Kensington Apartment Properties, LLC v. Loanvest IX, L.P.

Background

Kensington’s case was related to its bankruptcy but involved claims arising under California law: breach of contract, usury, failure to provide payoff demand statements, and money had and received. The case had proceeded in the bankruptcy court. That court had denied summary judgment on Kensington’s claims, and the case was ready for trial.

Withdrawal of Reference

Kensington moved to withdraw the reference, meaning it asked the district court to take the proceeding out of the bankruptcy court. The defendants did not file an opposition. The district court concluded that withdrawal was appropriate because the claims were noncore state-law claims that could have arisen outside a bankruptcy case, Kensington had not consented to the bankruptcy court’s jurisdiction, and the case was ready for trial.

The court relied on federal bankruptcy law providing that a district court may withdraw a referred case or proceeding for cause. It also cited authority stating that a bankruptcy court cannot conduct a jury trial on noncore matters when the parties have not consented. The court therefore granted Kensington’s motion to withdraw the reference.

Review of Summary-Judgment Rulings

The court further held that the bankruptcy court lacked authority to enter final judgment on its summary-judgment rulings. Kensington was ordered to submit those rulings, together with all relevant briefs, to the district court within 14 days. The district court would review the matters as required for a noncore proceeding, including de novo review of matters to which a party had timely and specifically objected.

Disposition

The motion to withdraw the reference was granted. The opinion did not decide the underlying California-law claims or enter judgment on the prior summary-judgment rulings.