NTCAPR

U.S. Bankruptcy Court

Northern District of Indiana (Hammond Division)

Adversary Proceeding #: 11−02151−jpk

Assigned to: J. Philip Klingeberger

Lead BK Case: 07−20188

Lead BK Title: Heartland Memorial Hospital, LLC and Robert Handler

Lead BK Chapter: 11

Demand: $50000

Date Filed: 10/05/11

Nature[s] of Suit: 02 Other (e.g. other actions that would have been brought in state court if unrelated to

bankruptcy)

Plaintiff

−−−−−−−−−−−−−−−−−−−−−−−

David Abrams, not individually but solely as the Liquidating Trustee and court −appointed manager of Heartla

Plaintiff

−−−−−−−−−−−−−−−−−−−−−−−

Heartland Memorial Hospital LLC, LLC, the Debtor, an Indiana Limited Liability Company

V.

Defendant

−−−−−−−−−−−−−−−−−−−−−−−

McGuire Woods, LLP

77 W. Wacker Drive

Suite 4100

Chicago, IL 60601

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Filing Date # Docket Text

10/05/2011 1

Adversary case 11−02151. (02 (Other (e.g. other actions that would

have been brought in state court if unrelated to bankruptcy)))

Complaint by David Abrams, not individually but solely as the

Liquidating Trustee and court −appointed manager of Heartland

Memorial Hospital, LLC, Heartland Memorial Hospital LLC

against McGuire Woods, LLP. Fee Amount $250. (Leipold, Mark)

(Entered: 10/05/2011)

10/05/2011 2

Summons Issued on McGuire Woods, LLP Answer Due 11/4/2011

Summon Issued (Leipold, Mark). Page 2 (Certificate of Service).

(Entered: 10/05/2011)

10/05/2011

Receipt of Complaint(11−02151−jpk) [cmp,cmp] ( 250.00) filing

fee. Receipt Number 10199177, amount $ 250.00. (U.S. Treasury)

(Entered: 10/05/2011)

10/06/2011 3

Certificate of Service Filed by Plaintiffs David Abrams, not

individually but solely as the Liquidating Trustee and court

−appointed manager of Heartland Memorial Hospital, LLC,

Heartland Memorial Hospital LLC (related document(s)1

Complaint filed by David Abrams, not individually but solely as the

Liquidating Trustee and court −appointed manager of Heartland

Memorial Hospital, LLC, Heartland Memorial Hospital LLC)

(Leipold, Mark) (Entered: 10/06/2011)

10/17/2011 4

Certificate of Service of Summons on McGuire Woods, LLP

10/17/2011 . (Leipold, Mark) (Entered: 10/17/2011)

11/04/2011 5

Notice of Agreed Initial Enlargement of Time to respond to

Plaintiff's Complaint Filed by Defendant McGuire Woods, LLP

(related document(s)1 Complaint filed by David Abrams, not

individually but solely as the Liquidating Trustee and court

−appointed manager of Heartland Memorial Hospital, LLC,

Heartland Memorial Hospital LLC) (Giles, David) Modified on

11/6/2011 (dlz). (Entered: 11/04/2011)

12/05/2011 6

Motion for Withdrawal of Reference . Fee Amount $176 Filed by

Defendant McGuire Woods, LLP (Giles, David) (Entered:

12/05/2011)

12/05/2011

Receipt of Motion for Withdrawal of Reference(11−02151−jpk)

[motion,mwdrefad] ( 176.00) filing fee. Receipt Number 10399832,

amount $ 176.00. (U.S. Treasury) (Entered: 12/05/2011)

12/05/2011 7

Memorandum In Support of McGuireWoods LLP's Motion to

Withdraw Reference Filed by Defendant McGuire Woods, LLP

(related document(s)6 Motion for Withdrawal of Reference filed by

McGuire Woods, LLP) (Giles, David) Modified on 12/7/2011 (dlz).

(Entered: 12/05/2011)

12/05/2011 8

Motion To Stay or Alternatively to Extend Time Filed by Defendant

McGuire Woods, LLP (Giles, David) Modified on 12/7/2011 (dlz).

