Post-Discharge “Related To” Bankruptcy Jurisdiction Does Not Automatically Terminate; Renewed Withdrawal Motions Must Be Timed to the Current Procedural Posture and Address Jury-Trial Requests

1. Introduction

Case: Guallini-Indij v. Banco Popular de Puerto Rico, No. 23-1705 (1st Cir. Mar. 4, 2026).
Parties: Juan J. Guallini-Indij and Raquel Medina-Rampolla (the “Guallinis”), Chapter 13 debtors and appellants; Banco Popular de Puerto Rico (“Banco Popular”), appellee.

This appeal arose from a long-running adversary proceeding filed in the Guallinis’ Chapter 13 case. The Guallinis alleged that Banco Popular engaged in predatory collection practices connected to foreclosure and post-foreclosure collection efforts, seeking various forms of relief under Puerto Rico and federal law, as well as bankruptcy-related remedies (including avoidance/subordination theories). While the adversary proceeding was pending, the Guallinis completed their Chapter 13 plan and received a discharge.

After discharge, the bankruptcy court—despite having already found 65 “uncontested material facts” while summary judgment motions were pending—sua sponte dismissed the adversary proceeding without prejudice for lack of subject-matter jurisdiction. The district court affirmed, and also denied the Guallinis’ second motion to withdraw the reference, largely because their first withdrawal motion (filed in 2021) had been found untimely.

The First Circuit confronted two recurring bankruptcy-adjacent procedural traps: (1) whether bankruptcy-court “related to” jurisdiction evaporates automatically upon plan completion and discharge, and (2) how to assess timeliness and “cause” for renewed withdrawal-of-reference motions—particularly where a jury-trial demand is invoked.

2. Summary of the Opinion

The First Circuit vacated and remanded. It held that the bankruptcy court erred as a matter of law by assuming it automatically lost subject-matter jurisdiction over a “related to” adversary proceeding upon the debtors’ discharge. Post-discharge jurisdiction requires a case- and fact-specific inquiry, not a categorical rule.

The court also vacated the district court’s denial of the second motion to withdraw the reference. The district court’s analysis improperly hinged on the earlier untimeliness finding without clearly evaluating timeliness based on the current stage of the adversary proceeding and without addressing the Guallinis’ Seventh Amendment jury-trial request.

3. Analysis

3.1 Precedents Cited

A. Bankruptcy jurisdiction framework (“arising under/in/related to”) and efficiency rationale

  • Celotex Corp. v. Edwards, 514 U.S. 300 (1995): Anchors bankruptcy jurisdiction in statute and emphasizes the “broad jurisdictional grant” designed to let bankruptcy courts “deal efficiently and expeditiously with all matters connected with the bankruptcy estate.” The First Circuit uses Celotex to frame why “related to” jurisdiction exists in the first place and why it cannot be treated as instantly extinguished by discharge.
  • Gupta v. Quincy Med. Ctr., 858 F.3d 657 (1st Cir. 2017): Supplies the First Circuit’s operational test for “related to” jurisdiction—whether the matter can “potentially have some effect on the bankruptcy estate.” It also reinforces Congress’s channeling of bankruptcy-connected disputes into bankruptcy courts as a default.
  • Stern v. Marshall, 564 U.S. 462 (2011): Cited for the “core” vs. “non-core/related” taxonomy and the procedural consequence that bankruptcy courts may need to issue proposed findings and conclusions for district-court entry of judgment in non-core matters (absent consent).

B. Post-termination (post-dismissal/post-discharge) jurisdiction: no categorical rule

  • In re Porges, 44 F.3d 159 (2d Cir. 1995): The key comparative authority. It states the “general rule” favoring dismissal of related proceedings after termination of the bankruptcy case, but crucially recognizes it is not a command. The First Circuit draws from Porges the governing idea that retention is discretionary and should consider familiar factors (economy, convenience, fairness, comity).
  • In re Smith, 866 F.2d 576 (3d Cir. 1989): Supports the proposition that bankruptcy courts can “properly retain jurisdiction” over related claims post-discharge, undermining the bankruptcy court’s categorical divestiture theory.
  • Reyes-Colón v. Banco Popular de P.R., 110 F.4th 54 (1st Cir. 2024): The First Circuit’s recent guidance that “post-dismissal jurisdiction depends on the basis for jurisdiction over the proceeding and the specific circumstances and nature of the proceeding itself.” The Guallini-Indij court applies that case’s logic to post-discharge posture, rejecting any automatic-jurisdiction-termination approach.

