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ORDER ON MOTION FOR 

WITHDRAWAL OF REFERENCE - 1

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

In re:

CHRISTOPHER J. HUTCHINS,

Debtor.

Case No. C06-934RSL

ORDER ON MOTION FOR

WITHDRAWAL OF REFERENCE

I. Introduction

This matter comes before the Court on a motion to withdraw reference of settlement

proceedings from the Bankruptcy Court by debtor Christopher Hutchins (Dkt. # 1). The trustee

opposes the withdrawal, arguing both that the settlement is a core proceeding properly before the

Bankruptcy Court, and that the withdrawal is moot because the Bankruptcy Court already ruled

on the settlement motion.

II. Background Facts

Hutchins filed for bankruptcy on March 12, 2003. The case was closed on July 2, 2003

as a “no asset” case. On November 6, 2003, Hutchins filed suit in federal court for federal and

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ORDER ON MOTION FOR 

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state employment-related claims against his employer, Rabanco Ltd. The action was assigned to

Judge Pechman. Because the alleged wrongdoing occurred prior to closure of the bankruptcy

action, Hutchins’s cause of action properly belongs to his estate. See Turner v. Cook, 362 F.3d

1219, 1226 (9th Cir. 2004) (citing 11 U.S.C. § 541(a)(1)).

Shortly after Rabanco moved to dismiss Hutchins’s claim based on Turner, Hutchins reopened his bankruptcy proceeding. Daniel Forsch was re-appointed as the trustee and promptly

settled Hutchins’s claims against Rabanco for $28,000, a fraction of what Hutchins sought. 

Forsch moved for approval of the settlement before the Bankruptcy Court on May 12, 2006, and

a hearing date was set for June 16, 2006. On June 8, 2006, Hutchins moved for withdrawal of

reference of the settlement motion, pursuant to 28 U.S.C. § 157(d). The motion was assigned to

this Court.

On June 16, 2006, Judge Steiner of the Bankruptcy Court held the hearing and approved

the settlement, ruling from the bench. The Bankruptcy Court suggested that this proceeding was

inappropriate for withdrawal of reference because it did not implicate non-bankruptcy federal

law. Transcript at 1 (“We’ve had motions to withdraw the reference before, but they usually go

to the fact that there’s federal law other than bankruptcy law involved in the case.”). The

Bankruptcy Court further noted that, although a motion for the withdrawal of the reference of

the very subject of the hearing was properly before this Court, it would proceed with ruling on

the matter, in part because “there is no stay that prevents me from doing so.” Id. The

Bankruptcy Court then provided a bleak assessment of the probability of success of Hutchins’s

federal court litigation and approved the settlement.

III. Discussion

A. Mootness Argument

This matter comes before the Court on a motion to withdraw pursuant to 28 U.S.C. §

157(d):

The district court may withdraw, in whole or in part, any case or proceeding

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ORDER ON MOTION FOR 

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referred under this section, on its own motion or on timely motion of any party, for

cause shown. The district 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.

28 U.S.C. § 157(d). The Federal Bankruptcy Rules of Procedure provide that a “motion for

withdrawal of a case or proceeding shall be heard by a district judge.” Fed. R. Bankr. P.

5011(a) (emphasis added). The rules further provide that such a motion will not stay the

administration of a case “except that the bankruptcy judge may stay, on such terms and

conditions as are proper, proceedings pending disposition of the motion.” Fed. R. Bankr. P.

5011(c).

A bankruptcy judge may not rule on a party’s motion to withdraw. See Fed. R. Bankr. P.

5011(a) advisory committee’s note (“Subdivision (a) of this rule makes it clear that the

bankruptcy judge will not conduct hearings on a withdrawal motion. The withdrawal decision is

committed exclusively to the district court.”). As such, the trustee’s argument that the

Bankruptcy Court’s decision has rendered moot the motion to withdraw lacks merit, because the

Bankruptcy Court lacks authority to deprive this Court of the opportunity to meaningfully rule

on the motion.

The trustee could argue that the stay provision in Rule 5011 is permissive and, moreover,

that Hutchins failed to move for a stay either before this Court or the Bankruptcy Court: 

[T]he bankruptcy judge may stay, on such terms and conditions as are proper,

proceedings pending disposition of the motion. A motion for a stay ordinarily

shall be presented first to the bankruptcy judge. A motion for a stay or relief from

a stay filed in the district court shall state why it has not been presented to or

obtained from the bankruptcy judge.

