1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 In re: THE ROMAN CATHOLIC BISHOP Case Nos. 3:24-cv-00709-JSC OF OAKLAND, a California corporation 3:24-cv-00711-JSC 8 sole, Debtor. Bankruptcy Case No.: 23-40523 WJL 9 Adv. Proc. No.: 23-04028 WJL ___________________________________ 10
11 THE ROMAN CATHOLIC BISHOP OF OAKLAND, ORDER RE: MOTIONS TO 12 WITHDRAW REFERENCE Plaintiff, 13 v. 14 PACIFIC INDEMNITY, a Delaware 15 corporation; TRAVELERS CASUALTY & SURETY COMPANY F/K/A AETNA 16 CASUALTY & SURETY COMPANY, a Connecticut corporation; INSURANCE 17 COMPANY OF NORTH AMERICA, a Delaware corporation; UNITED STATES 18 FIRE INSURANCE, a Delaware corporation; WESTPORT INSURANCE 19 CORPORATION, a Delaware corporation; CONTINENTAL CASUALTY COMPANY, 20 a Delaware corporation; PACIFIC EMPLOYERS INSURANCE, a Delaware 21 corporation; WESTCHESTER FIRE INSURANCE COMPANY, a Pennsylvania 22 corporation; the CALIFORNIA INSURANCE GUARANTEE 23 ASSOCIATION, a state entity; and CERTAIN UNDERWRITERS AT 24 LLOYD’S, LONDON, SUBSCRIBING SEVERALLY AND NOT JOINTLY TO 25 SLIP NOS. CU 1001 AND K 66034, Defendants. 26
27 1 The Roman Catholic Bishop of Oakland brought a declaratory relief action in the United 2 States Bankruptcy Court for the Northern District of California against numerous insurers 3 (collectively “the Underwriters”) seeking a coverage determination regarding the Underwriters 4 obligation to defend the Plaintiff against numerous state court actions, as well as a claim against 5 the California Insurance Guarantee Association (CIGA). Defendants’ motions to withdraw the 6 reference from bankruptcy court to district court under 28 U.S.C. § 157(d) are now pending before 7 the Court in two separately filed actions. See Case Nos. 24-709, 24-711. Plaintiff filed statements 8 of non-opposition in each. (No. 24-709, Dkt. Nos. 5, 6; No. 24-711, Dkt. No. 2.1) After carefully 9 considering the parties’ briefs and the relevant legal authority, the Court concludes oral argument 10 is unnecessary, see Civ. L.R. 7-1(b), VACATES the March 21, 2024 hearing, and GRANTS the 11 unopposed motions to withdraw the reference. 12 BACKGROUND 13 The Roman Catholic Bishop of Oakland is facing over 300 state court actions alleging 14 negligent supervision and negligent hiring of clerical and ministerial staff who perpetrated sexual 15 abuse against certain claimants. In response to these actions, on May 8, 2023, the Roman Catholic 16 Bishop of Oakland filed a voluntary chapter 11 petition in the United States Bankruptcy Court for 17 the Northern District of California. See In re the Roman Catholic Bishop of Oakland, No. 23- 18 40523. The following month, the Roman Catholic Bishop of Oakland filed the underlying 19 Adversary Proceeding against the Underwriters and CIGA. See In re the Roman Catholic Bishop 20 of Oakland, Adv. Proc. No. 23-04028 (“the Coverage Action”). 21 In the Coverage Action, Plaintiff brings state law claims regarding the Underwriters’ 22 obligation to provide coverage to Plaintiff in its defense of the state court actions and a declaratory 23 judgment regarding CIGA’s statutory obligations related to the same. Defendants moved to 24 dismiss the complaint and filed a jury demand. The Bankruptcy Court has since granted the 25 motion to dismiss and briefing on a third round of motions to dismiss is currently pending in the 26 Bankruptcy Court. Along with moving to dismiss the third amended complaint, Defendants filed 27 1 the now pending motions to withdraw the reference. 2 DISCUSSION 3 District courts have “original but not exclusive jurisdiction” over all bankruptcy 4 proceedings. See 28 U.S.C. § 1334(b). These proceedings fall into one of two categories: “core 5 proceedings, in which the bankruptcy court may enter appropriate orders and judgment,” and 6 “non-core proceedings, which the bankruptcy court may hear but for which it may only submit 7 proposed findings of fact and conclusions of law to the district court for de novo review.” Sec. 8 Farms v. Int’l Brotherhood of Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 9 1008 (9th Cir. 1997) (quoting 28 U.S.C. § 157). “Actions that do not depend on bankruptcy laws 10 for their existence and that could proceed in another court are considered ‘non-core.’” Sec. Farms 11 v. Int’l Bhd. of Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1008 (9th Cir. 12 1997). 