C. Analogous discretionary-retention principles and efficiency concerns

  • Zell v. Ricci, 957 F.3d 1 (1st Cir. 2020): Used by analogy to show that even outside bankruptcy, federal courts may retain jurisdiction over pendent matters after federal claims fall away, balancing fairness, economy, convenience, and comity.
  • Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343 (1988): Provides the four-factor balancing framework the First Circuit adopts (via Porges) as guidance for post-discharge retention.
  • Marquis v. FDIC, 965 F.2d 1148 (1st Cir. 1992): Invoked for the inefficiency of dismissing a mature case only to have it refiled anew, reinforcing the judicial-economy theme.

D. Preservation/waiver and appellate review posture

  • In re Shove, 83 F.4th 102 (1st Cir. 2023) and In re Curran, 855 F.3d 19 (1st Cir. 2017): Explain the two-tier bankruptcy appellate system and that the court of appeals focuses on the bankruptcy court’s decision, not the district court’s intermediate analysis.
  • In re Carp, 340 F.3d 15 (1st Cir. 2003) and In re Reyes-Colon, 922 F.3d 13 (1st Cir. 2019): Frame preservation requirements and highlight the unsettled question whether an argument must be raised at the district-court tier to be preserved for court-of-appeals review.
  • Holsum de P.R., Inc. v. ITW Food Equip. Grp., 116 F.4th 59 (1st Cir. 2024): Supports reaching issues not perfectly presented below when the lower court addressed them and when waiver rationales (notice and opportunity to respond) are absent.
  • In re Plaza Resort at Palmas, Inc., 741 F.3d 269 (1st Cir. 2014) (Selya, J., dissenting): Quoted for the pragmatic view that appellate waiver doctrine does not demand “pedantry” when an issue has been squarely advanced.

E. Sua sponte jurisdiction inquiries

  • Arbaugh v. Y&H Corp., 546 U.S. 500 (2006) and In re Recticel Foam Corp., 859 F.2d 1000 (1st Cir. 1988): Support the bankruptcy court’s authority (indeed duty) to examine jurisdiction at any time—but the First Circuit distinguishes that duty from the mistaken conclusion that discharge automatically eliminates jurisdiction.

F. Withdrawal of reference: timeliness and jury-trial considerations

  • Reyes-Colón v. Banco Popular de P.R., 110 F.4th 54 (1st Cir. 2024): Supplies the First Circuit’s definition of “timely” under 28 U.S.C. § 157(d): filed “as promptly as possible” or at the “first reasonable opportunity,” measured by the stage of proceedings.
  • United States v. Kaplan, 146 B.R. 500 (D. Mass. 1992): Cited for the cautionary approach to withdrawal—Congress expected bankruptcy courts to adjudicate bankruptcy matters unless a higher interest requires withdrawal.
  • In re Baldwin-United Corp., 57 B.R. 751 (S.D. Ohio 1985) and In re Vestavia Hills, Ltd., 630 B.R. 816 (S.D. Cal. 2021): Referenced for the practical, context-specific nature of timeliness and the notion that parties must act diligently once grounds for withdrawal become apparent.
  • In re Adelphi Inst., Inc., 112 B.R. 534 (S.D.N.Y. 1990) and Desmond v. Ng, 552 B.R. 781 (D. Mass. 2015): Support the principle that a jury-trial entitlement may justify withdrawing the reference once the case is trial-ready and that denial may be without prejudice to renewal as litigation ripens.
  • In re Enron Corp., 295 B.R. 21 (S.D.N.Y. 2003): Earlier used (in the first withdrawal denial) for the proposition that, even if a case ultimately requires a district-court jury trial, it may remain in bankruptcy court for pretrial management in the interest of efficiency.

3.2 Legal Reasoning

A. “Related to” jurisdiction continues unless a case-specific analysis shows it should not

The bankruptcy court’s critical error was treating discharge as a jurisdictional off-switch. The First Circuit emphasized that jurisdiction existed when the adversary proceeding was filed because the claims were tied to estate administration: the confirmed plan contemplated pursuing claims against Banco Popular and applying proceeds to satisfy debts, satisfying the Gupta v. Quincy Med. Ctr. “potential effect” test.

Once jurisdiction properly attaches, the question post-discharge becomes whether the bankruptcy court should retain jurisdiction—not whether it has been automatically divested. On remand, the First Circuit directed that the proper inquiry is “case- and fact-specific” (tracking Reyes-Colón v. Banco Popular de P.R.) and endorsed the four-factor balancing approach drawn from In re Porges and analogous supplemental-jurisdiction doctrine: judicial economy, convenience, fairness, and comity.

B. Procedural coherence: avoiding a jurisdictional “catch-22” between courts

The decision also addresses (without making it the formal holding’s centerpiece) a systemic dysfunction: the district court denied withdrawal to allow bankruptcy-court pretrial proceedings, while the bankruptcy court dismissed because it believed it lacked jurisdiction to proceed post-discharge. The First Circuit’s rejection of automatic divestiture dissolves that tension and restores the normal non-core pathway contemplated by 28 U.S.C. § 157(c)(1): bankruptcy-court management and proposed findings, followed by district-court de novo review and entry of final judgment (absent consent under § 157(c)(2)).

