certain prepetition promissory note executed by the Debtor in favor of ULXP and secured by a second 

priority lien on substantially all of the Debtor’s assets. (Claim No. 174.) 

8. Separately, on December 12, 2019, as amended on December 13, 2019, ULXP filed 

a proof of claim in the amount of $3,952,025 on account of outstanding fees owed under the MSA 

for services provided by ULXP to the Debtor prior to July 31, 2019. (Claim No. 175.) 

9. On October 26, 2020, the Trustee commenced this adversary proceeding by filing a 

complaint (as corrected by that October 28, 2020 filing, the “Complaint”) (Adv. Docket No. 4) 

against the Defendants. The Defendants were served with the Complaint and, in accordance with a 

stipulation agreed to with the Trustee, their responsive pleading is due no later than January 11, 2021. 

(Adv. Docket No. 7.) 

10. In the Complaint, the Trustee alleges that the Defendants, along with certain of the 

Debtor’s officers and directors, “prolonged” the Debtor’s existence after the Debtor allegedly became 

insolvent, “improperly and unfairly extract[ing]” money through certain insider transactions to the 

 

2

 References to “Bankr. Docket No. __” are to the Bankruptcy Court docket in the Debtor’s main 

bankruptcy, case number 19-34574 (KRH). References to “Adv. Docket No. __” are to the 

Bankruptcy Court docket in this adversary proceeding, case number 20-03142 (KRH). 

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5 

detriment of the Debtor’s creditors. (Complaint ¶¶ 1, 4.) As discussed below, the Trustee alleges 

fourteen causes of action – one (1) solely against UnitedLex, three (3) solely against ULXP and the 

remaining ten jointly against the Defendants. 

11. More specifically, the Trustee alleges multiple common law and state statutory claims 

against the Defendants, including claims for (a) conspiracy (Counts 10-11), (b) aiding and abetting 

breach of fiduciary duty by LCR directors and officers (Count 9),3 (c) conversion (Count 12), 

(d) unjust enrichment (Count 13), and (e) alter ego (Count 14). The Trustee also brings claims for 

fraudulent conveyances under sections 548 and 544(b) of the Bankruptcy Code (Counts 1–3, 6), 

preference claims under section 547 of the Bankruptcy Code (Count 4) and claims for disallowance 

and/or recharacterization of ULXP’s claims (Counts 7–8). The fourteen counts are as follows: 

Count Cause(s) of Action Cited Code Sections or 

Statutes 

(if any) 

Applicable 

Defendant 

1 Avoidance of Fraudulent Transfers – 

Actual Fraud

11 U.S.C. § 548(a)(1)(A) UnitedLex 

and ULXP

2 Avoidance of Fraudulent Transfers – 

Constructive Fraud

11 U.S.C. § 548(a)(1)(B) UnitedLex 

and ULXP

3 Avoidance of Fraudulent Transfers 

under Bankruptcy Code and 

Applicable State Law

11 U.S.C. §§ 544(b) and 550 UnitedLex 

and ULXP 

4 Avoidance of Preferences 11 U.S.C. § 547(b) UnitedLex 

and ULXP

5 Avoidance of Lien and Recovery of 

Avoided Transactions

11 U.S.C. §§ 544(b), 550(a) 

and 551

ULXP 

 

3

 Courts in Virginia have not yet recognized this alleged cause of action. See Infinity Tech., LLC 

v. Burney, 2020 WL 6387378, at *6 (E.D. Va. June 4, 2020) (citing MicroStrategy Servs. Corp. v. 

OpenRisk, LLC, 2015 WL 1221263, at *3 (E.D. Va. Mar. 17, 2015) and Calderon v. Aurora Loan 

Serv., Inc., 2010 WL 2306343, at *6 (E.D. Va. June 3, 2010), which declined to recognize an 

asserted cause of action for aiding and abetting breach of fiduciary duty). But see In re Health 

Diagnostic Laboratory, Inc., 2018 WL 4676339, at *11 (Bankr. E.D. Va. Sept. 26, 2018) (noting 

that “A cause of action for aiding and abetting a breach of fiduciary duty has been recognized by 

the Fourth Circuit and Virginia courts.”). However, as it is certainly not a cause of action stemming 

from bankruptcy law, the Defendants group it with other putative common law causes of action 

for purposes of this Motion. 

