In re Arter & Hadden LLP, Case No. 03-23293 (Bankr. N.D. Ohio 4/24/2008)

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IN RE: ARTER & HADDEN LLP, Chapter 7, Debtor MARC P. GERTZ, TRUSTEE, Plaintiff, v. HBR TECHNOLOGIES, Defendant.

Case No. 03-23293.

ADV. PROC. No. 05-1774.

United States Bankruptcy Court, N.D. Ohio, Eastern Division.

April 24, 2008.

MEMORANDUM OF OPINION AND ORDER

RANDOLPH BAXTER, Bankruptcy Judge

The matter before the Court is the Trustee Marc P. Gertz's Motion for Summary Judgment Against Defendant HBR Technologies. Defendant opposes the Motion. The Court acquires jurisdiction over this proceeding pursuant to 28 U.S.C. § 1334, and General Order Number 84 of this District. After conducting a hearing on the matter and considering the pleadings filed by the respective parties, the following findings of fact and conclusions of law are rendered:

The Trustee seeks summary judgment on his complaint against Defendant seeking payment of unpaid legal fees and accrued interest in the amount of $47,709.67. In support of his Motion, the Trustee attaches invoices sent to Defendant by Arter & Hadden and responses by Defendant to interrogatories and requests for admission. Defendant opposes the Motion. Included in Defendant's opposition is a cross-motion for summary judgment and a request for dismissal based on the alleged lack of jurisdiction of this Court over the claims alleged against Defendant.

Defendant's request for dismissal based on this Court's lack of jurisdiction is not well-premised and his hereby denied. Defendant alleges the Trustee's complaint should be dismissed because the breach of contract, action on account and unjust enrichment claims are state law matters and are therefore non-core. Defendant is correct that the matters raised in the Trustee's complaint are non-core matters. See Gertz v. Echo Rock Ventures, LLC, 339 B.R. 445, 452 (Bankr.N.D. 2006). HBR has not filed a proof of claim against the Debtor and accordingly, the claims alleged against HBR for breach of contract, open account and quantum meruit, are non-core state law claims. Id. at 452. This Court, however, has the authority to hear this adversary proceeding pursuant to 28 U.S.C. § 157(c)(1), which states in pertinent part that:

(c) (1) A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such a proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings of fact and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.

A civil proceeding is "related to" a bankruptcy case where" the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy." Wolverine Radio Co, 930 F.2d 1132, 1142 (6th Cir. 1991). Herein, the relief sought in the Trustee's complaint is related to the Debtor's bankruptcy estate because any recovery will impact distribution to the estate's creditors.

Although this Court is precluded from entering a final order or judgment with respect to HBR, the denial of a motion for summary judgment is not a final order. Archie v. Lanier, 95 F.3d 438, 442 (6^th Cir. 1996). 28 U.S.C. § 157(c)(1) speaks only to "final" orders or judgments and the plain language of that provision dictates that this Court has the authority to enter interlocutory orders in non-core proceedings. Courts have consistently held such to be within the power of the bankruptcy court. See In re Quality Care Medical Equipment, Co., Inc., 92 B.R. 117, (Bankr. E.D. Pa. 1988)("bankruptcy courts, in non-core matters, may enter only interlocutory orders, absent the consent of all parties."); In re Kennedy, 48 B.R. 621, 623 (Bankr.D.Ariz. 1985)("[w]hile not defined, Congress' use of the familiar legal expression `final order' connotes its intent that the words be given their usual legal meaning and bankruptcy interlocutory orders in noncore proceedings need not be submitted to the district court."); and In re One-Eighty Investments, Ltd., 72 B.R. 35, (N.D.Ill. 1987)(striking objections to bankruptcy court's findings of fact and conclusions of law denying motion for summary judgment because "Congress did not intend to impose the burden on the district court that would result if bankruptcy courts could not enter interlocutory orders.") Accordingly, the findings of fact and conclusions of law are rendered herein consistent with this Court's authority to enter an interlocutory order in a non-core, related-to, proceeding.

**

Summary judgment is appropriate where there is no genuine issue as to any material fact. See Fed. R. Civ. P. 56(c)(made applicable by Fed. R. Bankr.P. 7056); Celotex Corp. v. Catrett, 477 U.S. 317 (1986). Rule 56, states in pertinent part that:

(c) Motion and Proceedings thereon.... the judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

(e) Form of Affidavits; Further Testimony; Defense Required. Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. . . . When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

Initially, the movant bears the burden of pointing out to the Court the basis for the motion and the elements of the causes of action upon which the non-movant will be unable to establish a genuine issue of material fact. Celotex, 411 U.S. at 323. The burden then shifts to the non-movant to establish the existence of a material fact. Id.

The non-movant "must do more than simply show that there is some metaphysical doubt as to the material facts" by "comfing] forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87. The non-movant's bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Id. at 247-48. Further, a "mere scintilla of evidence in support of the non-moving party will not be sufficient." Nye v. CSX Transportation, 437 F.3d 556, 563 (6^th Cir. 2006).

Rather, the non-movant "must present significant probative evidence in support... to defeat the motion for summary judgment." Copeland v. Machulis, 57 F.3d 476, 479 (6^th Cir. 1995). A defendant bears the burden of proof on affirmative defenses. See Fonseca v. Consolidate Rail Corporation, 246 F.3d 585, 590 (6^th Cir. 2001). Therefore, if a moving defendant fails to meet its burden on an affirmative defense, a plaintiff need not "proffer any additional evidence in order to rebut the . . . defense." Id. at 591. ***

As the movant, the Trustee bears the initial burden of proving that no genuine issue of fact remains for trial. Rule 56(c), Fed.R.Civ.P. The Trustee seeks to recover property of the Debtors' estate, specifically, the unpaid legal fees. Property of the bankruptcy estate includes "all legal or equitable interests of the debtor in property...