REINER JCR NY CRC v. PANETH (2024)

MEMORANDUM & ORDER

This action arises from an adversary proceeding commenced in the United States Bankruptcy Court in the Eastern District of New York (the “Bankruptcy Court”) by Mendel Paneth (“Mr. Paneth” or “Debtor”) and his wife Sarah a/k/a Sury Paneth (“Mrs. Paneth”) (collectively “Plaintiffs” or “Respondents”) against twenty-three defendants (the “Defendants” or “Petitioners”). (See ECF No. 1-2 (“Aloe Aff.”), Ex. A (“Compl.”)); Paneth et al. v. Reiner et al., 24-ap-1006 (NHL) (“Adversary Proceeding”); In re Mendel Paneth, 22-bk-41414 (NHL) (“Bankruptcy Proceeding”). Plaintiffs allege violations of the Sherman Antitrust Act (the “Sherman Act”), 15 U.S.C. §§ 1, 2, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962, and an objection to proofs of claim. (Compl. ¶¶ 317–82). Defendants now seek to withdraw the reference from the Bankruptcy Court pursuant to 28 U.S.C. § 157(d), Rule 5011 of the Federal Rules of Bankruptcy Procedure, and Local Rule 5011-1 of the Bankruptcy Court. (ECF No. 1 (“Defs.’ Mot.”)). After carefully reviewing the record, and for the reasons set forth herein, Defendants’ Motion is granted.

BACKGROUND 1

Mr. Paneth sought to create a Yiddish comic book for the Hassidic community. (Compl. ¶ 2). In need of capital, Mr. Paneth was referred by non-party Eli Nadler (“Mr. Nadler”) to Petitioner/Defendant David Reiner (“Mr. Reiner”). (Id. ¶¶ 3–4). On October 29, 2014, Mr. Paneth, Mr. Nadler, and Mr. Reiner, as partners, established Kidline Enterprises, Inc. (“Kidline”), through which they began publishing a comic book series in December 2014. (Id. ¶¶ 9–10, 17). At the time of formation, Mr. Reiner and Mr. Paneth each held forty-five percent of the company, and Mr. Nadler held ten percent. (Id. ¶ 8). Later, Mr. Reiner acquired Mr. Nadler's interest, and Mr. Paneth transferred his interest to his wife, Mrs. Paneth. (Id. ¶¶ 17 n.4, 64). In addition to agreeing to arbitrate in their original joint venture agreement, the parties subsequently signed a separate arbitration agreement. See Bankruptcy Proceeding, ECF No. 33, Exs. A at 224, F. By 2019, Kidline was generating a profit of nearly $500,000 annually. (Compl. ¶ 17).

Despite Kidline's financial success, relations between the partners broke down, and they sought to resolve their issues before a rabbinical arbitrator pursuant to their arbitration agreements. (Id. ¶¶ 18, 20). After the initial arbitration, Mrs. Paneth commenced various state court actions against Mr. Reiner, Kidline's vendors, and the vendors’ principals. (Id. ¶¶ 134, 138, 150, 152). The New York Supreme Court consolidated and dismissed the actions, granting the defendants’ motions to compel arbitration. (Id. ¶¶ 190–92); see also Sury Paneth, et al. v. Tele Go Inc., et al., Index No. 515628/2020 (N.Y. Sup. Ct. Kings Cty.), Dkt. No. 117. On June 19, 2022, Mr. Paneth filed a Chapter 11 bankruptcy (the “Bankruptcy Proceeding”), automatically staying the arbitration proceedings. (Id. ¶ 291); see Bankruptcy Proceeding, ECF No. 1.

In the Bankruptcy Proceeding, Mr. Reiner and Kidline filed proofs of claim seeking $4,386,347 in damages for embezzlement and other financial fraud, and a creditor, Yosef Freund (“Mr. Freund”), filed a proof of claim seeking $450,343.98 for an unpaid loan. (Aloe Aff., Ex C); see also Bankruptcy Proceeding, Claims Register Nos. 9–11. Additionally, Mr. Reiner and Kidline filed an adversary proceeding challenging the dischargeability of their claims. Bankruptcy Proceeding., ECF No. 32; see also Kidline Enterprises Inc. et al. v. Paneth, 22-ap-1076 (NHL). Further, Mr. Reiner and Kidline, joined by Tele Go Inc., Infinite Solutions NY Inc., Chaim Kohn, JRC Printing, and Yossi Reiner as interested parties (collectively with Mr. Reiner and Kidline, the “Arbitration Movants”), moved to compel arbitration, that is, to return to the arbitration proceedings that were stayed by the commencement of the Bankruptcy Proceeding. Bankruptcy Proceeding, ECF No. 33. On February 8, 2024, the Bankruptcy Court denied the motion to compel. Id., ECF No. 170. The Arbitration Movants appealed that order to this Court. See Reiner et al. v. Paneth et al., 24-CV-1402 (RER).