(Entered: 12/05/2011)

12/05/2011 9

Notice of Appearance Filed by Defendant McGuire Woods, LLP

(Giles, David) (Entered: 12/05/2011)

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12/27/2011 10

Order Regarding McGuirewoods LLP's Motion to Stay or

Alternatively to Extend Time (Related Doc # 8) (jas) (Entered:

12/27/2011)

12/27/2011 11

Notice of Appearance of Christopher J. Horvay Filed by Plaintiff

David Abrams, not individually but solely as the Liquidating

Trustee and court −appointed manager of Heartland Memorial

Hospital, LLC (Horvay, Christopher) Modified on 12/28/2011 (jas).

(Entered: 12/27/2011)

12/27/2011 12

Response to Motion for Withdrawal of Reference Filed by Plaintiff

David Abrams, not individually but solely as the Liquidating

Trustee and court −appointed manager of Heartland Memorial

Hospital, LLC (related document(s)6 Motion for Withdrawal of

Reference filed by McGuire Woods, LLP) (Horvay, Christopher)

(Entered: 12/27/2011)

12/31/2011 13

Reply Motion for Withdrawal of Reference Filed by Defendant

McGuire Woods, LLP (related document(s)6 Motion for

Withdrawal of Reference filed by McGuire Woods, LLP) (Giles,

David) (Entered: 12/31/2011)

01/12/2012 14

Notice of Transmittal to U.S. District Court (related document(s)6

Motion for Withdrawal of Reference filed by Defendant McGuire

Woods, LLP). (Stewart, Michael) (Entered: 01/12/2012)

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UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF INDIANA 

HAMMOND DIVISION 

In re: ) 

 ) 

HEARTLAND MEMORIAL HOSPITAL, 

LLC, an Indiana limited liability company 

)

)

Case No. 07-20188-JPK 

Chapter 11 

 ) 

 Debtor, ) Hon. J. Philip Klingeberger 

 ) 

 ) 

DAVID ABRAMS, not individually but solely 

as the Liquidating Trustee and court-appointed 

manager of HEARTLAND MEMORIAL 

HOSPITAL, LLC, and HEARTLAND 

MEMORIAL HOSPITAL, LLC, the Debtor, 

an Indiana limited liability company, 

)

)

)

)

)

)

 ) 

 Plaintiffs, ) Adv. No. 11-02151-JPK 

 ) 

v. ) 

 ) 

McGUIREWOODS LLP, ) 

 ) 

 Defendant. ) 

McGUIREWOODS LLP’S MOTION TO WITHDRAW THE REFERENCE

McGuireWoods LLP moves the district court under 28 U.S.C. § 157(d), Federal Rule of 

Bankruptcy Procedure 5011(a), and Northern District of Indiana Local Rule 200.1(d) for an 

order withdrawing the reference of this adversary proceeding from the bankruptcy court to the 

district court.

1. For the reasons given in McGuireWoods’s accompanying memorandum of law 

(which is incorporated by reference into this motion), the district court should withdraw the 

reference of this adversary proceeding to the bankruptcy court. Among other things: 

• The adversary complaint contains a one-count claim for common-law legal 

malpractice under state law. 

Case 11-02151-jpk Doc 6 Filed 12/05/11 Page 1 of 4

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• There is a right to a jury trial on this one count claim for malpractice. 

• The only proper plaintiff in the adversary complaint, Heartland Memorial 

Hospital LLC, has filed a jury demand, so it—not McGuireWoods—was required 

under Local Rule 200.1(c)(2)(A) to move to withdraw the reference at the 

moment that it filed its demand. 

• The claim is “non-core;” it arises solely under state law and was filed long after 

Heartland’s Chapter 11 plan was confirmed by the bankruptcy court. 

• The claim is not by a debtor with a bankruptcy estate. The claim is by only a 

former—and now reorganized—debtor. 

• The claim is not against a creditor or other party involved in an actively 

administered bankruptcy case. 

• McGuireWoods was never a party to Heartland’s actively administered 

bankruptcy case.

• No substantive activity has taken place in this adversary proceeding (other than 

the filing of the adversary complaint). 

• The bankruptcy court has no special familiarity with the law or facts underlying 

the case. 

For all these reasons, there is no reason to maintain the reference of the adversary complaint to 

the bankruptcy court.

2. Other than Heartland’s status as a former debtor in the bankruptcy court and the 

fact that Heartland’s Chapter 11 plan required it to initiate this proceeding in the bankruptcy 

court, there is no connection between the claims in this case and the bankruptcy court and no 

reason for this case to continue in the bankruptcy court.

