The opinion of the court was delivered by: Dora L. Irizarry, United States District Judge:
Before the Court are two motions to withdraw the reference to the U.S. Bankruptcy Court for the Eastern District of New York ("Bankruptcy Court") made by Tozammel H. Mahia ("Defendant") and his defense counsel, Karamvir Dahiya ("Dahiya"), pursuant to 28 U.S.C. § 157(d), Rule 5011 of the Federal Rules of Bankruptcy Procedure, and Rule 5011-1 of the Local Bankruptcy Rules for the Eastern District of New York. On November19, 2012, Defendant and Dahiya moved to withdraw the reference to the Bankruptcy Court of a motion for sanctions brought against Dahiya and his firm, Dahiya Law Offices LLC, ("sanctions motion") in Debra Kramer v. Tozammel H. Mahia, 11-AP-1520 (ESS), an adversary proceeding pending in the Bankruptcy Court.*fn1 (Doc. Entry No. 1, 12-MC-794.) On December 5, 2012, Defendant filed a separate motion to withdraw the reference to the Bankruptcy Court of the adversary proceeding itself. (Doc. Entry No. 1, 12-MC-832.)*fn2 The Trustee opposes both motions. (See Trustee's Jan. 4, 2013 Response to Defendant's Motions to Withdraw the Reference ("Trustee Opp. Mem."), Doc. Entry No. 7, 12-MC-794, Doc. Entry Nos. 5, 7, 8, 12-MC-832.) On April 10, 2013, Dahiya, on behalf of Defendant, filed an Order to Show Cause in this Court for a preliminary injunction to stay the adversary proceeding in the Bankruptcy Court and enjoin the Bankruptcy Court's March 11, 2013 order imposing sanctions against Dahiya, pending the determination of the motions for withdrawal of reference. (See Doc. Entry No. 11, 12-MC-794.)
For the reasons set forth below, Defendant's and Dahiya's motions for withdrawal of reference are denied and the two matters are dismissed. In addition, because the motions for withdrawal of reference are denied, and the preliminary injunction seeks a stay of the Bankruptcy Court's Sanction Order pending the resolution of the withdrawal of reference motions, the preliminary injunction motion is denied as moot.*fn3
On December 3, 2011, Debra Kramer ("Trustee"), in her role as trustee of the bankruptcy estate of Shahara Khan (the "Debtor"), filed an adversary proceeding in Bankruptcy Court to recover alleged fraudulent conveyances from Defendant, the Debtor's son. (See Trustee Opp. Mem. ¶ 1, Ex. A, Complaint.) The Trustee alleges that Defendant, the Debtor, and a third party each held a one-third interest in real property located in Richmond Hills, New York and, upon the sale of the property, Defendant received all the net proceeds while Debtor did not receive any proceeds. (Id., Ex. A, Complaint ¶¶ 11-15.)
After Defendant initially defaulted by not answering the complaint, he retained Dahiya as counsel. (Trustee Opp. Mem. ¶ 3.) The Bankruptcy Court granted Defendant an extension of time, nunc pro tunc to January 31, 2012, to file an answer. (Id. ¶ 26.) A week after the deadline, Dahiya filed an answer and counterclaims on behalf of Defendant against the Trustee and demanded a jury trial. (Id. ¶ 3, Ex. C, Answer.) The counterclaims alleged abuse of process, constitutional torts, that the Trustee failed to investigate properly before bringing the adversary proceeding, and acted "deliberately, maliciously, and oppressively" to intimidate and injure the Debtor's family. (Id., Ex. C, Answer ¶¶ 22-29.) In addition, as part of the counterclaims, Defendant requested: an injunction barring the Trustee from bringing actions against a debtor's family unless she first demonstrates probable cause; that this requirement be incorporated into the Local Bankruptcy Rules for this District; and that the United States Trustee Office investigate whether lawsuits by panel trustees are abusive. (Id., Ex. C., Answer at 6-7.)