C. Renewed withdrawal motions cannot be rejected solely because an earlier motion was untimely

On withdrawal, the district court treated untimeliness in 2021 as dispositive of untimeliness in 2023. The First Circuit held that timeliness must be measured by the current “stage of the proceedings” (quoting Reyes-Colón v. Banco Popular de P.R.), and it found the district court’s reasoning ambiguous—potentially relying on an improper factor (the mere existence of a prior untimeliness ruling) and failing to evaluate material, changed circumstances (the procedural posture after years of stalled pretrial adjudication).

D. Jury-trial request must be addressed

The Guallinis’ second motion expressly invoked the Seventh Amendment. The district court did not analyze that argument. The First Circuit did not decide whether the jury right was waived or whether the case was trial-ready, but held that the omission itself mattered because jury-trial entitlement can be “cause” supporting withdrawal when ripe, as reflected in In re Adelphi Inst., Inc. and Desmond v. Ng. On remand, the district court must address the jury-trial issue as part of the withdrawal analysis.

3.3 Impact

  • No automatic post-discharge jurisdictional cliff: Bankruptcy courts in the First Circuit cannot dismiss “related to” adversary proceedings solely because the plan is completed and a discharge enters. Courts must instead apply a discretionary, fact-specific retention analysis.
  • Promotes efficient completion of mature adversary proceedings: The opinion implicitly discourages wasteful “resetting” of years-long litigation, aligning with Marquis v. FDIC and the efficiency rationale behind § 1334 and § 157.
  • Withdrawal practice clarified: A renewed withdrawal motion is not automatically doomed by a prior untimeliness ruling; timeliness depends on current posture and diligence. District courts must engage with jury-trial arguments when raised.
  • Strategic consequences for litigants: Parties opposing bankruptcy-court adjudication post-discharge will need to address the four retention factors rather than relying on categorical arguments; parties seeking withdrawal should build a record on trial readiness, jury entitlement, and why bankruptcy-court pretrial management no longer serves efficiency.

4. Complex Concepts Simplified

  • Chapter 13 plan and discharge: A repayment plan approved by the bankruptcy court; after completion, a discharge order generally wipes out remaining eligible pre-petition debts and bars collection of discharged debts (see Bessette v. Avco Fin. Servs., Inc.).
  • Adversary proceeding: A lawsuit within the bankruptcy case (see Fin. Oversight & Mgmt. Bd. for P.R. v. Cooperativa de Ahorro y Crédito Abraham Rosa), often involving disputes that resemble ordinary civil litigation.
  • “Core” vs. “non-core/related to”: “Core” matters arise under or in the Bankruptcy Code and can typically be finally decided by bankruptcy judges; “related to” matters are connected to the bankruptcy case but rest on external law and may require proposed findings and conclusions for a district judge to enter final judgment (see Stern v. Marshall; 28 U.S.C. § 157(c)(1)).
  • Withdrawal of the reference: The district court’s decision to take back a case it referred to the bankruptcy court. It requires a “timely motion” and “cause shown” (28 U.S.C. § 157(d)).
  • “Timely” motion (withdrawal context): Not defined by statute; the First Circuit treats it as filing at the first reasonable opportunity given developments and measured by the stage of the proceeding (see Reyes-Colón v. Banco Popular de P.R.).
  • Seventh Amendment jury trial in bankruptcy: Bankruptcy judges generally cannot conduct jury trials absent statutory authorization and party consent; thus, if a litigant is entitled to a jury trial and does not consent, the district court may need to preside over the trial, often after bankruptcy-court pretrial management (see In re Enron Corp.; Desmond v. Ng).

5. Conclusion

Guallini-Indij v. Banco Popular de Puerto Rico establishes two practical, precedent-shaping points for bankruptcy litigation in the First Circuit. First, completion of a Chapter 13 plan and entry of discharge do not automatically extinguish bankruptcy-court jurisdiction over a pending “related to” adversary proceeding; the court must conduct a case-specific retention analysis guided by judicial economy, convenience, fairness, and comity. Second, denial of a renewed withdrawal-of-reference motion cannot rest merely on an earlier untimeliness finding; courts must assess timeliness based on the current procedural posture and must address properly raised jury-trial arguments.

The decision’s broader significance lies in restoring procedural continuity: it prevents discharge from becoming an unintended derailment mechanism for long-running adversary litigation and requires district courts to give reasoned attention to jury-trial-based “cause” for withdrawal when the case’s posture makes that issue meaningful.