Welt v. Bumshteyn

United States Bankruptcy Court, S.D. Florida.·Decided February 1, 2022·No. 21-01069·Unknown

Opinion

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ORDERED in the Southern District of Florida on February 1, 2022.

Peter D. Russin, Judge United States Bankruptcy Court

Tagged Opinion for Print Publication UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION In re: Case No. 18-23930-PDR Emma Bumshteyn, Chapter 7 Debtor. ee Kenneth Welt, Plaintiff, V. Adv. Case No. 21-01069-PDR Emma Bumshteyn and Yevgeniya Bumshteyn, Defendants.

ORDER GRANTING IN PART RENEWED MOTION TO STRIKE

Page 1 of 17

This is a cautionary tale for parties who wish to demand a jury trial and object to the bankruptcy court entering final orders and judgments that emphasizes the need to comply with the applicable local rules and orders and, if compliance must be

delayed or challenged, seek timely relief. Ignoring the requirements risks waiving these important rights. That is what happened here. Background The Debtor Emma Bumshteyn, filed a voluntary Chapter 7 petition on November 8, 2018, and Kenneth Welt was appointed the Chapter 7 Trustee of the Estate.1 On February 26, 2021, the Trustee filed this adversary proceeding which includes five counts against the Debtor objecting to discharge under 11 U.S.C. § 727

(Counts I–V), three counts against the Debtor’s granddaughter, Yevgeniya Bumshteyn, for avoidance of fraudulent transfers under 11 U.S.C. § 544 (Counts VI– VIII), and one count against the Granddaughter to recover the avoided fraudulent transfers under 11 U.S.C. § 550 (Count IX).2 On March 1, 2021, the Court issued a summons setting March 31, 2021, as the deadline for the Defendants to respond to the Trustee’s Complaint (the “Response

Deadline”) and setting a status conference for April 15, 2021.3 The same day, the Court entered its Order Setting Status Conference and Establishing Procedures and Deadlines (the “Status Conference Order”), a standard order entered in every

1 See In re Bumshteyn, No. 18-23930-PDR (Bankr. S.D. Fla.) (the “Main Case”).

2 (Doc. 1).

3 (Doc. 2). adversary proceeding in this district.4 The Status Conference Order, in relevant part, states: 2. RIGHT TO JURY TRIAL; WAIVER. Unless each party has timely filed a statement of consent under Local Rule 9015−1(B), and unless otherwise ordered by the Court, not later than fourteen days before the date first set for the status conference, each party requesting a jury trial on any issue in this proceeding must file with this Court a motion for withdrawal of the reference pursuant to Local Rule 5011−1. FAILURE OF ANY PARTY TO FILE A MOTION TO WITHDRAW THE REFERENCE ON OR BEFORE THE DEADLINE PROVIDED IN THIS PARAGRAPH CONSTITUTES WAIVER BY SUCH PARTY OF ANY RIGHT TO TRIAL BY JURY IN THIS PROCEEDING. 3. OBJECTION TO ENTRY OF FINAL ORDERS AND JUDGMENTS BY THE BANKRUPTCY COURT; CONSENT. Unless otherwise ordered by the Court, not later than fourteen days before the date first set for the status conference, each party objecting to the entry of final orders or judgments by this Court on any issue in this proceeding must file with this Court a motion pursuant to Rule 7016(b), Fed. R. Bankr. P., requesting that this Court determine whether this proceeding is subject to the entry of final orders or judgments by this Court. Any such motion will be treated as an objection to the entry of final orders or judgments by this Court. FAILURE OF ANY PARTY TO FILE A MOTION ON OR BEFORE THE DEADLINE PROVIDED IN THIS PARAGRAPH CONSTITUTES CONSENT BY SUCH PARTY TO THIS COURT ENTERING ALL APPROPRIATE FINAL ORDERS AND JUDGMENTS IN THIS PROCEEDING. Nothing in this paragraph limits this Court's ability to determine whether this proceeding is subject to entry of final orders or judgments by this Court.5 The deadline under the Status Conference Order to file motions to withdraw the reference and to determine whether this proceeding is subject to the entry of final

4 (Doc. 3) (the “Status Conference Order”).

5 (Doc. 3) (emphasis in original). orders or judgments by this Court (the “Motions Requirement”) was April 1, 2021 (the “Motions Deadline”), the day after the Response Deadline. Sometime prior to the expiration of the Response Deadline, the parties agreed

to extend it to April 8, 2021. Apparently, there was no agreement to also extend the Motions Deadline. The Parties did not provide any notice of the agreed extension to, or seek approval of, the Court. On April 8, 2021, the Defendants filed an answer and affirmative defenses6 that included the Granddaughter’s demand for a jury trial and objection to this Court entering final orders and judgments (“Article III adjudication”).7 The Granddaughter did not, however, comply with the Motions Requirement; to date, she has neither filed

the required motions nor affirmatively sought relief from the Motions Requirement. Shortly after the Motions Deadline expired and the Defendants answered, the Trustee filed his Motion to Strike Demand for Jury Trial and Affirmative Defenses.8 The Trustee argues that the Granddaughter implicitly waived her purported jury trial and Article III adjudication rights by asserting them in an untimely and procedurally improper manner, and that the Defendants have improperly raised

jurisdiction and standing as affirmative defenses. In opposition, the Granddaughter

6 (Doc. 7).

7 The Answer clearly indicates that only the Granddaughter objects to the Court’s authority to enter final orders, but it does not specifically state who asserts a jury trial right. At the hearing, counsel for the Defendants clarified that only the Granddaughter, not the Debtor, asserts a right to a jury trial. To whatever extent the Debtor does assert a jury trial right, however, the Court notes that its analysis would apply equally to both Defendants.

8 (Doc. 8). contests waiver and asserts the Court’s procedures are unconstitutional, and the Defendants argue they appropriately assert the affirmative defenses. Ultimately, by agreement, the Trustee filed an Amended Complaint, the

Defendants answered, and the Trustee renewed his motion to strike, which the Defendants opposed.9 These documents are nearly identical to the originals. The Court heard the Renewed Motion on November 3, 2021.10 Legal Standard Under Fed. R. Civ. P. 12(f), made applicable to adversary proceedings by Fed. R. Bankr. P. 7012(b), “[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Motions to strike

are a “drastic remedy” that is “disfavored by the courts.” Adams v. Jumpstart Wireless Corp., 294 F.R.D. 668, 670 (S.D. Fla. 2013) (quoting Thompson v. Kindred Nursing Ctrs. E., LLC, 211 F. Supp. 2d 1345, 1348 (M.D. Fla. 2002)) (cleaned up). Consequently, courts generally will not strike a pleading unless it is irrelevant to the proceedings and is prejudicial. See, e.g., Graveling v. Castle Mortg. Co., 631 F. App’x 690, 696 (11th Cir. 2015); Adams, 294 F.R.D. at 270; Carter v. Flagler Hospital, Inc.

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