Fed. R. Bankr. P. 5011(c). Notwithstanding this permissive stay, Rule 5011(a) requires the

district court to consider the motion for withdrawal, and the Bankruptcy Court cannot undermine

that provision by relying on the permissive stay provision. Therefore, even if the Bankruptcy

Court can proceed despite the motion to withdraw, it is clear that the Bankruptcy Court’s

resolution of the proceeding cannot moot this Court’s consideration of the motion.

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 The Court observes that an argument could be made that the “material consideration of

non-bankruptcy federal law” required by the settlement approval question could trigger the

mandatory withdrawal provision of § 157(d). See Security Farms v. Int’l Bhd. of Teamsters,

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

ORDER ON MOTION FOR 

WITHDRAWAL OF REFERENCE - 4

B. Merits of Withdrawal

Assuming, as did the parties, that this motion is subject to the permissive withdrawal

provision of § 157(d), then the Court considers the following factors in order to determine the

appropriateness of withdrawal:

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.

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)).1 These factors require this Court to consider

the substantive analysis attendant to a motion to approve a settlement.

In order to determine the fairness and adequacy of a proposed settlement, a court must

consider:

(a) The probability of success in the litigation; (b) the difficulties, if any, to be

encountered in the matter of collection; (c) the complexity of the litigation

involved, and the expense, inconvenience and delay necessarily attending it; (d)

the paramount interest of the creditors and a proper deference to their reasonable

views in the premises.

In re A & C Properties, 784 F.2d 1377, 1381 (9th Cir. 1986). The Bankruptcy Court incorrectly

suggests that this analysis can be performed without reference to non-bankruptcy federal law. In

fact, this analysis only requires analysis of non-bankruptcy law, as evidenced by the Bankruptcy

Court’s justification for its decision.

The remaining Security Farms factors urge the Court to grant the motion to withdraw. In

this case, “efficiency [is] enhanced by withdrawing the reference because non-core issues

predominate.” Security Farms, 124 F.3d at 1008–9. The fairness of a settlement of a claim

based exclusively on non-bankruptcy federal and state issues is the sole issue proposed for

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 The trustee could argue that the quickness of the Bankruptcy Court’s resolution of this

matter is an indication of the efficiency of non-withdrawal, but this argument would have no

merit. Similarly, this Court will not entertain the argument that now that the Bankruptcy Court

has already ruled on the motion, it would be inefficient to vacate and re-consider that motion.

ORDER ON MOTION FOR 

WITHDRAWAL OF REFERENCE - 5

withdrawal.2 Requiring the re-argument of the settlement approval motion before this Court is a

minor burden to the parties, and this Court’s access to the record of the underlying employment

action will greatly increase the accuracy of its assessment of the fairness of the proposed

settlement. Finally, the resolution of this motion by the district court will have no impact on the

uniformity of bankruptcy administration because no bankruptcy law is implicated by this

decision.

This Court’s decision to grant the motion to withdraw is not intended to signal

disagreement with the Bankruptcy Court’s analysis of the merits of Hutchins’s employment

claims and the fairness of the trustee’s proposed settlement. Instead, this decision merely

reflects Congress’s clear intent to allow a party in bankruptcy to have the opportunity to

withdraw reference of a proceeding where the party can show cause in support of the

withdrawal. In the instant case, Hutchins has clearly shown that almost every aspect of the

settlement-approval analysis can be more effectively performed in the district court, where the

action in question has been pending for more than two and one-half years.

IV. Conclusion

For the foregoing reasons, Hutchins’s motion to withdraw (Dkt. # 1) is GRANTED. The

Bankruptcy Court’s approval of the settlement is VACATED. Forsch’s further motion, which

has been characterized as a motion to transmit the Bankruptcy Court’s decision (Dkt. # 3), is

STRICKEN AS MOOT. The trustee’s motion for approval of settlement will be noted for

consideration before this Court on Friday, August 25, 2006, and shall be briefed in accordance

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 The trustee’s opening brief will be due before Friday, August 11, 2006.

ORDER ON MOTION FOR 

WITHDRAWAL OF REFERENCE - 6

with Local Rule CR 7(d)(3).3

DATED this 31st day of July, 2006.

A

Robert S. Lasnik

United States District Judge

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