13 Pursuant to 28 U.S.C. § 157(d), a district court may withdraw reference to the bankruptcy 14 court. See 28 U.S.C. § 157(d). The provision provides for both permissive and mandatory 15 withdrawal. Id. Mandatory withdrawal is required if “resolution of the proceeding requires 16 consideration of both title 11 and other laws of the United States regulating organizations or 17 activities affecting interstate commerce.” Id. Permissive withdrawal, as sought here, requires a 18 showing of “cause.” 28 U.S.C. § 157(d). “In determining whether cause exists, a district court 19 should consider the efficient use of judicial resources, delay and costs to the parties, uniformity of 20 bankruptcy administration, the prevention of forum shopping, and other related factors.” Sec. 21 Farms, 124 F.3d at 1008. 22 Defendants contend withdrawal is appropriate here because the Coverage Action involves 23 exclusively non-core state law claims that do not arise under bankruptcy law and for which 24 Defendants have demanded a jury trial. Plaintiff does not oppose withdrawal of the reference 25 because it seeks adjudication of the claims alleged in the Coverage Action as soon as possible. 26 (No. 24-709, Dkt. Nos. 5 at ¶ 7; No. 24-711, Dkt. No. 2 at ¶ 7.) The Court concludes there is 27 good cause with withdraw the reference here. 1 A. Judicial Efficiency 2 Judicial efficiency favors withdrawal of the reference. The Court’s analysis here begins 3 with the question of whether Plaintiff’s claims are core or non-core “since it is upon this issue that 4 questions of efficiency and uniformity will turn.” Hjelmeset v. Cheng Hung, No. 17-CV-05697- 5 BLF, 2018 WL 558917, at *3 (N.D. Cal. Jan. 25, 2018). Because bankruptcy judges are not 6 Article III judges, “the Constitution limits their ability to adjudicate—i.e., to render a final 7 judgment—to issues that are at the ‘core’ of the bankruptcy power.” In re Harris, 590 F.3d 730, 8 737 (9th Cir. 2009). For core matters, “the statute empowers the bankruptcy judge to enter final 9 judgment on the claim, subject to appellate review by the district court.” Exec. Benefits Ins. 10 Agency v. Arkison, 573 U.S. 25, 34 (2014). However, “[i]f a matter is non-core, and the parties 11 have not consented to final adjudication by the bankruptcy court, the bankruptcy judge must 12 propose findings of fact and conclusions of law.” Id. The district court may then enter a final 13 order or judgment “after considering the bankruptcy judge’s proposed findings and conclusions 14 and after reviewing de novo those matters to which any party has timely and specifically 15 objected.” 28 U.S.C. § 157(c)(1).
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 In re: THE ROMAN CATHOLIC BISHOP Case Nos. 3:24-cv-00709-JSC OF OAKLAND, a California corporation 3:24-cv-00711-JSC 8 sole, Debtor. Bankruptcy Case No.: 23-40523 WJL 9 Adv. Proc. No.: 23-04028 WJL ___________________________________ 10
11 THE ROMAN CATHOLIC BISHOP OF OAKLAND, ORDER RE: MOTIONS TO 12 WITHDRAW REFERENCE Plaintiff, 13 v. 14 PACIFIC INDEMNITY, a Delaware 15 corporation; TRAVELERS CASUALTY & SURETY COMPANY F/K/A AETNA 16 CASUALTY & SURETY COMPANY, a Connecticut corporation; INSURANCE 17 COMPANY OF NORTH AMERICA, a Delaware corporation; UNITED STATES 18 FIRE INSURANCE, a Delaware corporation; WESTPORT INSURANCE 19 CORPORATION, a Delaware corporation; CONTINENTAL CASUALTY COMPANY, 20 a Delaware corporation; PACIFIC EMPLOYERS INSURANCE, a Delaware 21 corporation; WESTCHESTER FIRE INSURANCE COMPANY, a Pennsylvania 22 corporation; the CALIFORNIA INSURANCE GUARANTEE 23 ASSOCIATION, a state entity; and CERTAIN UNDERWRITERS AT 24 LLOYD’S, LONDON, SUBSCRIBING SEVERALLY AND NOT JOINTLY TO 25 SLIP NOS. CU 1001 AND K 66034, Defendants. 26
27 1 The Roman Catholic Bishop of Oakland brought a declaratory relief action in the United 2 States Bankruptcy Court for the Northern District of California against numerous insurers 3 (collectively “the Underwriters”) seeking a coverage determination regarding the Underwriters 4 obligation to defend the Plaintiff against numerous state court actions, as well as a claim against 5 the California Insurance Guarantee Association (CIGA). Defendants’ motions to withdraw the 6 reference from bankruptcy court to district court under 28 U.S.C. § 157(d) are now pending before 7 the Court in two separately filed actions. See Case Nos. 24-709, 24-711. Plaintiff filed statements 8 of non-opposition in each. (No. 24-709, Dkt. Nos. 5, 6; No. 24-711, Dkt. No. 2.1) After carefully 9 considering the parties’ briefs and the relevant legal authority, the Court concludes oral argument 10 is unnecessary, see Civ. L.R. 7-1(b), VACATES the March 21, 2024 hearing, and GRANTS the 11 unopposed motions to withdraw the reference. 