The opinion
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION - FLINT
IN RE:
Case No. 12-32264-dof
CHRISTOPHER D. WYMAN, Chapter 7 Proceeding
Debtor. Hon. Daniel S. Opperman
______________________________________/
SAMUEL D. SWEET,
Plaintiff/Counter-Defendant,
v. Adversary Proceeding
Case No. 19-03018-dof
BARBARA DUGGAN,
Defendant/Counter-Plaintiff.
______________________________________/
OPINION REGARDING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
Introduction
Plaintiff, Samuel D. Sweet, seeks summary judgment as to the counter-claims of
Defendant, Michael Tindall. Mr. Tindall responded to this motion and the Court heard oral
arguments on November 8, 2022. Subsequently, Mr. Tindall filed various pleadings with this Court
that touch on issues raised in this adversary proceeding and at oral argument. For the reasons
stated in this Opinion, the Court grants Plaintiff’s Motion for Summary Judgment.
Background
Plaintiff originally objected to the secured status of the claim of Barbara Duggan. Because
the relief sought was more appropriate in an adversary proceeding, this proceeding was opened.
A portion of Ms. Duggan’s claim was assigned to Mr. Tindall. Mr. Tindall filed responses and a
counter-claim, and Plaintiff filed a response. Subsequently, Mr. Tindall and Ms. Duggan filed a
Motion to Withdraw Reference. The District Court for the Eastern District of Michigan heard oral
arguments and issued an Order Denying Motion to Withdraw Reference (#1) and Administratively
Closing Case on August 22, 2019. This Order states:
On March 18, 2019, Sweet commenced an Adversary Proceeding against
Defendants Tindall and Duggan (collectively, “Defendants”) to avoid the
enforcement of Duggan’s Judgment Lien against the real property. (Adversary No.
19-03018, Doc # 1) In the Adversary Proceeding, Sweet alleged that Duggan failed
to renew her Judgment Lien five years from the original filing date pursuant to
Mich. Comp. Laws § 600.2809. (Id.) On March 22, 2019, Defendants filed a
Counter Complaint, which included three counterclaims, including: Declaratory
Judgment (Claim I); Breach of Fiduciary Duty and Waste under 11 U.S.C. § 704
(Claim II);1 and Abandonment under 11 U.S.C. § 554(b) (Claim III). (Adversary
No. 19-03018, Doc # 11) Claims I and III are now moot because the real property
has been sold. (Doc # 1, Pg ID 3)
On June 13, 2019, Defendants filed a Motion to Withdraw Reference
pursuant to 28 U.S.C. § 157(d). (Doc # 1) According to Defendants, the
circumstances of this case “create both grounds for mandatory withdrawal of the
reference, and, ‘cause’ for permissive withdrawal of the reference.” (Id. at Pg ID 4)
In addition to their request to withdraw the reference, Defendants request that the
Court stay all further proceedings in the Bankruptcy Court and expedite the hearing
on this Motion. (Id. at 5.) A Response was filed on June 17, 2019, and a Reply was
filed on June 19, 2019. (Doc # 3; Doc # 5) A hearing was held on this matter on
July 10, 2019.
. . .
A. Mandatory Withdrawal
Defendants request that the Court exercise its authority to withdraw the
reference pursuant to 28 U.S.C. § 157(d). Defendants argue that Claim II pertains
to a non-core state law tort claim, which not only entitles them to a jury trial, but
also prevents the Bankruptcy Court from having the subject matter jurisdiction
necessary to hear their Claim. Without going into any detail, Defendants contend
that the courts in Stern v. Marshall, 564 U.S. 462 (2011), Waldman v. Stone, 698
F.3d 910 (6th Cir. 2012), and Exec. Benefits Ins. Agency v. Arkison, 573 U.S. 25
(2014), found that claims such as theirs constitute non-core proceedings.
In response, Sweet argues that Defendants’ Claim is a core matter because
it concerns and affects the administration of the bankruptcy estate that is at issue.