On January 17, 2024, Plaintiffs commenced an adversary proceeding (the “Adversary Proceeding”), alleging claims under sections 1 and 2 of the Sherman Act, substantive and conspiracy RICO violations, and an objection to Mr. Reiner, Kidline, and Mr. Freund's proofs of claim, which is asserted as a counterclaim.² (See Compl. ¶¶ 317–82). Mr. Paneth alleges that during the rise of Kidline, Mr. Reiner “actively engaged in a protracted campaign of domination,” driving Mr. Paneth “into a state of subservience,” and that later, Mr. Reiner “coopted ․ [the rabbinic arbitrator] into his service to wage a war of attrition” against him. (Compl. ¶¶ 18, 20). Defendants now move to withdraw the reference from Bankruptcy Court to this Court. (Defs.’ Mot.). The Motion was fully briefed on May 31, 2024. (ECF Nos. 1-3 (“Defs.’ Mem.”), 3 (“Pls.’ Mem.”), 5 (“Defs.’ Reply”)).

DISCUSSION

I. Legal Standard

District courts have “original but not exclusive jurisdiction” over cases arising under or related to Title 11 of the Bankruptcy Code and may refer “any or all bankruptcy proceedings to the bankruptcy judges for the district. 28 U.S.C. §§ 1334(b), 157(a). This District has a standing order that automatically refers all proceedings arising under Title 11 to the Bankruptcy Court. Eastern District Administrative Order 264 (1986). Regardless, a district court retains the authority to withdraw the reference to bankruptcy court when withdrawal is either mandatory or permissive. See 28 U.S.C. § 157(d); see also In re SVB Fin. Group, No. 23 Civ. 7218 (JPC), 2023 WL 8622521, at *5 (S.D.N.Y. Dec. 13, 2023).

II. Mandatory Withdrawal

Defendants argue that withdrawing the reference is mandatory because (1) resolving the adversary proceeding requires substantial and material consideration of non-bankruptcy law and (2) a theoretical conflict exists between how federal courts and bankruptcy courts interpret arbitration agreements. (Defs.’ Mem. at 4–12).

28 U.S.C. § 157(d) provides for mandatory withdrawal “if the court determines that resolution of the proceeding requires consideration of both [T]itle 11 and other laws in the United States regulating organizations or activities affecting interstate commerce.” “The Second Circuit ․ construes this provision narrowly, requiring withdrawal of the reference only if substantial and material consideration of non-Bankruptcy Code federal [law] is necessary for the resolution of the proceeding.” In re Global Aviation Holdings Inc., 496 B.R. 284, 286 (E.D.N.Y. 2013) (quotation omitted); see also In re Ionosphere Clubs, Inc., 922 F.2d 984, 995 (2d Cir. 1990). The “substantial and material consideration element for mandatory withdrawal is satisfied where resolving the action would require the bankruptcy court to engage itself in the intricacies of non-bankruptcy-law[.]” Picard v. Sage Reality, Nos. 20 Civ. 10109, 20 Civ. 10057 (AJN), 2021 WL 1987994, at *6 (S.D.N.Y. May 18, 2021) (quotation omitted). Even so, “not every claim that implicates federal law must be removed from the Bankruptcy Court.” In re Motors Liquidation Co., 538 B.R. 656, 662 (S.D.N.Y. 2015). Mandatory withdrawal is “a fact specific determination.” In re Keene Corp., 182 B.R. 379, 382 (S.D.N.Y. 1995).