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6 Avoidance of Fraudulent Transfer 

under Bankruptcy Code and 

Applicable State Law

11 U.S.C. §§ 544(b) and 550 ULXP 

7 Disallowance of Claims 11 U.S.C. §§ 502(d), 547 and 

550

UnitedLex 

and ULXP

8 Re-Characterization of Debt as Equity ULXP 

9 Aiding and Abetting Breach of 

Fiduciary Duty 

 UnitedLex 

and ULXP

10 Statutory Conspiracy Va. Code §§ 18.2-499, et 

seq.

UnitedLex 

and ULXP

11 Common Law Conspiracy UnitedLex 

and ULXP

12 Conversion UnitedLex 

and ULXP

13 Unjust Enrichment UnitedLex 

and ULXP

14 Alter Ego Liability UnitedLex 

12. On December 17, 2020, the Bankruptcy Court held a pre-trial conference in 

connection with this adversary proceeding. Following the conclusion of the conference, the 

Bankruptcy Court entered an order (the “Pretrial Order”) (Adv. Docket No. 9) delineating the 

relevant deadlines for, among other things, discovery, dispositive motions and pre-trial filings. 

Pursuant to Paragraph 13 of the Pretrial Order, a party must move to withdraw the reference or for 

other appropriate relief within 30 days of the entry of the Pretrial Order or otherwise be deemed to 

consent to the entry of a final judgment by the Bankruptcy Court. 

13. The Defendants have not previously responded to the Complaint. Because many of 

the Trustee’s claims principally concern non-core, non-bankruptcy causes of action for which the 

Defendants are entitled to a jury trial and the Defendants do not consent to the Bankruptcy Court 

conducting any such jury trial, to avoid duplication of litigation, the Defendants timely seek to 

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7 

withdraw the automatic reference to the Bankruptcy Court with respect to all of the foregoing claims 

brought against them by the Trustee.4

ARGUMENT 

14. Under 28 U.S.C. § 1334, United States District Courts have original jurisdiction over 

all bankruptcy matters. District courts, however, may refer “any or all proceedings arising under title 

11 or arising in or related to a case under title 11” to a subordinate bankruptcy court. 28 U.S.C. § 

157(a); see also the General Order of Reference from the United States District Court for the Eastern 

District of Virginia, dated August 15, 1984 (the “Standing Order of Reference”). 

15. Pursuant to 28 U.S.C. § 157(d), however, the District Court’s automatic reference of 

claims to the Bankruptcy Court can be withdrawn in certain circumstances. Indeed, such withdrawal 

is even mandatory at times where “an issue or question of non-bankruptcy federal law must be 

essential or material to the disposition of the bankruptcy proceeding.” In re U.S. Airways Group, Inc., 

296 B.R. 673, 679 (E.D. Va. 2003). Defendants respectfully submit that at a minimum, under the 

District Court’s exercise of discretionary withdrawal, withdrawal of the reference is warranted in 

order to preserve their right to a jury trial on several of the alleged causes of action and to promote an 

economical use of the resources of the District Court, the Bankruptcy Court and the parties. 

A. CAUSE EXISTS TO WITHDRAW THE REFERENCE 

16. 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.” Id. (emphasis added). While “cause” is not defined in the statute, the district 

 

4

 The Motion is the Defendants’ first appearance with respect to the Complaint. They also intend 

to file a motion to dismiss certain of the claims asserted against them. 

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8 

courts in the Fourth Circuit generally consider the following factors for discretionary withdrawal of 

the reference on a case by case basis – none of which is solely dispositive: 

(i) whether the proceeding is core or non-core; 

(ii) the uniform administration of bankruptcy proceedings; 

(iii) expediting the bankruptcy process and promoting judicial economy; 

(iv) the efficient use of debtors’ and creditors’ resources; 

(v) the reduction of forum shopping; and 

(vi) the preservation of the right to a jury trial. 

See In re El-Atari, 2011 WL 5828013, at *5 (E.D. Va. Nov. 18, 2011) (citing Tyler v. McLane 

Foodservices, Inc. (In re QSM, LLC), 453 B.R. 807, 809-10 (E.D. Va. 2011); see also In re U.S. 

Airways Group, Inc., 296 B.R. at 682 (“[D]iscretionary withdrawal of reference should be determined 

on a case-by-case basis by weighing all the factors presented in a particular case.”). 

