UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF NEW YORK

In re:

MF GLOBAL INC.,

Debtor.

Case No. 12 Civ. 6014 (KBF)

REPLY MEMORANDUM IN SUPPORT OF CONOCOPHILLIPS’ 

MOTION TO WITHDRAW THE REFERENCE WITH RESPECT TO 

THE TRUSTEE’S MOTION TO CONFIRM HIS TREATMENT OF 

LETTERS OF CREDIT PROVIDED BY CONOCOPHILLIPS __

September 11, 2012

WACHTELL, LIPTON, ROSEN & KATZ

51 West 52nd Street

New York, New York 10019

(212) 403-1000

CADWALADER, WICKERSHAM & TAFT LLP

700 Sixth Street, N.W.

Washington, D.C. 20001

(202) 862-2200

Attorneys for ConocoPhillips Company and 

ConocoPhillips Canada Marketing & 

Trading ULC

Case 1:12-cv-06014-KBF Document 21 Filed 09/11/12 Page 1 of 14
-iTABLE OF CONTENTS

Page

PRELIMINARY STATEMENT .....................................................................................................1

ARGUMENT...................................................................................................................................3

I. THE MANDATORY WITHDRAWAL STATUTE APPLIES WITH FULL 

FORCE TO THE CFTC PART 190 REGULATIONS. ......................................................3

II. WITHDRAWAL OF THE REFERENCE IS REQUIRED HERE TO ADDRESS 

NUMEROUS NOVEL ISSUES OF FEDERAL NON-BANKRUPTCY LAW.................4

A. Withdrawal of the reference is required in light of the Trustee’s 

unprecedented reliance on CFTC Rule 190.08(a) and related 

commentary..............................................................................................................4

B. Withdrawal is further required to resolve a direct conflict between the 

Trustee’s interpretation of CFTC Rule 190.08(a) and the Commodity 

Exchange Act, which prohibits the CFTC from regulating letters of 

credit. .......................................................................................................................5

C. Withdrawal is further required to address substantial preemption issues 

raised by the Trustee’s motion.................................................................................6

D. Withdrawal is yet further required to resolve conflicts between the 

Trustee’s interpretation of CFTC Rule 190.08(a) and the Bankruptcy 

Code. ........................................................................................................................7

E. Withdrawal of the reference is required to address the Trustee’s novel 

theory that he is entitled to the value of conditional letters of credit 

that he permitted to expire. ......................................................................................8

III. THIS MATTER SHOULD NOT BE REMANDED TO THE BANKRUPTCY 

COURT FOR PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF 

LAW. .................................................................................................................................10

CONCLUSION..............................................................................................................................10

Case 1:12-cv-06014-KBF Document 21 Filed 09/11/12 Page 2 of 14
-iiTABLE OF AUTHORITIES

Cases Page

Barton v. SIPC, 185 B.R. 701 (D.N.J. 1994).................................................................................. 4

Brown v. Dellinger, 734 F.2d 119 (2d Cir. 1984)........................................................................... 7

Farmer v. Crocker Nat’l Bank, 30 B.R. 490 (B.A.P. 9th Cir. 1983).............................................. 7

Keller v. Blinder, 162 B.R. 555 (D. Colo. 1994)............................................................................ 4

Milner v. Department of the Navy, 131 S. Ct. 1259 (2011).......................................................... 4n

Mishkin v. Ageloff, 220 B.R. 784 (S.D.N.Y. 1998) ................................................................ 4n, 10

Picard v. Avellino, 469 B.R. 408 (S.D.N.Y. 2012) ...................................................................... 4n

Picard v. Flinn Invs., LLC, 463 B.R. 280 (S.D.N.Y. 2011) ......................................................... 4n

Picard v. HSBC Bank PLC, 450 B.R. 406 (S.D.N.Y. 2011) ........................................................ 4n

Picard v. JPMorgan Chase & Co., 454 B.R. 307 (S.D.N.Y. 2011)........................................... 3, 4

