Caution: Sometimes, a demand for a jury trial and an objection to final adjudication in bankruptcy court will have been waived even before the defendant answers the complaint.
Yup. Local rules or scheduling orders can require jury demands and objections to final orders before the defendant answers, as shown in an opinion by Bankruptcy Judge Peter D. Russin of Fort Lauderdale, Fla.
And here’s the kicker: There are no constitutional flaws in requiring defendants to demand juries or move to withdraw the reference immediately after the commencement of an adversary proceeding, as Judge Russin explained in his February 1 opinion.
The Scheduling Order Deadlines
The debtor allegedly made fraudulent transfers to her granddaughter before filing a chapter 7 petition. The trustee filed a complaint against the debtor and the granddaughter. The trustee sought to deny the debtor’s discharge and to avoid and recover the fraudulent transfers to the granddaughter.
As it does in every adversary proceeding in the Southern District of Florida, the court issued a scheduling order setting a status conference and deadlines for certain motion practice.
Specifically, the scheduling order required anyone demanding a jury trial to file a motion to withdraw the reference 14 days before the status conference. In bold letters and underscored, the scheduling order said that failure to file a motion to withdraw the reference before the deadline would waive any right to a jury trial.
In the next paragraph, the scheduling order said that anyone objecting to the ability of the bankruptcy court to issue final orders must file a motion not later than 14 days before the status conference. In bold letters and underscored, the scheduling order said that failure to file a motion by the deadline meant consent for the bankruptcy court to enter final orders.
The deadline for the two motions was April 1. The parties agreed to extend the time for answering the complaint to April 8 but did not extend the deadline for the two motions.
The granddaughter answered the complaint on April 8. The complaint demanded a jury trial and objected to the bankruptcy court’s entry of final orders. Neither then nor at any later time did the granddaughter file a motion to withdraw the reference, demand a jury trial or object to final orders in bankruptcy court.
The trustee filed a motion to strike the demands for a jury trial and final adjudication in district court. Judge Russin granted the motion.
Waiver
Citing Wellness Int’l Net., Ltd. v. Sharif, 575 U.S. 665, 675 (2015), and Lindsey v. Duckworth Dev. II, LLC (In re Lindsey), 854 F. App’x 301, 307 (11th Cir. 2021), Judge Russin said that a “defendant implicitly consents to a bench trial and final adjudication by the bankruptcy court where she knowingly and voluntarily waives her rights.”
Citing Exec. Benefits Ins. Agency v. Arkison (In re Bellingham Ins. Agency, Inc.), 702 F.3d 553, 566–570 (9th Cir. 2012), aff’d 573 U.S. 25 (2014), he went on to say that “[f]ailure to make a proper and timely objection constitutes implicit consent.”
Citing Lindsey, Judge Russin said that failure to meet a deadline in a local rule implicitly consents to final rulings in bankruptcy court.
Judge Russin said he could not find a waiver merely because the granddaughter failed to raise her objection before answering. “The problem though,” he said, “is that the Granddaughter completely ignored the [deadlines in the scheduling order] even after she filed her Answer and appeared to try the case.” Instead, the granddaughter argued in opposition to the motion to strike that the deadlines in the scheduling order were unconstitutional.
Had the granddaughter filed a motion at some later time to extend the lapsed deadlines, Judge Russin said “she likely would have” preserved her ability to object. “But she has utterly failed to do so,” he said.
Judge Russin struck the demands for a jury trial and final adjudication in district court.
Constitutionality
To buttress his finding of waiver, Judge Russin dealt with the granddaughter’s claim that the scheduling order was unconstitutional.
In the absence of a motion to withdraw the reference, Judge Russin said that the adversary proceeding “would sit endlessly in limbo because the bankruptcy court can neither conduct the jury trial nor withdraw the reference.” He found no “support for the notion that requiring parties to file a motion to withdraw the reference to assert a jury trial demand in adversary proceedings before bankruptcy courts is improper.”
Judge Russin said that the deadlines were “not only . . . appropriate, but necessary.”
The granddaughter also argued that it was unconstitutional to require a $188 filing fee for a motion to withdraw the reference.
Citing the Supreme Court, Judge Russin said, “Filing fees, as a general matter, are constitutional.”
The ability of the court to waive a filing fee “eviscerates any potential concern that the filing fee for a motion to withdraw the reference might impermissibly alienate a party’s Seventh Amendment rights.”
Judge Russin struck the demand for a jury trial and final adjudication in district court.
Caution: Sometimes, a demand for a jury trial and an objection to final adjudication in bankruptcy court will have been waived even before the defendant answers the complaint.
Yup. Local rules or scheduling orders can require jury demands and objections to final orders before the defendant answers, as shown in an opinion by Bankruptcy Judge Peter D. Russin of Fort Lauderdale, Fla.
And here’s the kicker: There are no constitutional flaws in requiring defendants to demand juries or move to withdraw the reference immediately after the commencement of an adversary proceeding, as Judge Russin explained in his February 1 opinion.