17. Applying these factors, the District Court should withdraw the reference for the claims 

asserted against the Defendants. Many of the claims are non-core, state law causes of action for which 

the Bankruptcy Court cannot enter a final judgment. In addition, withdrawal of all of the claims will 

promote uniformity in the litigation and preserve resources. Moreover, while initial disclosures have 

been made in accordance with the deadlines prescribed in the Pretrial Order, the Bankruptcy Court 

has not yet made any substantive rulings in this adversary proceeding, minimizing any concerns as to 

forum shopping. Finally, withdrawal will preserve the Defendants’ right to a jury trial on many of 

the claims. Therefore, ample “cause” exists to withdraw the reference. 

(i) Core vs. Non-Core

18. The core/non-core distinction is significant because it can impact how a bankruptcy 

court may treat and rule upon a claim and, thus, impact the question of whether a district court is 

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9 

instead the more appropriate or required forum. See Corliss Moore & Associates, LLC v. Credit 

Control Services, Inc., 497 B.R. 219, 223 (Bankr. E.D. Va., Richmond Division, 2013) (quoting Stern 

v. Marshall, 564 U.S. 462, 473 (2011)) (“The manner in which a bankruptcy judge may act on a 

referred matter depends on the type of proceeding involved.”). 

19. “[A] proceeding is core under section 157 [of the United States Code] if it invokes a 

substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the 

context of a bankruptcy case.” In re U.S. Airways Group, Inc., 296 B.R. at 681, n. 18 (quoting Matter 

of Wood, 825 F.2d 90, 97 (5th Cir. 1987)). In order to deem a proceeding “core” or “non-core,” a 

“[c]ourt [should] identify the nature of the cause of action itself, and whether the action invokes a 

right under title 11 or that arose in a case under title 11.” Chesapeake Trust v. Chesapeake Bay 

Enterprises, Inc., 2014 WL 202028, at *3 (E.D. Va. Jan. 17, 2014) (citing Corliss Moore & 

Associates, LLC, 497 B.R. at 224. In other words, “any proceeding dependent on bankruptcy for its 

existence is a core bankruptcy proceeding.” C.F. Trust, Inc. v. Tyler, 318 B.R. 795, 803 (E.D. Va. 

2004); see also Grimes v. First Citizens Bank & Trust Co., 388 B.R. 195, 200 (Bankr. N.D. W.Va. 

2008) (“Claims ‘arise under’ the Bankruptcy Code if the claims clearly invoke substantive rights 

created by bankruptcy law . . . .”). Bankruptcy courts generally have authority under 28 U.S.C. § 

157(b)(1) to enter final orders and judgments with respect to “core” proceedings arising under Title 

11 or arising in a case under Title 11. A non-exhaustive list of types of core proceedings is set forth 

in 28 U.S.C. § 157(b)(2). 

20. Non-core proceedings, by contrast, are not dependent upon bankruptcy laws for 

existence and instead “could proceed in another court.” Federal Insurance Co. v. Parnell (In re 

Peanut Corporation of America), 407 B.R. 862, 865 (W.D. Va. 2009) (citing Security Farms v. 

International Brotherhood of Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1008 

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10 

(9th Cir. 1997)). “Non-core” proceedings generally cannot be finally determined by the bankruptcy 

court and instead require that proposed findings of fact and conclusions of law be submitted by the 

bankruptcy court to the district court, subject to de novo review. See 28 U.S.C. § 157(c)(1); Stern, 

564 U.S. at 475 (2011) (“It is the district court that enters final judgment . . . after reviewing de novo 

any matter to which a party objects.”). Accordingly, where a proceeding is non-core, or where noncore issues predominate, withdrawal of the reference enhances efficiency and avoids duplicative 

litigation. 

21. Proceedings involving state law claims that merely augment a debtor’s bankruptcy 

estate and do not otherwise affect creditors’ rights are non-core proceedings, as they do not “arise in” 

a bankruptcy proceeding or “arise under” the Bankruptcy Code. See Stern, 564 U.S. at 467; Levy v. 

Butler, Payne & Griffin (In re Landbank Equity Corp.), 77 B.R. 44, 48 (E.D. Va. 1987) (“[A] Trustee 

cannot sweep ‘related’ cases under the ‘core’ umbrella merely by alleging that a recovery would 

benefit the estate, otherwise there would be no ‘related’ cases at all.” (citations omitted)); see also 

Matter of Wood, 825 F.2d at 97 (“If the proceeding does not invoke a substantive right created by the 

federal bankruptcy law and is one that could exist outside of bankruptcy it is not a core proceeding; it 

may be related to the bankruptcy because of its potential effect, but under section 157(c)(1) it is an 

‘otherwise related’ or non-core proceeding.”). 

