Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 NED GAINES, in his capacity as the Case No.: 3:25-cv-02119-RBM-AHG statutory receiver for SPIRIT 11 COMMERCIAL AUTO RISK ORDER: 12 RETENTION GROUP, INC., (1) DENYING DEFENDANTS’ 13 Plaintiff, MOTION TO WITHDRAW THE 14 v. REFERENCE [Doc. 17]; AND 15 QBE INSURANCE CORPORATION, a (2) DENYING DEFENDANTS’ Pennsylvania corporation, et al., 16 MOTION TO DISMISS OR IN THE Defendants. ALTERNATIVE TRANSFER AS 17 MOOT [Doc. 21] 18 19 20 Plaintiff Ned Gaines (“Plaintiff” or “Receiver”), the Insurance Commissioner for the 21 state of Nevada and statutory receiver for Spirit Commercial Auto Risk Retention Group, 22 Inc. (“Spirit”), filed the instant insurance recovery action for declaratory relief and breach 23 of contract against Spirit’s program administrators and their insurers. (See Doc. 1 ¶¶ 1, 24 65–76.) In the Complaint, Plaintiff seeks to determine the scope of Spirit’s program 25 administrators’ insurance coverage to satisfy “a judgment of more than $87 million that 26 was entered” against them in the Eighth Judicial District Court of the State of Nevada, 27 Clark County (“Nevada State Court”). (Id. ¶ 1.) 28 Shortly thereafter, Plaintiff filed two involuntary bankruptcy petitions under Chapter 1 7 of the Bankruptcy Code against CTC Transportation Insurance Services, LLC (“CTC 2 California”) and CTC Transportation Insurance Services of Missouri, LLC (“CTC 3 Missouri”) in the U.S. Bankruptcy Court for the Southern District of California 4 (“Bankruptcy Court”). (Doc. 29-1 at 53.) On Plaintiff’s Notice (see Docs. 5, 13), pursuant 5 to 28 U.S.C. § 157 and this District’s General Order No. 312-E, this action was referred to 6 the Bankruptcy Court “without prejudice to any motion to withdraw the reference as to any 7 claim or party or any recommendation of the Bankruptcy Court.” (Doc. 16.) 8 Now pending before the Court are Defendants QBE Insurance Corporation (“QBE”), 9 Capitol Specialty Insurance Corporation (“CapSpecialty”), Argonaut Insurance Company 10 (“Argo”), AXIS Surplus Insurance Company (“AXIS”), and Maxum Indemnity 11 Company’s (“Maxum”) (collectively, the “Insurer Defendants”) Motion to Withdraw 12 Reference (“Motion to Withdraw”) (Doc. 17) and Motion to Dismiss or in the Alternative 13 Transfer (“MTD”) (Doc. 21.) The Court finds this matter suitable for determination 14 without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the reasons set forth 15 below, the Motion to Withdraw is DENIED and the MTD is DENIED AS MOOT. 16 I. BACKGROUND 17 A. Parties 18 Spirit is a now defunct auto insurance company incorporated in Nevada that “issued 19 commercial auto liability policies to commercial truck owners throughout the [c]ountry.” 20 (Doc. 1 ¶¶ 2, 24.) In February 2019, the Nevada State Court placed Spirit “into 21 receivership—and later liquidation—because it was in severe financial distress and could 22 not meet its required minimum statutory reserve obligations nor its obligations to its 23 policyholders and creditors, including paying valid claims that were submitted by its 24 insureds.” (Id. ¶¶ 2, 27.) The state of Nevada appointed Plaintiff as the Receiver for Spirit, 25 “charged [him] with marshaling and conserving Spirit’s assets for purposes of meeting its 26 substantial financial obligations[,] and authorized [him] to file suits to reclaim money and 27 funds that should rightfully be part of the liquidation estate.” (Id. ¶¶ 2, 11.) 28 CTC California, CTC Missouri, and CTC Transportation Insurance Services of 1 Hawaii, LLC (“CTC Hawaii”) (collectively, the “CTC Defendants”) were Spirit’s program 2 administrators and “primarily responsible for its dismal financial condition and ultimate 3 collapse.” (Id. ¶ 3.) Nominal Defendant CTC Hawaii “is jointly owned and affiliated with 4 CTC California and CTC Missouri and was also named as a defendant by the Receiver in 5 the underlying asset recovery action the Receiver filed in Nevada state court in 2020.” (Id. 6 ¶ 20.) “CTC California and CTC Missouri . . . are insured under identical errors and 7 omissions malpractice insurance policies” issued by the Insurer Defendants (the “CTC 8 Malpractice Policies”). (Id. ¶ 7.) The CTC Malpractice Policies are comprised of a 9 primary policy and four excess policies that “provide $25 million in coverage to both CTC 10 California and CTC Missouri, for combined limits of $50 million.” (Id. ¶¶ 41, 44; see id. 11 ¶¶ 45–52.) The CTC Malpractice Policies “provide broad coverage for” professional 12 negligence claims and contain “contractual language that gives judgment creditors . . . a 13 direct right of action for policy proceeds when . . . there is an unsatisfied judgment that the 14 insureds are unable [to] pay.” (Id. ¶¶ 7–8.) 