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Valley of Lakes RICO Class Action against PNCBANK, et al.
ripped edge: federal court


			January 27, 1995

		
			LETTER ORDER
	 ORIGINAL ON FILE WITH CLERK OF THE COURT


Roger S. Antao, Esq.
Antao & Chuang
460 Bergen Boulevard
Palisades Park, NJ 07650
	Attorney for Plaintiffs, Leon R. Dongelewicz, et als.

Mary Ellen Tully, Esq.
Ravin, Sarasohn, Cook, Baumgarten, Fisch & Baime
103 Eisenhower Parkway
Roseland, NJ  07068-1072
	Attorney for Defendant First Eastern Bank

Gerard E. Hanlon, Esq.
50 South Street
Morristown, NJ  07960
	Attorney for Defendants Oneida Water Company, Valley
	  Utilities Company, Ralph Conte and Arlene Reiness

Frank Hoegen, Esq.
c/o Paul & Miller
1847 Route 70E
Cherry Hill, NJ  08003
	Attorney for Defendant C.B.G. Limited

Marisa Y. Paradiso, Esq.
Riverdale One
Route 23 North
P.O. Box 85
Riverdale, NJ  07457-0085
	Attorney for Defendant MLA Management Associates, Inc.

Eric T. Bielawski, Esq.
306 W. Somersdale Road
Voorhees, NJ  08043
	Attorney for Defendant Property owners Association of the
	  Valley of Lakes

Mr. Frank Cedrone
128 Monmouth Green
Marlton, NJ 08053


	Re:	Dongelewicz, et als. v.
		First Fastern Bank, et als.
		Civil Action 94-2883 (WHW)

Dear Counsel and Litigants:


	On January 19, 1995, this Court heard oral argument in 

this matter.  Specifically at issue was the application of the 

Plaintiffs for an order to show cause: (1) why a default judgment 

should not be entered against the Defendants; and (2) why an 

injunction should not be ordered to prevent this case from being 

litigated, in a proceeding docketed 94-2669, before the Bankruptcy 

Court, to which the defendants had purportedly "removed" it.  In 

reliance upon the parties' submissions and their oral arguments, 

this Court, having deliberated since oral argument, has reached a

conclusion different from that then announced.  For reasons set 

forth below, the Plaintiffs' application for injunctive relief is 

granted.  However, default judgment will not be entered against the 

Defendants.

			Background

	This case arises from events allegedly occurring over the 

past approximately 20 years involving a Pennsylvania land tract

known as the "Valley of Lakes."  In a 159-page complaint, the 

Plaintiffs basically allege that they were fraudulently induced into


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investing in that land tract by a number of conspiring Defendants, 

who misrepresented to them that the land in question was to be 

developed into a premier resort community.  The Plaintiffs complain 

that the Valley of Lakes has not been developed as promised.  The 

Plaintiff's complaint was filed with the Clerk of the District Court

in June, 1994.  The Defendants were served with process on various

dates in October, 1994.  The Defendants have not yet answered

Plaintiff's complaint and default was entered by the Clerk of the

Court on November 16, 1994.

	The Defendant's failure to answer may be the result of

their attempt to have the matter litigated in this Court's

Bankruptcy adjunct, rather than directly in the District Court.  To

accomplish that, defendant First Eastern Bank, N.A.  ("First

Eastern") filed a "notice of removal" with the Clerk of the District

Court on November 9, 1994, to remove the matter from the District

Court to the Bankruptcy Court.  First Eastern states, in its notice,

that three of the Defendants are debtors-in-possession in Chapter 

11 bankruptcy proceedings currently pending in the United States 

Bankruptcy Court for the Middle District of Pennsylvania, and that 

the subject matter of the Plaintiffs' complaint is directly relatcd 

to the bankruptcy action.  The notice further avers that upon

removal, First Eastern will promptly file a motion to transfer

Plaintiff's lawsuit to the United Stated Bankruptcy Court for the

Middle District of Pennsylvania, presumably for consolidation with

the currently pending action.  Defendants CBG Ltd, Oneida Water

Company and Valley Utilities Company filed an identical notice of


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removal.  Since the alleged removal, First Eastern has filed motions

in the Bankruptcy Court to dismiss the Plaintiffs' complaint and to

transfer the case to Pennsylvania, which are scheduled to be heard

in February, 1995.

	However, counsel for the plaintiffs came to the District

Court on January 6, 1995, seeking ex parte emergent relief in the

form of a temporary restraining order to enjoin the Bankruptcy Court

proceedings and for an order to show cause why a default judgement

should not be entered against the Defendants for their failure to

defend this action in the District Court.  This Court granted the

relief sought, with January 19, 1995 as the return date for argument

on Plaintiffs' application for a preliminary injunction.