Sweet claims that courts have considered this issue, and ruled that a lawsuit against
a trustee is a core matter. Sweet’s contention is premised on his belief that he could
not have breached a fiduciary duty, because under Michigan law, a trustee only has
a duty to the bankruptcy estate and not to each individual creditor. Further, Sweet
attempts to distinguish the instant case from Waldman and Stern, and asserts that
those cases involved a debtor and a creditor, as opposed to this case, which includes
a trustee and creditors.
The determinative issue in this case is whether a Breach of Fiduciary Duty
and Waste claim under 11 U.S.C. § 704 constitutes a “core proceeding” under 28
U.S.C. § 157(b)(2). Congress has provided a non-exhaustive list of “core” matters
in § 157(b)(2), including: 1) matters concerning the administration of the estate; 2)
counterclaims by the estate against persons filing claims against the estate; 3)
proceedings to determine, avoid, or recover preferences and fraudulent
conveyances; 4) orders to turn over property of the estate; and 5) confirmation of
plans. 28 U.S.C. § 157(b)(2). A bankruptcy court may hear and determine a core
proceeding, unless a party demands a jury trial. 28 U.S.C. § 157(b)(1), (e). Absent
consent of the parties, the bankruptcy judges will conduct hearings and file
proposed findings of fact and conclusions of law on non-core proceedings. E.D.
Mich. LR 83.50(a)(3).
The Court finds that Claim II clearly falls under the core proceedings
category because it is premised on Sweet’s potential liability for violating 11 U.S.C.
§ 704. § 157(b)(2)(A) straightforwardly indicates that core proceedings include
“matters concerning the administration of the estate.” Claim II is based on
Defendants’ argument that Sweet failed “to protect and preserve property of the
Bankruptcy Estate for the benefit of the creditors.” (Adversary No. 19-03018, Doc
# 11) Defendants’ Claim directly relates to the manner in which Sweet allegedly
carried out his obligations while administering the estate. See 28 U.S.C. §
157(b)(2).
Defendants have argued that their Claim is a state law tort claim, which
therefore would require the Court to determine that it should be deemed a non-core
proceeding. The Court is unconvinced by such an argument. In Defendants’
Counter Complaint, they determined that they would bring forward a Breach of
Fiduciary Duty and Waste claim pursuant to 11 U.S.C. § 704. There was no mention
of any state law violations. The Court will not allow Defendants to now make such
an argument because it is convenient for them. Claim II is based on federal law and
the Court will assess Defendants’ Claim as such for purposes of the instant Motion.
Defendants additionally contend that the courts in Stern, Waldman, and
Arkison found that claims similar to theirs were non-core proceedings. The
difference between those three cases and the instant case however, is that those
cases each assessed state law claims. As mentioned, Claim II is not premised on
state law and therefore, those cases are not analogous to the present case.
Since the proceeding here is a core proceeding, the Court must assess
whether Defendants are entitled to mandatory withdrawal. There are three
conditions in the statute which must be met to withdraw a case or proceeding under
the mandatory withdrawal provision in § 157(d): 1) the movant is a party; 2) the
motion is timely; and 3) the resolution of the proceeding before the Bankruptcy
Court requires consideration of both Title 11 and another federal law regulating
organizations or activities affecting interstate commerce. In re Baldwin–United
Corp., 47 B.R. 898, 899 (S.D.Ohio 1984).
Here, the Court finds that Defendants have not satisfied all three prongs of
the mandatory withdrawal analysis. The first prong has been met as to Duggan
because she is a party to the underlying bankruptcy action. The second prong has
been satisfied. Courts have determined that something will be considered timely if
it is done at the “first reasonable opportunity.” In re Baldwin–United Corporation,
57 B.R. 751, 753 (S.D.Ohio 1985). Courts have further explained that timeliness
requires that action be taken without undue delay and must be evaluated in the
context of the specific situation. Id. The Adversary Proceeding commenced on
March 18, 2019, and the present Motion was filed on June 13, 2019. The Court
determines that a period of approximately three months may be considered timely
even though there does not appear to be a reason why Defendants could not have
filed the instant Motion sooner, and Defendants have not explained why they waited
almost three months to file their Motion. Finally, the Court finds that the third prong
has not been met because the only law at issue is 11 U.S.C. § 704. No other “federal
law regulating organizations or activities affecting interstate commerce” has been
referenced by Defendants in relation to Claim II and they have not argued
otherwise.
