On a motion by non-debtor defendants to withdraw the reference of this adversary proceeding, the bankruptcy court recommended to the district court that the motion be denied. The trustee alleges in this lawsuit that the debtor fraudulently transferred property of the estate to entities ostensibly owned by his relatives. The trustee seeks a finding that the non-debtor defendants are alter egos of the debtor and are subject to liability for the debtor’s debts; that the estates of the non-debtors should be substantively consolidated with the debtor’s estate; that certain contract benefits received by the non-debtors are property of the estate and should be turned over to the trustee; that fraudulent transfers should be avoided and recovered; and that the defendants should provide an accounting. Some of these claims are non-core matters over which the bankruptcy court lacks authority to enter final judgment. However, others are core proceedings, and the parties as well as judicial efficiency would be served by leaving the adversary proceeding in the bankruptcy court.
Friday, December 16, 2016