		Discussion/Analysis

	At argument, the issue was whether the District Court or

the Bankruptcy Court is the appropriate venue for deciding First

Eastern't motions.  Plaintiffs claimed that proper venue was with

the District Court, while Defendants claimed that such was in the

Bankruptcy Court.  Resolution of this controversy requires the

proper construction of the Bankruptcy Removal Statute, Rule 9027,

which provides that any party to a civil action in state or federal

court may remove it to the bankruptcy court, provided that the

bankruptcy court has jurisdiction over the case.

	Plaintiffs correctly refer to decisions which rule that

cases never may be removed directly from a District Court to the

Bankruptcy Court.  See, e.g., Centrust Savings Bank v. Love, 131

B.R. 64 (S.D. Tex 1991); Helena Chemical Co. v. Manley, 47 B.R. 72


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(Bankr. N.D. Miss. 1985).  First Eastern contends, on the contrary,

that cases properly may be removed from a District Court to its

Bankruptcy adjunct, merely by filing a notice of removal with the

Clerk of the District Court, such practice having been sanctioned

by the Court of Appeals for the Third Circuit in Pacor, Inc. v.

Higgins, 743 F.2d 984 (3d Cir. 1984), and followed by District

Courts within this Circuit.  While this Court finds that the

Plaintiffs' analysis is more persuasive than that offered by First

Eastern, the Court also finds it unnecessary to reach the question.

	In the hierarchy of our federal courts, the Bankruptcy

Court is a unit of the District Court, and Bankruptcy judges are

judicial officials of the District Court.  The Supreme Court teaches

that neither Bankruptcy judeges nor Bankruptcy Courts constitute the

judicial power of the United States, found in Article III of the

Constitution.  See, Northern Pipeline Construction Co. v. Marathon

Pipeline Co.., 458 U.S. 50, 60-61 (1982).  Thus, the District Court

has the absolute power to refer cases to the Bankruptcy Court, and to

withdraw such referrals.  See, 28 U.S.C.  157.  Defendant First

Eastern has asked, unilaterally, the Bankruptcy Court to determine

the merits of its motion to dismiss Plaintiffs' complaint and,

alternatively, to transfer this case to the Middle District of 

Pennsylvania.  While this Court disagrees with First Eastern that

it can "remove" Plaintiffs' lawsuit from the District Court to the

Bankruptcy Court without an order of reference, where no true

proceeding already existed in the Bankruptcy Court, this Court

nevertheless had announced at oral argument that it was referring


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the matter to the Bankruptcy judge for her report and recommendation

as to First Eastern's motions.  However, such report and 

recommendation would not bind this Court, and this Court's

obligation would, in fact, be to review the merits of such motions

de nove, in the event that either party is dissatisfied with the

Bankruptcy judge's conclusions.  Rather than burden both this Court

and its adjunct with the same issues, this Court has determined that

the merits of First Eastern's motions will be adjudicated in the

District Court.  Thus, the issue of whether the case was properly

"removed" to the Bankruptcy Court is irrelevant because it is well-

within the province of the District Court to determine what issues

shall be determined by its judicial adjunct, the Bankruptcy Court.

The Court hereby Orders that First Eastern's motions shall be

decided by the District Court.

			Conclusion 

	The plaintifs' motion to enter default judgement against

the defendants is DENIED.  The default entered by the Clerk of this

Court against the defendants is VACATED for good cause, pursuant to

Rule 55 of the Federal Rules of Civil Procedure.

	The plaintiffs' motion for injunctive relief is GRANTED.

Adversary proceeding 94-2669 is hereby closed by Order of this

Court.

	The return date of First Eastern's motions to dismiss and

transfer will be February 27, 1995, at which time oral argument will

be heard.  First Eastern's briefs in support of those motions shall

be served by February 2, 1995.  The Court understands that such


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briefs probably have been submitted to Bankruptcy Judge Winfield and

if First Eastern, to save expense and promote efficiency, would like

this Court to obtain such papers from Judge Winfield's chambers,

such accommodation would be made.  Plaintiffs' briefs in opposition

to First Eastern's motions shall be served by February 14, 1995 and

First Eastern shall have until February 21, 1995 to respond thereto.


SO ORDERED:
					/s/
					William H. Walls, U.S.D.J.

					/January 27, 1995/
							   Dated

Valley of Lakes RICO Class Action against PNCBANK, et al.

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