 WHEREFORE, McGuireWoods respectfully requests that the district court enter an order 

(i) withdrawing the reference of this adversary proceeding and directing that the case proceed in 

the district court and (ii) granting McGuireWoods a reasonable period of 28 days from the date 

of ruling on this motion to respond to the adversary complaint. 

Case 11-02151-jpk Doc 6 Filed 12/05/11 Page 2 of 4

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Dated: December 5, 2011 Respectfully submitted, 

 /s/ David C. Giles 

David C. Giles 

SCHIFF HARDIN LLP 

233 S. Wacker Drive 

Chicago, IL 60606 

(312) 258-5819 

Counsel for Defendant 

McGuireWoods, LLP 

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CERTIFICATE OF SERVICE

 I, David Giles, certify that on December 5, 2011, I filed the foregoing using the ECF 

system, which will send notification of such filing to the following registered parties and 

constitutes service upon them: 

Christopher J. Horvay 

Mark E. Leipold 

Gould & Ratner LLP 

222 North LaSalle Street, 

Suite 800 

Chicago, IL 60601 

Eugene Schiltz 

Sean B. Crotty 

Elizabeth E. Richert 

Coleman Law Firm 

77 West Wacker Drive, 

Suite 4800 

Chicago, IL 60601 

Shawn D. Cox 

Gordon E. Gouveia 

Gouveia & Associates 

433 West 84th Drive 

Merrillville, IN 46410 

 /s/ David C. Giles 

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UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF INDIANA 

HAMMOND DIVISION 

In re: ) 

 ) 

HEARTLAND MEMORIAL HOSPITAL, 

LLC, an Indiana limited liability company 

)

)

Case No. 07-20188-JPK 

Chapter 11 

 ) 

 Debtor, ) Hon. J. Philip Klingeberger 

 ) 

 ) 

DAVID ABRAMS, not individually but solely 

as the Liquidating Trustee and court-appointed 

manager of HEARTLAND MEMORIAL 

HOSPITAL, LLC, and HEARTLAND 

MEMORIAL HOSPITAL, LLC, the Debtor, 

an Indiana limited liability company, 

)

)

)

)

)

)

 ) 

 Plaintiffs, ) Adv. No. 11-02151-JPK 

 ) 

v. ) 

 ) 

McGUIREWOODS LLP, ) 

 ) 

 Defendant. ) 

MEMORANDUM IN SUPPORT OF McGUIREWOODS LLP’S 

MOTIOIN TO WITHDRAW THE REFERENCE

The district court should withdraw the reference to the bankruptcy court of this adversary 

proceeding commenced against McGuireWoods LLP by Heartland Memorial Hospital LLC. See

28 U.S.C. § 157(d); Fed. R. Bankr. P. 5011(a); N. D. Ind. L.R. 200.1(d). The adversary 

complaint contains a one-count claim for common-law legal malpractice under state law. There 

is a right to a jury trial on this claim, and Heartland has in fact filed a jury demand. The claim is 

“non-core;” it arises solely under state law and was filed long after Heartland’s Chapter 11 plan 

was confirmed by the bankruptcy court. So the claim is not by a debtor with a bankruptcy estate. 

The claim is by only a former—and now reorganized—debtor. Nor is the claim against a 

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creditor or other party involved in an actively administered bankruptcy case. McGuireWoods 

was never a party to Heartland’s bankruptcy case. Finally, no substantive activity has taken 

place in this adversary proceeding (other than the filing of the adversary complaint). The 

bankruptcy court accordingly has no special familiarity with the law or facts underlying the case.

For all these reasons, there is no reason to maintain the reference of the adversary complaint to 

the bankruptcy court. In fact, as explained below, it was Heartland and not McGuireWoods that 

initially should have sought the relief requested in this motion by moving to withdraw the 

reference when it included a jury demand with its adversary complaint. 

BACKGROUND

A. The Post-Bankruptcy State-Law Claim Against McGuireWoods 

The legal-malpractice claim in this adversary proceeding was first asserted in a statecourt complaint filed on March 3, 2009. (Mar. 3, 2009 Complaint, attached as Exhibit 1. All of 

the exhibits to this brief are publicly filed records that can be judicially noticed. E.g., McCann v. 