15 As previously noted, the Insurer Defendants issued the CTC Malpractice Policies 16 from which the Receiver seeks to satisfy the Judgment. (See id. ¶¶ 7–16, 40.) 17 B. Nevada Asset Recovery Action 18 On February 6, 2020, the Receiver filed a lawsuit in Nevada State Court against the 19 CTC Defendants, Thomas Mulligan—the owner and CEO of the CTC Defendants—and 20 other affiliated individuals and entities (the “Nevada Asset Recovery Action”).1 (Doc. 1 21 ¶¶ 3, 30.) The Receiver asserted several causes of action arising from Spirit’s alleged 22 mismanagement and requested “more than $30 million in premium funds and other assets 23 allegedly diverted from” Spirit. (Doc. 17-1 at 11.) On July 20, 2020, the Nevada State 24 Court referred the Receiver’s causes of action against the CTC Defendants to arbitration 25 and stayed the litigation as to the remaining individuals and entities. (Doc. 1 ¶ 31.) 26 27 28 1 1 On August 2, 2022, after years of failed appeals, the Receiver filed an Arbitration 2 Complaint against the CTC Defendants based on the CTC Defendants’ allegedly wrongful 3 acts in the performance of professional services under the various agreements they had 4 entered into with Spirit (the “Spirit Asset Recovery Arbitration”). (Id. ¶¶ 31–32.) On 5 March 11, 2025, a three-person arbitration panel issued an arbitration award finding that 6 CTC California and CTC Missouri were jointly and severally liable to Spirit for 7 $82,909,671.00, which includes $44,022,915.00 in damages and an additional 8 $38,886,756.00 in pre-judgment interest (the “Arbitration Award”). (Id. ¶¶ 4, 35.) In 9 doing so, the arbitration panel determined that “CTC California and CTC Missouri had 10 breached multiple contractual, fiduciary, and common law obligations to Spirit,” 11 mismanaged Spirit’s finances, and had “and failed to comply with the most basic insurance 12 industry customs and practices.” (Id.) On April 1, 2025, and on the Receiver’s motion, 13 the arbitration panel “awarded an additional $2,818,257.39 for the Receiver’s attorneys’ 14 fees, costs, and expenses, and ordered that the same should be paid within twenty (20) days 15 of the panel’s June 6, 2025, order.” (Id. ¶ 5; see id. ¶ 37.) 16 On June 2, 2025, the Nevada State Court confirmed the Arbitration Award and 17 entered judgement against CTC California and CTC Missouri for $87,689,263 which 18 includes about $5 million in additional interest and provides $20,505 in daily accruing pre- 19 judgment interest (the “Judgment”). (Id. ¶¶ 4, 36.) The claims against CTC Hawaii were 20 dismissed and no judgment was entered against it. (Id. ¶¶ 20, 35; see Doc. 17-1 at 13.) 21 C. The New Jersey Action 22 In 2020, the CTC Defendants and Thomas Mulligan filed a lawsuit against the 23 Insurer Defendants in the United States District Court, District of New Jersey “seeking 24 defense and indemnity for the Nevada Asset Recovery Action, and the [Insurer Defendants] 25 counterclaimed.” (Doc. 17-1 at 12 (citing CTC Transp. Ins. Serv., LLC v. QBE Ins. Corp., 26 Civil Action No. 20-6228 (FLW) (LHG), 2021 WL 2651950 (D.N.J. June 28, 2021)).) The 27 case was voluntarily dismissed without prejudice in November 2022 to allow for the Spirit 28 Asset Recovery Arbitration to proceed. (Id. at 13; Doc. 29-1 [Reply] at 255.) 1 In February 2025, the Insurer Defendants filed a preemptive strike declaratory 2 judgment action in the District of New Jersey concerning their defense and indemnity 3 obligations in the Spirit Asset Recovery Arbitration and the Nevada Asset Recovery Action 4 (the “New Jersey Action”). (Doc. 17-1 at 13; see Doc. 29-1 at 50 (citing QBE Insurance 5 Corp. v. CTC Transp. Ins. Serv., LLC, Case No. 3:25-cv-01069 (D.N.J.).) The Receiver is 6 not a party in the New Jersey Action. (See Doc. 29-1 at 50.) The CTC Defendants and 7 Thomas Mulligan filed counterclaims asserting coverage for defense and indemnity. (Doc. 8 17-1 at 13.) 9 D. The Instant Insurance Coverage Action 10 On August 18, 2025, the Receiver filed the Complaint in this Court asserting two 11 causes of action for declaratory relief against all Defendants and breach of contract only as 12 to the Insurer Defendants (the “Insurance Coverage Action”). (Doc. 1 ¶¶ 65–76.) The 13 Receiver claims that CTC California and CTC Missouri are unable to pay the Judgment 14 and therefore seeks “a declaration that [the Insurer Defendants] are obligated to provide 15 coverage for the . . . Judgment and $2.8 million fee award” because CTC California and 16 CTC Missouri are insured under the CTC Malpractice Policies issued by the Insurer 17 Defendants. (Id. ¶¶ 6–7, 10.) 