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* Sigma Micro Corp. v. Healthcentral.com (In re Healthcentral.com), 505 F.3d. 775
(9th Cir. Sept. 2007) (Brunetti, J.) Local rule calling for the automatic reference withdrawal was invalid. The defendant in this adversary proceeding asserted its right to a jury trial and cited a local procedural rule which provided for automatic reference withdrawal upon certain conditions. The bankruptcy court ignored the local rule and retained jurisdiction over the pre-trial matters, eventually granting summary judgment in favor of the plaintiff. On appeal, the Ninth Circuit held that this local rule was invalid because it could not be squared with 28 U.S.C. S 157(d) (providing that only the district court may withdraw the reference) and Bankruptcy Rule 5011(a) (requiring the district court to hold hearings on motions to withdraw). Because all local rules promulgated by district courts must comport to the limitations of Bankruptcy Rule 9029 (i.e., they must be consistent with Acts of Congress and Federal Rules of Bankruptcy Procedure), and this local rule calling for the automatic withdrawal by the bankruptcy court went beyond these limitations, the Ninth Circuit held that the local rule was invalid and that the bankruptcy court did not err by ignoring it. The court further held that the defendant's Seventh Amendment right to a trial by jury did not divest the bankruptcy court of jurisdiction. However, the court reversed the grant of summary judgment on the merits and remanded to allow the bankruptcy court to consider the proper standards for the defendants' preference defenses.
* Northwest Airlines, Inc. v. City of Los Angeles (In re Northwest Airlines Corp.),
384 B.R 51 (S.D.N.Y. Feb. 2008) (Sweet, J.) Debtor takes a non-stop flight from SDNY to CDCA. The City of Los Angeles sought to withdraw the reference and to transfer venue in an adversary proceeding commenced by the debtor against the City regarding long-term leases at LAX. The district court concluded that the City's motion should be granted. Despite the fact that the City had filed a proof of claim in the debtor's bankruptcy case, the court held that this proceeding was unrelated to the City's proof of claim nor did it concern the debtor's distributions on or setoff of the City's claim. Instead, the principal thrust of the debtor's complaint, according to the district court, was to challenge the City's rights to charge new rates and to terminate the debtor's existing lease of terminal space at LAX. The district court recognized that the debtor was not the true leaseholder, but instead, was a member of an entity to which the City leased terminal space. The district court thus concluded that this matter was a non-core proceeding.12
The district court further recognized that the bankruptcy court never had a need to familiarize itself with the LAX leases. Meanwhile, the debtor was involved in at least two proceeding before in the Central District of California (where the City sought to transfer the proceeding) concerning those leases. In the interest of judicial efficiency (and, because the matter was a non-core proceeding), the district court concluded that withdrawal was warranted. As to the City's request to transfer venue, the district court recognized that the debtor's plan of
12 In so concluding, the district court followed what it called the "majority rule" in deciding that the matter was non-core without first allowing the bankruptcy court to give its input.
