Tres Hermanos Dairy, LLC and Associated Case in US District Court

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
TRES HERMANOS DAIRY, LLC,
Case No. 10-14240 T
Debtor.
MEMORANDUM OPINION ON DEBTOR’S MOTION FOR STAY OF PROCEEDINGS
The Court confirmed a plan of reorganization in this case on October 19, 2011, doc. 123
(“Confirmation Order”).1 The Confirmation Order contained extensive language agreed to by
the Debtor and its main secured creditor, Bank of America (“Bank”), resolving the Bank’s
objection to the plan. The Debtor now takes the position that the agreed-upon language did not
modify the plan.
Taken aback by Debtor’s stance, the Bank reopened the case2 and on September 13, 2013
filed a Motion for Order Interpreting Chapter 11 Plan and Confirming Debtor Default, doc. 145
(the “Interpretation Motion”). 	Debtor responded to the Interpretation Motion with a flurry of
filings, including:
1. 	Debtor’s Response to Bank of America’s Motion for Order Reinterpreting Chapter 11
Plan and Confirming Debtor Default, filed October 4, 2013, doc. 151 (“Response”);
2. 	Consent or Refusal to Consent to the Bankruptcy Court Hearing and Determining Claims,
filed November 8, 2013, doc. 155;
3. 	Motion, in the Alternative, to Withdraw the Referance [sic], filed November 8, 2013,
doc. 156 (“Withdrawal Motion”);
1 Hon. James S. Starzynski, now retired.
2 The Bank filed a motion to reopen on September 11, 2013 and paid the $167 filing fee. 	The Court
entered a reopening order the next day. Reopening a case is a ministerial act, with no independent legal
significance. See, e.g. In re Woods, 173 F.3d 770 (10 th Cir. 1999), cert. denied, 528 U.S. 878 (1999)
(reopening of a case is merely a ministerial or mechanical act that has no independent legal significations
and determines nothing with respect to the merits of the case).
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4. 	Motion 	for 	Abstention 	and 	Lack 	of 	Notice, 	filed 	November 	8, 	2013, 	doc. 	157
(“Abstention Motion”); and
5. 	Motion 	for 	Stay 	of 	Proceedings 	While 	For 	[sic] 	Motion 	for 	Withdrawal 	of
Reference/Abstention is Pending Decision, filed November 20, 2013, doc. 168 (“Motion
to Stay”).
By the Motion to Stay the Debtor asks the Court to stay all proceeding on the
Interpretation Motion and the Abstention Motion until after the District Court has ruled on the
Withdrawal Motion. 	In an ancillary matter, the Debtor asks for more time to respond to the
Interpretation Motion if the Court ultimately denies the Abstention Motion.
The Court has reviewed all filings by either party since the Interpretation Motion was
filed, and takes judicial notice of the docket in this case, including a recording of the
confirmation hearing, doc. 122.3 For the reasons set forth below, the Court concludes that the
Motion to Stay is not well taken and should be denied, and that the request for more time to
respond to the Interpretation Motion should be denied as moot.
I. 	BACKGROUND
On September 27, 2011, the Court held a hearing on the confirmation of the Debtor’s
Plan of Reorganization (the “Plan”). 	The Bank had objected to the Plan. 	See Objection to
Debtor’s 	Chapter 	11 	Plan, 	filed 	September 	16, 	2011, 	doc. 	114 	(“Objection”). 	At 	the
confirmation hearing, the Debtor and the Bank told the Court they had reached an agreement
resolving the Bank’s objection. 	Debtor’s counsel represented to the Court that Debtor had
agreed to modify its plan to include the language in Exhibit A to the Objection. Debtor’s counsel
3 See St. Louis Baptist Temple, Inc. v. Fed. Deposit Ins. Corp., 605 F.2d 1169, 1172 (10th Cir. 1979)
(holding that a court may, sua sponte, take judicial notice of its docket); In re Mailman Steam Carpet
Cleaning Corp., 196 F.3d 1, 8 (1st Cir.1999) (citing Fed.R.Evid. 201 and concluding that “[t]he
bankruptcy court appropriately took judicial notice of its own docket”); In re Quade, 496 B.R. 520, 524
(Bankr. N.D. Ill. 2013) (a “bankruptcy court [is authorized] ... to take judicial notice of its own docket”).
