Doe et al v. Martinez et al

OCR transcription for search; preserved printed pages are authoritative

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW MEXICO

In re:
ISAAC 8. MARTINEZ, DBA No. 09-15502-j7
GREAT WESTERN TRUCK SERVICE, (Bankruptcy Court}

Debtor.
JANE DOE, a minor, by and through her

next friend EVA HUGHES, her mother and A hy. No. \0- 104 A an
natural guardian; MARY DOE, a minor, by

and through her next friend EVA HUGHES,
her mother and natural guardian,

Plaintiffs,
vs. No. CIV 10-0454 JB/WDS

Adversary No. 10-0103-j

ISAAC 8. MARTINEZ, DBA GREAT
WESTERN TRUCK. SERVICE; CRUZ
DELIA MARTINEZ, spouse or former spouse;
VERENICE MARTINEZ, spouse,

Defendants.

MEMORANDUM OPINION AND ORDER
THIS MATTER comes before the Court on: (i) the Plaintiffs’ Motion to Withdraw the

Reference Pursuant to 28 U.S.C. §§ 157(d) and 157(b)(5), filed April 29, 2010 (Doc. 1); and (ii) the
Plaintiffs’ Motion to Consolidate: Motion to Withdraw Reference from New Mexico Bankruptcy
Court and Remand to Arizona Court Into Arizona State Court Case Removed to United States
District Court for District of New Mexico, filed June 2, 2010 (Doc. 3). No party responded or filed,
timely or otherwise, a written opposition to the motion, and thus they are deemed to have consented

to the motions. See D.N.M. L.R.-Civ. 7.1(b)(“The failure of a party to file and serve a response in

opposition to a motion within the time prescribed for doing so constitutes consent to grant the

INFORMATION

GPO

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motion.”); D.N.M. L.R.-Civ. 7.4(a)(“A response must be served and filed within fourteen (14)
calendar days after service of the motion.”). The Court held a hearing on July 12, 2010. No party
or counsel appeared at the hearing other than the Plaintiffs’ counsel. The primary issue is whether
the Court should withdraw the reference of this proceeding from the United States Bankruptcy Court
and transfer the proceeding to the United States District Court forthe District of Arizona, or whether
the Court should transfer the proceeding to the Honorable William P. Johnson, United States District
Judge for the District of New Mexico, to be consolidated with Doe v. Martinez, No. CIV 09-0104
WJ/WPL. For the reasons stated on the record, and for further reasons consistent with those already
stated, the Court will grant the motion to withdraw in part, and will withdraw the reference from the
Bankruptcy Court, but the Court will deny the request to transfer the proceeding to the District of
Arizona, The Court will also deny the motion to consolidate.

On December 31, 2008, the Plaintiffs Jane Doe and Mary Doe, by and through their mother
and legal guardian Eva Hughes, filed a complaint for negligence, assault, battery, intentional
infliction of emotional distress, false imprisonment, and negligent supervision against Defendants
Isaac Martinez, Cruz Delia Martinez, and other unknown Defendants, in the Superior Court of
Arizona, County of Maricopa. The case was removed from Arizona state court to the United States
District Court for the District of New Mexico on February 4, 2009. On April 3, 2009, Judge
Johnson found the notice of removal deficient on its face and ordered the case remanded to the

Arizona state court. See Doe v. Martinez, 674 F. Supp. 2d 1282, 1284 (D.N.M. 2009)(“Assuming

diversity of citizenship such that there would be subject matter jurisdiction in federal court, the only
federa] court Defendant Martinez could have removed the Arizona State Court case to is the United
States District Court for the District of Arizona.”). The order to remand is currently on appeal with

the United States Court of Appeals for the Tenth Circuit.

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On December 1, 2009, Martinez filed a voluntary bankruptcy case in the United States
Bankruptcy Court for the. District of New Mexico, Case No. 7-09-15502-7j. To preclude the
Plaintiffs’ personal injury claims in the remanded Arizona state case from being discharged in
bankruptcy, the Plaintiffs timely filed an objection to dischargeability, pursuant to 11 U.S.C. § 523,
in the bankruptcy proceeding. The Plaintiffs brought an adversary proceeding, and filed
a Complaint to Determine Dischargeability of Personal Injury Tort Claim Pursuant to
11 U.S.C. §§ 523(a)(6) and 523(a)(13) on April 22, 2010. The Plaintiffs then filed their motion to
withdraw the reference to bankruptcy court with this Court.