At this stage in litigation, the Court cannot determine whether mandatory withdrawal is warranted. The mere invocation of the Sherman Act and RICO is insufficient for mandatory withdrawal of the reference, and Defendants do not identify any nuanced or novel application of federal law.³ See In re Adler, 270 B.R. 562, 565 (S.D.N.Y. 2001) (mandatory withdrawal was not warranted and the bankruptcy court was legitimately authorized to oversee Sherman Act claims); Keene Corp., 182 B.R. at 382–83 (antitrust claims did not justify mandatory withdrawal); In re Laventhol & Horwath, 139 B.R. 109, 115 (S.D.N.Y. 1992) (“the presence of RICO claims does not necessarily dictate withdrawal of the reference”) (collecting cases); Adelphia Comms. Corp. v. Rigas, No. 02 Civ. 8495 (GBD), 2003 WL 21297258, at *4 (S.D.N.Y. June 4, 2003) (a bankruptcy court can adequately interpret RICO pleading requirements because a substantial body of case law exists for guidance); but see Picard v. Kohn, No. 11 Civ. 1181 (JSR), 2011 WL 10894857, at *4 (S.D.N.Y. Sept. 6, 2011) (withdrawing the reference when the bankruptcy court would have to analyze: (1) whether an association-in-fact enterprise existed; (2) the structural elements of RICO; (3) whether RICO could be applied extraterritorially, which was a newly-settled doctrine by the Second Circuit; and (4) whether the RICO claims were barred by the “RICO Amendment” promulgated as part of the Private Securities Litigation Reform Act, an issue about which the district courts disagreed). Moreover, Plaintiffs’ claims against the rabbinical arbitrators and their religious arbitration organizations require nothing beyond the interpretation and application of federal common law that provides immunity to arbitrators and their sponsoring organizations. See Landmark Ventures, Inc. v. Cohen, No. 13 Civ. 9044 (JGK), 2014 WL 6784397, at *4 (S.D.N.Y. Nov. 26, 2014) (“under well-established Federal common law, arbitrators and sponsoring arbitration organizations have absolute immunity for conduct in connection with an arbitration”). Consequently, based on the materials before the Court, only a general application of well-settled federal law is necessary to adjudicate Plaintiff's claims.

Second, Defendants assert that an issue will arise as to whether a conflict exists between the Bankruptcy Code's policy aims and the “liberal federal policy favoring arbitration agreements.” (Defs.’ Mem. at 11) (quotation omitted). Bankruptcy courts, however, apply the same level of favor toward enforcing arbitration agreements as district courts. See, e.g., In re Celsius Network LLC, 658 B.R. 643, 658–59 (Bankr. S.D.N.Y. 2024) (quoting and citing various Supreme Court, Second Circuit, and district court cases to explain the standard for evaluating a motion to compel arbitration); In re U.S. Lines, Inc., 197 F.3d 631, 640 (2d Cir. 1999) (“The Arbitration Act as interpreted by the Supreme Court dictates than an arbitration clause should be enforced unless [doing so] would seriously jeopardize the objectives of the [Bankruptcy Code].”) (quotation omitted).

Therefore, withdrawal of the reference is not mandatory.

III. Permissive Withdrawal

A district court may permissively withdraw the referral to bankruptcy court “in whole or in part ․ for any cause shown.” 28 U.S.C. § 157(d). “District courts have broad discretion to withdraw the reference for cause,” and the “movant bears the burden of showing withdrawal is warranted.” In re Haynes, Nos. 14 Civ. 4171, 14 Civ. 6183, 2015 WL 862061, at *2 S.D.N.Y. Mar. 2, 2015 (quotation omitted). To determine whether a party has shown cause, courts consider the Orion factors: (1) “whether the proceeding is core or non-core;” (2) considerations of efficiency, such as the allocation of judicial resources and the delay and potential costs to parties; (3) uniformity of bankruptcy administration; and (4) “the prevention of forum shopping.” In re Schneorson, No. 22-MC-1922 (ARR), 2024 WL 1242084, at *2 (E.D.N.Y. Mar. 22, 2024) (quotation omitted); see In re Orion Pictures, Corp., 4 F.3d 1095, 1101 (2d Cir. 1993)). A district court's first inquiry is “whether the case involves a core or non-core proceeding.” Schneorson, 2024 WL 1242084, at *2 (quotation omitted). A bankruptcy judge “may hear and determine all core proceedings.” See 28 U.S.C. § 157(b)(1). If a proceeding is non-core, a bankruptcy judge may still hear the matter but must submit proposed findings of fact and conclusions of law to the district court. Id. § 157(c)(1).

Regardless of a core designation, however, the Supreme Court has clarified that the principal question is “whether the bankruptcy court has constitutional authority to enter final judgment on the claims at issue.” Madoff 2023, 2023 WL 6122905, at *2 (emphasis in original) (quotation omitted); Stern, 564 U.S. at 482, 493, 497, 131 S.Ct. 2594 (2011). After Stern, courts replace the first prong of the Orion test with an inquiry into whether the bankruptcy court has final adjudicative authority. See In re Arbco Cap. Mgmt., LLP, 479 B.R. 254, 262 (S.D.N.Y. 2012). Accordingly, the Court first analyzes the bankruptcy court's authority to adjudicate the claims before proceeding with the remaining Orion factors. Id.