22. As described below, many of the Trustee’s claims against the Defendants are 

non-core, state law claims that do not depend on the Bankruptcy Code for their existence. Rather, the 

claims relate to actions taken by the Debtor’s management and related events that occurred prior to 

the bankruptcy proceeding. If the Trustee were to prevail on these claims, it would only serve to 

enhance any recovery to the Debtor’s estate. With respect to such claims, the Bankruptcy Court 

cannot enter a final judgment, but can only submit findings of fact and conclusions of law to the 

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11 

district court for de novo review. Although certain of the Trustee’s claims against the Defendants are 

“core” in nature and the Bankruptcy Court would be authorized to finally resolve such causes of 

action,5 in the interest of preserving judicial and party resources, the Defendants respectfully request 

that all of the alleged claims be addressed by the District Court. At minimum, however, the non-core 

claims should be withdrawn for adjudication by the District Court. 

23. Counts 3 and 6. The Trustee seeks to avoid all transfers to the Defendants in Counts 

3 and 6 (note, Count 6 is only asserted against ULXP) on the basis of constructive or actual fraudulent 

transfers under Virginia law. These claims, however, do not “stem” from bankruptcy. Rather, they 

are independent, state law claims that backstop similar claims asserted by the Trustee under provisions 

of the Bankruptcy Code, and these state law claims could have been pursued in another court; 

therefore, they are non-core proceedings. See, e.g., In re Systems Engineering & Energy Management 

Associates, Inc., 252 B.R. 635, 641-50 (E.D. Va. 2000) (noting various state law claims that are 

considered to be non-core). Because these claims are non-core, this factor weighs in favor of 

withdrawing the reference to the Bankruptcy Court. 

24. Counts 9, 10, 11, 12, 13 and 14. Count 9 (aiding and abetting breach of fiduciary 

duty), Count 10 (statutory conspiracy), Count 11 (common law conspiracy), Count 12 (conversion), 

Count 13 (unjust enrichment) and Count 14 (alter ego liability) are not expressly designated as a 

“core” proceeding under 28 U.S.C. § 157(b)(2). Rather, these are state common law and statutory 

 

5

 As ULXP filed proofs of claim against the Debtor, ULXP is subject to the Bankruptcy Court’s 

jurisdiction in connection with the claims allowance process. See Langenkamp v. Culp, 498 U.S. 

42, 44-45 (1990) (holding that when a creditor files a proof of claim it brings itself within the 

“equitable jurisdiction of the [b]ankruptcy [c]ourt”); see also Granfinanciera, S.A. v. Nordberg, 

492 U.S. 33, 59 n. 14 (1989) (noting that when a claim is submitted to the bankruptcy court that 

creditors subject themselves to the court’s power to disallow such claims). 

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12 

claims6 that do not invoke substantive rights under bankruptcy law nor arise on account of the 

bankruptcy case and, therefore, should be deemed to be non-core. See, e.g., In re Systems 

Engineering, 252 B.R. at 644 (noting that state law claim for breach of fiduciary duty is considered 

non-core); Id. at 648 (claims for civil conspiracy are non-core); Lehman Brothers Holdings Inc. v. 

JPMorgan Chase Bank, N.A. (In re Lehman Bros. Holdings, Inc.), 480 B.R. 179, 190-91 (Bankr. 

S.D.N.Y. 2012) (finding, among others, unjust enrichment and conversion claims to be non-core); 

Field v. Albright (In re Maui Indus. Loan & Fin. Co.), 2012 WL 405056, at *4 (Bankr. D. Haw. 

Feb. 8, 2012) (holding unjust enrichment claim to be non-core); see also In re Systems 

Engingeering, 252 B.R. at 649 (discussing split of authority regarding whether state law claim for 

alter-ego liability is considered core or non-core with many courts holding such claims, when pursued 

to recover property of the estate, to be core; that is not the case in this proceeding); Shaia v. Malone, 

2017 WL 4203544, at *5 (E.D. Va. Sept. 21, 2017) (holding that claims seeking a determination 

that non-debtor defendants are alter egos of the debtor are core matters; such is not the case in this 

proceeding where the allegation is that two non-debtor defendants are alter egos of each other); 

McCarthy v. Giron, 2014 WL 269660, at *6 (E.D. Va. June 6, 2014) (finding to be core allegations 

that non-debtor defendant was the alter ego of the debtor). These claims do not stem from the 

bankruptcy nor do they owe their existence to or require the interpretation of bankruptcy law in any 

respect. They, instead, could be tried in any court of competent jurisdiction. Because these claims 

are non-core, this factor weighs in favor of withdrawing the reference to the Bankruptcy Court. 

