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Barnes v. Sea Hawaii Rafting, LLC

United States District Court, D. Hawaii

May 31, 2019

CHAD BARRY BARNES,, Plaintiff,
v.
SEA HAWAI`I RAFTING, LLC; KRIS HENRY; ALOHA OCEAN EXCURSIONS, LLC; JOHN DOES 1-20; MARY DOES 1-20; DOE CORPORATIONS 1-20; DOE PARTNERSHIPS 1-20; DOE ASSOCIATES 1-20; DOE GOVERNMENTAL AGENCIES 1-20; AND OTHER ENTITIES 1-20, in personam; AND M/V TEHANI, HA 1629-CP, AND HER ENGINES, EQUIPMENT, TACKLE, FARES, STORES, PERMITS, FURNISHINGS, CARGO AND FREIGHT; DOE VESSELS 1-20, in rem. Defendants.

          ORDER DENYING PLAINTIFF BARNES'S MOTION TO WITHDRAW THE REFERENCES OF CASES TO THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF HAWAI`I

          ALEN C. KAY, SR., UNITED STATES DISTRICT JUDGE.

         For the reasons that follow, Plaintiff Barnes's motion requesting the Court to withdraw the references of In re Sea Hawai`i Rafting, LLC, No. 14-01520 (Bankr. D. Haw. 2014) and In re Kristin Kimo Henry, No. 14-01475 (Bankr. D. Haw. 2014) to the United States Bankruptcy Court for the District of Hawai`i is DENIED.

         BACKGROUND

         For purposes of this Order, the Court will not recount this case's lengthy procedural history beginning in 2013. The Court only discusses those facts and events of specific relevance to the issues that this Order addresses.

         On November 3, 2014, Defendant Kris Henry (“Defendant Henry”), the sole member of Defendant Sea Hawai`i Rafting, LLC (“Defendant SHR”), filed a chapter 13 bankruptcy petition[1] in the United States Bankruptcy Court for the District of Hawai`i (the “bankruptcy court”). See In re Kristin Kimo Henry, No. 14-01475 (Bankr. D. Haw. 2014) (the “chapter 13 case”). On November 12, 2014, Defendant SHR filed a chapter 7 bankruptcy petition[2] in the bankruptcy court. See In re Sea Hawai`i Rafting, LLC, No. 14-01520 (Bankr. D. Haw. 2014) (the “chapter 7 case”).

         Plaintiff Chad Barry Barnes's (“Plaintiff Barnes”) efforts to prosecute his maritime and non-maritime tort claims against Defendant SHR and Defendant Henry have been significantly frustrated by the operation of the bankruptcy stay, which comes into effect automatically when a debtor files for bankruptcy and stays the commencement or continuation of litigation against the debtor. 11 U.S.C. § 362(a).

         Plaintiff Barnes has sought to prosecute his claims by asking the bankruptcy court to lift the automatic stays against Defendant SHR and Defendant Henry, their bankruptcy estates, and the vessel M/V Tehani. Chapter 7 case, Dkt. No. 285. In a Memorandum of Decision dated May 21, 2018, the bankruptcy court lifted the automatic stays as to the vessel M/V Tehani and as to Defendant SHR, allowing Plaintiff Barnes to litigate his in rem claims against the vessel and his in personam claims against Defendant SHR. Chapter 7 case, Dkt. No. 300. The bankruptcy court declined to lift the automatic stays as to Defendant Henry, Defendant Henry's bankruptcy estate, or Defendant SHR's bankruptcy estate. Id.

         On March 11, 2019, Plaintiff Barnes filed a “Motion to Reverse Referrals of Sea Hawaii Rafting, LLC and Kris Kimo Henry to Bankruptcy Court Pursuant to Rule 28 U.S.C. § 157(d)” (the “Motion”). ECF No. 531. Plaintiff Barnes asks the Court to withdraw the references of the chapter 13 and chapter 7 cases to the bankruptcy court. No party has filed a memorandum in opposition. The Court held a hearing on Plaintiff Barnes's Motion on May 15, 2019.

         STANDARD OF REVIEW

         In general, district courts have original jurisdiction over all bankruptcy matters. 28 U.S.C. § 1334. However, 28 U.S.C. § 157(a) permits district courts to refer all bankruptcy matters to a bankruptcy court. Local Rule 1070.1(a) of the Local Rules of Practice for the United States District Court for the District of Hawai`i provides that, pursuant to 28 U.S.C. § 157(a), “all cases under Title 11 and civil proceedings arising under Title 11 or arising in or related to a case under Title 11 are referred to the bankruptcy judges of this district.”

         28 U.S.C. § 157 classifies matters as either “core proceedings, ” for which the bankruptcy court may enter appropriate orders and judgments, or “non-core proceedings, ” which the bankruptcy court may hear but for which it may only submit proposed findings of fact and conclusions of law to the district court for de novo review. Sec. Farms v. Int'l Bhd. of Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1008 (9th Cir. 1997) (citing 28 U.S.C. § 157). “Actions that do not depend on bankruptcy laws for their existence and that could proceed in another court are considered “non-core.” Sec. Farms, 124 F.3d at 1008 (citing In re Castlerock Props., 781 F.2d 159, 162 (9th Cir. 1986)). Core proceedings include “motions to terminate, annul, or modify the automatic stay, ” as well as “objections to discharges.” 28 U.S.C. § 157(b)(2)(G), (J).

         “A party who believes that a proceeding pending in the Bankruptcy Court should instead be litigated before the district court may move for mandatory or permissive withdrawal of that reference pursuant to 28 U.S.C. § 157(d).” Horowitz v. Sulla, Civ. No. 16-00433 DKW-KSC, 2016 WL 5799011, at *1 (D. Haw. Sept. 30, 2016). A district court may also sua sponte withdraw the reference of a case or proceeding to the bankruptcy court. Hawaiian Airlines, Inc., 355 B.R. 214, 218 (D. Haw. 2006); 28 U.S.C. § 157(d). Motions to withdraw a reference are heard by the district court. Fed.R.Bankr.P. 5011(a). 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 party moving for withdrawal of the reference has the burden of persuasion. Hawaiian Airlines,Inc., 355 B.R. at 218 (citing In re First Alliance Mortg. ...


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