A. The Bankruptcy Court's Constitutional Authority to Adjudicate the Matter

A bankruptcy court only has constitutional authority to enter final judgment “(1) if the claim involves a public right; (2) the process of adjudicating the creditor's proof of claim would resolve a counterclaim; or (3) the parties consent to final adjudication by the bankruptcy court.” Pryor v. Tromba, No. 13-CV-676 (JB), 2014 WL 1355623, at *3 (E.D.N.Y. Apr. 7, 2014) (collecting cases); see Stern, 564 U.S. at 482, 493, 497, 131 S.Ct. 2594.⁴

i. Private or Public Rights

A bankruptcy court cannot enter a final order unless the action “stems from the bankruptcy itself or would necessarily be resolved in the claims allowance process.” Stern, 564 U.S. at 499, 131 S.Ct. 2594. In other words, if the claim involves private rights, the bankruptcy court does not have authority to enter a final decision. See Schneorson, 2024 WL 1242084, at *2. Although a murky distinction, a “matter of public rights must at a minimum arise between the government and others,” whereas individual liability is a matter of private rights. Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 69–70, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (quotation omitted).

Here, there is no dispute that Plaintiffs’ Sherman Act and RICO claims are those of private rights. See, e.g., Assoc. Gen. Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 529–30, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983) (describing the elements and class of persons who may maintain a private damages action under the antitrust laws); RJR Nabisco, Inc. v. European Comm., 579 U.S. 325, 346, 136 S.Ct. 2090, 195 L.Ed.2d 476 (2016) (RICO creates a “private right of action” for “[a]ny person injured in his business or property by reason of a violation of section 1962”) (quoting 18 § 1964(c)). Likewise, although Plaintiffs’ claim objection stems from the bankruptcy itself, it incorporates the Sherman Act and RICO allegations, thus setting forth a claim under federal law, rather than one that falls under the public rights exception. (See Compl. ¶¶ 373–81); Stern, 564 U.S. at 493, 131 S.Ct. 2594 (the counterclaim did not fall into the public rights exception when it was “not a matter that can be pursued only by grace of the other branches” of government and did not flow from a federal regulatory scheme, in addition to the fact that the proof of claim in the bankruptcy action did not constitute consent and instead was the only forum for the claimant to pursue his claim) (quotations and citations omitted). Therefore, the Bankruptcy Court does not have constitutional adjudicatory authority to enter final judgment on Plaintiffs’ claims.

ii. Whether the Claim Would be Resolved in Ruling on Proof of Claim

Mr. Reiner's proof of claim alleges that Mr. Paneth engaged in fraud and embezzlement, and Mr. Freund's proof of claim seeks repayment for a loan. Bankruptcy Proceeding, Claims Register, Nos. 9, 11. Plaintiffs’ claim objection alleges that Mr. Reiner, Kidline, and Mr. Freund engaged in “predatory and racketeering conduct” and that “Defendants colluded with each other to saddle [Mr. Paneth] with charges and excruciating covenants of onerous terms which were not enforceable in New York state and court but for the deception by Defendants[.]” (Compl. ¶¶ 373–82) (emphasis added). The claim objection thus rests on facts related to and a determination of the alleged Sherman Act and RICO violations. (See id.). Therefore, the process of adjudicating the proofs of claim would not necessarily resolve Plaintiffs’ counterclaim. See, e.g., Dynegy Danskammer, L.L.C. v. Peabody COALTRADE Int'l. Ltd., 905 F. Supp. 2d 526, 532 (S.D.N.Y. 2012) (when the primary facts at issue related to a breach of contract claim, adjudicating the proofs of claim would not resolve the counterclaim).

iii. Consent to Jurisdiction

Plaintiffs invoke issue preclusion, arguing that Defendants consented to the Bankruptcy Court's jurisdiction and waived their right to move to withdraw the reference because in the Bankruptcy Proceeding, a motion to compel arbitration was litigated and decided, precluding Defendants from relitigating the issue. (Pls.’ Mem. at 10). Under the doctrine of issue preclusion, “a prior judgment ․ foreclos[es] successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment.” Herrera v. Wyoming, 587 U.S. 329, 342, 139 S.Ct. 1686, 203 L.Ed.2d 846 (2019) (quotation omitted). Here, that a motion to compel arbitration was denied in the Bankruptcy Proceeding has no impact on whether Defendants consent to the Bankruptcy Court's jurisdiction.