18 On August 19, 2025, the Receiver filed a Chapter 7 involuntary bankruptcy petition 19 against CTC California in Bankruptcy Court. (Doc. 5 at 2.) On August 21, 2025, the 20 Receiver filed a second Chapter 7 involuntary bankruptcy petition against CTC Missouri 21 in Bankruptcy Court. (Id.) Plaintiff filed a Notice of Involuntary Bankruptcy and 22 Automatic Stay in this Court on August 28, 2025, seeking to refer this matter to the 23 Bankruptcy Court. (Id. at 3; see also Doc. 15 at 2–3.) The Court subsequently entered an 24 order referring the matter to the Bankruptcy Court “without prejudice to any motion to 25 withdraw the reference as to any claim or party or any recommendation of the Bankruptcy 26 Court.” (Doc. 16.) 27 On November 4, 2025, the Insurer Defendants filed the instant Motion to Withdraw 28 Reference in this Court. (Doc. 17.) On January 12, 2026, the Insurer Defendants filed the 1 same Motion to Withdraw Reference in Bankruptcy Court. (Bankr. Doc. 17.) On March 2 6, 2026, the Receiver filed an Opposition to the Motion to Withdraw Reference 3 (“Opposition”) in Bankruptcy Court. (Bankr. Doc. 79.) The Insurer Defendants filed a 4 Reply in Support of the Motion to Withdraw Reference (“Reply”) in Bankruptcy Court 5 shortly thereafter. (Bankr. Doc. 91.) On March 26, 2026, the Clerk of the Bankruptcy 6 Court transmitted the Motion to Withdraw and all related briefing to this Court. (Doc. 29.) 7 II. LEGAL STANDARD 8 “[D]istrict courts have original jurisdiction over bankruptcy cases and related 9 proceedings,” but may refer “‘any or all’ bankruptcy cases and related proceedings . . . ‘to 10 the bankruptcy judges for the district.’” Wellness Int’l Network, Ltd. v. Sharif, 575 U.S. 11 665, 670 (2015) (quoting 28 U.S.C. § 1334(a)–(b); 28 U.S.C. § 157(a)). Section 157 12 “classifies matters as either ‘core proceedings,’ in which the bankruptcy court ‘may enter 13 appropriate orders and judgments,’ or ‘non-core proceedings,’ which the bankruptcy court 14 may hear but for which it may only submit proposed findings of fact and conclusions of 15 law to the district court for de novo review.” Sec. Farms v. Int’l Bhd. of Teamsters, 16 Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1008 (9th Cir. 1997) (quoting 28 17 U.S.C. § 157). The bankruptcy court may also “enter appropriate orders and judgments” 18 in non-core proceedings but only “with the consent of all the parties to the proceeding.” 19 28 U.S.C. § 157(c)(1)–(2). 20 District courts may withdraw “any case or proceeding referred” to the bankruptcy 21 court under 28 U.S.C. § 157(d). This section allows for both mandatory and permissive 22 withdrawal. Id. Mandatory withdrawal is required if “resolution of the proceeding requires 23 consideration of both title 11 and other laws of the United States regulating organizations 24 or activities affecting interstate commerce.” Id. Permissive withdrawal, however, requires 25 26 27 2 The Court cites to the docket filings in the Adversary Proceeding pending before the Bankruptcy Court unless otherwise noted. See Barclay v. QBE Ins. Corp., Adv. Case No. 28 1 a “timely motion of any party” and a showing of “cause.” Id. “In determining whether 2 cause exists, a district court should consider the efficient use of judicial resources, delay 3 and costs to the parties, uniformity of bankruptcy administration, the prevention of forum 4 shopping, and other related factors.” Sec. Farms, 124 F.3d at 1008. The “burden of 5 persuasion is on the party seeking withdrawal.” In re First All. Mortg. Co., 282 B.R. 894, 6 902 (C.D. Cal. 2001). 7 “Ultimately, ‘it is within a district court’s discretion to grant or deny a motion for 8 permissive withdrawal of reference; that decision will not be disturbed unless the court 9 abuses its discretion.’” In re Cachet Fin. Servs., 652 B.R. 341, 346 (C.D. Cal. 2023) 10 (quoting In re EPD Inv. Co. LLC, No. ADV 2:12-AP-02424-ER, 2013 WL 5352953, at *2 11 (C.D. Cal. Sept. 24, 2013)). 12 III. DISCUSSION 13 The Insurer Defendants seek permissive withdrawal of the reference in this action 14 because: (1) this action raises non-core claims; (2) withdrawal promotes judicial economy; 15 (3) withdrawal is necessary to prevent forum shopping; (4) withdrawal will have no impact 16 on the uniform administration of the CTC Defendants’ bankruptcy proceedings; and (5) 17 withdrawal will not result in any delay. (See Doc. 17-1 at 16–21.) The Court addresses 18 each of these arguments in turn. 19 A. Timeliness 20 “A motion to withdraw [the reference] is timely ‘if it was made as promptly as 21 possible in light of the developments in the bankruptcy proceeding.’” Sec. Farms, 124 22 F.3d at 1007 n.3 (quoting In re Baldwin-United Corp., 57 B.R. 751, 754 (S.D. Ohio 1985)). 