SEC v. Goren, 2002 WL 32963582 (E.D.N.Y. Mar. 6, 2002)........................................................ 4

Shugrue v. Air Line Pilots Ass’n, Int’l, 922 F.2d 984 (2d Cir. 1990)............................................. 3

SIPC v. Bernard L. Madoff Inv. Sec. LLC, 2012 WL 2524367 (S.D.N.Y. June 26, 2012).......... 4n

SIPC v. Bernard L. Madoff Inv. Sec. LLC, 2012 WL 2524513 (S.D.N.Y. June 26, 2012).......... 4n

SIPC v. Bernard L. Madoff Inv. Sec. LLC, 460 B.R. 106 (Bankr. S.D.N.Y. 2011)........................ 7

Sullivan v. Willock, 854 F.2d 196 (7th Cir. 1988).......................................................................... 9

WPIX, Inc. v. ivi, Inc., --F.3d --, 2012 WL 3645304 (2d Cir. Aug. 27, 2012) ............................... 6

Wyeth v. Levine, 555 U.S. 555 (2009)........................................................................................ 5, 7

Statutes and Administrative Materials

7 U.S.C. § 27(b).............................................................................................................................. 6

7 U.S.C. § 27a(a)(1)........................................................................................................................ 5

11 U.S.C. § 108(b)........................................................................................................................ 8n

11 U.S.C. § 541(a)(1)...................................................................................................................... 7

11 U.S.C. § 766(f)........................................................................................................................... 8

11 U.S.C. § 766(j)(1) ...................................................................................................................... 8

15 U.S.C. § 78c note ....................................................................................................................... 6

15 U.S.C. § 78fff(b)........................................................................................................................ 4

28 U.S.C. § 157(d)............................................................................................................ 1, 3, 4, 10

Gramm-Leach-Bliley Act of 1999, Pub. L. No. 106-102, 113 Stat. 1338...................................... 6

17 C.F.R. § 190.02.......................................................................................................................... 8

17 C.F.R. § 190.08(a)............................................................................................................. passim

Case 1:12-cv-06014-KBF Document 21 Filed 09/11/12 Page 3 of 14
PRELIMINARY STATEMENT

The briefs filed in response to ConocoPhillips’ motion to withdraw the reference 

only confirm that the motion should be granted. The Trustee’s opposition makes perfectly clear 

that he is relying on a novel, untested interpretation of a CFTC regulation promulgated under the 

Commodity Exchange Act and that resolution of this dispute will require intense consideration of 

both the regulation and the Act itself. Likewise, the CFTC’s very appearance — and its 

interposition of a premature “merits” brief that explicitly does not oppose withdrawal of the 

reference — only proves the point: this matter turns upon the CEA and associated regulations 

and is in no way “routine.” Under Second Circuit law, the sole question presented at this stage is 

whether resolution of this proceeding requires “significant interpretation” of federal nonbankruptcy law. It plainly does. 

The Trustee’s arguments against withdrawal are wholly unpersuasive. First, there 

is no merit to the argument that the CFTC regulations at issue are exempt from the mandatory 

withdrawal statute because they “implement” and are “referred to” in title 11. Opp. at 7-8. The 

governing statute, 28 U.S.C. § 157(d), draws an unambiguous distinction between “title 11” and 

“other laws of the United States” such as CFTC regulations and the CEA. It does not exempt 

laws that are somehow related to title 11. Moreover, the statute applies with full force to cases 

referred to the bankruptcy court under SIPA. As shown below, the Trustee’s assertion to the 

contrary is at odds not only with every case to address the issue but also with the language of 

SIPA, which dictates that SIPA proceedings are to be conducted “as though” they were 

commenced under title 11. 