Neilsen, 466 F.3d 619, 620 n.1 (7th Cir. 2006).) The state-court complaint included claims 

against McGuireWoods and two other sets of lawyers and law firms that allegedly represented 

Heartland in 2005 and 2006: DLA Piper LLP as well as Harold Collins, his son Michael Collins, 

and their firm, Collins & Collins. (Ex. 1, passim.) The state-court complaint’s theory is that 

each set of lawyers committed malpractice by breaching an alleged state-law duty of “loyalty” to 

safeguard Heartland’s assets from its parent company and its parent’s shareholders. (Id. ¶¶ 79, 

88, 95, 102(A).) The claim—which is hopelessly flawed—is that the lawyers (who actually 

represented different parties in a series of deals with McGuireWoods representing Heartland’s 

parent in just one deal) somehow acted “adversely” to Heartland by failing to stop Heartland’s 

management from selling and leasing back Heartland’s assets in order to raise cash for itself, its 

parent, and its parent’s shareholders. (Id.) The principal of several problems with this claim is 

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that Heartland was a wholly owned subsidiary. So not even Heartland’s management—much 

less its outside lawyers—owed it any independent duties of “loyalty” separate from those owed 

to its parent or the parent’s shareholders. As a wholly owned subsidiary, Heartland at all times 

existed for its parent’s sole benefit as a matter of settled corporate law. E.g., Deleo v. Swirsky,

No. 00 C 6917, 2001 WL 687458, at *8 (N.D. Ill. Jun. 19, 2001); Anadarko Petro. Corp. v. 

Panhandle E. Corp., 545 A.2d 1171, 1174 (Del. 1988). 

The state-court complaint was filed after Heartland had emerged from a Chapter 11 

bankruptcy case in the U.S. Bankruptcy Court for the Northern District of Indiana. (See In re 

Heartland Mem’l Hosp., LLC, No. 07-20188-JPK (Bankr. N. D. Ind. Jan. 31, 2007), Dkt. 1, 

2010.) Long after the complained of transaction involving McGuireWoods, Heartland’s 

creditors in January 2007 filed an involuntary complaint against it in the bankruptcy court, and in 

November 2008 the bankruptcy court confirmed its Chapter 11 plan of reorganization. (Id., Dkt. 

1, 1887-1, 2010.) Under the plan Heartland established a liquidating trust, appointed David 

Abrams as the “Liquidating Trustee” for the trust, and tasked the Liquidating Trustee with 

liquidating Heartland’s principal assets, which Heartland had transferred to the trust. (Id., Dkt. 

1887-1, §§ 1.58, 3.1, 6.2, and Dkt. 1938, § 7.1.) Those assets included Heartland’s litigation 

claims—except for claims against attorneys for which an assignment to the trust might violate 

state law. (Id., Dkt. 1887-1 § 3.1 (“The Plan proponents believe, for example, that certain 

malpractice claims against attorneys cannot be transferred to the Liquidating Trust. These assets 

will remain with the Reorganized Debtor [i.e. Heartland following confirmation of the Chapter 

11 plan].”). 

Almost five months after the plan’s confirmation, the Liquidating Trustee filed 

Heartland’s state-law legal-malpractice claims against McGuireWoods, DLA Piper, and the 

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Collins defendants in Illinois state court, as well as a series of adversary proceedings in the 

bankruptcy court to recover for alleged preferential transfers and other claims under the 

Bankruptcy Code. The Liquidating Trustee brought these adversary proceedings against 

Heartland’s former management as well as some of its alleged former lawyers—including DLA 

Piper and the Collins defendants. (Abrams v. DLA Piper, Adv. No. 02049-jpk (Bankr. N.D. Ind. 

Feb. 26, 2009), Dkt. 1 & 3, Amend. Compl. (asserting claims under §§ 502, 547, 548, and 550 of 

the Bankruptcy Code); Abrams v. Collins, Adv. No. 09-02068 (Feb. 29, 2009), Dkt. 1 (asserting 

claims under §§ 547, 548, and 550 of the Bankruptcy Code).) But no case was filed in 

bankruptcy court against McGuireWoods. Nor had McGuireWoods participated to that point in 

any way in Heartland’s bankruptcy case. 

