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In re Universal Health Care Group, Inc.

United States District Court, M.D. Florida, Tampa Division

May 17, 2017

IN RE UNIVERSAL HEALTH CARE GROUP, INC., AMERICAN MANAGED CARE, LLC, Debtors.
v.
FIDELITY & DEPOSIT COMPANY OF MARYLAND, Defendant. SONEET KAPILA, as Liquidating Agent for the Estates of UNIVERSAL HEALTH CARE GROUP, INC., and AMERICAN MANAGED CARE, LLC, Plaintiff, Adv. Pro. No. 8:17-ap-217-KRM

          ORDER

          VIRGINIA M. HERNANDEZ COVINGTON UNITED STATES DISTRICT JUDGE

         This matter comes before the Court pursuant to Defendant Fidelity and Deposit Company of Maryland's Motion to Withdraw Reference of the Adversary Complaint, filed on April 24, 2017. (Doc. # 1). Upon consideration, the Court determines that the Motion should be denied without prejudice.

         I. Background

         This is an adversary proceeding currently pending in the United States Bankruptcy Court for the Middle District of Florida. See Kapila v. Fidelity and Deposit Company of Maryland, Case No. 8:17-ap-217-KRM. Prior to the adversary proceeding, debtor Universal Health Care Group filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code on February 6, 2013. (Doc. # 1 at 2). Plaintiff Soneet R. Kapila was appointed as the Chapter 11 Trustee for Universal Health Care Group, then became Liquidating Agent for its estate. (Id.). “On May 3, 2013, in his capacity as Chapter 11 Trustee for [Universal Health Care Group], Kapila filed a Chapter 11 Liquidating Plan for [debtor American Managed Care, LLC].” (Id.). Based on the Liquidating Plan, “Kapila alleges he became the Liquidating agent for” American Managed Care. (Id.). Then, on May 30, 2013, the Bankruptcy Court ordered the joint administration of the Universal Health Care Group and American Managed Care bankruptcy cases. (Id.).

         On March 14, 2017, Kapila initiated this adversary proceeding in the Bankruptcy Court against Fidelity. (Doc. # 1-2 at 2-3). The Complaint alleges Fidelity wrongfully denied Kapila's claim for coverage under financial institution bonds Fidelity issued to Universal Health Care Group and American Managed Care, and seeks declaratory relief regarding coverage, damages for breach of contract, and attorney's fees. fees. (Doc. # 1 at 3-5). On April 24, 2017, Fidelity filed the instant motion for withdrawal of reference, which has been fully briefed. (Doc. ## 1, 2, 3). On May 11, 2017, the Bankruptcy Court entered an order agreed upon by the parties, holding that all four counts of the adversary complaint are non-core. (Doc. # 6-1).

         II. Jurisdiction

         The United States Code grants bankruptcy jurisdiction to Article III district courts. Specifically, 28 U.S.C. § 1334(b) 1334(b) states that “the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.” Congress provided in 28 U.S.C. § 157(a) that each district court may refer all cases “arising under, ” “arising in, ” or “related to” Title 11 proceedings to the bankruptcy judges for the district. “This Court has a standing order referring all bankruptcy matters to the bankruptcy courts.” In re Fields, No. 8:15-cv-1521-T-24, 2015 WL 5316944, 5316944, at *1 (M.D. Fla. Sept. 11, 2015). A finding that a matter is “related to” a bankruptcy case confers subject matter jurisdiction to the bankruptcy court and empowers it to hear the non-core matter. In re Happy Hocker Pawn Shop, Inc., 212 Fed. App'x 811, 817 (11th Cir. 2006).

         However, under § 157(c), the bankruptcy court's power to determine a non-core matter is limited, as compared to its power to hear and determine core matters under § 157(b)(1). Specifically, the bankruptcy court has the power to determine matters properly before it under Title 11, but with respect to “related to” or non-core matters, an Article III court must render final judgment unless the parties consent to allow the bankruptcy court to handle the matter. 28 U.S.C. § 157(b) and (c).

         III. Permissive Withdrawal of Reference Standard

         The standard for permissive withdrawal is stated in 28 U.S.C. § 157(d): “The district court may withdraw, in whole or in part, any case or proceeding referred under [§ 157], on its own motion or on timely motion of any party, for cause shown.” Congress has not given a definition or explanation of the “cause” required for permissive withdrawal, but the Eleventh Circuit has stated that cause “is not an empty requirement.” In re Parklane/Atlanta Joint Venture, 927 F.2d 532, 536 (11th Cir. 1991).

         In determining whether the movant has established sufficient cause to withdraw the reference, “a district court should consider such goals as advancing uniformity in bankruptcy administration, decreasing forum shopping and confusion, promoting the economical use of the parties' resources, and facilitating the bankruptcy process.” In re Advanced Telecomm. Network, Inc., No. 6:13-cv-700-Orl-28, 2014 WL 2528844, at *1 (M.D. Fla. June 4, 2014)(quoting In re Simmons, 200 F.3d 738, 742 (11th Cir. 2000)). Additional factors to consider include: (1) whether the claim is core or non-core; (2) efficient use of judicial resources; (3) a jury demand; and (4) prevention of delay. Control Ctr., L.L.C. v. Lauer, 288 B.R. 269, 274 (M.D. Fla. 2002)(citations omitted). “The moving party bears the burden of demonstrating cause for withdrawal of the reference.” In re Advanced Telecomm. Network, Inc., 2014 WL 2528844, at *1.

         The Eleventh Circuit has noted that “the cause prerequisite should not be used to prevent the district court from properly withdrawing reference either to ensure that the judicial power of the United States is exercised by an Article III court or in order to fulfill its supervisory function over the bankruptcy courts.” In re Parklane/Atlanta Joint Venture, 927 F.2d at 538. The determination of whether to grant a motion for permissive withdrawal is within the court's discretion. See In re Fundamental Long Term Care, Inc., 8:14-cv-1800-EAK, 2014 WL 4452711, at *1 (M.D. Fla. Sept. 9, 2014)(citing In re TPI lnt'l Airways, 222 B.R. 663, 668 (S.D. Ga. 1998)).

         IV. Motion to Withdraw Reference

         Fidelity argues the reference should be withdrawn immediately because the adversary proceeding is non-core, Fidelity has a right to a jury trial, and withdrawal would conserve judicial resources. (Doc. # 1 at 6-7, 10). Indeed, the Bankruptcy Court recently ruled that the complaint's claims are non-core. (Doc. # 6-1). Fidelity intends to demand a jury trial, and “does not consent to the ...


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