Consent to bankruptcy court jurisdiction to hear non-core claims must be “knowing and voluntary” and can be “express or implied.” Wellness Int'l. Network, Ltd. v. Sharif, 575 U.S. 665, 685, 135 S.Ct. 1932, 191 L.Ed.2d 911 (2015). “Courts generally hold that a litigant impliedly consents to the bankruptcy court's entry of final judgment by appearing before the bankruptcy court and failing to raise a constitutional objection to its jurisdiction.” Madoff 2023, 2023 WL 6122905, at *4 (collecting cases). Timing is critical. “[T]he consequences of ‘a litigant ․ “sandbagging” the court—remaining silent about his objection and belatedly raising the error only if the case does not conclude in his favor.’ ” Stern, 564 U.S. at 482, 131 S.Ct. 2594 (ellipsis in original) (quoting Puckett v. United States, 556 U.S. 129, 134, 129 S.Ct. 1423, 173 L.Ed.2d 266 (2009)). Accordingly, “courts have found implied consent where a party litigates before the bankruptcy court and objects to its jurisdiction only after receiving an unfavorable final ruling.” Madoff 2023, 2023 WL 6122905, at *4 (collecting cases).

In this case, Defendants object to bankruptcy court jurisdiction. That Mr. Reiner and Mr. Freund filed proofs of claim in the Bankruptcy Proceeding is not relevant to their consent. See Wellness Int'l. Network, Ltd., 575 U.S. at 685, 135 S.Ct. 1932. Even if participation in the Bankruptcy Proceeding did indicate consent, a mere three months after Mr. Paneth commenced the Bankruptcy Proceeding, the Arbitration Movants sought to compel arbitration, arguing that the Bankruptcy Court lacked jurisdiction because “Federal Courts may not assume jurisdiction where the parties agreed to apply religious law in a religious forum,” as they did in this instance. Bankruptcy Proceeding, ECF Nos. 1, 33, 59 at 4–5. Further, after the Bankruptcy Court denied the motion, id., ECF No. 170., the Arbitration Movants appealed to this Court, again making the same jurisdictional arguments. Reiner et al. v. Paneth et al., 24-CV-1402 (RER), ECF No. 4 at 42–44.

Turning to the Adversary Proceeding, aside from Mr. Reiner and Mr. Freund, the remaining twenty-one Defendants were either not involved in the Bankruptcy Proceeding or only joined the motion to compel as interested parties. See generally Adversary Proceeding, ECF No. 1; Bankruptcy Proceeding, ECF No. 33. Although the twenty-one Defendants have business relationships with Mr. Reiner and Kidline (Pls.’ Mem. at 10), those relationships do not implicate knowing and voluntary consent to bankruptcy court jurisdiction. The Supreme Court has found that bankruptcy judges are not constitutionally vested with the jurisdiction to make final judgments on state-law contract claims against an entity that is not otherwise a party to the underlying bankruptcy proceeding. See Exec. Benefits Ins. Agency v. Arkison, 573 U.S. 25, 32, 134 S.Ct. 2165, 189 L.Ed.2d 83 (2014) (citing Northern Pipeline Const. Co., 458 U.S. at 53, 87 n.40, 91, 102 S.Ct. 2858). The parties make no argument as to why this holding should not apply to the non-bankruptcy claims at issue here. Further, all twenty-three Defendants acted swiftly by moving to withdraw the reference to bankruptcy court less than three months after the adversary proceeding was commenced. Adversary Proceeding, ECF Nos. 1, 27; see Pryor, 2014 WL 1355623, at *6 (“courts in this Circuit have defined ‘timely’ to mean as soon as possible after the moving party has notice of the grounds for withdrawing the reference”) (quotation omitted). Accordingly, the Defendants did not consent to Bankruptcy Court jurisdiction.

Therefore, the Bankruptcy Court lacks the constitutional authority to adjudicate Plaintiffs’ claims.

B. Other Orion Factors

Although the Bankruptcy Court lacks the constitutional authority to adjudicate the claims, the Court is not required to withdraw the reference. See Arkison, 573 U.S. at 36, 134 S.Ct. 2165. Thus, the Court evaluates the remaining Orion factors: (1) judicial efficiency, (2) the uniformity of bankruptcy administration, and (3) the prevention of forum shopping.

