UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

ASHLAND DIVISION

IN RE:

W.E.C. COAL SALES, INC.

DEBTOR CASE NO. 90-00345

CHAPTER 11

W.E.C. COAL SALES, INC. PLAINTIFF

VS. ADV. NO. 90-0325

STINNES COAL COMPANY, INC. DEFENDANT

MEMORANDUM OPINION

This matter is before the Court on the plaintiff's demand for a jury trial. The plaintiff has alleged that this Court has jurisdiction of this matter pursuant to 28 U.S.C. '1334 and that it is a core proceeding pursuant to 28 U.S.C. '157. The defendant maintains that this matter is not in the nature of a core proceeding.

The record in this case reveals that prior to the filing of the Chapter 11 petition, the plaintiff contracted with the defendant on August 9, 1990, to supply coal for resale to the defendant's customers. On September 13, 1990, the defendant terminated the contract. The Complaint filed in this action seeks damages which are the result, the plaintiff maintains, of that termination.

The first issue to be decided is whether the within action constitutes a core proceeding. Section 157 is the congressional response to the Supreme Court's decision in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, ___ L.Ed. ___ (1982), that traditional common law ("private right") claims were reserved for Article III courts. Courts must therefore decide if particular proceedings founded on state law claims fall within "the core of the federal bankruptcy power." Marathon, 458 U.S. at 71. In this regard, a core proceeding has been defined as an action which must have as its foundation the creation, recognition or adjudication of rights which would not exist independently of the bankruptcy environment. Holloway v. Heci Explor. Co. Emp. P. Sharing Plan, 76 B.R. 563, 568 (Bkrtcy.N.D.Tex. 1987).

The Second Circuit Court of Appeals recently held in In re Ben Cooper, Inc., 896 F.2d 1394 (2nd Cir. 1990) "that the bankruptcy court has core jurisdiction, pursuant to '157(b)(2)(A), over contract claims under state law when the contract was entered into post-petition." At 1400. The court distinguished its decision from earlier lower court cases which had held pre-petition claims

to be non-core. The contract at issue in this case was entered into pre-petition, as set out above. In addition, the plaintiff has not demonstrated that this proceeding is one which "ha[s] as its foundation the creation, recognition or adjudication of rights which would not exist independently of the bankruptcy environment." Holloway, supra.

This Court must conclude that this is not a core proceeding pursuant to 28 U.S.C. '157(b), but a related proceeding pursuant to '157(c). Therefore, once this proceeding is heard in this Court, proposed findings of fact and conclusions of law shall be submitted to the district court, and any final order or judgment shall be entered by the district court after consideration of the proposed findings and conclusions.

The specific question before the Court is whether the plaintiff is entitled to a jury trial. Analysis of entitlement to a jury trial typically begins with Katchen v. Landy, 382 U.S. 323, 337, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966), wherein the Court stated that "there is no Seventh Amendment right to a jury trial for determination of objections to claims." In Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed. 2d 26 (1989), the Court held that a person who has not submitted a claim against the bankruptcy estate has a Seventh Amendment right to a jury trial when sued by the trustee in bankruptcy to recover an allegedly fraudulent transfer, notwithstanding Congress' designation of fraudulent conveyance actions as core proceedings. At 2787.

The Granfinanciera Court pointed out that in Katchen v. Landy it had

held that the bankruptcy court had jurisdiction to order petitioner to surrender the preferences and that it could rule on the trustee's claim without according petitioner a jury trial. Our holding did not depend, however, on the fact that '[bankruptcy] courts are essentially courts of equity' because 'they characteristically proceed in summary fashion to deal with the assets of the bankrupt they are administering.' Our decision turned, rather, on the bankruptcy court's having 'actual or constructive possession' of the bankruptcy estate, and its power and obligation to consider objections by the trustee in deciding whether to allow claims against the estate. (Cites omitted).

At 2798. Most recently, the Supreme Court has held in Langenkamp v. Culp, 111 S.Ct. 330 (1990) that creditors who had submitted claims against the debtor's bankruptcy estate had no Seventh Amendment right to a jury trial when sued by the bankruptcy trustee to recover allegedly preferential transfers. The filing of claims brought the creditors within the equitable jurisdiction of the bankruptcy court.

In Langenkamp the Court cited its decision in Granfinanciera, at 109 S.Ct. 2799, wherein it "recognized that by filing a claim against a bankruptcy estate the creditor triggers the process of 'allowance and disallowance of claims', thereby subjecting himself to the bankruptcy court's equitable power." Langenkamp, p. 331. It is the opinion of this Court that this reasoning is applicable to a jury trial demand by a debtor. This position is supported by the holding in In re Lion Country Safari, Inc. California, 124 B.R. 566 (Bkrtcy.C.D.Cal. 1991), that a Chapter 11 debtor was not entitled to a jury trial on its cross claim in an adversary proceeding because it had voluntarily submitted itself to the equitable jurisdiction of the bankruptcy court by filing its bankruptcy petition. The court found that the voluntary act of filing a bankruptcy petition triggered the process of allowing or disallowing claims.

While Lion Country Safari is not squarely on point with the case at bar in that the debtor therein was a cross-claimant, the court's reasoning is sound and in the opinion of this Court, applicable in this case. In addition, not only did the debtor herein submit to the equitable jurisdiction of the bankruptcy court by filing a bankruptcy petition, but the within action is such that it could have been brought in state or even federal district court. The debtor chose rather to invoke the jurisdiction of the bankruptcy court.

In conclusion, and in consideration of all of the foregoing, it is therefore the opinion of this Court that the plaintiff/debtor herein is not entitled to a jury trial. Entered this ____ day of July, 1991.

By the Court -

____________________________________

Judge

Copies to:

John A. West, Esq.

William V. Seillor, Esq.

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