Bankruptcy judges may preside over, and enter appropriate orders and judgments pertaining
to, all cases under chapter 11 of the Bankruptcy Code and all “core proceedings” arising thereunder.
28 U.S.C. § 157(b)(1). Bankruptcy judges may also hear “non-core proceedings” that are “related
to” pending proceedings. 28 U.S.C. § 157(c)(1). In certain circumstances, however, when a case
has been referred to a bankruptcy court, the district court may withdraw that reference from the
bankruptcy court’s jurisdiction. See 28 U.S.C. § 157(d). Section 157(d) of Title 28 of the United
States Code provides:

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.
28 U.S.C. § 157(d). Under rule 5011 of the Federal Rules of Bankruptcy Procedure, a district judge
shall hear a motion for withdrawal of a case or proceeding and the relief that the district judge grants

pursuant to a filed motion for withdrawal shall be on such terms and conditions as the

judge deems proper. See Fed. R. Bankr. P. 5011(c). The district court has broad discretion whether

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to permit withdrawal of the reference to the bankruptcy court. See In re Cook, No. 09-803,

2010 U.S. Dist. LEXIS 51541], at *6 (D.N.M. Apr. 19, 2010)(Herrera, J.); In re Millennium Studios

Inc., 286 B.R. 300, 303 (D. Md. 2002); In re C-TC 9th Ave. P’ship, 177 B.R. 760, 765
(N.D.N.Y. 1995). Cause must be shown before the reference can be withdrawn, see In re Pruitt,
910 F.2d 1160, 1168 (3d Cir. 1990), and the moving party bears the burden to show cause,
see In re NDEP Corp., 203 B.R. 905, 907 (D. Del. 1996).

Factors relevant to the Court’s determination of whether to withdraw the reference

for cause 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.

In re Cook, 2010 U.S. Dist. LEXIS $1541, at *6 (quoting Inre Apponline.com, Inc., 303 B.R. 723,
726 (E.D.N.Y. 2004)).

Section 157 of Title 28 of the United States Code emphasizes that the bankruptcy
courts have no power to make factual determinations regarding personal-injury tort claims.
See 28 U.S.C. § 157(6)(2)(B)(stating that core jurisdiction does not extend to “the liquidation or
estimation of contingent or unliquidated personal injury tort or wrongful death claims against the
estate for purposes of distribution in a case under title 11”); 28 U.S.C. § 157(b)\(2)(O/) stating that
core jurisdiction extended to “other proceedings affecting the liquidation of the assets of the estate
or the adjustment of the debtor-creditor or the equity security holder relationship, except personal
injury tort or wrongful death claims”). According to 28 U.S.C. § 157(b)(5):

The district court shall order that personal injury tort and wrongful death claims shall

be tried in the district court in which the bankruptcy case is pending, or in the district

court in the district in which the claim arose, as determined by the district court in

which the bankruptcy case is pending.

28 U.S.C. § 157(b)(5). See Inre Erickson, 330 B.R. 346, 349 (Bankr. D. Conn. 2005\(stating that,

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although bankruptcy court lacks subject-matter jurisdiction to adjudicate personal injury tort claim,
it has exclusive jurisdiction to adjudicate dischargeability once the claim has been liquidated).
The Plaintiffs brought the adversary proceeding pursuant to 11 U.S.C. § 523(a)(6), which
excepts from discharge any debt incurred for willful and malicious injury by the debtor to another.
This determination is a core bankruptcy matter. See 28 U.S.C. § 157(b)(2)(1). The underlying
claims, however, are the personal injury tort claims currently being litigated in the Arizona
state-court personal-injury action. The bankruptcy court’s core jurisdiction does not extend to “the
liquidation or estimation of contingent or unliquidated personal injury tort or wrongful death claims
against the estate for purposes of distribution in a case.” 28 U.S.C. § 157(b)(2)(B). Pursuant to
28 U.S.C. § 157(b)(5), the district court decides the issues related to the underlying personal injury

tort claims. See In re Smith, 389 B.R. 902, 912 (Bankr. D. Nev. 2008)(stating that § 157(b)(5)