Second, it defies credulity for the Trustee to claim that withdrawal is unwarranted 

because the issues presented here are “straightforward.” Opp. at 12-13. The Trustee concedes 

Case 1:12-cv-06014-KBF Document 21 Filed 09/11/12 Page 4 of 14
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that, outside of bankruptcy, MF Global would “unquestionably” be prohibited as a matter of 

contract and state law from drawing on the letters of credit absent a default by ConocoPhillips. 

Opp. at 17. The Trustee likewise does not dispute that the same would be the case in an ordinary

bankruptcy proceeding: letter-of-credit terms and state law would be fully respected. Instead, as 

to all of the letters of credit at issue, the Trustee argues that CFTC Rule 190.08(a), by defining 

the “proceeds” of a letter of credit as “customer property”: (1) implicitly authorizes the creation

of such “proceeds” in violation of the parties’ contracts; (2) implicitly preempts uniform state 

law that treats an unauthorized draw on a letter of credit as “material fraud” and breach of 

warranty; and yet (3) does not run afoul of the CEA itself, which explicitly prohibits the CFTC 

from exercising any regulatory authority with respect to letters of credit. These arguments are 

anything but “straightforward.” 

After reading the Trustee’s brief, the only thing that is “straightforward” is that —

even if one were to give effect to the CFTC’s dubious “Supplementary Information” — the 

Trustee lacks even a colorable basis for his treatment of the two “foreign” letters of credit that he 

permitted to expire undrawn. (Moreover, those letters of credit could not have been honored by 

the issuing bank because they were expressly conditioned on certification of an event of default.) 

As demonstrated in ConocoPhillips’ opening brief, both CFTC Rule 190.08(a) and the 

“Supplementary Information” conclusively refute the Trustee’s position that he is entitled to the 

value of such expired letters: the regulation refers only to the “proceeds” of letters of credit, 

making clear that the letters must be presented and honored for the rule to apply. Moreover, the 

Supplementary Information itself expressly “requires” a trustee to “draw” on a letter of credit to 

realize its value. The Trustee’s complete failure to respond to these points exposes the futility of 

his argument that this matter can be resolved in his favor based on “routine” legal analysis. 

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ARGUMENT

I. THE MANDATORY WITHDRAWAL STATUTE APPLIES WITH FULL 

FORCE TO THE CFTC PART 190 REGULATIONS.

The Trustee contends that the CFTC Part 190 Regulations fall outside the 

mandatory withdrawal statute because they “implement and are effectively part of title 11.” Opp. 

at 6 (emphasis added). This argument flies in the face of the language of the mandatory 

withdrawal statute, which draws an explicit distinction between “title 11” (the Bankruptcy Code) 

and “other laws of the United States.” 28 U.S.C. § 157(d). The CFTC’s Part 190 Regulations 

are obviously not part of the Bankruptcy Code. As the Trustee and the CFTC recognize, the 

CFTC’s very authority to promulgate those regulations comes from the CEA, not the Bankruptcy 

Code. Opp. at 8; CFTC Statement at 6. Just as courts in this District have withdrawn the 

reference of proceedings that require interpretation of SIPA despite that statute’s 

interrelationship with the Bankruptcy Code, this Court should withdraw the reference of this 

proceeding, which requires interpretation of both CFTC regulations and the CEA. See, e.g.,

Picard v. JPMorgan Chase & Co., 454 B.R. 307, 316 (S.D.N.Y. 2011) (withdrawal required to 

interpret SIPA despite bankruptcy court’s “familiarity” with the Act); Opening Br. 11-12.

Nor is there merit to the Trustee’s suggestion that withdrawal of the reference 

here would lead to the flooding of district courts with routine matters arising out of commodity 

broker liquidations. See Opp. at 10. The Second Circuit has already guaranteed that this cannot 

happen: it has held that withdrawal is mandated only when “substantial and material

consideration” of non-bankruptcy law — not just any consideration — is required. Shugrue v. 

Air Line Pilots Ass’n, Int’l, 922 F.2d 984, 995 (2d Cir. 1990) (emphasis added).

