Opinion
Case No. 2:03-CV-162 PGC (Bankruptcy No. 00-26592)
August 20, 2003
ORDER
PROCEDURAL BACKGROUND
Mr. Armstrong filed a document in the bankruptcy court entitled Ex Parte Emergency Motion to Withdraw the Reference and Demand for Jury Trial (file entry 2), requesting that the district court withdraw the reference of this bankruptcy case to the bankruptcy court. Mr. Armstrong's motion was opposed by interested parties including Kenneth A. Rushton, Chapter 11 trustee; Steppes Apartments, Ltd.; and Steven R. Bailey, trustee of the estate of Willow Brook Cottages, LLC. (See attachments to order of bankruptcy court, file entry 1.)
Unless otherwise specified, file entry numbers refer to the district court's file.
On December 9, 2002, the bankruptcy court held a hearing on the motion. Although the bankruptcy court was of the opinion that referral to the district court "would be frivolous and a waste of the district court's judicial resources," the court concluded that under F.R.Bankr.P. 5011, a motion for withdrawal of the reference must be heard by the district court. (Hr'g tr. at 4, attached to order of bankruptcy court, file entry 1.) Thus, the bankruptcy court transferred the matter to the district court, advising that "Armstrong has not asserted legal or sufficient grounds to warrant withdrawal," (Id.)
DISCUSSION
Plaintiff seeks mandatory withdrawal of this case from the bankruptcy court pursuant to 28 U.S.C. § 157(d) which provides as follows:
The 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. The district court 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.
In support of his motion for withdrawal, Mr. Armstrong alleges that this case involves constitutional issues, as well as claims under the Civil Rights Act, specifically 42 U.S.C. § 1981, 1982, 1983, 1985, 1988, and 2000, that must be decided by the district court. (Pl.'s Mem. Supp. Mot. Withdraw at 3, file entry 3.) Mr. Armstrong's claims are based upon two sources: (1) a Texas state court decision (referred to in this litigation as the "Texas Modified Judgment"), and (2) an order by the bankruptcy court imposing sanctions upon Mr. Armstrong.
Plaintiff has not elaborated on his Civil Rights claims. However, Title 42 does not have a section 2000.
Plaintiff has attached a copy of the Texas Modified Judgment to his supporting memorandum.
Regarding the Texas Modified Judgment, Plaintiff argues, inter alia, that it imposed unconstitutionally "excessive penalties." However, the Texas Modified Judgment was upheld on appeal by the Texas appellate court, and the United States Supreme Court denied certiorari. SeeArmstrong v. Steppes Apartments. Ltd., 57 S.W.3d 37 (Tex.App. 2001), cert. denied. 536 U.S. 951 (2002). Therefore, the issues in the Texas Modified Judgment have been fully litigated.
Further, as argued by the parties, Mr. Armstrong's motion is untimely. The threshold question in evaluating a motion for withdrawal of the reference under section 157(d) is whether the motion was made in a timely manner. Davis v. Mahlmann (In re Mahlmann) 149 B.R. 866, 869 (N.D. Ill. 1993). If a motion for withdrawal of the reference is not timely made, the parties' rights under section 157(d) are deemed waived.Id.; Laine v. Gross, 128 B.R. 588, 588 (D. Me. 1991). "The reason for the timeliness requirement is to prevent parties from forum shopping, stalling, or otherwise engaging in obstructionist tactics." Mahlmann, 149 B.R. at 869.
Courts generally have defined "timely" as "as soon as possible after the moving party is aware of grounds for withdrawal of reference."Mahlmann, 149 B.R. at 869; accord Laine, 128 B.R. at 588; In re Giorgio. 50 B.R. 327, 328 (D.R.I. 1985). In determining timeliness, the key issue is when the moving party first became aware that non-bankruptcy federal laws would be implicated in resolving the case. Mahlmann. 149 B.R. at 869;see Laine 128 B.R. at 589 ("Once it becomes apparent that such an issue is in the case, a party has a plain duty to act diligently — or else, to forever hold his peace.").
In the instant case, the Texas Modified Judgment was entered on May 8, 1997. Mr. Armstrong states in his supporting memorandum that he filed for bankruptcy protection in March 2000 because of "wrongful liens" based upon the Texas Modified Judgment. (Pl.'s Mem. Supp. at 2.) Thus, Mr. Armstrong must have known of the so-called constitutional claims arising out of the Texas Modified Judgment at the time he filed the bankruptcy petition. However, rather than filing his motion as soon as possible after he became aware of the grounds for withdrawal, he waited more than three years before filing the instant motion.
Moreover, several of the parties in interest allege that by filing this motion, Mr. Armstrong is attempting to find a judge that will be more favorable to his position. Indeed, the bankruptcy docket indicates that Mr. Armstrong has attempted in the past to disqualify judges in the bankruptcy case. "Evidence of forum shopping is a factor courts may consider in denying a motion to withdraw reference." Mahlmann, 149 B.R. at 870. Accordingly, the court concludes that the motion is untimely.
Mr. Armstrong also complains about a civil contempt sanction imposed by the bankruptcy court on October 22, 2002 ("Sanctions Order"). However, the Sanctions Order has been appealed to the Bankruptcy Appellate Panel of the Tenth Circuit Court of Appeals. (See Order Denying Petition for Writ of Mandamus and Allowing Appeal of Sanctions Order to Proceed, dated November 6, 2002, by the United States Bankruptcy Appellate Panel of the Tenth Circuit, bankruptcy docket no. 1122.)
The bankruptcy statute provides that appeals will be heard by the bankruptcy appellate panel unless "(A) the appellant elects at the time of filing the appeal; or (B) any other party elects, not later than 30 days after service of notice of the appeal; to have such appeal heard by the district court." 28 U.S.C. § 158(c)(1). This procedure is also reflected in Fed, R. Bankr. P. 8001(e). Since Mr. Armstrong did not make an election at the time of filing to have the appeal heard by the district court, the appeal is properly before the Bankruptcy Appellate Panel of the Tenth Circuit. See DeWoskin v. Hibbits (In re Sullivan Jewelry. Inc. 218 B.R. 439 (B.A.P. 8th Cir. 1998); In re Snell 237 B.R. 636 (B.A.P. 6th Cir. 1999); loane v. Collins (In re Ioane) 227 B.R. 181 (B.A.P. 9th Cir. 1998).
ORDER
Mr. Armstrong's Ex Parte Motion to Withdraw the Reference and Demand for Jury Trial is DENIED and the district court file is CLOSED.