United States District Court, E.D. Michigan, Northern Division
THOMAS MCDONALD, JR. CHAPTER 13 TRUSTEE Plaintiff,
PAUL WENZLOFF, JOSHUA FIREMAN WENZLOFF & WENZLOFF P.L.C., and WILDFIRE CREDIT UNION, Defendants.
ORDER HOLDING MOTIONS TO DISMISS IN ABEYANCE AND
ORDERING SUPPLEMENTAL BRIEFING ON MOTION TO WITHDRAW
L. LUDINGTON, UNITED STATES DISTRICT JUDGE.
Thomas McDonald (“Plaintiff” or
“Trustee”) was the Chapter 13 trustee in the
bankruptcy matter In Re: Wild, et al. (Case No.
14-21888-dob). Defendant Wildfire Credit Union (Wildfire) is
an unsecured creditor of the debtors Jonathan William Wild
and Tamara Jean Moore (Debtors) with an unsecured claim of
$9, 391.05. Defendants Paul Wenzloff, Joshua Fireman, and
Wenzloff & Wenzloff P.L.C. (Defendants) represented
Wildfire as its counsel in the Chapter 13 proceedings.
Debtors' chapter 13 plan was confirmed on October 14,
2014. Approximately two and a half years later Debtor's
11-year old Jeep failed and they sought approval to obtain a
loan to purchase a replacement vehicle. It is fair to surmise
that Mr. McDonald and Mr. Wenzloff did not and do not agree
on the process or procedure to be observed by Debtors to
secure post-confirmation approval to purchase a replacement
vehicle or to borrow the funds to accomplish that objective.
Their disagreement is well documented in what the gentlemen
refer to as “the pleadings” that followed in the
bankruptcy matter. These “pleadings” explain not
only their difference of opinion on the applicable law and
procedure but also their reciprocal displeasure with each
then initiated an adversary proceeding, filing a 7 count
complaint containing over 100 factual allegations. Plaintiff
has moved to have this Court withdraw the reference from the
bankruptcy court (ECF No. 1) in order to adjudicate the
adversary proceeding in this Court.
April 10, 2017, the Debtors filed a post-confirmation motion
for approval to purchase a 2014 GMC Acadia to replace their
older automobile that had mechanical problems. Am. Compl. at
2 (Case No. 17-02118-dob). The Trustee approved the request.
Id. Debtors then filed an ex parte motion to approve
the purchase, which the bankruptcy court granted.
Id. Santander Consumer USA, the creditor who
financed the GMC purchase, then filed a proof of claim.
Defendants objected to the claim. Id. at 3. The
dispute as to the propriety of the Trustee's approval of
the purchase appears to center on the applicability of what
counsel refer to as the “Fuller order”.
The Fuller order is described as a settlement
embedded in an order in another (entirely separate) case in
which Plaintiff and Defendant Wenzloff agreed Plaintiff would
“advise Debtor's counsel that ex-parte motions to
purchase contain certain information.” Id. at
Plaintiff's position is that the Fuller order is
not applicable to the Wild matter and did not limit
his discretion in approving the GMC purchase. Id.
Defendants have a different view. Allegedly, Defendants filed
“the pleadings” in the bankruptcy matter accusing
Plaintiff of misconduct in conjunction with his approval of
the car purchase. Plaintiff initiated the adversary
proceeding on November 15, 2017.
I and IV seek declaratory and injunctive relief that the
Fuller order is not applicable to the In re
Wild matter and that Plaintiff did not commit fraud on
the court when he approved the GMC purchase. Id. at
4, 9. On their face, these counts appear to raise core
abuse of process counts (counts II and III) allege Defendants
“filed the Pleadings with the ulterior motive of
obtaining money or property from the Debtors and/or
Bankruptcy estate, attempting to pressure debtors to convert
or dismiss their Bankruptcy case, in an attempt to slander
the Trustee and damage his reputation and in an attempt to
create unnecessary delay and expense in the administration of
this Bankruptcy case” in violation of Rule 9011,
thereby “undermining the whole bankruptcy system, or
process.” Id. at 8. Again, whether Rule 9011
was violated appears to raise a core bankruptcy law question.
defamation, libel, and slander counts (counts V-VII) do not
appear to be related to the Debtors' chapter proceeding
other than that they occurred during its administration.
Plaintiff alleges Defendants accused him of “wrongful
conduct involving moral turpitude, ” “cast his
character in a false light”, accused him of
“Fraud, Contempt of Court and collusion, ” and
“breached the public trust in the office of the
Standing Chapter 13 Trustee.” Id. at 10.
Embedded in his three overlapping defamation counts also
appears to be a claim for “false light, ” a
privacy tort distinct from defamation. Again, although the
alleged wrongful conduct occurred in the context of a
bankruptcy matter, the nucleus of the dispute is unrelated to
bankruptcy law. There is also no apparent predicate for the
exercise of federal jurisdiction on these state law claims
between Michigan citizens.
relief, Plaintiff asks the court to “strike the
entirety of the pleadings, statements and discovery from the
record due to their scandalous, disparaging and unnecessary
and untrue nature.” Id. at 13. He also asks
the court to dismiss Defendant's allegations in the
Chapter 13 matter, award costs and fees, set aside the
Fuller order in its entirety, and impose sanctions.
Finally, Plaintiff seeks punitive damages of $100, 000
“to be distributed as follows: $50, 000 to a charity
promoting bankruptcy education or assistance of the
court's choosing and $50, 000 to the Office of the
Chapter 13 Trustee for having been forced to defend and
respond [to] the Pleadings . . ., ” and additional
damages for defamation, libel, and slander. Id.
filed the instant motion on November 30, 2017, seeking to
have the reference to the United States Bankruptcy Court
withdrawn. ECF No. 1. Defendant Wenzloff & Wenzloff, PLC
responded on December 13, 2017. ECF No. 6. Defendants then
moved to dismiss Plaintiff's first amended complaint
filed in the adversary proceeding. ECF Nos. 7-9.
U.S.C. § 1334(a)-(b) vests district courts with
jurisdiction over bankruptcy matters. The district courts
may, however, refer bankruptcy cases and all proceedings
arising therefrom to bankruptcy courts. 28 U.S.C. §
157(a). A standing order of the Eastern District of Michigan
automatically refers bankruptcy cases. Local Rule
83.50(a)(1). § 157(b) authorizes bankruptcy judges to
hear all cases under title 11 and all core proceedings
U.S.C. § 157(d) provides for withdrawal of the reference
on discretionary and mandatory grounds. The first sentence of
157(d) sets the standard for discretionary withdrawal:
“The district court may withdraw, in whole or in party,
any case or proceeding referred under this section, on its
own motion or on timely motion of any party, for cause
shown.” The second sentence sets forth the standard for
mandatory withdrawal: “The district court shall, on
timely motion of a party, so withdraw a proceeding if the
court determines that resolution of the ...