 

6

 See note 3, supra, with respect to Count 9. 

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(ii) Uniform Administration of the Bankruptcy Does 

Not Preclude Withdrawal 

25. Uniform administration of the bankruptcy, the second factor in the discretionary 

withdrawal analysis, also weighs in favor of withdrawal. As discussed below, the Defendants are 

entitled to a jury trial on many of the claims asserted against them. This notion is reinforced in the 

Complaint where the Trustee notes that the value of any damages on account of several of the alleged 

claims would need to ultimately be “proven at trial”. (Complaint ¶¶ 284, 294, 301, 306, 311). 

Nevertheless, the Defendants do not consent to the Bankruptcy Court conducting a trial on these 

claims. 

26. Accordingly, withdrawal of the reference as to all claims by the District Court will 

promote uniformity in the administration of the litigation by allowing the claims to be resolved at the 

same time and by the same court, avoiding the risk, should only a subset of the claims be withdrawn, 

of inconsistent or conflicting rulings by the District Court and the Bankruptcy Court. 

(iii) Judicial Economy Weighs in Favor of Withdrawal of Reference and 

Will Conserve Resources 

27. The third and fourth factors for discretionary withdrawal both strongly favor 

withdrawing the reference for the claims against the Defendants to the District Court. As noted above, 

the Bankruptcy Court is not authorized to enter final judgments on purely non-core proceedings. In 

such cases, the Bankruptcy Court is instead required to issue a report and recommendation to the 

District Court, which, upon objection to the same, will then review the matter de novo. See Stern, 

564 U.S. at 475. 

28. As a result, if the reference is not withdrawn, the parties will likely be forced to litigate 

the non-core claims twice. See, e.g., Orion Pictures Corp. v. Showtime Networks (In re Orion 

Pictures Corp.), 4 F.3d 1095, 1101 (2d Cir. 1993) (“the fact that a bankruptcy court’s determination 

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14 

on non-core matters is subject to de novo review by the district court could lead the latter to conclude 

that in a given case unnecessary costs could be avoided by a single proceeding in the district court”). 

29. Furthermore, as mentioned above, the adjudication of the non-core claims alleged in 

the Complaint will be fact-intensive. Other than initial disclosures that have been made in accordance 

with the Pretrial Order, the parties are in the initial stages of discovery. As such, the Bankruptcy 

Court does not have any heightened familiarity with the facts relevant to the asserted claims and the 

parties would not be prejudiced should the District Court withdraw the reference. 

30. Additionally, as discussed below, the Defendants are entitled to a jury trial that must 

be conducted in the District Court. “[B]ankruptcy courts may not conduct jury trials on non-core 

issues absent the consent of the parties.” Helmer v. Murray (In re Murray), 149 B.R. 383, 387 (E.D. 

Va. 1993). Accordingly, it would serve both the parties and the courts to withdraw the reference at 

this early stage of the adversary proceeding as the parties litigate this case towards that end. See In 

re Gulf States Long Term Acute Care of Covington, L.L.C., 455 B.R. 869, 878 (E.D. La. 2011) 

(“[B]ecause there will be a jury trial, it will be more efficient for this Court to handle pretrial matters 

so as to be fully acquainted with the case as it makes its way to trial in this Court.”). 

(iv) Forum Shopping is Not Applicable 

31. Withdrawal of the reference of the claims asserted against the Defendants would not 

promote forum shopping. As noted above, initial disclosures have only recently been made and the 

parties are in the initial stages of discovery. Moreover, the Bankruptcy Court has not yet ruled on any 

substantive matters impacting the Defendants. As such, the Defendants are not seeking to withdraw 

the reference as a tactic to avoid an unfavorable forum. Rather, as many of the claims against the 

Defendants are generally non-core claims for which the Bankruptcy Court cannot enter a final 

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15 

judgment, the Defendants are pursuing this request for the District Court to withdraw the reference 

out of a desire to avoid wasting resources and preserve their right to a jury trial, as discussed below. 

(v) Withdrawal Preserves the Right to a Jury Trial 

32. With respect to the final factor, withdrawal of the reference will preserve the 

Defendants’ right to a jury trial. The Defendants are entitled to a jury trial on many of the claims that 

the Trustee asserts against them and in her attempt to recover damages alleged to exceed $140M. See 

In re Stansbury Poplar Place, Inc. 13 F.3d 122, 124 (4th Cir. 1993) (noting that a right to a jury trial 

attaches to actions seeking monetary damages). This right to trial by jury “is of such importance and 

occupies so firm a place in our history and jurisprudence that any seeming curtailment of the right to 

a jury trial should be scrutinized with the utmost care.” Chauffeurs, Teamsters & Helpers, Local No. 