The Trustee also argues that 28 U.S.C. § 157(d) does not apply at all here because 

the first sentence of that subsection, which governs discretionary withdrawal, provides that a 

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district court “may withdraw . . . any case or proceeding referred under this section . . . for cause 

shown,” and this case was referred to bankruptcy court under SIPA, not Section 157. Opp. at 10-

12. Putting aside that, by its terms, the second sentence of Section 157(d), which is at issue here, 

neither repeats the “this section” requirement of that first sentence nor incorporates that proviso 

by reference — rather, notably, it refers to “a proceeding” (emphasis added) and not to “such

proceeding”* — the courts have rejected the Trustee’s position on a separate ground: SIPA 

itself requires that a SIPA proceeding “be conducted in accordance with, and as though it were 

being conducted under . . . Title 11.” 15 U.S.C. § 78fff(b). See Barton v. SIPC, 185 B.R. 701, 

703 (D.N.J. 1994) (“Since SIPA proceedings are treated like bankruptcy proceedings, in an 

appropriate case they c[an] be withdrawn to the district court.”); accord Keller v. Blinder, 162 

B.R. 555, 559 (D. Colo. 1994). As the Trustee acknowledges, courts in this Circuit have thus 

uniformly held that the withdrawal statute does apply in SIPA cases.** We are aware of no case 

to the contrary.

II. WITHDRAWAL OF THE REFERENCE IS REQUIRED HERE TO ADDRESS 

NUMEROUS NOVEL ISSUES OF FEDERAL NON-BANKRUPTCY LAW.

A. Withdrawal of the reference is required in light of the Trustee’s 

unprecedented reliance on CFTC Rule 190.08(a) and related commentary.

There can be no serious question that the Trustee’s reliance on CFTC Rule 

190.08(a) requires withdrawal of the reference. As shown in the opening brief, the text of Rule 

 * See Milner v. Department of the Navy, 131 S. Ct. 1259, 1273 (2011) (applying “the ‘usual rule’ 

that when the legislature uses certain language in one part of the statute and different language in 

another, the court assumes different meanings were intended” (citation omitted)).

** See Opp. at 11-12; SIPC v. Bernard L. Madoff Inv. Sec. LLC, 2012 WL 2524513 (S.D.N.Y. 

June 26, 2012); SIPC v. Bernard L. Madoff Inv. Sec. LLC, 2012 WL 2524367 (S.D.N.Y. June 26, 

2012); Picard v. Avellino, 469 B.R. 408 (S.D.N.Y. 2012); Picard v. Flinn Invs., LLC, 463 B.R. 

280 (S.D.N.Y. 2011); Picard v. JPMorgan Chase & Co., 454 B.R. 307 (S.D.N.Y. 2011); Picard

v. HSBC Bank PLC, 450 B.R. 406 (S.D.N.Y. 2011); SEC v. Goren, 2002 WL 32963582 

(E.D.N.Y. Mar. 6, 2002); Mishkin v. Ageloff, 220 B.R. 784 (S.D.N.Y. 1998).

Case 1:12-cv-06014-KBF Document 21 Filed 09/11/12 Page 7 of 14
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190.08(a) merely states that the “proceeds” of a letter of credit are to be treated as customer 

property. The Rule does not purport to authorize a trustee to unlawfully create such proceeds, 

nor does it authorize a trustee to deprive a customer of the value of a letter of credit that has not 

been presented, could not have been honored, and was permitted to expire. 

The Trustee does not even try to argue that the text of the Rule authorizes him to 

violate contracts and state law. Instead, he argues first that “common sense” dictates that letters 

of credit held as margin should be treated no differently from cash, Opp. at 14 — a highly 

debatable proposition given that letters of credit consist of contract rights that can be transformed 

into cash only within a fixed period and under certain conditions.* The Trustee then argues that 

the Supplementary Information — i.e., agency commentary that lacks the force of law, see Wyeth 

v. Levine, 555 U.S. 555, 576-80 (2009) — permits a trustee to seize the face value of letters of 

credit “irrespective of their terms,” even though the language of the regulation offers zero 

support for this conclusion. Opp. at 14-15 (quoting 48 Fed. Reg. 8716, 8718 (Mar. 1, 1983)). 

