What Are the Odds?

Mandatory Withdrawal

Mandatory withdrawal requires an evaluation of the extent of the consideration of non-bankruptcy law. Withdrawal is appropriate where the case requires “significant interpretation, as opposed to simple application, of federal laws apart from the bankruptcy statutes.” City of New York v. Exxon Corp., 932 F.2d 1020, 1026 (2d Cir. 1991) (analysis of various federal environmental statutes would likely warrant mandatory withdrawal of the reference). See also In re Vicars Ins. Agency, Inc., 96 F.3d 949, 952-954 (7th Cir. 1996) (the court affirmed denial of withdrawal of the reference where application of civil RICO liability would not require substantial and material consideration of federal non-bankruptcy law); Enron Power Mktg., Inc. v. City of Santa Clara (In re Enron Power Mktg. Inc.), No. 01 Civ. 7964, 2003 WL 68036, at *5 (S.D.N.Y. Jan. 8, 2003) (declining to withdraw the reference, and noting that “I do not agree that the federal issues are substantial, let alone substantial issues of 'first impression' that preclude resolution by a bankruptcy court judge.”). Technically, the statute would not require withdrawal of the reference on a mandatory basis if the claims were only based on federal non-bankruptcy law, or only state law, such as where no claims were asserted for preferences, fraudulent conveyances, or other bankruptcy actions. Of course, that would be inconsistent with the statutory structure of the Bankruptcy Court being a unit of the District Court (28 U.S.C. ' 151) to deal with the Constitutional infirmities of the Bankruptcy Court's jurisdiction addressed in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982). It would also be inconsistent with the concepts behind withdrawal of the reference, namely, allowing the Article III District Court of general jurisdiction to consider issues beyond the specialized purview of the Article I Bankruptcy Judge. See In re Vicars Ins. Agency.