12 BACKGROUND 13 The Roman Catholic Bishop of Oakland is facing over 300 state court actions alleging 14 negligent supervision and negligent hiring of clerical and ministerial staff who perpetrated sexual 15 abuse against certain claimants. In response to these actions, on May 8, 2023, the Roman Catholic 16 Bishop of Oakland filed a voluntary chapter 11 petition in the United States Bankruptcy Court for 17 the Northern District of California. See In re the Roman Catholic Bishop of Oakland, No. 23- 18 40523. The following month, the Roman Catholic Bishop of Oakland filed the underlying 19 Adversary Proceeding against the Underwriters and CIGA. See In re the Roman Catholic Bishop 20 of Oakland, Adv. Proc. No. 23-04028 (“the Coverage Action”). 21 In the Coverage Action, Plaintiff brings state law claims regarding the Underwriters’ 22 obligation to provide coverage to Plaintiff in its defense of the state court actions and a declaratory 23 judgment regarding CIGA’s statutory obligations related to the same. Defendants moved to 24 dismiss the complaint and filed a jury demand. The Bankruptcy Court has since granted the 25 motion to dismiss and briefing on a third round of motions to dismiss is currently pending in the 26 Bankruptcy Court. Along with moving to dismiss the third amended complaint, Defendants filed 27 1 the now pending motions to withdraw the reference. 2 DISCUSSION 3 District courts have “original but not exclusive jurisdiction” over all bankruptcy 4 proceedings. See 28 U.S.C. § 1334(b). These proceedings fall into one of two categories: “core 5 proceedings, in which the bankruptcy court may enter appropriate orders and judgment,” and 6 “non-core proceedings, which the bankruptcy court may hear but for which it may only submit 7 proposed findings of fact and conclusions of law to the district court for de novo review.” Sec. 8 Farms v. Int’l Brotherhood of Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 9 1008 (9th Cir. 1997) (quoting 28 U.S.C. § 157). “Actions that do not depend on bankruptcy laws 10 for their existence and that could proceed in another court are considered ‘non-core.’” Sec. Farms 11 v. Int’l Bhd. of Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1008 (9th Cir. 12 1997). 13 Pursuant to 28 U.S.C. § 157(d), a district court may withdraw reference to the bankruptcy 14 court. See 28 U.S.C. § 157(d). The provision provides for both permissive and mandatory 15 withdrawal. Id. Mandatory withdrawal is required if “resolution of the proceeding requires 16 consideration of both title 11 and other laws of the United States regulating organizations or 17 activities affecting interstate commerce.” Id. Permissive withdrawal, as sought here, requires a 18 showing of “cause.” 28 U.S.C. § 157(d). “In determining whether cause exists, a district court 19 should consider the efficient use of judicial resources, delay and costs to the parties, uniformity of 20 bankruptcy administration, the prevention of forum shopping, and other related factors.” Sec. 21 Farms, 124 F.3d at 1008. 22 Defendants contend withdrawal is appropriate here because the Coverage Action involves 23 exclusively non-core state law claims that do not arise under bankruptcy law and for which 24 Defendants have demanded a jury trial. Plaintiff does not oppose withdrawal of the reference 25 because it seeks adjudication of the claims alleged in the Coverage Action as soon as possible. 26 (No. 24-709, Dkt. Nos. 5 at ¶ 7; No. 24-711, Dkt. No. 2 at ¶ 7.) The Court concludes there is 27 good cause with withdraw the reference here. 1 A. Judicial Efficiency 2 Judicial efficiency favors withdrawal of the reference. The Court’s analysis here begins 3 with the question of whether Plaintiff’s claims are core or non-core “since it is upon this issue that 4 questions of efficiency and uniformity will turn.” Hjelmeset v. Cheng Hung, No. 17-CV-05697- 5 BLF, 2018 WL 558917, at *3 (N.D. Cal. Jan. 25, 2018). Because bankruptcy judges are not 6 Article III judges, “the Constitution limits their ability to adjudicate—i.e., to render a final 7 judgment—to issues that are at the ‘core’ of the bankruptcy power.” In re Harris, 590 F.3d 730, 8 737 (9th Cir. 2009). For core matters, “the statute empowers the bankruptcy judge to enter final 9 judgment on the claim, subject to appellate review by the district court.” Exec. Benefits Ins. 10 Agency v. Arkison, 573 U.S. 25, 34 (2014). However, “[i]f a matter is non-core, and the parties 11 have not consented to final adjudication by the bankruptcy court, the bankruptcy judge must 12 propose findings of fact and conclusions of law.” Id. The district court may then enter a final 13 order or judgment “after considering the bankruptcy judge’s proposed findings and conclusions 14 and after reviewing de novo those matters to which any party has timely and specifically 15 objected.” 