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In re Whistler Energy II, LLC

United States District Court, E.D. Louisiana

January 8, 2019

IN RE WHISTLER ENERGY II, LLC

          ORDER AND REASONS

          JANE TRICHE MILAZZO UNITED STATES DISTRICT JUDGE

         Before the Court is Baker Hughes Oilfield Operations, LLC's Motion for Reconsideration (Doc. 15) and Second Motion to Withdraw the Reference for Adversary Number 18-01028 (Doc. 20). For the following reasons, the Motions are DENIED.

         BACKGROUND

         On March 24, 2016, an involuntary petition for Chapter 11 bankruptcy was filed against Whistler Energy II, LLC (“Whistler Energy”). On January 25, 2017, a plan of reorganization was confirmed. As part of the plan, certain causes of action were transferred and assigned to a litigation trust. Subsequently, the Trustee of the Whistler Energy II, LLC Litigation Trust filed a Complaint against Baker Hughes Oilfield Operations, LLC (“Baker Hughes”) in bankruptcy court seeking to avoid and recover an allegedly preferential transfer made to Baker Hughes by Whistler Energy. Baker Hughes did not submit a proof of claim against the bankruptcy estate.

         On April 24, 2018, Baker Hughes asked this Court to withdraw the reference of the adversary proceeding. This Court denied its request, holding that this is a core proceeding, a jury trial is not yet certain, and the bankruptcy court has the authority to at a minimum issue a findings of fact and conclusions of law for this Court's review. The Court noted that “[o]nce it becomes clear that a jury trial must be conducted, Defendant may re-urge its Motion.”[1]Thereafter, Baker Hughes filed a Motion for Reconsideration of that decision, which the Trustee opposed.

         While the Motion for Reconsideration was pending before this Court, the case progressed before the Bankruptcy Court. On November 15, 2018, the Trustee filed a Motion for Summary Judgment, which is currently under advisement before the Bankruptcy Court. On November 28, 2018, the Bankruptcy Court set a hearing on the sole issue of the debtor's insolvency (“Insolvency Hearing”). This hearing is to be held on January 22, 2019 in conjunction with two other preference actions commenced by the Trustee to address the common issue of the debtor's insolvency more efficiently and to prevent the possibility of different outcomes in each case. Briefs and expert reports in connection with the Insolvency Hearing are due to the bankruptcy court on January 8, 2019.

         On December 31, 2018, Baker Hughes filed a Second Motion to Withdraw the Reference and requested expedited consideration. It argues that because the Insolvency Hearing has been set, it is now clear that a jury trial must be conducted and withdrawal of the reference is warranted.

         LEGAL STANDARD

         This Court's decision in this matter is governed by 28 U.S.C. § 157(d), which provides for both permissive and mandatory withdrawal of the reference. It states:

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.

         This case presents an issue of permissive withdrawal. Although “cause shown” is not defined by statute, the Fifth Circuit has indicated that the district court should consider the following factors in articulating the foundation for its decision:

(1) whether the matter at issue is a core or a non-core proceeding,
(2) whether the proceedings involve a jury demand, and (3) whether withdrawal would further the goals of (a) promoting uniformity in bankruptcy administration, (b) reducing forum shopping and confusion, (c) fostering the economical use of the debtor's and ...

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