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Twin City Fire Insurance Company v. Spry

United States District Court, D. South Carolina, Charleston Division

July 25, 2017

TWIN CITY FIRE INSURANCE COMPANY, Plaintiff,
v.
THOMAS SPRY, THOMAS PAIGE INTERNATIONAL, DEBORAH ESTRIN, ABBOTT ESTRIN, and FITZGERALD ADDISION GROUP, LLC, Defendants. ABBOTT SIMON ESTRIN, and DEBORAH LEAH ESTRIN, Appellants,
v.
TWIN CITY FIRE INSRUANCE COMPANY, Appellee.

          ORDER

          DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

         The following matter is before the court on Abbott Simon Estrin (“Mr. Estrin”) and Deborah Leah Estrin's (“Ms. Estrin, ” together with Mr. Estrin, the “Estrins”)[1] motion for leave to appeal Bankruptcy Judge David R. Duncan's (the “Bankruptcy Judge”) January 22, 2016 order denying the Estrins' request for a continuance, Case No. 2:16-mc- 00273-DCN, ECF No. 1, and the Bankruptcy Judge's February 23, 2016 Report and Recommendation (the “R&R”) that the court withdraw reference of all causes of action in Case No. 2:15-cv-01663-DCN (the “Primary Action”) and transfer that action to the Central District of California. Case No. 2:15-cv-01663-DCN, ECF No. 96.[2] For the foregoing reasons, the court denies the Estrins' motion for leave to appeal and rejects the Bankruptcy Judge's recommendation to withdraw reference.

         I. BACKGROUND[3]

         On July 12, 2013, Twin City Fire Insurance Company (“Twin City”) filed the Primary Action against the Estrins and defendants Thomas Spry (“Spry”) and Thomas Paige International (“TPI, ” together with Spry, the “TPI Defendants”) in the Central District of California, alleging that the Estrins had engaged in a fraudulent scheme to obtain fees for recruiting services that were never performed. According to the complaint, Ms. Estrin, who was employed by Home Serve USA Corp. f/k/a Home Service USA Corp. (“HSUSA”), funnelled candidates for employment to her husband, who would then “present” the candidates to HSUSA via TPI and Spry-TPI's chief executive officer. HSUSA would then pay TPI a recruiting fee for candidates that would not have required any recruiting fee, but for the Estrins' involvement, at which point the TPI Defendants would split their ill-gotten proceeds with the Estrins.[4] Based on these allegations, Twin City brought claims for conspiracy to commit fraud, fraud, and violation of California Business and Professions Code 17200, et. seq. Notably, the TPI Defendants were California residents at all times relevant to the Primary Action.

         The TPI Defendants filed an answer with a jury demand on September 30, 2013. ECF No. 8. The Estrins, however, never answered the complaint. Instead, the Estrins filed a motion to dismiss the Primary Action for lack of jurisdiction. ECF No. 15. This motion was denied on April 8, 2014. ECF No. 41. In the meantime, the court scheduled the Primary Action for a “jury trial” on September 9, 2014. ECF No. 24. Twin City filed an amended complaint on August 14, 2014 to add Fitzgerald Addison Group, LLC (“Fitzgerald Allison”) as a defendant. ECF No. 51. Again, the Estrins failed to file an answer. Twin City reached a settlement with the TPI Defendants on January 29, 2015. Fitzgerald Allison was placed in default on February 20, 2015. ECF No. 60.

         Sometime in 2014, the Estrins moved from Florida to South Carolina, and on August 25, 2014, the Estrins filed for bankruptcy under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court of the District of South Carolina (the “Bankruptcy Court”). Case No. 14-br-04795-dd. Twin City filed an adversary proceeding in the Bankruptcy Court on March 6, 2015 (the “Adversary Proceeding”), alleging that the Estrins' debts to Twin City were not dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), (a)(4), and (a)(6). Case No. 15-br-80039-dd.[5] The Estrins filed an answer in the Adversary Proceeding on April 1, 2015. Adversary Proceeding ECF No. 5. On March 13, 2015, Twin City moved to transfer the Primary Action to this court. The Central District of California granted this motion, reasoning that: (1) the Estrins' liability in the Primary Action may have a significant impact on the estate, (2) there is “significant overlap” between the determination of the Estrins' liability in the Primary Action and “the determination whether the claim in the [b]ankruptcy [c]ase is dischargeable, ” and (3) transfer would most convenient for the parties. ECF No. 70 at 3.

         On May 26, 2015, this court entered an order referring the Primary Action to the Bankruptcy Court. ECF No. 89. On September 18, 2015, the Estrins informed the court that they had moved yet again-this time, to New Orleans, Louisiana. ECF No. 95. On November 18, 2015, the Bankruptcy Court set a January 28, 2016 trial date in the Adversary Proceeding. Adversary Proceeding ECF No. 60. On December 29, 2015, the Estrins filed a motion for a jury trial. Adversary Proceeding ECF No. 63. The Bankruptcy Court, relying on Twin City's counsel's representation at a pretrial conference that the only issue to be tried was the dischargability of the debt, R&R at 4, denied the Estrins' motion for a jury trial, holding that “[n]o right to a jury trial exists for nondischargeability proceedings.” Adversary Proceeding ECF No. 65.