B. Discretionary Withdrawal
Defendants argue that the Court should alternatively exercise its authority
pursuant to 28 U.S.C. § 157(d)’s discretionary withdrawal provision. Regarding
discretionary withdrawal, it appears that Defendants insist that the Court should use
its discretionary authority to withdraw the reference since the Bankruptcy Court
relocated from Flint, Michigan to Bay City, Michigan. Defendants seemingly argue
that this relocation will make it more difficult for them and their counsel to appear
at subsequent proceedings. Defendants assert that this case should be heard in this
Court because it would be less burdensome for them and their counsel to travel to
Detroit, Michigan as opposed to Bay City, Michigan. The Court notes that Sweet
did not address Defendants’ argument pertaining to a potential discretionary
withdrawal.
Section 157(d) grants the district court the discretion to withdraw the
reference for “any case or proceeding referred under this section, on its own motion
or on timely motion of any party, for cause shown.” In considering a withdrawal
motion, “whether a proceeding is core or non-core…is a central question.” In re
Appalachian Fuels, LLC, 472 B.R. 731, 2012 WL 1344984 at *4 (E.D.Ky.2012).
A district court should first evaluate whether the claim is core or non-core and then
turn to the other factors. Id. Courts have considered the following factors to
determine whether cause exists to withdraw the reference: 1) judicial economy; 2)
uniformity in Bankruptcy administration; 3) reducing forum shopping and
confusion; 4) fostering economical use of the debtor's and creditor's resources; 5)
expediting the bankruptcy process; and 6) the presence of a jury demand. Id. at *3.
Other courts in this circuit have found that discretionary withdrawal of reference
requires “compelling” cause. Id.
The Court finds that the justification offered by Defendants is not
compelling. While the Court understands that the relocation of the Bankruptcy
Court might be a hardship for Defendants as it relates to their travel to future
proceedings, the Court does not believe that it will impose a burden on Defendants
that is significant enough for the Court to exercise its discretion to withdraw the
reference.
C. Jury Trial
Defendants additionally assert that they are entitled to a jury trial before this
Court and “have not and do not consent to the Bankruptcy Court hearing and/or
entering Judgment on Count II.” (Doc # 1, Pg ID 4) Parties may consent to a jury
trial before the Bankruptcy Court if all parties so agree. 28 U.S.C. § 157(e) states:
If the right to a jury trial applies in a proceeding that may be heard
under this section by a bankruptcy judge, the bankruptcy judge may
conduct the jury trial if specially designated to exercise such
jurisdiction by the district court and with the express consent of all
the parties.
28 U.S.C. § 157(e). Considering that Defendants do not consent to a jury trial in
the Bankruptcy Court, but still demand a jury trial, the referral of the case may be
withdrawn by the District Court. However, Defendants have not shown that they
are entitled to a jury trial as to Claim II. As argued by Sweet, as a trustee, he has no
duty to the creditors, only to the bankruptcy estate under Michigan law. The Court
denies Defendants’ request for a jury trial at this time. If it is determined that
Defendants are entitled to a jury trial before this Court, the Court finds that in the
interest of judicial economy, the Bankruptcy Court should complete the pre-trial
portion of this case. Other courts have similarly found this approach to be
appropriate in these instances. See In re Collins & Aikman Corp., No. 05-55927,
2006 WL 6584164, at *2 (E.D. Mich. June 15, 2006); see also In re Solar Stamping
& Mfg., LLC, No. 08-13433, 2008 WL 4239146, at *1 (E.D. Mich. Sept. 10, 2008).
After pre-trial matters conclude, and the case is ready for trial, the parties and the
Bankruptcy Court will then notify the Court, and a final pretrial conference and
date for the jury trial will be set.
On August 29, 2019, this Court held a status conference regarding this matter in
conjunction with related matters. Mr. Tindall appeared and advised the Court he anticipated filing
a Motion for Reconsideration with the District Court or taking an appeal to the Sixth Circuit Court
of Appeals. The Court was advised he would notify this Court of the outcome of any such action.