B. Dismissal of The State-Court Complaint 

On March 2, 2010 the Illinois state court dismissed the state-law malpractice complaint 

against McGuireWoods, DLA Piper, and the Collins defendants. The court gave two grounds for 

its decision: (i) the complaint had to be filed in the first instance in the bankruptcy court under 

Section 9.13 of Heartland’s Chapter 11 plan and (ii) Heartland itself and not the Liquidating 

Trustee was the only proper plaintiff because Heartland had retained all malpractice claims in 

Section 3.1 of the plan. (Mar. 2, 2010 Tr at 6:9-24 & Order, attached as Exhibits 2 and 3.) The 

Liquidating Trustee moved to reconsider the first ruling (and sought leave to amend to try to 

resolve the second), and at the same time asked the bankruptcy court to “interpret” Section 9.13 

of the Chapter 11 plan. (In re Heartland, No. 07-20188-JPK, Dkt. 2181.) The bankruptcy court 

did so in a decision issued on June 9, 2011, concluding that (i) the state court had correctly 

interpreted Section 9.13 of the plan and (ii) Section 9.13 as originally written was impermissibly 

broad and had to be amended. (Id. Dkt. 2230.) The bankruptcy court was not presented with—

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and did not purport to address—any issue bearing on the substance of Heartland’s state-court 

complaint. 

The Liquidating Trustee presented the bankruptcy court’s order to the state court, but 

after further briefing and a hearing held on October 5, 2011, the state-court judge declined to 

reconsider his ruling dismissing the complaint. (Oct. 5, 2011 Order, attached as Exhibit 4.) That 

same day, Heartland and the Liquidating Trustee filed this adversary proceeding against 

McGuireWoods, asserting verbatim the same complaint and state-law claim that it had filed in 

Illinois state court. The adversary complaint differs from its state-court predecessor only in that 

Heartland removed the counts against DLA Piper and the Collins defendants, having elected 

instead to try to import those counts against those defendants into the preference adversary 

proceedings pending against them since 2009. (Abrams v. DLA Piper, Adv. No. 02049-jpk, Dkt. 

48; Abrams v. Collins, Adv. No. 09-02068, Dkt. 201.) 

Heartland asserts in its adversary complaint against McGuireWoods that it continues to 

“disagree” with the state court’s ruling, which it is now appealing. Heartland says in its 

complaint that “these claims have been filed in this Court at this time to preserve the position 

that the statute of limitations is tolled because of their pendency.” (Heartland v. McGuireWoods 

LLP, Adv. No. 11-02151-jpk (Bankr. N.D. Ind. Oct. 5, 2011), Dkt. 1, Adv. Compl. ¶ 4, attached 

as Exhibit 5.) 

ARGUMENT 

Under 28 U.S.C. § 1334 federal district courts have original jurisdiction over all 

bankruptcy matters. Matters within that jurisdiction are “referred” automatically to the 

bankruptcy court for each federal judicial district, including the U.S. Bankruptcy Court for the 

Northern District of Indiana, e.g., N.D. Ind. L.R. 200.1, and this reference can and should be 

“withdrawn” in any case “for cause shown.” 28 U.S.C. § 157(d). “Cause” can exist under at 

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least five circumstances: (i) the “parties have demanded a jury trial,” (ii) a “non-core proceeding 

is involved,” (iii) “withdrawal would promote judicial economy or uniformity and efficiency in 

bankruptcy administration” and “reduce forum shopping,” (iv) the bankruptcy court has no 

superior “familiarity with the case,” and (v) withdrawal would not “cause delay and costs to the 

parties.” Means v. Ameriquest Mortg. Co., 2:06-CV-409-TS, 2009 WL 4427696, at *4 (N.D. 

Ind. Nov. 24, 2009). Here all of these circumstances exist. Possibly no complaint could serve as 

a better candidate for withdrawal than this case’s state-law adversary complaint, which concerns 

only conduct that allegedly occurred before Heartland’s bankruptcy case and was filed long after 

that case effectively concluded with the confirmation of Heartland’s Chapter 11 plan*

I. THIS CASE INVOLVES A JURY DEMAND. 

Bankruptcy courts in the Seventh Circuit cannot hold jury trials. Matter of Grabill Corp.,

967 F.2d 1152, 1156 (7th Cir. 1992). Consequently, “the right to a jury trial is sufficient cause to 

withdraw the reference to the bankruptcy court” even if all parties consent to proceed in the 

bankruptcy court (which they do not here) Means, 2009 WL 4427696, at *4; Wellman Thermal 

Sys. Corp. v. Columbia Cas. Co., 105CV-01191-JDT-TAB, 2005 WL 4880619, at *3 (S.D. Ind. 