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stated: “I believe that Ms. Heaphy and I have worked out a form of order and I have it in my
hand.” See Doc. 122 at 1:35-1:40. 	After explaining a small discrepancy not at issue here,
Debtor’s counsel stated: “So we do have a proposed form of order but I would like to make sure
that we verify that.” Id. at 4:44 – 4:50. Before the hearing concluded the Bank’s counsel stated:
“Provided the language that the Bank proposed in its objection in the exhibit were substituted in
for the previous language addressing treatment of the Bank that we would be amenable to the
Plan and agree to the order that Ms. Behles is proposing.” Id. at 12:36-12:46.
On October 19, 2011, this Court entered the Confirmation Order. 	The language in
Exhibit A to the Objection is set forth, nearly verbatim, in the Confirmation Order. 	A Final
Decree was entered on April 13, 2012, and the case was closed on that date.
About 18 months later the Bank reopened the case and filed its Interpretation Motion,
asking the Court to confirm that the language in the Confirmation Order did in fact represent the
Bank’s treatment under the Plan. 	The Debtor filed its Response on October 4, 2013, denying
that the Confirmation Order modified the Plan. 	The Debtor then filed the Withdrawal Motion
and Abstention Motion. In these motions Debtor argues that either the District Court or a New
Mexico state court should decide whether the Confirmation Order modified the Plan.
II. 	DISCUSSION
A. 	Request for Stay.
With the Motion to Stay, the Debtor asks the Court to stay determination of the
Interpretation Motion and the Abstention Motion until after the District Court decides whether to
withdraw the reference. In support of this position Debtor cites Fed.R.Bankr.P. 5011(c), which
provides:
The filing of a motion for withdrawal of a case or proceeding or for abstention
pursuant to 28 U.S.C. §1334(c) shall not stay the administration of the case or any
proceeding therein before the bankruptcy judge except that the bankruptcy judge
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may stay, on such terms and conditions as are proper, proceedings pending
disposition of the motion. 	A motion for a stay ordinarily shall be presented first
to the bankruptcy judge. 	A motion for a stay or relief from a stay filed in the
district court shall state why it has not been presented to or obtained from the
bankruptcy judge. Relief granted by the district judge shall be on such terms and
conditions as the judge deems proper.
Rule 5011(c) appears to give the Court broad discretion to determine whether to stay a
matter pending the District Court’s decision whether to withdraw the reference. 	That is
consistent with the inherent power of trial courts to control the disposition of cases pending
before them. “The power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for itself, for
counsel, and for litigants.” In re Kozeny, 236 F.3d 615, 620 (10 th Cir. 2000).
Many courts examine the propriety of granting a stay under Rule 5011(c) by applying
traditional preliminary injunction factors, with the “likelihood of success on the merits” prong
directed to the likelihood that the motion for withdrawal of the reference will be granted. 	See,
e.g., In re City of Detroit, Mich., 498 B.R. 776, 780 (Bankr. E.D. Mich. 2013); In re Beach First
Nat. Bancshares, Inc., 2011 WL 2441501, *1 (Bankr. D.S.C. 2011); In re The Antioch Co., 435
B.R. 493, 496-97 (Bankr. S.D. Ohio 2010); In re Eagle Enterprises, Inc., 259 B.R. 83, 86
(Bankr. E.D. Pa. 2001).
The other preliminary injunction factors weighed by courts are the harm to the movant if
proceedings are not stayed; the harm to the other party if a stay is imposed; and whether the
public interest will be served by granting a stay. See, e.g., In re City of Detroit, Mich., 498 B.R.
at 780; In re Beach First National Bancshares Inc., 2011 WL 2441501, *1; In re Summit Global
Logistics, Inc., 2008 WL 5953690, *2 (Bankr. D.N.J. 2008).
“The manner by which a court considers the factors, the relative weight given to each,
and the standards by which a movant is required to prove them, are driven by the special and
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unique circumstances of any given case.” O Centro Espirita Beneficiente Uniao Do Vegetal v.
Ashcroft, 389 F.3d 973, 999 (10th Cir. 2004) aff'd, 546 U.S. 418 (2006).