The Court was not advised of any appellate status until the Court held a routine status conference
regarding this matter on September 6, 2022. Thereafter, a flurry of pleadings have been filed with
the Court. Two pleadings filed by Mr. Tindall, Dockets #107 and #108, restate arguments already
raised and decided by the District Court in its August 22, 2019 Order.
The first pleading after the September 6, 2022 conference, however, is Plaintiff’s Motion
for Summary Judgment. As the District Court noted and concluded, Counts I and III are moot and
Plaintiff renewed that argument. As to Count II – Breach of Fiduciary Duty and Waste, Plaintiff
argues that he has immunity, citing Grant, Konvalinka & Harrison, PC v. Banks, Morgan, and
Richard Banks & Assoc., P.C. (In re McKenzie), 716 F.3d 404 (6th Cir. 2013), cert. den., 571 U.S.
955 (2013).
Mr. Tindall replied, denying that Plaintiff was entitled to immunity and pointing out that
Plaintiff did not plead immunity in his response to the counter-claim. Plaintiff in turn amended
his response to include the immunity defense. Mr. Tindall countered this maneuver by filing a
Motion to Strike on November 8, 2022 (Docket #99) which Plaintiff replied to on November 22,
2022 (Dockets #110 and #112).
The Court heard oral arguments on November 8, 2022 and took this matter under
advisement. The Court has reviewed all pleadings filed after September 6, 2022 and finds that
additional oral argument is not necessary.
Statement of Legal Authorities and Standards
Summary Judgment Standard
Federal Rule of Civil Procedure 56 is made applicable in its entirety to bankruptcy
adversary proceedings by Federal Rule of Bankruptcy Procedure 7056. Rule 7056(c) provides that
summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to judgment as a matter of law." See Choate
v. Landis Tool Co., 486 F. Supp. 774 (E.D. Mich. 1980). The moving party bears the burden of
showing the absence of a genuine issue of material fact as to an essential element of the non-
moving party's case. Street v. J.C. Bradford & Co., 886 F.2d 1472 (6th Cir. 1989) (citing Celotex
Corp. v. Catrett, 477 U.S. 317 (1986)). The burden then shifts to the nonmoving party once the
moving party has met its burden, and the nonmoving party must then establish that a genuine issue
of material fact does indeed exist. Janda v. Riley-Meggs Indus., Inc., 764 F. Supp 1223, 1227
(E.D. Mich. 1991).
Amendments to Pleadings Standard
Federal Rule of Civil Procedure 15(a)(2) states:
(a) Amendments Before Trial
. . .
(2) Other Amendments. In all other cases, a party may amend its
pleading only with the opposing party’s written consent or the court’s leave. The
court should freely give leave when justice so requires.
This Rule is applicable in bankruptcy adversary proceedings by Federal Rule of
Bankruptcy Procedure 7015.
Analysis
The application of immunity is dispositive to the remaining count in the counter-claim.
The first and third counts are moot and Mr. Tindall did not address either count in his response or
at oral argument. To get to the application of the immunity defense, the Court must first determine
if that defense has been waived.
In his brief and in oral argument, Mr. Tindall makes much of the failure of Plaintiff to plead
immunity in his initial response. Mr. Tindall is correct, but that alone does not completely address
the issue.
First, the authority cited by Mr. Tindall, Summe v. Kenton Cty. Clerk’s Office, 604 F.3d
257, 269-70 (6th Cir. 2010), does hold that qualified immunity can be waived when raised sua
sponte by the trial court. Moreover, Haskell v. Washington Twp., 864 F.2d 1266, 1273 (6th Cir.
1988) did prohibit the raising of an immunity defense because of length of time and extensive
litigation, as well as three published opinions.