Oct. 5, 2005); Good v. Kvaerner U.S., Inc., 1:03-CV-0476 SEB-VSS, 2003 WL 21755782, at *3 

(S.D. Ind. July 25, 2003); Consol. Indus. Corp. v. Welbilt Holding Co., 254 B.R. 237, 238-39 & 

n.5 (N.D. Ind. 2000) (“If the defendants are entitled to a jury trial, cause exists to withdraw the 

reference, because the bankruptcy court is not able to provide them with the jury trial they have 

requested.”). So fundamental is this principle that there is a local rule in this district on the 

*

 In addition to showing these five circumstances, a request to withdraw the reference 

must be “timely.” McGuireWoods’s motion meets that standard because it represents 

McGuireWoods’s first substantive filing in this adversary proceeding, coming before even a 

responsive pleading to the adversary complaint. E.g., Vista Metals Corp. v. Metal Brokers Int'l 

Inc., 161 B.R. 454, 457 (E.D. Wis. 1993) (withdrawal request “timely” if brought with the first 

responsive pleading or “shortly thereafter”). 

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subject. Parties who demand a jury trial in a case pending in the bankruptcy court are required

when making their jury demand to move simultaneously to withdraw the reference. N.D. Ind. 

L.R. 200.1(c)(2)(A). 

Here there is no dispute that a claim for legal malpractice is a state common-law claim 

for which there is a right to a jury trial under the Seventh Amendment. E.g., Goodman v. Levy,

06 C 5526, 2007 WL 641562 (N.D. Ill. Feb. 28, 2007). Indeed, Heartland’s adversary complaint 

contains a demand for a jury trial, so under Local Rule 200.1(c)(2)(A), it should have moved to 

withdraw the reference when it filed that demand at the risk of waiving the demand. Consol.

Indus., 254 B.R. at 240-41. And although Heartland failed to discharge that obligation, 

McGuireWoods of course retains the right to demand a jury until at least 14 days after it files any 

answer to the adversary complaint, which has yet to come due. Fed. R. Civ. P. 38(b)(1); Fed. R. 

Bankr. P. 9015(a); N.D. Ind. L.R. Bankr. P. B-7038-1. That this case involves a single claim on 

which there undisputedly is a right to a jury trial by itself justifies withdrawing the reference. 

II. STATE-LAW CLAIMS FOR LEGAL MALPRACTICE ARE “NONCORE.”

Beyond the right to a jury trial, “whether the proceeding is core or noncore is the most 

important factor when deciding whether to withdraw the reference.” Wellman, 2005 WL 

4880619, at *3; In re Comdisco Ventures, Inc., 04 C 2007, 2004 WL 1375353, at *2 (N.D. Ill. 

June 18, 2004). There is no dispute that a state-law claim for legal malpractice is “non-core.” 

Diamond Mortg. Corp. of Illinois v. Sugar, 913 F.2d 1233, 1238-39 (7th Cir. 1990). Heartland 

admits as much in its adversary complaint. (Heartland v. McGuireWoods, Adv. No. 11-02151-

jpk, Dkt. 1, Adv. Compl. ¶ 10.) In fact, the bankruptcy court in ruling on the Liquidating 

Trustee’s motion to “interpret” the plan specifically held that the claim against McGuireWoods 

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asserted first in the state court and now in the adversary complaint is “non-core.” (In re 

Heartland, No. 07-20188-JPK, Dkt. 2230 at 4-5 n.4.)

McGuireWoods had no involvement in Heartland’s bankruptcy case. No preference 

claims (which also are “non-core”) or any other claims are asserted in the adversary complaint 

that even arguably relate to the Bankruptcy Code. The events giving rise to the alleged state-law 

malpractice claim against McGuireWoods all occurred years before Heartland was involuntarily 

placed into bankruptcy proceedings. And Heartland brought its state-court and now its adversary 

complaint after its Chapter 11 plan was confirmed—a fact that several courts in the Seventh 

Circuit have concluded further removes a case from the “core” of matters that bankruptcy courts 

have the power to hear. In re Commercial Loan Corp., 363 B.R. 559, 565-66 (Bankr. N.D. Ill. 