1. 	Likelihood that the Withdrawal Motion Will be Granted. Tres Hermanos
seeks withdrawal of the reference for cause.4 Withdrawal Motion, p. 1. The factors relevant to
the District Court’s determination of whether to withdraw the reference include: “(1) whether the
proceeding 	is 	core 	or 	non-core; 	(2) 	judicial 	economy; 	(3) 	uniformity 	in 	bankruptcy
administration; (4) economical use of the debtors’ and creditors’ resources; (5) reduction of
forum shopping and confusion; (6) expediting the bankruptcy process; and (7) the presence of a
jury demand.” 	Samson Res. Co. v. Valero Mktg. and Supply Co., 449 B.R. 120, 132 (D.N.M.
2011) (internal quotations omitted).
a. 	Core Proceeding. A non-exhaustive list of core proceedings is set
forth in 28 U.S.C. § 157. 	The list includes confirmation of plans. 	28 U.S.C. § 157(b)(2)(L).
Core proceedings are “precisely the kind of issue that falls within the expertise of the bankruptcy
court, and there is a strong preference for resolving core proceedings in the bankruptcy court.”
In re Wahl, 2012 WL 5199630, *3 (N.D. Okla. 2012). More broadly defined, “Core proceedings
are proceedings which have no existence outside of bankruptcy.” 	In re Houlik, 481 B.R. 661,
674 (10th Cir. BAP 2012).
The contested matter commenced by the Interpretation Motion is a core proceeding.
Although the Interpretation Motion does not seek plan confirmation, it is an issue that would
have no existence outside of bankruptcy. Unless the Bankruptcy Code existed there would be no
Plan nor Confirmation Order.
4 This is the standard for “permissive” withdrawal of the reference, set out in the first sentence of 28
U.S.C. § 157(d). 	The standards for “mandatory” withdrawal of the reference are found in the second
sentence of § 157(d). The Debtor has not argued that the mandatory withdrawal provision applies, and it
clearly does not.
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Debtor argues it would be inefficient for the Court to keep the matter because it would
have to issue proposed findings of fact and conclusions of law, subject to de novo review by the
District Court. Motion to Stay, p. 2. That argument fails. Since the matter before the Court is
“core,” the Court may enter a final order or judgment. 28 U.S.C. ¶ 157(b)(1).
b. 	Judicial Economy. 	Despite Tres Hermanos’ arguments to the
contrary, judicial economy would be benefited if this Court decided the Interpretation Motion. It
is logical for this Court to interpret the Plan and Confirmation Order because the docket and
hearing recording are readily available and because it is familiar with the local practice and
procedure with confirming plans and/or amending plans with a confirmation order.
Further, it is an essential function of all courts to interpret their own orders. 	See
Travelers Indem. Co. v. Bailey, 557 U.S. 137, 152 (2009) (a bankruptcy court “plainly ha[s]
jurisdiction to interpret and enforce its own prior orders); Local Loan Co. v. Hunt, 292 U.S. 234,
239 (1934) (“That a federal court of equity has jurisdiction of a bill ancillary to an original case
or proceeding in the same court, whether at law or in equity, to secure or preserve the fruits and
advantages of a judgment or decree rendered therein, is well settled . . . These principles apply to
proceedings in bankruptcy.”).
If the Court interprets the Confirmation Order, it would enable the state court to enforce
the Plan according to standard contractual construction, allowing that court to effectively utilize
its resources and expertise. On the other hand, failing to do so could lead to spurious litigation or
appeals.
c. 	Uniformity 	of 	Bankruptcy 	Administration. 	Uniformity 	of
administration would be furthered if this Court were to interpret the Confirmation Order. 	It
would be disruptive to the reorganization process if a court were to interpret the Confirmation
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Order contrary to the Court’s intent when the order was entered. 	This Court is in the best
position to ascertain that intent.
d. 	Conservation 	of 	the 	Parties’ 	Resources. 	Having 	this 	Court
interpret the Confirmation Order would also conserve the parties’ resources. 	This Court is
familiar with the history of the bankruptcy case, the Plan, and the representations of counsel at
the confirmation hearing. 	It would be a relatively simple matter for the Court to construe the
Confirmation Order and determine what affect it had on the Debtor’s Plan. Further, this Court is
much more familiar with the plan confirmation process than either the District Court or the state
court.
The Debtor’s position would have been stronger had it filed its Withdrawal Motion as an
initial matter, rather than waiting until after filing the Response and appearing at a preliminary
hearing on the Interpretation Motion. “A withdrawal motion is deemed timely if it is brought as
promptly as possible in light of the developments in the bankruptcy proceedings.” In re
Horstmann, 	1997 	WL 	266759, 	*23, 	85-0186 	(Bankr. 	D.N.M. 	1997) 	(citations 	omitted).
