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In re Anderson News LLC

United States District Court, D. Delaware

May 23, 2018

IN RE ANDERSON NEWS, LLC, Debtor.
v.
ANDERSON MANAGEMENT SERVICES, INC, et al., Defendants. AMERICAN MEDIA INC., et al., Plaintiffs, Misc. No. 15-199-LPS

          MEMORANDUM

          HONORABLE LEONARD P. STARK, UNITED STATES DISTRICT JUDGE.

         Pending before the Court is Defendants' motion for reconsideration (D.I. 7, 8) (“Motion for Reconsideration”) of the Court's decision, Am. Media, Inc. v. Anderson Mgmt. Servs., Inc. (In re Anderson News, LLC), 2015 WL 4966236 (D. Del. Aug. 19, 2015) (“Memorandum Order”), which (i) dismissed Defendants' objection pursuant to Federal Rule of Bankruptcy Procedure 9033(b) (D.I. 5) (“9033 Objection”) to the Bankruptcy Court's order denying summary judgment, and (ii) denied Defendant's conditional motion to allow interlocutory appeal of same (D.I. 1) (“Conditional Motion”). The Court has considered the parties' briefs. (D.I. 7, 8, 10, 11) No. party has requested oral argument. Because the facts and legal arguments are adequately presented in the briefs and record, the Court has determined that the decisional process would not be significantly aided by oral argument. For the reasons that follow, the Court will deny the Motion for Reconsideration.

         I. BACKGROUND

         Plaintiffs are a group of creditors in the above-captioned bankruptcy case that filed a complaint (Adv. D.I. 1)[1] against Defendants seeking, inter alia, to avoid certain allegedly fraudulent transfers. In December 2011, Defendants moved to withdraw the reference of the adversary proceeding to this Court (Civ. No. 12-238-LPS, D.I. 1) (“Withdrawal Motion”). The Court ordered:

[T]he Withdrawal Motion [] is DENIED WITHOUT PREJUDICE to renew when the case is ready for trial. More specifically, the bankruptcy judge assigned to this adversary proceeding shall manage the discovery process and any motion practice. A renewed motion for withdrawal of the reference will be considered only when the parties (through stipulation) or the bankruptcy judge (through a decision) identify the genuine issues of material fact which should be tried to a jury.

(Id., D.I. 20 at 4 (internal footnotes omitted; emphasis added)) Defendants moved for reconsideration of the Court's order on the Withdrawal Motion, which the Court denied. (Id., D.I. 27)[2]

         On December 12, 2014, Defendant filed a motion for summary judgment as to Count XVI of the complaint on the basis that “the discovery responses provided to date establish that the Plaintiffs cannot introduce facts to support Count XVI of the Complaint and that Summary Judgment in favor of [Defendants] is required as a matter of law.” (Adv. D.I. 195-1 at 1-2) (“Summary Judgment Motion”) Defendants argued that Plaintiffs had failed to identify, within the timeframe agreed by the parties in a scheduling order, the transfers at issue “by date, amount, and transferee.” (Id. At 2) The Summary Judgment Motion requested that “the Bankruptcy Court enter proposed findings of fact and conclusions of law recommending that the District Court grant summary judgment on Count XVI, and that the District Court then issue a final order.” (Id. at 14)

         Following oral argument on June 11, 2015, the Bankruptcy Court denied the Summary Judgment Motion, finding that Plaintiffs had complied with the specific and negotiated language of the scheduling order, and that “there's really not, at this point, a basis to pursue summary judgment.” (Adv. D.I. 259, 6/11/15 Hr'g. Tr. at 43) The transcript reflects that the remainder of the hearing involved discussions as to the parties' next steps in managing the discovery process and identifying the transfers at issue. (See id. at 43-51) Thereafter, the Bankruptcy Court entered an order denying the Summary Judgment Motion “for the reasons set forth on the record at the hearing.” (Adv. D.I. 251) (“June 11, 2015 Order”)

         Defendants subsequently filed a motion to alter or amend the June 11, 2015 Order because it contained the following two statements: (i) “this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)” and (ii) “the Court has judicial power to enter a final order.” (Adv. D.I. 255, 256) Defendants argued that that Count XVI of the Complaint is a Stern claim[3] and that they had not consented to the Bankruptcy Court's authority to enter a final judgment. On June 11, 2015, the Bankruptcy Court vacated the June 11, 2015 Order and entered an amended order, which deleted the second of the two phrases: “the Court has judicial power to enter a final order.” (Adv. D.I. 265) (“July 8, 2015 Order”)

