United States District Court, S.D. New York
B. Schneider Jacklyn M. Siegel Davis & Gilbert LLP
Attorneys for Plaintiff
J. Snyder Alan D. Zuckerbrod Eloy A. Peral WlLK AUSLANDER LLP
Attorneys for Defendants DiamondRock NY Lex Owner, LLC and
Marriott International, Inc.
Loretta M. Gastwirth Meltzer, Lippe, Goldstein &
Breitstone LLP Attorney for Defendant Highgate Hotel L.P.
A. Kaplan, District Judge.
matter is before the Court on defendants' motion to
withdraw the reference of an adversary proceeding brought by
plaintiff in the United States Bankruptcy Court for the
Southern District of New York.
2003, K&H Restaurant, Inc. d/b/a Raffles
("K&H") entered into a commercial lease with
Lexington Hotel LLC (defendant DiamondRock NY Lex Owner,
LLC's ("DiamondRock") predecessor-in-interest),
as landlord, to operate a coffee shop-restaurant in the
ground floor of the hotel located at 511 Lexington Avenue in
lease contained various provisions relating to the
interaction between hotel guests and K&H's
restaurant, including that K&H would accept breakfast
vouchers provided by the hotel to its guests and that K&H
would provide room service subject to certain
conditions. The original lease contained also a number
of labor-related provisions, including that K&H would
comply with the provisions and standards set forth in "a
certain collective bargaining agreement. .. between the Hotel
Association of New York City, Inc. and the New York Hotel and
Motel Trades Council, AFL-CIO (the 'Union')"
(the "CBA"). If K&H failed to comply with the
CBA for a period of seven days after notice from the
landlord, the landlord had the right to terminate the
October 24, 2013, K&H signed a memorandum of
understanding with the hotel and the Union pursuant to which
K&H would pay certain wages to its
employees. The relationship between K&H and
defendants subsequently deteriorated and, in 2016, an
arbitrator issued awards directing the hotel and K&H,
jointly and severally, to make certain payments to the Union
and to specific employees.
issued a notice of default to K&H on October 9, 2016,
stating that K&H had failed to comply with the CBA and
that it had fifteen days to cure before the landlord would
exercise is remedies under the lease, including its right to
terminate the lease. On November 7, 2016, the landlord issued a
notice of cancellation and termination of the
lease. Shortly thereafter, on December 12, 2016,
the landlord commenced a holdover proceeding in New York
Civil Court.In the meantime, on November 13, 2016,
K&H filed a petition for relief under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for
this district. As discussed further below, that case remains
filed the adversary proceeding at issue here in the
bankruptcy court on February 10, 2017. The complaint alleged
that DiamondRock breached its contract with K&H in April
2015 by ceasing to allow K&H to exercise its rights to
provide room service, breakfast and catering services to
hotel guests. The complaint asserted claims for breach
of contract, intentional interference with contractual
relationship and unjust enrichment. Defendants now move to
withdraw the reference.
has distinguished between "core proceedings arising
under title 11, or arising in a case under title 11, "
which bankruptcy judges may hear and determine, and non-core
proceedings that are "otherwise related to a case under
title 11, " which a bankruptcy judge may hear, but not
decide without the consent of the parties. Section
157(d) provides that "[t]he 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 ... ."
Second Circuit has articulated the following rule:
"A district court considering whether to withdraw the
reference should first evaluate whether the claim is core or
non-core, since it is upon this issue that questions of
efficiency and uniformity will turn... . [O]nce a district
court makes the core/non-core determination, it should weigh
questions of efficient use of judicial resources, delay and
costs to the parties, uniformity of ...