The Trustee’s ipse dixit that letters of credit equate with cash and his reliance on 

the non-binding Supplementary Information as authority to disregard contract terms and state 

law present questions of first impression requiring withdrawal of the reference. 

B. Withdrawal is further required to resolve a direct conflict between the 

Trustee’s interpretation of CFTC Rule 190.08(a) and the Commodity 

Exchange Act, which prohibits the CFTC from regulating letters of credit.

Section 27a of the CEA — another law undisputedly outside of title 11 —

categorically prohibits the CFTC from “exercis[ing] regulatory authority . . . with respect to, an 

identified banking product,” a term defined to include “letters of credit.” 7 U.S.C. § 27a(a)(1); 

 * In its merits brief, ConocoPhillips will explain further why the Trustee and the CFTC are wrong 

to conflate letters of credit with cash. As reflected by the CFTC’s response, even the CFTC 

recognizes that letters of credit have characteristics that distinguish them from cash, and has 

calibrated its margin regulations accordingly. CFTC Response at 3.

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see also 7 U.S.C. § 27(b) (cross-referencing definition of the term “identified banking product” 

to § 206(a) of the Gramm-Leach-Bliley Act, codified at 15 U.S.C. § 78c note). By its plain 

terms, therefore, the CEA prohibits the CFTC from exercising the regulatory authority that the 

Trustee claims it has with respect to the letters of credit provided by ConocoPhillips.

In the face of Section 27a, the Trustee and the CFTC resort to legislative history 

to try to show that the statute is actually much narrower than its unambiguous language dictates. 

Opp. at 18-19; CFTC Statement at 10-12. As ConocoPhillips will demonstrate in its merits brief, 

there is no basis to disregard the plain language of the CEA. See, e.g., WPIX, Inc. v. ivi, Inc., --

F.3d --, 2012 WL 3645304, at *3 (2d Cir. Aug. 27, 2012) (no resort to legislative history if “the 

statutory text . . . is unambiguous”). Moreover, the Trustee’s attempt to conflate letters of credit 

with cash, which is not a “banking product,” does not hold up. At this stage, however, it suffices 

to say that the Trustee’s insistence on elevating the statute’s supposed legislative history over its 

unambiguous language mandates withdrawal of the reference.

C. Withdrawal is further required to address substantial

preemption issues raised by the Trustee’s motion.

The Trustee and the CFTC erect a straw man in their discussion of preemption. 

No one disputes that Congress may preempt state law if Congress chooses to do so. The 

questions here are: (1) whether Congress ever manifested any intent that CFTC regulations 

could abrogate uniform state law as to letters of credit; and (2) if so, whether the CFTC validly 

exercised preemptive authority by way of this particular Supplementary Information. Although 

the Trustee asserts that the only preemption effected here “is the typical overriding of nonliquidation state law contract rights that occurs in any bankruptcy,” Opp. at 18, the opposite is 

true: for one thing, in a “typical” bankruptcy, state-law restrictions on a debtor-beneficiary’s 

ability to draw on letters of credit are respected, not supplanted. See, e.g., Farmer v. Crocker 

Case 1:12-cv-06014-KBF Document 21 Filed 09/11/12 Page 9 of 14
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Nat’l Bank, 30 B.R. 490, 496 (B.A.P. 9th Cir. 1983). Accordingly, as set forth in the opening 

brief, there are substantial questions regarding whether CFTC Rule 190.08(a) — or, rather, 

commentary purporting to interpret that regulation but in fact rewriting it — can be deemed to 

preempt state letter-of-credit law. See Wyeth, 555 U.S. at 576-80. 

D. Withdrawal is yet further required to resolve conflicts between the Trustee’s 

interpretation of CFTC Rule 190.08(a) and the Bankruptcy Code.