391 v. Terry, 494 U.S. 558, 564-65 (1990). 

33. Pursuant to 28 U.S.C. § 157(e), “if the right to a jury trial applies in a proceeding that 

may be heard under this section by a bankruptcy judge, the bankruptcy judge may conduct the jury 

trial if specially designated to exercise such jurisdiction by the district court and with the express 

consent of all the parties.” The Standing Order of Reference is silent as to whether the Bankruptcy 

Court could conduct a jury trial, and the District Court has not specifically authorized the 

Bankruptcy Court to conduct a jury trial in this proceeding. Furthermore, although the Defendants 

have not yet requested a jury trial, they anticipate doing so if ultimately required to file an answer to 

the Complaint and do not waive such right or otherwise consent to the Bankruptcy Court conducting 

a jury trial. See In re Lawrence, 2020 WL 6875947, at *4 (E.D. Va. July 8, 2020) (finding that 

defendants waived any right to a jury trial and were deemed to consent to the entry of final orders 

by the bankruptcy court because they failed to timely file a motion to withdraw the reference as 

required by the pretrial order); see also Chesapeake Trust v. Chesapeake Bay Enterprises, Inc., 

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16 

2014 WL 202028, at *3-*4 (E.D. Va. Jan. 17, 2014) (holding a movant who acquired a debtor’s 

assets through the bankruptcy proceeding impliedly consented to be subject to the jurisdiction of 

the bankruptcy court). 

34. Accordingly, this factor weighs in favor of withdrawing the reference and permitting 

this matter to proceed in the District Court. See In re QSM, LLC, 453 B.R. at 810 (noting that since 

the defendant did not consent to allowing the bankruptcy court to conduct a jury trial, such trial would 

have to proceed in the district court, thus weighing in favor of withdrawing the reference). 

[Concluded on Following Page]

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CONCLUSION 

 The automatic reference of the Trustee’s claims against the Defendants to the Bankruptcy 

Court should be withdrawn. Counts 3, 6, 9, 10, 11, 12, 13 and 14 of the Complaint are subject to 

discretionary withdrawal as the relevant factors all weigh in favor of, or are otherwise inapplicable 

with respect to, withdrawal. Accordingly, for the reasons set forth above, the Defendants respectfully 

request that the Motion be granted and that all of the Trustee’s claims against the Defendants, or, at 

minimum, the non-core claims identified above, be promptly withdrawn by the District Court.

Dated: January 11, 2021 _/s/ Thomas J. McKee, Jr.___________

David G. Barger (VSB No. 21652) 

Thomas J. McKee, Jr. (VSB No. 68427) 

Greenberg Traurig, LLP 

1750 Tysons Boulevard, Suite 1000 

McLean, Virginia 22102 

Telephone: (703) 749-1300 

Facsimile: (703) 749-1301 

Email: bargerd@gtlaw.com 

 mckeet@gtlaw.com 

and 

J. Gregory Milmoe (admitted pro hac vice) 

Greenberg Traurig, LLP 

One International Place, Suite 2000 

Boston, MA 02110 

Telephone: (617) 310-6064 

Email: milmoeg@gtlaw.com 

Counsel to Defendants.

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CERTIFICATE OF SERVICE

 I hereby certify that on this 11th day of January 2021, I served a true and correct copy of 

Defendants’ Motion to Withdraw the Reference and Memorandum in Support Thereof via the 

Court’s CM/ECF filing system upon: 

 Erika L. Morabito, Esq. 

 Brittany J. Nelson, Esq. 

 FOLEY & LARDNER LLP 

 3000 K Street, NW, Suite 600 

 Washington, DC 20007-5109 

 emorabito@foley.com 

 bnelson@foley.com 

 Special Counsel to Lynn L. Tavenner, Chapter 7 Trustee 

_/s/ Thomas J. McKee, Jr.__________

Thomas J. McKee, Jr. (VSB No. 68427) 

Greenberg Traurig, LLP 

1750 Tysons Boulevard, Suite 1000 

McLean, Virginia 22102 

Telephone: (703) 749-1300 

Facsimile: (703) 749-1301 

Email: mckeet@gtlaw.com 

Counsel to Defendants 

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