2007); In re Federalpha Steel LLC, 341 B.R. 872, 880-82 (Bankr. N.D. Ill. 2006). These facts 

are also independent grounds for withdrawing the reference. 

III. CONSIDERATIONS OF EFFICIENCY AND AVOIDING FORUM 

SHOPPING SUPPORT WITHDRAWING THE REFERENCE. 

Because the adversary complaint presents only a non-core state law claim, the bankruptcy 

court’s specialized knowledge and expertise in the Bankruptcy Code and issues common to 

bankruptcy cases is not required to decide Heartland’s claim. Nor does the claim affect an 

existing bankruptcy estate under the administration of a trustee or debtor in possession, since 

Heartland’s Chapter 11 plan was confirmed years ago. In re United Operating, LLC, 540 F.3d 

351, 355 (5th Cir. 2008) (“Upon confirmation of the plan, the estate ceased to exist, and Dynasty 

lost its status as a debtor ‘in possession.’”). Adjudicating the claim in the district court 

accordingly will not reduce the efficiency of the bankruptcy process or promote forum shopping. 

Wellman, 2005 WL 4880619, at *3 (“Withdrawal of the reference here will neither negatively 

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affect the uniformity and efficiency in bankruptcy administration nor promote forum shopping 

because the issues presented by the adversary proceeding are not unique to bankruptcy law.”). 

If anything, withdrawing the reference at this time will have the opposite effect. It will 

promote efficiency. In addition to having to become familiar with the claims in this case for 

purposes of trial, the district court will have plenary review over all findings of fact or 

conclusions of law that the bankruptcy court might enter in a case like this one where the claim is 

non-core and there is no consent to entry of a judgment in the bankruptcy court. 28 U.S.C. 

§ 157(c)(1). That fact inevitably will produce wasted effort. As the court explained in Wellman:

Certain efficiencies would be lost were the bankruptcy court to 

proceed with pretrial matters; the district court would not gain a 

valuable familiarity with the case that could assist it leading up to 

and through trial. Though the bankruptcy court could issue 

proposed findings of fact and conclusions of law, 28 U.S.C. 

§ 157(c)(1), in the court’s view, considerations of judicial 

economy favor withdrawal of the reference. 

2005 WL 4880619, at *3; see also In re Orion Pictures Corp., 4 F.3d 1095, 1101 (2d Cir. 1993) 

(“[T]he fact that a bankruptcy court’s determination 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”); In re Coe-Truman Tech., 

Inc., 214 B.R. 183, 187 (N.D. Ill. 1997) (where bankruptcy court’s decision is subject to de novo

review, it is a more efficient use of judicial resources to decide the case in the district court); In

re Almac's, Inc., 202 B.R. 648, 659 (D.R.I. 1996) (withdrawing reference to avoid the waste of 

judicial resources that would result from a de novo review of bankruptcy court’s findings).

The same reasoning applies here. Because the bankruptcy court’s work will be subject to 

plenary review and any trial must proceed in the district court, it would be inefficient either to 

wait until trial to withdraw the reference or to refer the case to the bankruptcy court for purposes 

of handling pretrial matters under Local Rule 200.1(b)(1)(D). The district court should follow 

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the approach in Wellman and these other cases and withdraw the reference now. This case 

simply is not one where the bankruptcy court has developed specialized knowledge about the 

claims or issues so that efficiencies would arise from that court’s handling some part of the case 

up to trial. E.g., Orion Pictures Corp., 4 F.3d at 1101 (mentioning this possibility). This case 

just began, and McGuireWoods had no involvement in Heartland’s substantive bankruptcy case.

The bankruptcy court also has had no chance to consider the substance of the malpractice claim 

against McGuireWoods. Nor does it have any special knowledge about the circumstances, 

witnesses, evidence, discovery, facts, or law on which that claim and McGuireWoods’s defenses 

turn. Compare Wellman, 2005 WL 4880619, at *3 (holding that even in cases where the 

bankruptcy court has such knowledge, “that factor does not tip the scales against withdrawal in 

light of the other factors that favor withdrawal,” including a jury demand, non-core claims, and 

the district court’s plenary review). 