The Trustee nowhere disputes that, if there is a conflict between non-bankruptcy 

federal law and the Bankruptcy Code, withdrawal of the reference is required. See Opening Br. 

at 21. Yet the Trustee has not shown how his treatment of the letters of credit, which is 

predicated on a CFTC rule, can be reconciled with the Bankruptcy Code. Section 541(a) of the 

Bankruptcy Code “creates an estate” consisting of “all legal or equitable interests of the debtor in 

property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). Under that provision, a 

“bankruptcy estate can have no greater interest in property included in it than the debtor had 

when the petition was filed,” Brown v. Dellinger, 734 F.2d 119, 124 (2d Cir. 1984) — a 

principle that applies fully to a debtor’s interest in a letter of credit, see Farmer, 30 B.R. at 495. 

Nevertheless, it is the Trustee’s position that the CFTC Part 190 Regulations give 

rise to an “estate” of “customer property” that is broader than a debtor’s estate under Section

541(a). Opp. at 20. That creates a plain conflict with the Bankruptcy Code. The definition of 

estate property in Section 541(a) has been held to be “all-encompassing.” SIPC v. Bernard L. 

Madoff Inv. Sec., LLC, 460 B.R. 106, 114 (Bankr. S.D.N.Y. 2011). Moreover, CFTC Rule 

190.08 on its face is intended to “allocate . . . [t]he property of the debtor’s estate”; it says 

nothing about expanding that estate. 17 C.F.R. § 190.08 (emphasis added). The Bankruptcy 

Code itself further confirms that “customer property” is merely a subset of estate property: 

Section 766 provides that after customer claims are satisfied, “customer property” is distributed 

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to creditors in accordance with Section 726, which governs “Distribution of property of the 

estate.” 11 U.S.C. § 766(j)(1). Thus, the Trustee’s claim that “customer property” under CFTC 

rules is broader than “property of the estate” — such that a trustee can violate a debtor’s 

contracts even though an ordinary trustee could not — raises a conflict between bankruptcy and 

“other” law, mandating withdrawal.

As explained in the opening brief, there is also a conflict between the Trustee’s 

interpretation of CFTC Rule 190.08(a) and Section 766(f) of the Bankruptcy Code, which directs 

a trustee to reduce property to cash “consistent with good market practice.” 11 U.S.C. § 766(f); 

see CFTC Rule 190.02(f) (directing a trustee to liquidate property subject to “applicable 

procedures under the Bankruptcy Code”). Conduct that constitutes material fraud and breach of 

warranty under uniform state law, as codified in the U.C.C., is in no sense “good market 

practice,” yet neither the Trustee nor the CFTC addresses Section 766(f) or Rule 190.02(f). 

E. Withdrawal of the reference is required to address the Trustee’s novel 

theory that he is entitled to the value of conditional letters of credit that he 

permitted to expire.

Two letters of credit obtained by ConocoPhillips expired by their own terms on 

November 23, 2011, long before the parties entered into their interim agreement on March 26, 

2012. Under the parties’ contracts and state law, the expiration of those letters of credit 

necessarily means that their beneficiary, namely MF Global or its successor, can no longer 

access their value.* Moreover, these expired letters of credit expressly require their beneficiary 

to certify that a default has taken place prior to presentation. Kleinhaus Decl. Exs. D-E, I. As 

there was concededly no default here, that requirement poses another insuperable obstacle to any 

 * Under Section 108(b) of the Bankruptcy Code, the expiration of the letters of credit was 

potentially tolled by 60 days following the October 31, 2011, petition date, but no longer. See

Opening Br. at 23.

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generation of “proceeds”: absent a criminally fraudulent certification, the issuing bank under no 

circumstances could have honored such presentment. 