As Dahiya previously had brought similar counterclaims against Ms. Kramer and other trustees, on March 24, 2012, the Trustee responded to the counterclaims by moving for sanctions against Dahiya pursuant to 28 U.S.C. § 1927 and 11 U.S.C. § 105. (See Trustee Opp. Mem. ¶ 4, Ex. D.) The Trustee asserted the counterclaims were baseless, made in bad faith, protracted the adversary proceeding, and caused her to incur additional legal fees and increased malpractice and liability insurance premiums. Id. Between April 2012 and November 2012, the Bankruptcy Court granted Defendant numerous adjournments of the evidentiary hearing on the sanctions motion and encouraged Dahiya to obtain counsel. During this period, Defendant relieved and then re-hired Dahiya as counsel, and Dahiya missed several deadlines to file his prehearing statements on the sanctions motion, hired and fired counsel, and reneged on a tentative settlement that the parties had placed on the record. (Id. ¶¶ 6-10.) When Dahiya advised the Bankruptcy Court that he was having personal issues and was unable to defend himself, the Bankruptcy Court emphasized the serious nature of the sanctions motion and implored him to seek help from a bar associations' lawyer's assistance program and retain counsel. (See Transcript of June 13, 2012 Bankruptcy Court Hearing ("June 13, 2012 Tr.") at 23:25-24:9, 26:18-24, 38:19-25, Doc. Entry No. 9, Ex. 1, 12-MC-794 and 12-MC-832.) Nowhere in the record does it appear that Dahiya pursued the Bankruptcy Court's suggestions.
On November 19, 2012, Defendant and Dahiya moved this Court to withdraw the reference of the sanctions motion. (Doc. Entry No. 1, 12-MC-794.) On November 30, 2012, the Bankruptcy Court held an evidentiary hearing on the sanctions motion, at which Dahiya refused to participate. (Trustee Opp. Mem. ¶ 12; Transcript of Nov. 30, 2012 Bankruptcy Court Evidentiary Hearing on Motion for Sanctions, Doc. Entry No. 9, Ex. 2, 12-MC-794 and 12-MC-832.) On December 5, 2012, Defendant filed a separate motion in this Court to withdraw the reference of the adversary proceeding. (Doc. Entry No. 1, 12-MC-832.) On March 11, 2013, the Bankruptcy Court found Dahiya had acted in bad faith by bringing counterclaims against the Trustee that lacked a colorable basis and imposed sanctions against Dahiya and his law firm in the amount of $15,000 ("Sanction Order"). See In re Khan, 2013 WL 920825, at *16, 18 (Bankr. E.D.N.Y. Mar. 11, 2013). The sanctions are to be paid to the Trustee in three installments of $5,000, to be received by April 15, 2013, May 15, 2013, and June 17, 2013.
On April 10, 2013, Dahiya, on behalf of Defendant, filed an Order to Show Cause in this Court seeking a preliminary injunction to stay the adversary proceeding in the Bankruptcy Court and enjoin the Bankruptcy Court's March 11, 2013 Sanction Order pending resolution of the withdrawal of reference motions.*fn4
While district courts have original jurisdiction over bankruptcy cases, see 28 U.S.C. § 1334(a), each district court may refer "any or all" bankruptcy proceedings "to the bankruptcy judges for the district." 28 U.S.C. § 157(a). The United States District Court for the Eastern District of New York has referred all bankruptcy cases to the bankruptcy courts in the district pursuant to 28 U.S.C. § 157(a). See Eastern District Administrative Order 264 (1986).
District courts have broad authority to withdraw the referral in
individual cases under 28 U.S.C. § 157(d), which provides for
discretionary withdrawal by the district court for cause shown: "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." 28 U.S.C. § 157(d).*fn5
In determining whether the reference to the bankruptcy court
should be withdrawn permissively, the court should consider the
following factors: "(1) whether the bankruptcy court has
constitutional authority to enter a final decision; (2) judicial
economy; (3) uniformity in bankruptcy administration; (4) economical
use of debtors' and creditors' resources;
(5) reduction of forum shopping and confusion; (6) expediting the bankruptcy process; and (7) the presence of a jury demand." Nisselson v. Salim, 2013 WL 1245548, at *3 (S.D.N.Y. Mar. 25, 2013). This analysis reflects the recognition that the U.S. Supreme Court's decision in Stern v. Marshal, 131 S. Ct. 2594 (2011) modified the factors set forth by the Second Circuit in In re Orion Pictures Corp., 4 F. 3d 1095 (2d Cir. 1993)*fn6 such that the distinction between ...