Here, neither the Summe or Haskell factors are present. Plaintiff raised the issue of
immunity as early as May 23, 2019 in his Amended Motion for Summary Judgment of Counter
Claims:
C. Immunity. The Trustee believes that he has provided a qualified judicial
immunity in the Sixth Circuit Court of Appeals and as such this claim is not well
founded. Pursuant to In re McKenzie, 716 Fed 3rd 404 Sixth Circuit 2013 the
Trustee’s actions as long as within the scope of his employment and taken pursuant
to proper court orders are immune from a potential claim individually by a creditor
or other party in interest. Ironically, the only exception to this appears to be when
a Trustee wrongfully seizes property that is found not to be property of the estate
without first obtaining a Court order. As the Counter Plaintiff had requested and
had specifically provided in their Counter Claim that the Trustee take specific
action prior to obtaining a determination that this property did constitute property
of the estate. The Trustee further relies upon In re Bryan, 308 B.R. 583 (2004), In
Re Hildebrand, 205 B.R. 278 (1997) and Weissman v. Hassett, 47 B.R. 462 (1985)
wherein a Trustee is provided with immunity for claims provided he acts within the
scope of his duty and pursuant to bankruptcy court orders. This Trustee has done
exactly that and as such sees no basis for Counter Plaintiff’s claim.
Likewise, time has passed because Mr. Tindall sought appellate review of the District
Court’s August 22, 2019 Order and he neglected to advise the Court of the completion of his
efforts. Moreover, there has not been any activity, much less extensive litigation in this adversary
proceeding. Accordingly, the Court finds and concludes that Plaintiff did not waive his immunity
and that Mr. Tindall’s Motion to Strike Plaintiff’s Pleading should be denied.
The Court next turns to the applicability of Plaintiff’s immunity defense. The Plaintiff as
a Trustee was tasked with the liquidation of Debtor’s assets, which includes the 1011 Jones Road
property. He sought out purchasers for the property but was not as successful as Mr. Tindall would
have liked. Once Plaintiff did obtain a potential purchaser, he duly filed a motion with this Court
and noticed creditors and parties in interest, including Mr. Tindall and Ms. Duggan. Mr. Tindall
and Ms. Duggan objected, and Plaintiff filed an amended motion to transfer interest of the 1011
Jones Road property to the sale proceeds. Objections were again raised and overruled by the Court,
and an Order approving the sale was entered on March 13, 2019. As summarized in the Trustee’s
Report of Sale and Seller’s Settlement Statement filed on May 30, 2019 in the bankruptcy case of
Christopher Wyman, the 1011 Jones Road property was sold and a closing held on May 29, 2019
with the interests of Ms. Duggan and Mr. Tindall paid.
Federal Rule of Civil Procedure 15 allows for the amendment of pleadings and applies in
this instance. Mr. Tindall was on notice of Plaintiff’s immunity defense as early as May 2019 and
is not prejudiced by the amendment of Plaintiff’s defenses. Justice requires this Court to give
leave to Plaintiff in this situation, so the Court allows Plaintiff to amend his affirmative defenses
as stated in his October 31, 2022 pleading found at Docket #93.
Plaintiff has acted within his statutory authority as a bankruptcy trustee under 11 U.S.C. §
704, and has the immunity granted to him by Grant, supra. More importantly, when a trustee is
acting pursuant to a court order, such as in this case with the March 13, 2019 Sale Order, the trustee
is protected by absolute or derived immunity. See Phoenician Mediterranean Villa, LLC v. Swope
(In re JBS Properties, LLC), 872 F.3d 138, 142 n.3 (3d Cir. 2017) (citing In re Harris, 590 F.3d
730, 742 (9th Cir. 2009); Boullion v. McClanahan, 639 F.2d 213, 214 (Sth Cir. Unit A. Mar.
1981)). As stated by the United States Supreme Court:
“The practice is well established by which Trustees seek instructions from the
Court, given notice to creditors and interested parties, as to matters which involve
difficult question of judgment ......but had it been authorized, at least the assenting
creditor might have found themselves estopped to question the transaction.”
Mosser v. Darrow, 341 U.S. 267, 274 (1951).
Plaintiff did exactly that in this case and is entitled to immunity, which compels the Court
to grant his Motion for Summary Judgment.
Conclusion
For the reasons stated in this Opinion, the Court GRANTS Plaintiff's Motion for Summary
Judgment (Docket #88).
The Court enters an Order consistent with this Opinion.
Not for publication
Signed on December 28, 2022 SS,
Ki ~ /s/ Daniel S. Opperman
Eliya ae Daniel S. Opperman
Bay United States Bankruptcy Judge