Although the Withdrawal Motion was filed within two months of the filing of the Interpretation
Motion, this Court and the parties invested significant resources into this matter during that
period.
e. 	Reduction of Forum Shopping. This factor weighs heavily against
granting the Withdrawal Motion. It seems clear from the Debtor’s actions that it has no desire to
argue before this Court that the Confirmation Order did not modify the Plan. 	Apparently the
Debtor hopes that a court with less familiarity with the facts and history of the proceeding might
be more likely to conclude that the extensive language in paragraph 7(d) of the Confirmation
Order has no meaning or effect.
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f. 	Expediting the Bankruptcy Process. 	The sixth factor weighs in
favor of denying the Withdrawal Motion. A final hearing on the Interpretation Motion is set for
December 18, 2013, and the Court should be able to rule on the matter shortly thereafter. 	This
likely would be before the District Court or the state court would rule.
g. 	Jury Trial. Finally, there is no jury trial demanded by any party, so
this factor weighs in the Bank’s favor as well.
In sum, all of the factors in the likelihood of success prong weigh in favor of denying the
Motion to Stay, because the factors indicate that it is unlikely the District Court would grant the
Withdrawal Motion.
2. 	Balance of Harm. 	The more a movant can show irreparable injury, the
less it must demonstrate likelihood of success on the merits. 	As the Tenth Circuit stated in O
Centro:
In general, ‘[e]mphasis on the balance of [irreparable harm to plaintiffs and
defendants] results in a sliding scale that demands less of a showing of likelihood
of success on the merits when the balance of hardships weighs strongly in favor of
the plaintiff, and vice versa.’ In re Microsoft Corp. Antitrust Litigation, 333 F.3d
517, 526 (4th Cir.2003). Thus, the more likely a movant is to succeed on the
merits, ‘the less the balance of irreparable harms need favor the [movant's]
position.’ Ty, Inc. v. Jones Group, Inc., 237 F.3d 891, 895 (7th Cir.2001). And,
alternatively, ‘if there is only slight evidence that plaintiff will be injured in the
absence of interlocutory relief, the showing that he is likely to prevail on the
merits is particularly important.’ Canal Auth. of State of Florida v. Callaway, 489
F.2d 567, 576–77 (5th Cir.1974).
O Centro, 389 F.3d at 1002.
The harm Debtor would suffer by denying the Motion to Stay would be that this Court
likely would resolve the Interpretation Motion rather than the District Court. 	This harm seems
neither substantial nor irreparable. 	The Debtor can appeal any adverse ruling to the District
Court. Further, some court must deal with the dispute, and the Debtor has articulated no reason
why this Court is less able than the District Court to do so. Rather, given this Court’s familiarity
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with bankruptcy law and procedure and the plan confirmation process, it might be easier for this
Court to determine the matter. 	The Court finds that Debtor has made no showing of harm,
irreparable or otherwise, if the Motion to Stay is denied.
On the other hand, the Bank might suffer some harm if the Motion to Stay were granted.
Because the Withdrawal Motion likely will be denied, granting the stay likely would have no
effect other than delay. Delay would harm the Bank.
Overall, the Court finds that the balance of harms weighs against granting the Motion to
Stay.
3. 	Would Public Interest be Served by a Stay? 	The Withdrawal Motion
implicates the important public policy of respecting the separation of powers enunciated in the
Constitution. 	The Motion to Stay, on the other hand, does not appear to touch significantly on
the public interest. To the extent it does, public interest probably weighs in favor of denying the
stay request, since granting the request likely would cause delay, and also because it is in the
public interest to keep routine, core bankruptcy matters out of the District Court’s busy docket.
4. 	Jurisdiction. 	In addition to arguing the factors set out above, the Debtor
asserts that the reference should be withdrawn because under Stern v. Marshall, 131 S. Ct. 2594
(2011), this Court “lacks constitutional authority to adjudicate the types of claims asserted
against Debtor and others.” 	Withdrawal Motion, p. 1. 	The argument is meritless. 	Stern v.
Marshall held that non-Article III courts may not be able to enter final judgment in cases that
existed at common law in 1789. 	Id. at 2609. 	This is not such a case. 	However narrowly the
Supreme Court may eventually construe the jurisdiction of this Court, it is unlikely to hold that
the Court may not confirm a Chapter 11 plan of reorganization, nor to construe its own
Confirmation Order.