         Defendants assert the Bankruptcy Court lacked authority to enter the interlocutory July 8, 2015 Order, and was instead required to vacate July 8, 2015 Order and submit proposed findings of fact and conclusions of law with a recommended disposition of the Summary Judgment Motion. Pursuant to Bankruptcy Rule 9033(b), Defendants filed objections to the Bankruptcy Court's findings and conclusions. (D.I. 5) Defendants also filed the Conditional Motion, seeking leave to appeal the July 8, 2015 Order, but requesting that the Court consider the Conditional Motion “if, and only if, the [Court] determines that the procedures of Bankruptcy Rule 9033 do not apply to the July 8, 2015 Order for any reason.” (See D.I. 1 at 2) Essentially, the Conditional Motion and the 9033 Objection sought the same relief: (i) an order requiring that the language “this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)” contained in the July 8, 2015 Order be either deleted in its entirety or modified as follows: “this is a non-core proceeding pursuant to Executive Benefits Insurance Agency v. Arkison, 134 S.Ct. 2165 (2014) notwithstanding the fraudulent conveyance and other avoidance claims raised herein being nominally core under 28 U.S.C. § 157(b)(2);” and (ii) an order requiring that the July 8, 2015 Order be recast as “Proposed Findings of Fact and Conclusions of Law.” (D.I. 1 at 2; D.I. 5 at 3)[4]

         On August 20, 2015, the Court entered a Memorandum Order denying both the 9033 Objection and the Conditional Motion. See Anderson News, 2015 WL 4966236 at *1.[5] In doing so, the Court noted that the July 8, 2015 Order, which denied Defendants' request for summary judgment, “was not a final order for purposes of bankruptcy appeals under 28 U.S.C. § 158(a).” (Id. at *1) The Court further rejected Defendants' argument that the July 8, 2015 Order somehow created a Stern conflict, stating: “Even if the Bankruptcy Court lacks constitutional authority to hear and enter a final judgment on Count XVI of Plaintiff's claim, there is no constitutional constraint preventing it from entering interlocutory orders, such as the July 8, 2015 Order, regarding that same claim.” (Id. at *2) (quoting Arkison, 134 S.Ct. at 2172-73 (“By definition, a Stern claim may not be adjudicated to final judgment by the bankruptcy court, as in a typical core proceeding.”) and In re Trinsum Grp., Inc., 467 B.R. 734, 739 (Bankr. S.D.N.Y. 2012) (“After Stern[, ] the ability of bankruptcy judges to enter interlocutory orders in non-core proceedings, or in core proceedings as to which the bankruptcy court may not enter final orders or judgments consistent with Article III absent consent, has been reaffirmed by the courts . . . .”). Finally, the Court determined that Defendants had not met their burden to demonstrate that an appeal would involve a controlling question of law for which there are substantial grounds for a difference of opinion, and, therefore, denied the Conditional Motion for leave to appeal the interlocutory order. (Id. at *2)

         On September 2, 2015, Defendants filed the Motion for Reconsideration of the Memorandum Order. (D.I. 6) The adversary proceeding remains pending.[6]

         II. PARTIES' CONTENTIONS

         Defendants argue that reconsideration of the Memorandum Order is necessary “to prevent manifest injustice” and to address a “clear error of law” because the Memorandum Order “deprived [Defendants] of their Constitutional right to proceed before an Article III Judge and failed to comport with the controlling Supreme Court decision in [Arkison].” (D.I. 8 at 2) In Arkison, the Supreme Court held that when a bankruptcy court is presented with a claim statutorily designated as core but over which it lacks constitutional authority to finally adjudicate, a so-called “Stern claim, ” the bankruptcy court is to issue proposed findings of fact and conclusions of law to the district court, as it would when hearing non-core claims. See Arkison, 134 S.Ct. at 2170 (referring to 28 U.S.C. § 157(c)(1)). Based on Arkison, Defendants argue “the Bankruptcy Court does not have authority ...


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