Free Letter - District Court of Delaware - Delaware

I p V Case 1 :05—cv—00455-SLR Document 4-4 Filed 07/08/2005 Page 1 of 4
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In Re: ) Chapter 11
) Case No. 03-10945 (MFW)
Fleming Companies, Inc., et al., ;
) (Jointly Administered)
Debtors )
)
)
)
PCT’ 3 Adversary Proceeding No. 05-77317 (PBL)
Piarmrrr, l
)
v. )
)
WD-40 Company, g
Defendant. )
WD-40 COMPANY’S MOTION TO WIT HDRAW
THE REFERENCE TO THE BANKRUPTCY COURT
Pursuant to 28 U.S.C. § I57(d), WD-40 Company ("WD-40"), by and through
counsel, files this Motion to Withdraw the Reference to the Bankruptcy Court, seeking an
order to withdraw the order of reference to the United States Bankruptcy Court for the
District of Delaware, and states as follows:
The Parties and Procedural Background
1. The Debtors filed voluntary petitions for relief under chapter ll of title ll
of the United States Code (the "Bankruptcy Code") on April 1, 2003 (the "Petition
Date").
2. On July 27, 2004, the Court confirmed the Debtors’ and Official
Committee of Unsecured Creditors’ Third Amended and Revised Joint Plan of
Reorganization of Fleming Companies, Inc. and its Filing Subsidiaries under Chapter Il
of the United States Bankruptcy Code.

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3. On March 24, 2005, Plaintiff filed this action seeking to recover over $1
million dollars. Among other causes of action, plaintiff asserted a preference claim under
section 547 of the Bankruptcy Code. Plaintiff also asserted state law breach of contract
action, fraudulent conveyance and unjust enrichment claims, which are non-core claims.
4. Pursuant to the District Cour“t’s standing order dated September 6, 2001,
the automatic reference of Chapter 11 cases was reinstated. Accordingly, this action was
automatically referred to the Bankruptcy Court.
5. Prior to the Petition Date, WD-40 sold certain products to the Debtor.
6. WD-40 has not filed a claim against any of the Debtors.
7. On April 22, 2005, WD-40 filed an answer to the complaint, in which it
demanded a trial by jury.
8. Also on April 22, 2005, WD-40 filed a Motion for a Determination of
Core/Non—Core Status, pursuant to Local Rule 5011-1.
WD-40 has a Right to a Jury Trial
9. The Seventh Amendment provides, in part: "[i]n Suits at common law,
where the value in controversy shall exceed twenty dollars, the right of trial by jury shall
be preseryed." U.S. Const. amend. VII. "Suits at common law" has been interpreted to
mean actions involving legal rights. Billing v. Ravin, Greenberg & Zackin, P.A., 22 F.3d
1242, 1245 (3rd Cir. l994)(citing, Granfinanciera, S.A. v. Norberg, 492 U.S. 33, 41
(1989)). There is no right to a jury trial on equitable claims. Id. A preference action is a
legal action to which the right of a jury trial attaches. Langenkamp v. Cum 498 U.S. 42,
45 (1991)(‘“...the trustee can recover allegedly preferential transfers only by tiling what
amounts to a legal action to recover a monetary transfer."). Therefore, there can be no
question that the right to a jury trial is preseryed in this preference action. NDEP Corp. v.
HANDLJ7] Inc., 203 B.R. 905, 908-09 (D.Del. 1996). Additionally, there can be no
dispute that the right to a jury trial attaches to a breach of contract claim. Moreover,
WD-40 has not waived its right to a jury trial by submitting a claim against the estate.
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See, Billing, 22 F.3d at 1247-48; Travellers International, A.G. v. Robinson, 982 F.2d 96,
98-99 (3rd Cir. 1992); Goldin v. K—Swiss, Inc., 2002 WL 550035 (Bankr. D. Del,).
The Reference Should Be Withdrawn
10. Section l57(d) provides, in relevant part, "The district court may
withdraw, in whole or in part, any case or proceeding referred under this section...on a
timely motion of any party, for cause shown." 28 U.S.C. § 157(d).
11. The statute does not define "a timely motion." However, courts have held
that the motion should be filed at the first reasonable opportunity, taking into
consideration the circumstances ofthe proceeding. Schlein v. Golub, 188 B.R. 13, 14-15
(E.D.Pa 1995). Here, the motion is being filed in less than 4 weeks after the filing ofthe
complaint and contemporaneously with the filing of the answer. Thus, the motion has
been timely filed. See, NDEP Corp., 203 B.R. at 907 (motion filed eleven weeks after
the complaint was filed was considered timely).
12. The statute also does not explain "cause." Courts, however, have set out
some standards to consider when determining whether "cause" exists. Ia'. at 907-08. One
such factor is whether a party has requested a jury trial. Ia'. at 908. Most courts that have
been presented with a motion to withdraw the reference, where a jury demand has been
made (and not been waived) have held that the demand constitutes sufficient cause for
withdrawal of the reference. See, K-Swiss, at *2 (the trustee "cor·rectly asserts that most
courts have held that the right to a jury trial constitutes sufficient cause for withdrawal of
the reference"). Thus, here, as in K—Swiss, "cause" exists for the withdraw of the
reference and the motion should be granted.
13. Section 157(e) provides:
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
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I “ ’ Case 1:05-cv-00455-SLR Document 4-4 Filed 07/08/2005 Page 4 of 4
jurisdiction by the district court and with the
express consent of all the parties.
28 U.S.C. § 157(e). WD—40 does not consent to a jury trial in the bankruptcy court and
therefore requests that the reference be withdrawn.
WHEREFORE, WD—40 prays for an order withdrawing the reference, and for all
other relief this Court deems just and proper.
Dated: April 22, 2005 SMITH, KATZENSTEIN & FURLOW LLP
/ ’ » een r
a r · - " er (ID No. 2898)
Avenue, 7"` Floor
mai .4 i1ler delaware.com
» OfCounsel: P. B »é/
Foley & Lardner, LLP » • gton, DE 19899 (Courier 19801)
Keith C. Owens, Cal Bar. No. 184841 I · ephone: 302-652-8400
2029 Century Park East, Suite 3500 Telecopy: 302-652-8405
Los Angeles, California 90067-3021
Telephone: 310.277.2223
Facsimile: 310 557.8475 Attomeys for WD—40 Company
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