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As shown above, the Interpretation Motion is a core proceeding. Additionally, 11 U.S.C.
§ 1142 provides: “[T]he debtor . . . shall carry out the plan and shall comply with any orders of
the court.” Construing this section, the Tenth Circuit stated: “[P]ost-confirmation jurisdiction is
appropriate when the matter is ‘related-to’ the bankruptcy case.” 	In re CF & I Fabricators of
Utah, Inc., 150 F.3d 1233, 1237 (10th Cir. 1998) (quoting U.S. Trustee v. Gryphon at Stone
Mansion, Inc., 216 B.R. 764, 768 (W.D. Pa. 1997)); see also In re S.N.A. Nut Co., 206 B.R. 495,
500 (Bankr. N.D. Ill. 1997) (“Bankruptcy Court jurisdiction over post-confirmation matters is
appropriate when adjudication has an impact on the estate or the recovery of the creditors”)
(citing cases). Further: “Bankruptcy courts have inherent or ancillary jurisdiction to interpret and
enforce their own orders wholly independent of the statutory grant of jurisdiction under 28
U.S.C. § 1334.” In re Chateaugay Corp., 201 B.R. 48, 62 (Bankr. S.D.N.Y. 1996) aff'd in part,
213 B.R. 633 (S.D.N.Y. 1996) (relying on Local Loan Co. v. Hunt, 292 U.S. 234 (1934)). 	See
also Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (2009) (stating that a Bankruptcy Court
plainly has jurisdiction to interpret and enforce its own prior orders).
The Interpretation Motion falls directly within the Court’s jurisdiction to specifically
interpret or enforce its Confirmation Order in order to carry out the provisions of the Plan.
Accordingly, this Court has jurisdiction over this matter.
As Judge Chapman observed in In re Ambac Fin. Grp., Inc., 457 B.R. 299, 308 (Bankr.
S.D.N.Y. 2011), aff'd, 2011 WL 6844533 (S.D.N.Y. 2011), aff'd, 487 F. App’x 663 (2d Cir.
2012), “Unfortunately, Stern v. Marshall has become the mantra of every litigant who, for
strategic or tactical reasons, would rather litigate somewhere other than the bankruptcy court.”
The observation applies here. 	The Debtor chose the bankruptcy court forum to reorganize and
obtained 	substantial 	relief 	through 	confirmation 	of 	a 	consensual 	plan 	of 	reorganization.
Regardless of the nature of the dispute about the meaning of the Confirmation Order, this Court
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is an appropriate forum to resolve the dispute, and clearly has the jurisdiction to do so. 	The
Debtor’s resort to Stern v. Marshall is a red herring.
5. 	Summary. In summary, the Court concludes that the Debtor has not satisfied any
of the City of Detroit factors relevant to the Motion to Stay.
C. 	Request for Additional Response Time.
The Debtor also requests additional time to respond to the Interpretation Motion if the
Abstention Motion is denied. This request is not well taken because Tres Hermanos has already
responded. 	See Response, filed October 4, 2013. 	The Response was filed 21 days after the
Interpretation Motion. Because Debtor has already responded, the request is moot.5
III. 	CONCLUSION
The Court concludes that the Stay Motion is not well taken and should be denied, and
also that Debtor’s request for additional time to respond to the Interpretation Motion should be
denied. A separate order will be entered.
_____________________________________
Hon. David T. Thuma
United States Bankruptcy Judge
Date entered on docket: November 27, 2013.
5 It should be noted that the local rule Debtor cites in support of its request does not assist Debtor. The
local rule, LBR 5011-2, states:
(3) 	Contested Matter. In a contested matter, a motion for abstention shall be deemed
timely filed if filed within the time allowed for responses or objections to the matter. If a
motion for abstention is filed and denied, then the time for filing a response or objection
to the contested matter shall be extended until 14 days after the entry of an order denying
the motion.
Under this rule, Debtor filed the Response timely and the Abstention Motion late. 	These facts do not
support Debtor’s request for more time to supplement the Response.
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Copies to:
Jennie D Behles
P.O. Box 7070
Albuquerque, NM 87194-7070
Robert J Muehlenweg
316 Osuna Rd NE Unit 201
Albuquerque, NM 87107
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