23 “Thus, a party must move for withdrawal ‘at the first reasonable opportunity’ it has, ‘as 24 evaluated within the specific factual context of the case.’” In re GTS 900 F, LLC, 25 Bankruptcy Case No. 2:09-bk-35127-VZ., U.S. District Court Case No. CV 10-06693 SJO, 26 2010 WL 4878839, at *2 (C.D. Cal. Nov. 23, 2010) (citation modified) (quoting Stratton 27 v. Vita Bella Grp. Homes, Inc., No. CV F 07–0584 LJO, 2007 WL 1531860, at *2 (E.D. 28 Cal. May 25, 2007)). “Courts have found that motion for withdrawal is timely if filed 1 within days of the underlying complaint in bankruptcy court.” Westport Ins. Corp. v. Off. 2 Comm. of Unsecured Creditors of Roman Cath. Archbishop of San Francisco, Case No. 3 25-cv-09314-WHO, 2025 WL 3545838, at *2 (N.D. Cal. Dec. 10, 2025) (citations 4 omitted). 5 The Insurer Defendants filed the instant Motion to Withdraw on November 4, 6 2025—thirteen days after this action was referred to the Bankruptcy Court. (See Docs. 16, 7 17.) The orders for relief in the involuntary bankruptcy proceedings “against CTC 8 California, CTC Missouri, and CTC Hawaii were entered September 12 and 23 and 9 October 30, 2025, respectively.” (Doc. 17-1 at 16 n.2.) Accordingly, the Court finds the 10 Motion to Withdraw is timely under § 157(d). 11 B. For Cause Shown 12 1. Core vs Non-Core 13 “To determine whether cause for permissive withdrawal exists, a district court 14 ‘should first evaluate whether the claim is core or non-core, since it is upon this issue that 15 questions of efficiency and uniformity will turn.’” One Longhorn Land I, L.P. v. Presley, 16 529 B.R. 755, 762 (C.D. Cal. April 13, 2015) (quoting In re Orion Pictures Corp., 4 F.3d 17 1095, 1101 (2nd Cir. 1993)). Generally, “claims that arise under or in [the Bankruptcy 18 Code] are deemed to be ‘core’ proceedings, while claims that are related to [the Bankruptcy 19 Code] are ‘noncore’ proceedings.” In re Harris Pine Mills, 44 F.3d 1431, 1435 (9th Cir. 20 1995). “A matter ‘arises under’ the Bankruptcy Code if its existence depends on a 21 substantive provision of bankruptcy law, that is, if it involves a cause of action created or 22 determined by a statutory provision of the Bankruptcy Code.” In re Ray, 624 F.3d 1124, 23 1131 (9th Cir. 2010) (citations omitted). Put differently, “a ‘core proceeding’ in 24 bankruptcy is one that ‘invokes a substantive right provided by [the Bankruptcy Code] or 25 . . . a proceeding that, by its nature, could arise only in the context of a bankruptcy case.” 26 In re Gruntz, 202 F.3d 1074, 1081 (9th Cir. 2000) (quoting In re Wood, 825 F.2d 90, 97 27 (5th Cir. 1987)). 28 Section 157(b)(2) provides a non-exhaustive list of types of core proceedings as well 1 as two “catch-all” provisions which designate as “core” “matters concerning the 2 administration of the estate” and “other proceedings affecting the liquidation of the assets 3 of the estate.” See 28 U.S.C. §§ 157(b)(2)(A), (O). The “section, however, does not 4 enumerate examples of, or define what constitutes, ‘non-core’ proceedings.” Dunmore v. 5 United States, 358 F.3d 1107, 1114 (9th Cir. 2004). To determine “whether a matter is a 6 non-core proceeding,” courts generally “look to a variety of factors ‘such as whether the 7 rights involved exist independent of [the Bankruptcy Code], depend on state law for their 8 resolution, existed prior to the filing of a bankruptcy petition, or were significantly affected 9 by the filing of the bankruptcy case.’” In re Yochum, 89 F.3d 661, 670 (9th Cir. 1996) 10 (quoting In re Cinematronics, Inc., 916 F.2d 1444, 1450 n.5 (9th Cir. 1990)). 11 In this case, the Receiver asserts state law claims for declaratory relief and breach of 12 contract. (See Doc. 1 ¶¶ 65–76.) Such state law claims do not invoke federal bankruptcy 13 law and do not, by their nature, “arise only in the context of a bankruptcy case.” Gruntz, 14 202 F.3d at 1081 (quoting Wood, 825 F.2d at 97). Indeed, “there seems to be a consensus 15 that the prepetition breach of a prepetition contract is a non-core matter.” In re Daewoo 16 Motor Am., Inc., 302 B.R. 308, 312 (C.D. Cal. 2003); see In re Castlerock Props., 781 F.2d 17 159, 162 (9th Cir. 1986) (noting state law contract claims “have been held to be ‘noncore’ 18 ‘related proceedings’ under § 157(c)”) (collecting cases). The crux of this Insurance 19 Coverage Action involves disputes over the terms of insurance contracts—the CTC 20 Malpractice Policies—that the Insurer Defendants and the CTC Defendants executed 21 several years before the Receiver filed involuntary bankruptcy petitions against CTC 22 California and CTC Missouri. (See Doc. 1 ¶ 41.) The Receiver’s claims based on such 23 prepetition insurance contracts therefore depend on state law determinations of the Parties’ 24 contractual rights and liabilities for their resolution and “exist[ ] independently of 25 bankruptcy law.” In re Tamalpais Bancorp, 451 B.R. 6, 11 (N.D. Cal. 2011); see In re 26 GACN, Inc., 555 B.R. 684, 698 (B.A.P. 9th Cir. 2016) (holding a declaratory relief 27 coverage action against an insurer was non-core because “[t]he underlying dispute solely 28 concerns the parties’ rights and liabilities under a prepetition insurance contract, which was 1 entered into pursuant to state law rather than as a part of a bankruptcy case.”). 