Nor would withdrawing the reference promote “forum shopping.” As explained above, 

Heartland—not McGuireWoods—should have brought this motion in the first instance, and 

McGuireWoods is now timely bringing the request at the earliest opportunity before any 

substantive activity in this case has occurred. E.g., In re Mahlmann, 149 B.R. 866, 869 (N.D. Ill. 

1993) (“The reason for the timeliness requirement is to prevent parties from forum shopping, 

stalling, or otherwise engaging in obstructionist tactics.”). Attempting to remedy Heartland’s 

noncompliance with Local Rule 200.1(c)(2)(A) by seeking to withdraw the reference where there 

is a jury demand and before any substantive consideration of the case cannot be labeled “forum 

shopping.”

True, this case is unusual because the lawyers for Heartland and the Liquidating Trustee 

drafted Heartland’s Chapter 11 plan to require that they initiate this adversary proceeding in the 

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bankruptcy court in the first instance, as the state court held. But these same counsel have 

always recognized that this requirement could not limit the options of other parties—like 

McGuireWoods—who had no involvement in the Chapter 11 plan or proceeding. (In re 

Heartland, No. 07-20188-jpk, Dkt. 2210 at 8 (“It would have been patently unfair for this Court 

to approve a plan that bound third parties to a choice of forum clause requiring state-law causes 

of action to be filed in the bankruptcy court.”).) That this case had to start in the bankruptcy 

court does not mean that it can or should proceed in bankruptcy court. That conclusion is 

particularly true where Heartland’s Chapter 11 plan was confirmed long ago and where the only 

claims being asserted are non-core, pre-petition, state-law claims to which there is a jury 

demand. State-law claims for negligence—whether professional or otherwise—are the sorts of 

claims that federal district courts see not infrequently. 

IV. THE BANKRUPTCY COURT HAS NO SUPERIOR “FAMILIARITY” 

WITH THE CASE. 

The bankruptcy court also has no special “familiarity” with this case. The case involves 

only a state-law claim—not any claim under the Bankruptcy Code or other legal issues with 

which the bankruptcy court has specialized knowledge. E.g., In re Comdisco, Inc., 04 C 5570, 

2004 WL 2674398 (N.D. Ill. Oct. 15, 2004) (“[T]he bankruptcy court’ familiarity with the 

bankruptcy proceedings will not help it address the state law issues raised in adversary 

complaint.”). And the bankruptcy court has no particular familiarity with the facts of this case. 

Although several adversary proceedings involving Heartland were filed in the bankruptcy court 

before this case, none involved legal malpractice, and certainly none involved McGuireWoods. 

What duties McGuireWoods may have owed to Heartland and whether McGuireWoods 

appropriately discharged those duties are subjects that the bankruptcy court has not previously 

considered.

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V. WITHDRAWING THE REFERENCE WOULD NOT CAUSE UNDUE 

DELAY OR COST. 

Finally, withdrawing the reference would not only conserve judicial resources, but it 

would conserve the parties’ resources as well. Nothing substantive has transpired or should 

transpire in this adversary case until the district court rules on this motion. (McGuireWoods is 

simultaneously presenting a request for a stay to the bankruptcy court so that the withdrawal of 

the reference is dealt with before other matters of substance.) Withdrawing the reference 

accordingly has no potential to force the parties to replicate work. In addition, the substantive 

component of Heartland’s bankruptcy case ended years ago, so the time it takes to address the 

motion to withdraw the reference will not hold up other business in the bankruptcy court or 

prejudice Heartland or any other party.

* * * * 

Other than Heartland’s status as a former debtor in the bankruptcy court and the fact that 

Heartland’s Chapter 11 plan required it to initiate this proceeding in the bankruptcy court, there 

is no connection between the claims in this case and the bankruptcy court and no reason for this 

case to continue in the bankruptcy court. The district court accordingly should withdraw the 

reference and grant McGuireWoods a reasonable time to respond to the adversary complaint 

after ruling on this motion. 

CONCLUSION

For the foregoing reasons, the district court should grant McGuireWoods’s motion. 

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Dated: December 5, 2011 Respectfully submitted, 

 /s/ David C. Giles 

David C. Giles 

SCHIFF HARDIN LLP 

233 S. Wacker Drive 

Chicago, IL 60606 

(312) 258-5819 

Counsel for Defendant 

McGuireWoods, LLP 

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