TO: UNITED STATES DISTRICT COURT

     This is a report and recommendation under Bankruptcy Rule 5011(c), recommending withdrawal of reference of this adversary proceeding to the United States District Court because a jury trial has been demanded.

     1. BACKGROUND- The chapter 7 trustee in this case has filed an action against Joan Baum Mickelsen alleging the fraudulent transfer of property situated in the State of Louisiana. This was done under § 544(b) of the Bankruptcy Code, and the trustee relies     2 ABR 295  on the state fraudulent conveyance law of Louisiana. La CC Article 2038 or 2039.

     The parties agree that, under Louisiana law, the defendant would be entitled to a jury trial. The parties have stipulated to the withdrawal of this case to the United States District Court.

     2. DISCUSSION- Granfinanciera v Nordberg, 492 US 330, 109 US 2782, 106 LEd 2d 26 (1989) held that a jury trial is required, if demanded, in fraudulent transfer cases where the transferee has not filed a proof of claim. But, the Supreme Court did not say if the bankruptcy court could conduct such a trial. Many bankruptcy practitioners and bankruptcy judges think that one of the most significant unanswered questions in bankruptcy practice today is whether or not a bankruptcy judge is authorized to conduct a jury trial in a core proceeding.

     The circuits which have decided the issue are split three-to-one, the majority holding that a bankruptcy court does not have jurisdiction to hold a jury trial.

     In re Bank of Missouri N.A., 901 F2d 1449 (8th Cir 1990), the court held that a judge had no statutory authority to conduct a jury trial. In accord are Kaiser Steel Corp. v Frates (In re Kaiser Steel Corp.), 911 F2d 380, 392 (10th Cir 1990) and Rafoth v Nat'l. Union Fire Ins. Co., _____ F2d _____, 1992 WL 8817 (6th Cir 1992).

     In Ben Cooper, Inc. v Insurance Company of State of Pennsylvania (In re Ben Cooper, Inc.), 896 F2d 1394, 1402-04 (2d Cir), cert granted, 110 SCt 3269, vacated and remanded, 111 SCt 425 (1990), reinstated, 924 F2d 36, cert denied, 111 SCt 2041 (1991), the Second Circuit held that there was no constitutional or     2 ABR 296  statutory prohibition against a bankruptcy judge conducting a jury trial in a "core proceeding". A "core proceeding" is defined by 28 USC § 157(b), and means generally those matters traditionally decided by bankruptcy judges. In re Cinematronics, Inc., 916 F2d 1444, 1449-50 (9th Cir 1990).

     There is no Ninth Circuit opinion on whether a bankruptcy judge can conduct a jury trial where not all parties consent. There is disagreement among district judges who have ruled on the question. The Central District of California goes both ways on the issue. Compare In re Great American Mfg. and Sales, Inc., 129 BR 633 (CD Cal 1991) (J. Hupp) holding jury trials may be conducted by a bankruptcy court and In re Transcon Lines, 121 BR 837 (CD Cal 1990) (J. Tevrizian) saying they cannot.

     Thus, bankruptcy courts are in a quandary about whether or not they can conduct jury trials in core proceedings. In noncore proceedings, "related proceedings", which are proceedings which are not as close to the day-to-day issues that a bankruptcy judge decides, but are nonetheless matters that could affect the outcome of a bankruptcy, the Ninth Circuit has held that a bankruptcy judge may not conduct a jury trial if all the parties do not consent. This is because the parties are entitled to a de nova review in a related proceeding, and this would be difficult to do in an appellate matter where the U.S. District Judge has not heard the jury him or herself. 28 USC § 157(c)(1). See In re Cinematronics, 916 F2d at 1450-1451.

     In the District of Alaska, I believe Judge Singleton has allowed withdrawal of the reference in a similar circumstance.

    2 ABR 297       3. CONCLUSION- The United States Bankruptcy Court in Alaska is not logistically geared up to conduct jury trials. Bankruptcy courts are waiting for the Supreme Court to decide the issue that it tantalizingly left unanswered in Granfinanciera.

     To conduct a jury trial, the bankruptcy court would have to ask the assistance of the United States District Court to borrow its jurors, and possibly a courtroom in which to conduct the jury trial since we are not completely set up to do it at this time. The Federal Judicial Center has done no significant training of bankruptcy judges in the art of conducting a jury trial.

     Therefore, I recommend at this time that all core proceedings in which jury trials are requested be withdrawn to the United States District Court.