2 The Receiver relies on the Ninth Circuit’s decision in In re Thorpe Insulation Co., 3 671 F.3d 1011 (9th Cir. 2012), and contends that “‘pre-petition’ contracts between an 4 insurer and insured can give rise to ‘core’ jurisdiction.” (Doc. 29-1 at 57, 59.) But the 5 proceeding deemed core in Thorpe was a dispute concerning a creditor’s proof of claim 6 filed in a bankruptcy case. 671 F.3d at 1022. The Ninth Circuit found the dispute clearly 7 fell under § 157(b)(2)(B) as an “allowance or disallowance of claims against the estate” 8 and determined that the resolution of the creditor’s claim “directly impacted the 9 administration of the bankruptcy estate” because it “disputed or affected assets” in a trust 10 formed under 11 U.S.C. § 524(g).” Id.3 Unlike in Thorpe, the Receiver claims this action 11 is a “core” proceeding under §§ 157(b)(2)(A),(O)’s “catch-all” provisions, not 12 § 157(b)(2)(B). (See Doc. 29-1 at 57.) The Receiver’s reliance on Thorpe is therefore 13 inapposite. 14 The Receiver then argues that this Insurance Coverage Action is a core proceeding 15 under §§ 157(b)(2)(A) and 157(b)(2)(O)’s “catch-all” provisions because “a debtor’s 16 liability insurance policies are ‘property of the estate’” and “a determination of insurance 17 coverage directly affects assets of the estate, the distribution of those assets, and the 18 debtors’ creditors.” (Doc. 29-1 at 57–58 (citations omitted).) The Ninth Circuit has 19 explained that these “catch-all” provisions should be construed narrowly “to avoid 20 potential constitutional problems arising from having Article I judges issue final orders in 21 cases requiring an Article III judge, without a party’s consent.” Dunmore, 358 F.3d at 22 1115; see Castlerock, 781 F.2d at 162 (“[A] court should avoid characterizing a proceeding 23 as ‘core’ if to do so would raise constitutional problems.”). As such, “state law contract 24 25 26 3 Section 524(g) “is unique to the asbestos context [and] provides a mechanism for 27 consolidating asbestos-related assets and liabilities of a debtor into a single trust for the benefit of present and future asbestos claimants.” In re Thorpe, 671 F.3d at 1015 (citing 28 1 claims that only ‘arguably fit within the literal wording of the two catchall provisions’ 2 should be considered non-core.” In re Harris, 590 F.3d 730, 740 (9th Cir. 2009) (quoting 3 Castlerock, 781 F.2d at 162) (emphasis in original). 4 In Harris, the Ninth Circuit held that a contract action against a trustee was a core 5 proceeding that “literally [fell] within” § 157(b)(2)(A) because the contract claim was 6 based on the trustee’s sale of assets under a post-petition settlement agreement that was 7 approved by the bankruptcy court. Id. at 740 (emphasis in original). The Ninth Circuit 8 found the post-petition contract claim “necessarily involve[d] how the bankruptcy estate 9 was administered” and distinguished it from prepetition contract actions that “just 10 ‘relate[d]’ to the administration of the estate because one of the parties to the contract was 11 in bankruptcy.” Id. (distinguishing Castlerock, 781 F.2d at 162; and N. Pipeline Const. 12 Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982)); see also Tamalpais Bancorp, 451 13 B.R. at 10–11 (“[W]hile a claim arising from a post-petition contract regarding the property 14 of the bankruptcy estate is a core proceeding, a claim arising from a pre-petition contract 15 is a non-core proceeding even if the debtor is a party to the contract at issue.”). 