28 U.S.C. § 157(c)(1). “Since a bankruptcy court’s determination of non-core matters 16 may be subject to de novo review by the district court, in cases where non-core issues 17 predominate, judicial efficiency may be ‘enhanced’ and ‘unnecessary costs could be avoided by a 18 single proceeding in the district court.’” In re Cachet Fin. Servs., 652 B.R. 341, 346 (C.D. Cal. 19 2023) (quoting Sec. Farms, 124 F.3d at 1008–09). 20 The state law coverage claims here are exclusively non-core. See In re Castlerock 21 Properties, 781 F.2d 159, 162 (9th Cir. 1986) (holding state law contract claims “have been held 22 to be ‘noncore’ ‘related proceedings’ under § 157(c)” and collecting cases); In re GACN, Inc., 555 23 B.R. 684, 698 (B.A.P. 9th Cir. 2016) (holding a declaratory relief coverage action against an 24 insurer was not core because “[t]he underlying dispute solely concerns the parties’ rights and 25 liabilities under a prepetition insurance contract, which was entered into pursuant to state law 26 rather than as a part of a bankruptcy case.”); see also In re Tamalpais Bancorp, 451 B.R. 6, 11 27 (N.D. Cal. 2011) (“While Trustee’s claim will have a profound impact on the bankruptcy 1 traditional contract dispute that could have been brought even if Debtor had never filed for 2 bankruptcy. Trustee’s claim is therefore non-core.”). Further, because Defendants have demanded 3 a jury trial and do not consent to bankruptcy jurisdiction, the Bankruptcy Court cannot conduct a 4 jury trial on the noncore claims. See In re Cinematronics, Inc., 916 F.2d 1444, 1451 (9th Cir. 5 1990). 6 If the Court were to deny the motions to withdraw the reference, “it would result in an 7 unnecessary layer of judicial review, which would in turn waste time and judicial resources.” In 8 re Cachet Fin. Servs., 652 B.R. at 347. Judicial efficiency is thus best served by withdrawing the 9 reference here. See Sec. Farms, 124 F.3d at 1008 (finding judicial efficiency “enhanced by 10 withdrawing the reference” where plaintiff’s claims are non-core and the Bankruptcy Court is 11 unable to enter final judgment). 12 B. Other Factors 13 The other factors—“delay and costs to the parties, uniformity of bankruptcy 14 administration, the prevention of forum shopping, and other related factors”—likewise favor 15 withdrawal of the reference here. Sec. Farms, 124 F.3d at 1008. “[W]ithdrawal will prevent delay 16 and added costs to the parties by placing the non-core cases in this Court, which can render final 17 judgment.” In re Rosales, No. 13-CV-01316-LHK, 2013 WL 5962007, at *7 (N.D. Cal. Nov. 7, 18 2013) (citing 28 U.S.C. § 157(c)(1)). Forum shopping is not a concern as even if the Bankruptcy 19 Court were to adjudicate the coverage claims, the Court would be required to conduct de novo 20 review. See In re Tamalpais, 451 B.R. at 9 (“[N]either denying nor granting [the] motion [to 21 withdraw reference] will facilitate forum shopping here because a district court will ultimately 22 need to address the issues, whether initially or on de novo review of the bankruptcy court.”). 23 *** 24 As judicial efficiency would best be served by withdrawal of the reference, none of the 25 factors for permissive withdrawal weigh in favor of leaving the proceeding in Bankruptcy Court, 26 and Plaintiff does not oppose withdrawal of the reference, the Court exercises its jurisdiction to 27 withdraw the reference here. 1 CONCLUSION 2 For the reasons stated above, the Court grants the motions to withdraw the reference. 3 The Court sets an initial case management conference for April 18, 2024 at 1:30 p.m. via 4 || Zoom videoconference. A joint case management conference statement is due April 11, 2024. 5 The parties in both cases are encouraged to file an omnibus joint case management conference 6 statement. 7 This Order disposes of Docket No. 3 in Case No. 24-709 and Dkt. No. | in Case No. 24- 8 |] 711. 9 IT IS SO ORDERED. 10 Dated: March 18, 2024 11 12 fu JACQUELINE SCOTT CORLEY 13 nited States District Judge © 15 16
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