         Shortly before trial, on January 6, 2016, the Estrins requested a continuance of 120 days, stating that Mr. Estrin was too ill to travel and participate in the trial. Adversary Proceeding ECF No. 70. The Bankruptcy Court denied this request on the grounds that the Estrins' motion was untimely, lacking in evidentiary support, and appeared to be part of a pattern of conduct designed to delay the Adversary Proceeding. Adversary Proceeding ECF No. 75. The Estrins appealed the Bankruptcy Court's denial of their motion for a continuance-without first moving for leave to appeal-and requested a stay of the Adversary Proceeding pending the appeal. Trial commenced on January 28, 2016. The Estrins did not appear. The same day, the Bankruptcy Court issued an order denying the Estrins' request to stay the proceedings pending appeal. Adversary Proceeding ECF No. 80. The Bankruptcy Court later entered an order finding that the Estrins' debts to Twin City are not dischargeable. Adversary Proceeding ECF No. 86.

         The remaining issues in the Adversary Proceeding are the “amount of the debt owed by the Estrins to [Twin City] and all three causes of action in the [Primary Action].” R&R at 5. On February 23, 2016, the Bankruptcy Court issued its R&R, recommending that the court withdraw reference of the Primary Action. Id. at 8. The Bankruptcy Court reasoned that it could not resolve the remaining issues in the Adversary Proceeding because the Estrins had not waived their right to a jury trial or consented to allow the Bankruptcy Court to conduct a jury trial on the claims in the Primary Action. R&R at 7. On March 8, 2016, Twin City filed a limited objection to the R&R, arguing that the Estrins waived their right to a jury trial on the remaining issues before the court, and therefore, there is no reason for the Bankruptcy Court not to address all remaining factual issues in the Adversary Proceeding. ECF No. 96-10. On March 21, 2016, the Estrins filed their own limited objection, arguing that they did not waive their right to a jury trial, and the case should be referred to the United States District Court in the Eastern District of Louisiana. ECF No. 96-12. The Estrins also filed a response to Twin City's objection, again arguing that they did not waive their right to a jury trial in the Primary Action. ECF No. 96-13. On March 28, 2016, the Bankruptcy Court issued a Supplemental Report and Recommendation (“Supplemental R&R”), in which it found that “there remains a question regarding whether [the Estrins] are entitled to a jury trial on the issues still remaining to be tried, ”[6] but added that, if the Estrins “have in fact waived their right to jury trial, this Court can hear the remaining issues in the [Primary Action] and can make proposed findings of fact and conclusions of law for the District Court's consideration.” ECF No. 98, Supplemental R&R at 3. The Estrins filed an objection to the Supplemental R&R on May 31, 2016. ECF No. 101. The matters are now ripe for the court's review.

         II. DISCUSSION

         When the procedural complexities of this case are disentangled, the issues presented are rather simple: (1) must the court reverse the Bankruptcy Court's denial of the Estrins' motion for a continuance? (2) did the Estrins waive their right to a jury trial with respect to Twin City's claims in the Primary Action? and (3) should the court withdraw reference of the remaining issues in the Adversary Proceeding, and if so, should the court transfer this action to another district? The court addresses each issue in turn.

         A. Appeal of Bankruptcy Court's Ruling on Motion for Continuance

         As to the first issue, the court finds no reason to disturb the decision of the Bankruptcy Court. The Estrins filed their notice of appeal on January 28, 2016, Case No. 2:16-nc-0273, ECF No. 1, six days after the Bankruptcy Court denied their request for a continuance. As the Bankruptcy Court's order was plainly interlocutory, the Estrins were required to seek leave of the district court prior to filing their appeal. 28 U.S.C. § 158(a)(3) (“The district courts of the United States shall have jurisdiction to hear appeals . . . with leave of the court, from interlocutory orders and decrees, of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title.”). Though the Estrins did not seek leave to appeal the Bankruptcy Court's decision, they did file an otherwise timely notice of appeal. In such circumstances, Federal Rule of Bankruptcy Procedrue 8003(c) “requires the district court to . . . (1) grant leave to appeal, (2) order the party to file a motion for leave to appeal, or (3) deny leave to appeal after considering the notice of appeal as a motion for leave to appeal.” Cathcart v. Campbell, No. 2:10-2534, 2010 WL 4622462, at *1 (D.S.C. Oct. 12, 2010) (quoting In re Poor, 2008 WL 3925268 at *2 (W.D. N.C. Aug. 21, 2008)), report and recommendation approved, 2010 WL 4622457 (D.S.C. Nov. 3, 2010).

         When evaluating a motion for leave to appeal under 28 U.S.C. § 158(a)(3), district courts in the Fourth Circuit employ the same basic analysis used to evaluate a motion for leave to appeal under 28 U.S.C. § 1292(b). In re Mastercraft Interiors, Ltd., 2009 WL 2223740, at *1 (D. Md. July 22, 2009). Under this standard the district court “should grant leave to appeal if ‘(1) the order involves a controlling question of law, (2) to which there is a substantial ground for difference of opinion; and (3) immediate appeal would materially advance the termination of the litigation.'” Id. (quoting Atlantic Textile Group, Inc. v. Neal, 191 B.R. 652, 653 (E.D. Va. 1996)). The Estrins' request for a continuance most certainly did not involve a “controlling question of law.” Consequently, it cannot have involved a “controlling question to law to which there is a substantial ground for difference of opinion.” Id. (emphasis added). ...


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