16 Unlike the contract in Harris, the CTC Malpractice Policies are prepetition contracts 17 that were not entered into as part of a bankruptcy case or subject to bankruptcy court 18 approval. This action is therefore more akin to the prepetition contract actions at issue in 19 Castlerock and Marathon which “arose before and independent of the administration of 20 bankruptcy assets.” See Harris, 590 F.3d at 740 (citing Castlerock, 781 F.2d at 162; and 21 Marathon Pipe Line Co., 458 U.S. at 90). While the Receiver’s claims may “have a 22 profound impact on the bankruptcy proceedings, a declaratory judgment action regarding 23 ownership of the [CTC Malpractice Policies] involves only a traditional contract dispute 24 that could have been brought even if” the Receiver had never filed involuntary bankruptcy 25 petitions against CTC California and CTC Missouri. Tamalpais, 451 B.R. at 11; see also 26 Ray, 624 F.3d at 1131. In fact, the Receiver brought this coverage dispute before he filed 27 involuntary bankruptcy petitions against CTC California and CTC Missouri. (See Doc. 5 28 at 2.) As such, this is a “traditional” contract action that merely “‘relate[s]’ to the 1 administration of the estate” but does not necessarily involve how the bankruptcy estate is 2 administered. Cf. Harris, 590 F.3d at 740–41. “Because contract disputes involve 3 quintessentially ‘private rights,’ bankruptcy courts lack authority under Article III to issue 4 a final judgment on [such] contractual claims.” Westport Ins. Corp., 2025 WL 3545838, 5 at *3 (quoting Exec. Benefits Ins. Agency v. Arkison, 573 U.S. 25, 32 (2014)). 6 The Court therefore finds the Receiver’s claims are non-core. See GACN, Inc., 555 7 B.R. at 698; In re Temecula Valley Bancorp, 523 B.R. 210, 223 (C.D. Cal. 2014) (finding 8 a declaratory relief claim “arising from a pre-petition contract is a non-core proceeding 9 even if the debtor is a party to the contract at issue”) (internal citation omitted); In re We 10 Ins. Servs., Inc., Case No.: 20-CV-2076 JLS (MDD), 2021 WL 4150311, at *3 (S.D. Cal. 11 Sept. 13, 2021) (finding an adversary proceeding concerning an insurance coverage dispute 12 was non-core where a trustee sought damages for breach of the insurance policy and a 13 declaration that the policy covers claims against the non-debtor insured). Since “the non- 14 core nature of the claims is not necessarily dispositive,” the Court now turns to address the 15 remaining factors to determine whether permissive withdrawal is warranted. See id. at *3. 16 2. Forum Shopping 17 The Receiver and the Insurer Defendants raise forum shopping arguments against 18 each other. The Insurer Defendants argue that the Receiver is forum shopping because his 19 “strategy to file the Coverage Action followed shortly by the two involuntary bankruptcy 20 petitions in Bankruptcy Court, right before dispositive motions were to be briefed in the 21 New Jersey Coverage Action reveals the Receiver’s attempt to find what it perceives to be 22 a more favorable forum.” (Doc. 17-1 at 20.) The Receiver, on the other hand, argues that 23 the Insurer Defendants are forum shopping by seeking withdrawal because “they would 24 much prefer to litigate in New Jersey without the Receiver and without the oversight of the 25 Bankruptcy Court or the Bankruptcy Trustee.” (Doc. 29-1 at 66.) 26 “‘Forum shopping’ occurs when a party attempts to manipulate an action to have it 27 heard before a forum it deems more favorable, charitable, or sympathetic toward its point 28 of view.” In re: KSL Media, Inc., No. AP 15-01212-GM, 2016 WL 74385, at *9 (C.D. 1 Cal. Jan. 6, 2016) (quoting Calvert v. Berg, No. C13–1019JLR, 2013 WL 3407790, at *5 2 (W.D. Wash. July 8, 2013)). Courts determine whether a party is forum shopping based 3 on the party’s intent. See Vivendi SA v. T-Mobile USA Inc., 586 F.3d 689, 695 (9th Cir. 4 2009). Forum shopping “is likely present when a party, ‘perceiving that it may find itself 5 forced into a disadvantageous forum, seeks to manipulate procedural devices to secure an 6 advantage which, were those devices not available, it could not employ to defeat its 7 opponent's choice of forum.’” KSL Media, Inc., 2016 WL 74385, at *9 (quoting Calvert, 8 2013 WL 3407790, at *5). 9 As a preliminary matter, the Court finds that the Insurer Defendants seeking to 10 withdraw the reference is not indicative of forum shopping. The Insurer Defendants filed 11 the instant Motion to Withdraw less than two weeks after the action was referred to the 12 Bankruptcy Court (see supra Sec.III.A.) and, at the time of the Insurer Defendants’ filing, 13 the Bankruptcy Court had not issued any adverse rulings against the Insurer Defendants. 14 Cf. GTS 900 F, LLC, 2010 WL 4878839, at *5 (“Forum shopping is likely where a party 15 moves to withdraw the reference after adverse findings have been made against it by the 16 [b]ankruptcy [c]ourt.”); In re Nw. Territorial Mint, LLC, CASE NO. C16-01895-JCC, 17 2017 WL 568821, at *4 (W.D. Wash. Feb. 13, 2017) (“Timely motions to withdraw the 18 reference decrease the likelihood of forum shopping.”). 