United States District Court, S.D. New York
MEMORANDUM OPINION AND ORDER
GREGORY H. WOODS, United States District Judge.
months ago, Plaintiff-Debtor Phillip Michael Scott commenced
an adversary proceeding in bankruptcy court against
Defendants Great Northern Insurance Company ("Great
Northern") and AIG Properly Casualty Company
("AIG"), alleging causes of action for breach of
contract and breach of the covenant of good faith and fair
dealing relating to homeowner's insurance policies issued
to Plaintiff by Great Northern and AIG. Defendants now move
pursuant to 28 U.S.C. § 157(d) to withdraw the reference
of this matter to the bankruptcy court.
Court finds that Defendants have shown cause for permissive
withdrawal. The adversary proceeding concerns a non-core
pre-petition contract dispute over which the bankruptcy court
does not have final adjudicative authority, and withdrawal at
this early stage of the case will conserve judicial resources
and will not prejudice the parties. As a result,
Defendants' motion to withdraw the bankruptcy reference
has a long, unfortunate history with the property at 12
Inverness Road, in Scarsdale, New York. The property has been
the subject of multiple foreclosure actions, discussed in
detail by the bankruptcy court in Plaintiffs last bankruptcy
proceeding. See In re Philip Scott, Case No.
15-cv-755 (Bankr. S.D.N.Y), Dkt. No. 11 at 2-5. The house has
burnt to the ground twice since Plaintiff acquired the
property. This adversary proceeding is an insurance dispute
related to the second fire.
purchased a homeowner's insurance policy for his property
from Defendant AIG, which was effective from December 4, 2014
to December 7, 2015. Adversary Proceeding Complaint, Case No.
16-01329, Dkt. No. 1 ("Compl.") ¶ 2. Defendant
purchased an additional insurance policy for the property
from Defendant Great Northern, which was effective from
December 8, 2014 to December 8, 2015. Id. ¶ 3.
Around January 1, 2015, the property was damaged by a fire.
Id. ¶ 26. Plaintiff promptly submitted an
insurance claim to Defendants seeking insurance coverage for
the damage to the property caused by the fire. Id.
20, 2016, Plaintiff filed a voluntary bankruptcy petition
seeking relief under Chapter 13 of the Bankruptcy Code in the
U.S. Bankruptcy Court for the Southern District of New York.
In re Phillip Scott, Case No. 16-12045 (Bankr.
S.D.N.Y). On October 4, 2016, AIG issued a letter denying
Plaintiffs insurance claim for damages resulting from the
fire. PL's Opp'n, Dkt. No. 12, at 6-7. Plaintiff
states that Great Northern has also not provided payment for
the claim. Id. at 7.
December 28, 2016, Plaintiff commenced an adversary
proceeding against Defendants. The adversary proceeding
complaint seeks damages for breach of contract and for breach
of an implied covenant of good faith and fair dealing,
contending that Defendants breached their respective
insurance contracts by withholding payment under the
homeowner's insurance policies. On February 13, 2017,
Defendant Great Northern moved this Court to withdraw the
bankruptcy reference. Dkt. No. 1. Defendant AIG adopted the
arguments set forth in Great Northern's motion for
withdrawal. Affirmation of Michael Bono, Dkt. No. 4 ¶ 9.
On March 2, 2017, Plaintiff opposed Defendants' motion.
Dkt. No. 12. On March 9, 2017, Defendant AIG submitted a
reply brief. Dkt. No. 14.
courts have original jurisdiction over bankruptcy cases and
all civil proceedings "arising under" or
"related to" cases under title 11. 28 U.S.C. §
1334; see In re Connie's Trading Corp., et al,
No. 14-civ-376, 2014 WL 1813751, at *3 (S.D.N.Y. May 8,
2014). The Southern District of New York has a standing order
that provides that "any or all proceedings arising under
title 11 or arising in or related to a case under title
11" are automatically referred to the bankruptcy court.
In re Standing Order of Reference Re Title 11, 12
Misc. 32 (S.D.N.Y. Feb. 1, 2012). Pursuant to 28 U.S.C.
§ 157(d), however, "a 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 Second Circuit has
articulated a number of non-exhaustive factors that district
courts should weigh in determining whether "cause"
is shown for permissive withdrawal under § 157(d).
See In re Orion Pictures Corp., 4 F.3d 1095 (2d Cir.
1993). Those factors, commonly referred to as the
"Orion factors, " include: "(1)
whether the claim is core or non-core, (2) what is the most
efficient use of judicial resources, (3) what is the delay
and what are the costs to the parties, (4) what will promote
uniformity of bankruptcy administration, (5) what will
prevent forum shopping, and (6) other related factors."
In re Burger Boys, Inc., 94 F.3d 755, 762 (2d Cir.
1996) (paraphrasing Orion, 4 F.3d at 1101).
and subsequent cases emphasized that the first factor-whether
a claim is core or non-core-was the most important
consideration. See Id. However, a 2011 Supreme Court
decision reoriented this analysis. In Stern v.
Marshall, the Supreme Court held that Article III,
Section 1 of the U.S. Constitution limits Congress's
power to assign adjudicatory power to the bankruptcy court.
564 U.S. 462 (2011). As the Court explained in
When a suit is made of the stuff of the traditional actions
at common law tried by the courts at Westminster in 1789, and
is brought within the bounds of federal jurisdiction, the
responsibility for deciding that suit rests with Article III
judges in Article III courts. The Constitution assigns that
job-resolution of the mundane as well as the glamorous,
matters of common law and statute as well as constitutional
law, issues of fact as well as issues of law-to the
Id. at 484 (citing Northern Pipeline Constr. Co.
v. Marathon Pipe Line Co.,458 U.S. 50, 86-87 n.39, 90
(1982) (internal ...