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In re Dozier Financial, Inc.

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

March 7, 2019

In re DOZIER FINANCIAL, INC., Debtor.
v.
MICHAEL A. DOZIER; SEQUENCE FINANCIAL SPECIALISTS LLC; WEBSTERROGERS, LLP; WEBSTERROGERS FINANCIAL ADVISORS, LLC; SHILSON, GOLDBERG, CHEUNG & ASSOCIATES; and WILLCOX, BUYCK, AND WILLIAMS, P.A., Defendants. JANET B. HAIGLER, Trustee, Debtor,

          ORDER ADOPTING THE REPORT AND RECOMMENDATION AND GRANTING THE CORPORATE DEFENDANTS' MOTION TO WITHDRAW REFERENCE OF ADVERSARY PROCEEDING

          MARY GEIGER LEWIS, UNITED STATES DISTRICT JUDGE.

         I. Introduction

         This matter arises out of the July 29, 2014 involuntary petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq., filed against Dozier Financial, Inc. (Debtor), in the United States Bankruptcy Court for the District of South Carolina (Bankruptcy Court) styled as In re: Dozier Financial, Inc., Bankruptcy No. 14-04262-HB (bankruptcy case). On December 27, 2017, Janet B. Haigler, the Chapter 7 Trustee (Trustee), filed Adversary Proceeding No. 17-80113-HB in the Bankruptcy Court against Michael A. Dozier (Dozier), as well as corporate defendants Sequence Financial Specialists LLC (Sequence); WebsterRogers, LLP and WebsterRogers Financial Advisors, LLC (collectively WebsterRogers); Shilson, Goldberg, Cheung & Associates (SGC); and Willcox, Buyck & Williams, P.A. (Willcox) (collectively Corporate Defendants). The Corporate Defendants filed the instant matter in this Court on July 10, 2018 as a motion to withdraw the refence of the adversary proceeding. ECF No. 1. The Court has jurisdiction under 28 U.S.C. § 1331.

         This matter is before the Court for review of the Report and Recommendation (Report) of the United States Magistrate Judge suggesting to the Court the Corporate Defendants' motion to withdraw the reference be granted. The Report was made in accordance with 28 U.S.C. § 636 and Local Civil Rule 73.02 for the District of South Carolina.

         II. Standard of Review

         The Magistrate Judge makes only a recommendation to this Court. The recommendation has no presumptive weight. The responsibility to make a final determination remains with the Court. Mathews v. Weber, 423 U.S. 261, 270 (1976). The Court is charged with making a de novo determination of those portions of the Report to which specific objection is made, and the Court may accept, reject, or modify, in whole or in part, the recommendation of the Magistrate Judge or recommit the matter with instructions. 28 U.S.C. § 636(b)(1).

         The Magistrate Judge filed the Report on September 6, 2018. ECF No. 12. The Trustee filed objections to the Report on September 19, 2018. ECF No. 15. The Corporate Defendants replied to the Trustee's objections on October 8, 2018. ECF No. 17. Dozier failed to respond to the Report but he advised the Magistrate Judge he did not take a position on the pending motion. ECF No. 12 at 2.

         III. Discussion and Analysis

         The Report recommends this Court grant the Corporate Defendants' motion to withdraw the reference and direct the underlying adversary proceeding to be filed as a separate case in this Court. The Trustee objects to the Magistrate Judge's recommendation and insists the adversary proceeding is properly filed in the Bankruptcy Court and therefore the Corporate Defendant's motion to withdraw the reference should be denied. Specifically, the Trustee asserts in her objections: (1) the Magistrate Judge erred in assessing the timeliness of the Corporate Defendants' motion; (2) the Magistrate Judge erred in finding mandatory withdrawal appropriate; and (3) the Magistrate Judge erred in finding permissive withdrawal appropriate. ECF No. 15 at 2. The Court will address each of the Trustee's objections in turn.

         As a preliminary matter, the local rules for this District automatically refer “to the bankruptcy judges for this district all cases under Title 11 [the Bankruptcy Code] and all proceedings arising under Title 11 or arising in or related to a case under Title 11.” Local Civ. R. 83.IX.01 (D.S.C.) However, Title 28, Section 157(d) provides:

The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.

28 U.S.C. § 157(d). The first sentence of §157(d) is commonly referred to as “permissive withdrawal”; the second sentence is referred to as “mandatory withdrawal” of proceedings referred to the Bankruptcy Court. See Houck v. Substitute Tr. Servs., Inc., 791 F.3d 473 (4th Cir. 2015). The Magistrate Judge suggested the Corporate Defendants meet the requirements for both mandatory and permissive withdrawal in this case.

         The Court will first consider the Trustee's objection to the Magistrate Judge's recommendation the Corporate Defendants' motion to withdraw the reference was timely. The Trustee objects to the Magistrate Judge's conclusion the Corporate Defendants did not impliedly consent to the jurisdiction of the Bankruptcy Court when they filed motions to dismiss for improper venue, alternative motions to transfer venue, and motions to dismiss under Fed.R.Civ.P. 12(b)(6) in the Bankruptcy Court. The Trustee acknowledges the Corporate Defendants explicitly withheld consent to jurisdiction by the Bankruptcy Court by including language to that effect in their motion to dismiss filed in the Bankruptcy Court, but the Trustee asserts this attempt to withhold consent to jurisdiction is ineffective because the Corporate Defendants still sought the Bankruptcy Court's dismissal of the Complaint. In response, the Corporate Defendants assert courts in other jurisdictions have routinely granted motions to withdraw in similar situations where the motion to withdraw was filed in district court prior to, or simultaneously with, the filing of an answer in Bankruptcy Court and before the parties exchanged any discovery.

         A bankruptcy judge may enter appropriate orders and judgments in all core proceedings arising under Title 11. See 28 U.S.C.A. § 157(b)(1). A bankruptcy judge may also enter dispositive orders in non-core proceedings otherwise related to a case under Title 11 as long as the parties consent to such jurisdiction. Canal Corp. v. Finnman (In re Johnson), 960 F.2d 396, 402 (4th Cir. 1992). The consent of the parties may be implied from the conduct of the parties. Id. at 403-04. The Court agrees with the Magistrate Judge's conclusion the Corporate Defendants' motion to withdraw the reference is timely. Not only did the Corporate Defendants file their motion to withdraw the reference before all responsive pleadings were due in the Bankruptcy Court, but they also filed the motion prior to filing their Answer and prior to the exchange of any discovery. The only activity that occurred since the Trustee filed the Complaint in Bankruptcy Court were motions on the pleadings. In addition, the Corporate Defendants explicitly withheld their consent ...


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