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In Re Estate Financial

September 9, 2011

IN RE ESTATE FINANCIAL, INC.


The opinion of the court was delivered by: Present: The Honorable S. James Otero, United States District Judge

Priority Send Enter Closed JS-5/JS-6 Scan Only

CIVIL MINUTES - GENERAL

Victor Paul Cruz Courtroom Clerk

COUNSEL PRESENT FOR PLAINTIFF:

Not Present

Not Present Court Reporter

COUNSEL PRESENT FOR DEFENDANTS:

Not Present

PROCEEDINGS (in chambers): ORDER DENYING DEFENDANTS' MOTION TO WITHDRAW THE REFERENCE TO THE BANKRUPTCY COURT AS TO ADVERSARY PROCEEDING [Docket No. 6]

This matter is before the Court on Defendants Bryan Cave, LLP and Katherine M. Windler's (collectively, "Defendants") Motion to Withdraw the Reference to the Bankruptcy Court as to Adversary Proceedings ("Motion"), filed on May 20, 2011.*fn1 Plaintiff Thomas P. Jeremiassen, Chapter 11 Trustee to Debtor Estate Financial Inc. ("EFI") ("Plaintiff"), filed an Opposition to the Motion on May 27, 2011, to which Defendant replied. The Court found this matter suitable for disposition without oral argument and vacated the hearing set for June 20, 2011. See Fed. R. Civ. P. 78(b). For the following reasons, Defendants' Motion is DENIED.

BACKGROUND

EFI was a mortgage brokerage company engaged in the business of funding, servicing and managing commercial and construction loans secured by real estate located in California. (Opp'n 3:22-24.) EFI funded its loans with money obtained from individual investors or from Estate Financial Mortgage Fund, LLC, a funding company that EFI formed in 2002 for the purpose of investing in EFI-brokered loans. (Id. at 3:24-26.) In November, 2006, EFI retained Defendants to conduct a compliance review and audit of EFI's business practices. (Id. at 5:4-6.)

On June 25, 2008, EFI's creditors filed an involuntary bankruptcy petition against it. (EFI Req. for Judicial Notice ("EFI RJN") Ex. 2 at 9.) EFI consented to the entry of an order for relief under Chapter 11 on July 11, 2008, and on July 16, 2008, the order was entered. (Id. at 10.) In response to the order for relief, the Court appointed Plaintiff to EFI's estate on July 25, 2008. (EFI RJN Ex. 3 at 20.) On March 31, 2010, Defendants filed proofs of claim ("Proof of Claim") totaling $281,684.25 in EFI's bankruptcy for unpaid fees. (EFI RJN Ex. 6 at 338.) Subsequently, Plaintiff notified Defendants on June 11, 2010, that Plaintiff intended to commence litigation against them with causes of action stemming from Defendants' legal representation of EFI. (EFI RJN Ex. 11 at 363.) Shortly thereafter, Plaintiff and Defendants entered into a tolling agreement to allow more time to explore alternatives to litigation. (Id.) In a final effort to avoid litigation, Defendants and Plaintiff held a settlement conference on April 28, 2011. No progress was made at the conference, and Plaintiff immediately filed his complaint against Defendants. (Id.)

Following notice of the commenced action, Defendants filed a Notice of Withdrawal and Withdrawal of Claim Pursuant to Rule 3007 of the Federal Rules of Bankruptcy Procedure ("Withdrawal of Claim") on May 2, 2011. (EFI RJN Ex. 3 at 210.) In response, Plaintiff filed objections to Bryan Cave's Withdrawal of Claim on May 5, 2011. (Id.) Defendants filed the instant Motion with the Court on May 17, 2011. Defendants assert that the bulk of Plaintiff's claims are non-core to the bankruptcy proceedings because the claims are common-law causes of action arising out of Defendants' pre-petition representation of EFI. (See generally ...


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