“deals specifically with the handling of personal injury tort claims within this system.”). Because
the bankruptcy proceeding involves the non-core personal injury issues, the Court finds the
appropriate action is to withdraw the reference of the adversary proceeding, Adversary
No. 10-01039-j, from the bankruptcy court. Because the personal-injury claims are currently being
adjudicated in the state-court proceeding in Arizona, the Court believes the best course of action is
to stay this proceeding and allow the state-court proceeding, and the appeal of the notice of remand
in Judge Johnson’s case, to reach resolution. Once those cases reach a resolution, and the Court
makes a determination on the personal injury claims, the Court may refer the proceeding
back to the bankruptcy court for that court to determine dischargeability. See In re Erickson,
330 B.R. at 349 (stating that, although bankruptcy court lacks subject-matter jurisdiction to
adjudicate personal-injury tort claim, it has exclusive jurisdiction to adjudicate dischargeability once
the claim has been liquidated). At the hearing, Louis Puccini, the Plaintiffs’ attorney, stated that

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the Court’s proposed resolution of this matter is acceptable to the Plaintiffs and had no suggested
changes. See Transcript of Hearing at 4:5-11 (taken July 12, 2010) (Puccini)(“Tr.”).! The Court,
therefore, will grant in part and deny in part the Plaintiffs’ Motion to Withdraw the Reference
Pursuant to 28 U.S.C. §§ 157(d} and 157(b)(5). The Court will withdraw the reference of the
adversary proceeding to the bankruptcy court, but the Court will not transfer the adversary
proceeding to the United States District Court for the District of Arizona, as the Plaintiffs request.

The Court will, however, stay the proceeding pending the resolution of the appeal of

Judge Johnson’s order to remand Doe v. Martinez, No. CIV 09-0104 WJ/WPL, and pending the
resolution of the Plaintiffs’ tort claims in the Arizona state court proceeding. The Court will also
deny the Plaintiffs’ Motion to Consolidate: Motion to Withdraw Reference from New Mexico
Bankruptcy Court and Remand to Arizona Court Into Arizona State Court Case Removed to United
States District Court for District of New Mexico. Judge Johnson’s remand order is on appeal, and,
for all practical purposes, that proceeding has come to a close. Judge Johnson believes that case is
over for him. Thus, the Court believes it would not be beneficial to any party, or in the interest of
judicial economy, to consolidate the adversary proceeding with Judge Johnson’s case, at least at this
time.

IT IS ORDERED that the Plaintiffs’ Motion to Withdraw the Reference Pursuant to
28 U.S.C. §§ 157(d) and 157(b)(5) is granted in part and denied in part. The Court orders that the
reference of the Adversary Proceeding No. 10-01039-] be withdrawn from the United States
Bankruptcy Court for the District of New Mexico, The Court will stay ail proceedings in this

matter. The Court orders that the parties must provide the Court with status reports regarding the

'The Court’s citations to the transcript refer to the court reporter’s original, unedited version.
Any final transcript may contain slightly different page and/or line numbers.

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status of the state proceedings every 120 days. The Court will aiso deny the Plaintiffs’ Motion to
Consolidate: Motion to Withdraw Reference from New Mexico Bankruptcy Court and Remand to

Arizona Court Into Arizona State Court Case Removed to United States District Court for District

\ QR

UNITED STATES DISTRICT FUDGE

of New Mexico.

Counsel and parties:

Louis Puccini, Jr.

Puccini Law, P.A.
Albuquerque, New Mexico
-- and --

Leonard J. Mark

Dorian L. Eden

Tiffany & Bosco, P.A.
Phoenix, Arizona

Attorneys for the Plaintiffs

{saac 8S. Martinez
Lordsburg, New Mexico

Defendant pro se

Cruz Delia Martinez
Lordsburg, New Mexico

Defendant pro se

Verenice Martinez
Lordsburg, New Mexico

Defendant pro se

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