First, with respect to judicial efficiency, if the motion to withdraw the reference is not granted, the Court will be required to review de novo proposed findings of fact and conclusions of law made by the Bankruptcy Court. 28 U.S.C. § 157(c)(1); Arkison, 573 U.S. at 36, 134 S.Ct. 2165; see also Eastern District Administrative Order 601 (2012). As such, “judicial resources will be better served if this Court grants [the] motion to withdraw the reference and oversee the entire litigation of this matter.” In re EMS Fin. Serv., LLC, 491 B.R. 196, 205 (E.D.N.Y. 2013) (citations omitted). Further, in this instance, bankruptcy courts do not have “specialized knowledge” that would contribute to the resolution of the Sherman Act or RICO claims. See Lehman Bros. Holdings Inc. v. Wellmont Health Sys., No. 14 Civ. 1083 (LGS), 2014 WL 3583089, at *4 (S.D.N.Y. July 18, 2014).

Second, “courts look to the nature of the cause of action” to determine whether withdrawing the reference promotes uniform administration of bankruptcy law. Dynegy Danskammer, L.L.C., 905 F. Supp. 2d at 533. Because the adversary proceeding relates to federal non-bankruptcy laws, this does not present a concern. See Arbco Cap. Mgmt., LLP, 479 B.R. at 268 (a benefit to uniform bankruptcy administration existed when claims focused on specific provisions of the Bankruptcy Code).

Finally, “as a general rule, courts should employ withdrawal judiciously in order to prevent it from becoming just another litigation tactic for parties eager to find a way out of bankruptcy court.” Madoff 2023, 2023 WL 6122905, at *9 (quotation omitted); see, e.g., 29 Beekman Corp. v. Wansdown Properties Corp. N.V., Nos. 20 Civ. 8984, 20 Civ. 10294, 21-Civ. 2280 (MKV), 2021 WL 4481006, at *7 (S.D.N.Y. Sept. 29, 2021) (when the motion to withdraw the reference was made after an adverse summary judgment finding, forum shopping was a consideration weighing heavily against withdrawal). Defendants unabashedly state that they believe that this Court will be more favorable regarding a motion to compel arbitration (Defs.’ Mem. at 11)—an overt declaration of forum shopping. These sentiments, however, do not articulate a real issue because this Court applies the same standard of enforcing arbitration agreements as bankruptcy courts. See U.S. Lines, 197 F.3d at 640. Nevertheless, the Court recognizes the attempt to forum shop, so this factor weighs slightly against withdrawal of the reference.

In sum, the Bankruptcy Court lacks the constitutional authority to adjudicate Plaintiffs’ claims. All the Orion factors except forum-shopping, which only weighs slightly against withdrawal, are in favor of withdrawing the reference. Defendants have therefore shown cause for withdrawing the reference. Accordingly, the Court exercises its discretion and grants Defendants’ Motion.

CONCLUSION

For the reasons set forth above, the Court grants Defendants’ motion to withdraw the reference. The Clerk of the Court is directed to assign a civil action number, assign a magistrate judge, and to docket all previously filed docket entries in Case No. 24-MC-1339 onto the civil docket.

SO ORDERED.

FOOTNOTES

2.   The Court notes that the Complaint names Kidline when asserting the objection to proofs of claim (Compl. ¶¶ 373–82), but Kidline is not a named defendant (see generally Compl.).

3.   Likewise, Plaintiffs’ objection to proofs of claim expressly incorporates the allegations under the Sherman Act and RICO, so analysis will largely turn on non-bankruptcy law.

4.   In addition, the RICO and Sherman Act claims are non-core. In re Kentile Floors, Inc., No. 95 Civ. 2470 (LLS), 1995 WL 479512, at *2 (S.D.N.Y. Aug. 10, 1995) (“A matter is a core proceeding if it invokes a substantive right provided by the Bankruptcy Code or if it could only arise in the context of a bankruptcy case.”); Adelphia Comms. Corp., 2003 WL 21297258, at *2 (although the RICO, Exchange Act, and other allegations stemmed from the same set of facts as the core claims, they are non-core because they are “not unique to a bankruptcy proceeding, they do not directly affect a core bankruptcy function, nor are they matters which the bankruptcy court would ordinarily be expected to have greater familiarity or expertise.”).

RAMÓN E. REYES, JR., United States District Judge