Edgar Reyes-Colon v. Banco Popular de Puerto Rico, et al.

Summary

The United States District Court for the District of Puerto Rico grants Edgar Reyes-Colon’s motion to withdraw the reference of his adversary proceeding seeking damages under 11 U.S.C. § 303(i)(2). The court holds that the Granfinanciera test establishes a Seventh Amendment right to a jury trial, rejects arguments that Puerto Rico residents lack that right in federal civil proceedings, and finds no waiver because the claim was not ripe before dismissal of the involuntary bankruptcy petition. The court also concludes that the § 303(i)(2) claims were timely and that the dispute should proceed in the district court.

Holdings

1. The reference must be withdrawn because Reyes-Colon's § 303(i)(2) damages claims satisfy the Granfinanciera test and implicate a Seventh Amendment right to a jury trial, which constitutes cause for withdrawal under 28 U.S.C. § 157(d).
2. Puerto Rican litigants in federal court are entitled to the Seventh Amendment right to a jury trial in civil proceedings; Balzac and the Insular Cases do not eliminate that right in a federal civil case arising under federal law.
3. Reyes-Colon did not waive his right to a jury trial because a § 303(i)(2) claim does not become ripe until the involuntary petition is dismissed, so he could not have been required to demand a jury before a legally cognizable claim existed.
4. The § 303(i)(2) claims were timely under the circumstances presented.

Questions Presented

1. Whether the reference of the § 303(i)(2) adversary proceeding should be withdrawn because Reyes-Colon has a Seventh Amendment right to a jury trial.
2. Whether Puerto Rico residency or the Insular Cases deprive a federal civil litigant in Puerto Rico of the Seventh Amendment right to a jury trial.
3. Whether Reyes-Colon waived his jury-trial right by failing to demand a jury before dismissal of the involuntary petition.
4. Whether the § 303(i)(2) claims were timely.
5. Whether Banco Popular's arguments concerning the § 157(d) withdrawal factors or the alleged lack of bad faith precluded withdrawal.

Disposition

other