19 The Insurer Defendants contend the Receiver is forum shopping because he “could 20 have brought [his] coverage claim in New Jersey,” where the CTC Defendants and the 21 Insurer Defendants had litigated related issues arising from the CTC Malpractice Policies 22 in 2020 and then again in 2025. (Doc. 29-1 [Reply] at 258; see Doc. 17-1 at 8.) The Insurer 23 Defendants suggest that “the Receiver’s strategy is to avoid an early dispositive motion by 24 the Insurer[ ] [Defendants] on the duty to defend and move the entire dispute to California, 25 which the Receiver has acknowledged.” (Doc. 29-1 [Reply] at 255 (citing Bankr. Doc. 21- 26 11).) The Receiver responds that he is not forum shopping by “refusing to litigate in a 27 court that cannot obtain jurisdiction over him and exercising his right to collect on the $87 28 Million Judgment by forcing debtors with no ability to pay into bankruptcy.” (Doc. 29-1 1 at 65 (citation omitted).) The Receiver claims the District of New Jersey “does not have 2 jurisdiction over [him], who is a citizen of Nevada, and therefore has no ability to provide 3 complete relief.” (Id. at 61.) Although he is also not a citizen of California (see Doc. 1 4 ¶ 11), the Receiver does not explain why he chose to initiate this action in this District, file 5 the involuntary petitions against CTC California and CTC Missouri in Bankruptcy Court 6 only two days later, and invoke this District’s automatic referral rule in such proximity. 7 Based on the evidence on the record, however, the Court cannot conclude that the 8 Receiver sought “to manipulate procedural devices to secure an advantage.” KSL Media, 9 Inc., 2016 WL 74385, at *9 (quoting Calvert, 2013 WL 3407790, at *5). While the timing 10 of the Receiver’s court filings is questionable, there is no evidence that the District of New 11 Jersey, the Bankruptcy Court, or this Court have issued any substantive rulings against the 12 Receiver or otherwise unfavorable to his position.5 Cf. Cachet Fin. Servs., 652 B.R. at 350 13 (finding forum shopping weighed in favor of withdrawal where it appeared “‘more than 14 coincidental’ that [plaintiff] chose to bring its concededly non-core claims against 15 [defendant] in [b]ankruptcy [c]ourt after [the district court] dismissed a related suit only 16 one month prior). 17 Moreover, as the Receiver notes, the New Jersey Action “may only address a . . . 18 fraction of the issues at the core of this coverage dispute (i.e., the [Insurer Defendants’] 19 obligation to pay defense costs for Thomas Mulligan).” (Doc. 29-1 [Opp.] at 47.) Indeed, 20 “neither denying nor granting [withdrawal] will facilitate forum shopping here because a 21 district court will ultimately need to address” the Receiver’s non-core state claims. 22 23 4 The Receiver claims the District of New Jersey “cannot obtain personal jurisdiction over” 24 him, and thus cannot provide complete relief, “because he is a citizen of Nevada.” (Doc. 25 29-1 [Opp.] at 48.) In the District of New Jersey, the Receiver sought to dismiss the New Jersey Action under Rule 12(b)(7) on the ground that he is an “indispensable party” that 26 could not be joined for lack of personal jurisdiction. (See Bankr. Doc. 21-11 at 3.) 27 5 The Insurer Defendants acknowledge they had not moved for judgment on the pleadings in the New Jersey Action at the time of the Receiver’s filings. (See Doc. 29-1 [Reply] at 28 1 Tamalpais, 451 B.R. at 12 (citation omitted); see Sec. Farms, 124 F.3d at 1009 (rejecting 2 argument that withdrawal encourages forum shopping because “[w]ithout regard to 3 withdrawal, the bankruptcy court’s order remanding [the] non-core, state law claims 4 inevitably was subject to the approval of the district court.”). Accordingly, the Court finds 5 this factor is neutral or weighs slightly in favor of withdrawal. 6 3. Remaining Factors 7 The other factors— judicial efficiency, “delay and costs to the parties, uniformity of 8 bankruptcy administration, . . . and other related factors”—favor denying withdrawal here. 9 See Sec. Farms, 124 F.3d at 1008. “Generally, where the claims at issue are non-core, 10 efficiency favors withdrawing the reference.” We Ins. Servs., Inc., 2021 WL 4150311, at 11 *3. “Since a bankruptcy court’s determination of non-core matters may be subject to de 12 novo review by the district court, in cases where non-core issues predominate, judicial 13 efficiency may be ‘enhanced’ and ‘unnecessary costs could be avoided by a single 14 proceeding in the district court.’” Cachet Fin. Servs., 652 B.R. at 346 (quoting Sec. Farms, 15 124 F.3d at 1008). Still, “[e]ven if the claims against [the defendant] are non-core, judicial 16 efficiency still may be served by denying withdrawal of the reference in light of the 17 circumstances of this case.” Hjelmeset v. Cheng Hung, Case No. 17–cv–05697–BLF, 2018 18 WL 558917, at *4 (N.D. Cal. Jan. 25, 2018). 