TO: THE UNITED STATES DISTRICT COURT

This is a report and recommendation on a motion to withdraw the reference filed by the defendant, Louis Kemp, based on his demand for a jury trial. No opposition has been filed by plaintiff.

FRBP 5011 provides that the motion to withdraw the reference will be heard by the district judge, but I have been requested by the District Court to make a recommendation. I recommend that the U.S. District Court withdraw the reference.

As the defendant, Louis Kemp, points out, in this circuit, a bankruptcy court cannot conduct a jury trial in a non-core proceeding. See, 28 USC § 157(b)(2) and In re Cinematronics, 916 F2d 1444, 1450 (9th Cir 1990). This adversary proceeding involves a suit by a trustee to collect a pre-petition obligation. This type of proceeding is treated as a non-core proceeding to avoid running afoul of the constitutional problems raised by Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 US 50 (1982). See In re Castlerock Properties, 781 F2d 159, 161-62 (9th Cir 1986).

Judge Singleton has withdrawn the reference in a core matter involving an alleged fraudulent transfer. See, Kenneth W. Battley, Trustee v Joan Baum Mickelsen (In re Bernd Vockner and Barbara Vockner), 2 ABR 294 (Bankr D AK 1992) for the Bankruptcy Court's report and recommendation. Judge Holland also withdrew the reference in a similar core matter in
Adv.         3 ABR 97  Proc. No. F91-00007-001-HAR, William Barstow v Vernon Lon Boyle and Wendy G. Brown (In re Vernon H. Boyle) in February, 1993.

A recent U.S. District Court opinion, In the matter of Billing, ______ BR ______, ______, 1993 WL 30845 (DNJ 1993), discussed the status of the case law regarding the authority of a bankruptcy court to conduct a jury trial:

whether a bankruptcy court may conduct a jury trial in a core proceeding, remains unanswered by the Third Circuit and is the subject of a split among other circuits. See Metro Transportation Co. v. North Star Reinsurance Co., 912 F.2d 672, 675 n. 1 (3d Cir.1990); see also In re Ben Cooper, Inc., 896 F.2d 1394 (2d Cir.), cert. granted, 110 S.Ct. 3269, vacated and remanded, 111 S.Ct. 425 (1990), reinstated, 924 F.2d 36 (2d Cir.), cert. denied, 111 S.Ct.2041 (1991); In re Grabill Corp., 967 F.2d 1152 (7th Cir.1992); In re Baker & Getty Financial Services, Inc., 954 F.2d 1169 (6th Cir.1992); In re Kaiser Steel Corp., 911 F.2d 380 (10th Cir.1990); In re United Missouri Bank, N.A., 901 F.2d 1449 (8th Cir.1990). Thus, key to a determination of whether the instant action proceeds in this court or in the bankruptcy court is whether the proceeding is deemed to be core or non-core.

After determining the matter at issue was a core proceeding, by district court in Billing at ______, added:

Whether bankruptcy courts may conduct jury trials has not been determined by the Supreme Court, see Granfinanciera, 492 U.S. at 50, and is the subject of a split among the circuit courts. The Sixth, Seventh, Eighth, and Tenth Circuits have held that bankruptcy courts do not have the power to conduct jury trials and that actions which implicate Seventh Amendment rights, even if otherwise categorized as core proceedings, must be heard by the district court. In re Grabill Corp., 967 F.2d 1152 (7th Cir.1992); In re Baker & Getty Financial Services, Inc., 954 F.2d 1169 (6th Cir.1992); In re Kaiser Steel Co., 911 F.2d 380 (10th Cir.1990); In re United Missouri Bank, N.A., 901 F.2d 1449 (8th Cir.1990). The Second Circuit, on the other hand, has taken the opposite stance, holding that bankruptcy courts may conduct jury trials in core proceedings. In re Ben Cooper, 896 F.2d 1394 (2d Cir.), cert. granted ___ U.S. ____, 110 S.Ct. 3269, vacated and remanded, 111 S.Ct. 425 (1990), reinstated, 924 F.2d 36 (2d Cir.), cert. denied, 111 S.Ct.2041 (1991); see also In re SPI Communications & Marketing, Inc., 112 B.R. 507 (Bankr.N.D.N.Y. 1990); see also Dailey v. First Peoples Bank, 76 B.R. 963, 968 (D.N.J.1987)(bankruptcy courts may conduct jury trials in core proceedings).

The district court determined that the bankruptcy court does not have         3 ABR 98  authority to conduct a jury trial in either a core or non-core proceeding.

The weight of authority to date is that a bankruptcy court does not have authority to conduct a jury trial, nor is the bankruptcy court currently set up or trained to conduct them. Therefore, I recommend withdrawal of the reference. I note, however, the strong advocacy for allowance of the bankruptcy court to conduct jury trials by Judges Easterbrook and Posner of the 7th Circuit in reponse to a denial of an en banc hearing on the matter. In re Grabill, 976 F2d 1126 (7th Cir 1992).

DATED: March 3, 1993

HERBERT A. ROSS
U.S. Bankruptcy Judge