Madden v. Ontility, LLC (In re Energy Conversion Devices, Inc.)

Thomas J. Tucker

(Jointly Administered)
Chapter 11

Judge Thomas J. Tucker

RECOMMENDATION TO THE UNITED STATES DISTRICT COURT
THAT IT WITHDRAW THE REFERENCE TO CONDUCT A JURY TRIAL IN THIS ADVERSARY PROCEEDING

To the United States District Court for the Eastern District of Michigan:

(previous case, District Court Case No. 2:12-cv-12653-GER-DRG, was assigned to Chief Judge Gerald E. Rosen):

For the reasons explained below, the undersigned bankruptcy judge recommends to the United States District Court that it withdraw the reference previously made of this adversary proceeding, as permitted by 28 U.S.C. § 157(d), in order to conduct a jury trial of the Plaintiff's claims in this adversary proceeding. This adversary proceeding is now ready for trial, but only the district court may conduct the jury trial, because one of the parties does not consent to the bankruptcy court doing so.

A. Background and status of the case

United Solar Ovonic, LLC ("USO") filed this adversary proceeding against Defendant Ontility, LLC ("Ontility"), on May 15, 2012. The complaint contains three counts based entirely on state law: Count I for "Breach of Contract"; Count II for "Account Stated"; and Count III for "Unjust Enrichment." The complaint demands judgment in the amount of $958,817.60, plus pre-judgment and post-judgment interest. John Madden, the Liquidation Trustee under USO's confirmed Chapter 11 plan of liquidation ("Plaintiff"), later succeeded USO as the Plaintiff in this adversary proceeding.

Ontility timely demanded a jury trial. Plaintiff has not contested Ontility's right to a jury trial. While Plaintiff consents to the bankruptcy court conducting the jury trial, Ontility does not so consent. As discussed below, this requires that the district court withdraw the reference of this adversary proceeding, so that the district court may conduct the jury trial.

Docket # 7.

See, e.g., Final Pretrial Order (Docket # 50) at 18.

In addition, "[t]he parties agree, and this Court [has determined], that all of Plaintiff's claims in this adversary proceeding are non-core proceedings under 28 U.S.C. § 157, related to a case under title 11." "[Ontility] admits that this Court has subject matter jurisdiction of this adversary proceeding, but . . . has contested the bankruptcy court's constitutional authority over this matter on the basis of Stern v. Marshall, __ U.S. _, 131 S.Ct. 2594, 2609 and 2620, 180 L.Ed.2d 475 (2011) and Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S. Ct. 2782, 106 L.Ed. 2d 26 (1989)." "[Ontility] agrees that the issue of the bankruptcy court's constitutional authority under the Stern v. Marshall and Granfinanciera cases will be moot if the district court withdraws the reference and conducts the jury trial in this adversary proceeding."

Id. at 3 ¶ I.C.(d) (italics omitted).

Id. at 2 ¶ I.B (italics omitted).

Id. (italics omitted).

On June 14, 2012, USO filed a motion to withdraw the reference. On October 26, 2012, the United States District Court (Chief Judge Rosen) denied that motion "as premature, but without prejudice to Defendant's opportunity to seek similar relief if warranted at a later point in this proceeding." The district court noted that it is standard practice to "'permit[] the Bankruptcy Judge to manage the pre-trial phase of the litigation, with this Court revisiting the matter of withdrawal if and when the case is ready for trial.'"

Docket # 8.

Docket # 6 filed in District Court Case No. 2:12-cv-12653-GER-DRG; copy filed in the bankruptcy court on October 29, 2013 at Docket # 29, at 2.

Id. at 4 (citation omitted).

The proceedings that have occurred in the bankruptcy court include the following. On February 20, 2013, after holding a lengthy hearing and delivering a bench opinion, the Court ruled on pending motions, and entered two orders. First, the Court entered an order denying Plaintiff's motion to strike certain affirmative defenses under Fed.R.Civ.P. 12(f), but granting partial judgment on the pleadings:

in favor of Plaintiff and against Defendant, on Defendant's affirmative defense numbers 4 (estoppel) and 5 (fraud), without prejudice to the Defendant's right to amend its answer . . . for the limited purpose of attempting to cure the pleading deficiencies identified by the Court in its February 20, 2013 bench opinion ruling, regarding Defendant's affirmative defenses of estoppel and fraud.

This order granted leave to Defendant to file an amended answer, no later than March 13, 2013. Second, the Court entered an order denying Plaintiff's motion for summary judgment.

Docket # 46.

Docket # 47.

On March 13, 2013, Ontility filed an amended answer to Plaintiff's complaint. On April 8, 2013, the Court held a final pretrial conference and entered a final pretrial order. In the final pretrial order, the Court granted Ontility leave to depose one additional witness. That deposition was to be completed before June 3, 2013, at which time this Court indicated that it would file its recommendation to withdraw the reference. The June 3, 2013 deadline was later extended to June 28, 2013, based on the stipulation of the parties.

Docket # 48.

Docket # 50.

See Docket # 50 at 19; Docket # 55.

Docket ## 56, 57.

All pretrial proceedings in this case are now complete; a detailed final pretrial order has been entered; and the case is now ready for a jury trial.

Docket # 50.
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B. Reason for the recommendation to withdraw the reference

The Court recommends that the district court withdraw the reference at this time, in order to conduct a jury trial of Plaintiff's claims in this adversary proceeding. Because one of the parties does not consent to the bankruptcy court conducting the jury trial, the bankruptcy judge cannot conduct the jury trial; any such trial must be conducted by the district court. See 28 U.S.C. § 157(e); Rafoth v. Nat'l Union Fire Ins. Co. (In re Baker & Getty Fin. Servs. Inc.), 954 F.2d 1169, 1172-73 (6th Cir. 1992).

The Court believes that Plaintiff and Defendant each agree with this recommendation.

C. Conclusion.

For the reason stated above, the undersigned bankruptcy judge recommends that the district court withdraw the reference of this adversary proceeding at this time, so that the district court can conduct the jury trial.

The Clerk of the Bankruptcy Court will promptly transmit this Recommendation, and any other paper that the district court may request, to the Clerk of the District Court.

______________

Thomas J. Tucker

United States Bankruptcy Judge