19 In this case, the Court finds it would be more efficient for all the claims in the 20 Adversary Proceeding to remain together in the Bankruptcy Court. The Insurer Defendants 21 assert that they do not consent to bankruptcy jurisdiction and the Bankruptcy Court can 22 therefore only issue proposed findings of fact and law as to the Receiver’s non-core claims, 23 which would then be subject to this Court’s de novo review. (See Doc. 17-1 at 19.) Even 24 so, bankruptcy courts are “permitted to retain jurisdiction over the action for pre-trial 25 matters.” In re Healthcentral.com, 504 F.3d 775, 787 (9th Cir. 2007).6 26 27 6 This is true even if a party demands a jury trial. See Healthcentral.com, 504 F.3d at 787. 28 1 Several named Defendants have filed motions to dismiss the Chapter 7 Trustee’s 2 claims in the Adversary Proceeding and a hearing on such motions has been set for October 3 29, 2026. (See Bankr. Doc. 207.) The Receiver also notes that Thomas Mulligan, the CTC 4 Defendants’ CEO, consented to “all coverage disputes . . . proceed[ing] in California in 5 one integrated action.” (Doc. 29-1 [Opp.] at 47–48.) “Having the Bankruptcy Court 6 address these pre-trial matters ‘promotes judicial economy and efficiency by making use 7 of the bankruptcy court’s unique knowledge of Title 11 and familiarity with the actions 8 before them.’” Yoo v. VoIP Guardian LLC, Case No. 2:25-cv-11607-SSS, Case No. 2:25- 9 cv-11598-SSS, 2026 WL 772606, at *2 (C.D. Cal. Mar. 2, 2026) (quoting 10 Healthcentral.com, 504 F.3d at 787–88); see also In re Solid Landings Behav. Health, Inc., 11 No. SACV 20-1167 JGB, 2020 WL 5934304, at *3 (C.D. Cal. July 28, 2020) (“[T]he 12 Bankruptcy Court has the ability to conserve the Court’s judicial resources by conducting 13 pre-trial management in the form of discovery, pre-trial conferences, and ruling on other 14 routine motions.”) (citing Healthcentral.com, 504 F.3d at 787). “Put simply, the 15 Bankruptcy Court’s initial determinations are likely to increase the chances of efficiently 16 resolving this matter.” Solid Landings Behav. Health, Inc., 2020 WL 5934304, at *3 17 (emphasis in original). 18 As such, withdrawing the reference at this juncture would also “result in further costs 19 and delay resolving pretrial motions which could narrow the issues or ‘obviate the need for 20 trial altogether.’” In re Cachet Fin. Servs. v. Bancorp Bank, No. 2:20-BK-10654-VZ, 2023 21 WL 1785766, at *8 (C.D. Cal. Feb. 6, 2023) (quoting Hjelmeset, 2018 WL 558917, at *5); 22 see also In re Heller Ehrman LLP, 464 B.R. 348, 360 (N.D. Cal. 2011) (“If this Court 23 ultimately is called upon to make a final judgment in this action, it is not clear that such a 24 procedure will cause unnecessary delay and costs, particularly given the efficiencies of 25 26 27 Doc. 1) and withdrew the jury demand in January 2026. (See Doc. 17-1 at 19.) As such, the Court need not reach the Insurer Defendants’ argument that “bankruptcy courts cannot 28 1 || having the [B]ankruptcy [C]ourt deal with the issues in the first instance.’’). 2 Withdrawal is also likely to impact the uniformity of the bankruptcy administration. 3 ||“This dispute will decide whether significant assets belong to the bankruptcy estate, and 4 ||bankruptcy courts in this district have recently (and ably) adjudicated similar cases.” 5 || Temecula Valley Bancorp, Inc., 523 B.R. at 224 (declining to permissively withdraw the 6 reference, even where the adversary proceeding for declaratory judgment was non-core, 7 ||based on the “principles of efficiency and uniformity of bankruptcy administration’). 8 || Despite this action involving non-core claims (see supra Sec.II.B.1), a potential ruling on 9 ||the Receiver’s entitlement to the CTC Malpractice Insurance Policies’ proceeds could 10 significantly impact the assets available to creditors. See We Ins. Servs., Inc., 2021 WL 11 }}4150311, at *4; see also Cachet Fin. Servs., 2023 WL 1785766, at *8 (finding uniformity 12 || factor weighed against withdrawing the reference because the bankruptcy proceeding had 13 concluded and “the outcome of the parties’ claims may have a significant impact on 14 administration of the bankruptcy.”’). 15 The Court therefore finds that considerations of judicial efficiency, uniformity of 16 bankruptcy administration, delay, and costs to the parties weigh against withdrawal. 17 Conclusion 18 As all but one of the factors weigh against withdrawing the reference, the Court 19 declines to permissively withdraw the bankruptcy reference. 20 IV. CONCLUSION 21 Based on the foregoing, the Motion to Withdraw (Doc. 17) is DENIED and the 22 Motion to Dismiss (Doc. 21) is therefore DENIED AS MOOT. 23 IT IS SO ORDERED. 24 ||DATE: September 14, 2026 25 FR Bavrrids, MpigeD 6 HON. RUTH BERMUDEZ MONTENEGRO UNITED STATES DISTRICT JUDGE 27 28 17