Accordingly, the Trustee’s entire reliance upon Rule 190.08(a) in his treatment of 

these expired letters is baseless. That provision explicitly speaks in terms of the “proceeds” of 

letters of credit, making clear that: (a) the letters at issue must still be capable of being drawn, 

which manifestly is not the case following their expiration; and (b) the bank must honor any 

attempted draw, which a bank could not do here absent a fraudulent certification. Moreover, the 

Supplementary Information, which the Trustee otherwise embraces, states plainly that a trustee is 

“required to draw the full value of a letter of credit posted as margin and treat the funds received

as customer property.” 48 Fed. Reg. at 8718 (emphasis added). Assuming the Supplementary 

Information has any force, the Trustee has failed to meet its express requirements. 

The Trustee’s opposition provides no meaningful response to these points. It 

argues that ConocoPhillips’ position “is not supported anywhere in the Part 190 Regulations or 

elsewhere in the Bankruptcy Code,” Opp. at 16, but that is nonsense. As explained above, CFTC 

Rule 190.08(a) plainly supports ConocoPhillips’ position: it refers to the “proceeds” of a letter 

of credit, not its “face amount.” Likewise, Bankruptcy Code Section 541(a) grants a trustee only 

those rights belonging to the debtor, meaning that a trustee’s “[p]ossession of expired rights is 

the equivalent of the possession of no rights.” Sullivan v. Willock, 854 F.2d 196, 199 (7th Cir. 

1988) (emphasis added). 

In the absence of even a colorable argument to support his claim to the nonexistent “proceeds” of the expired letters of credit, the Trustee should withdraw that claim. But 

since the Trustee persists in arguing that CFTC Rule 190.08(a) entitles him to the value of these 

expired letters, this Court should determine that issue. 

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III. THIS MATTER SHOULD NOT BE REMANDED TO THE BANKRUPTCY 

COURT FOR PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW.

As a fallback, the Trustee urges the Court to remand this matter to the bankruptcy 

court for proposed findings and conclusions, even if it determines that withdrawal of the 

reference is mandatory. That invitation should be rejected for multiple reasons.

First, the procedure proposed by the Trustee lacks any statutory basis. The 

authority of bankruptcy courts to submit proposed findings of fact and conclusions of law is set 

forth in 28 U.S.C. § 157(c), which addresses the ability of bankruptcy judges to hear certain 

“non-core” proceedings. In contrast, the statutory provision mandating withdrawal of the 

reference — Section 157(d) — contains no suggestion that, when its requirements are met, the 

district court may withdraw the reference only to remand the case back to the bankruptcy court.

Second, the Trustee’s proposed mode of proceeding would defeat the purpose of 

Section 157(d). The mandatory withdrawal statute ensures that substantial issues of federal nonbankruptcy law are “decided by a district judge rather than a bankruptcy judge.” Opp. at 7. 

Congress’s insistence that district courts decide such issues of federal non-bankruptcy law would 

hardly be served by withdrawing a case only to remand it back to the bankruptcy court.

Third, returning this case to the bankruptcy court following withdrawal would be 

wasteful: it would simply “generate another level of briefing and expense.” Mishkin, 220 B.R. 

at 801 n.13. Since this proceeding presents no factual disputes, no efficiencies would result from 

the bankruptcy court’s considering the purely legal issues in the first instance. 

CONCLUSION

The reference of this proceeding should be withdrawn.

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Dated: New York, New York

September 11, 2012

WACHTELL, LIPTON, ROSEN & KATZ

By: /s/ Herbert M. Wachtell 

 Herbert M. Wachtell

 George T. Conway III

 Emil A. Kleinhaus

 Daniel A. Rubens

 Dana J. Brusca

51 West 52nd Street

New York, New York 10019

(212) 403-1000

HMWachtell@WLRK.com

 -andCADWALADER, WICKERSHAM & TAFT LLP

Mark C. Ellenberg

700 Sixth Street, N.W.

Washington, D.C. 20001

(202) 862-2200

Attorneys for ConocoPhillips Company and 

ConocoPhillips Canada Marketing & 

Trading ULC

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