IN RE: AVATEX CORPORATION, DEBTOR.

NO. 02-81268-SAF-11, § (Jointly Administered), CIVIL NO. 3:03-CV-0159-DUnited States Bankruptcy Court, N.D. Texas, Dallas Division.
January 29, 2003

REPORT TO DISTRICT COURT ON MOTION TO WITHDRAW REFERENCE
STEVEN A. FELSENTHAL, United States Bankruptcy Judge

On January 21, 2003, the class action plaintiffs in Zuckerman v. FoxMeyer Health Corp., civil no. 3:96-CV-2258-L, filed a motion to withdraw the reference of a bankruptcy motion to approve a settlement of the Zuckerman class action as it affects the bankruptcy estate. The motion will be filed by Avatex Corp., the debtor, pursuant to Bankruptcy Rule 9019. The Rule 9019 motion has not yet been filed. The United States Bankruptcy Court conducted a status conference concerning the motion to withdraw the reference on January 28, 2003. 11 U.S.C. § 105(d); L.B.R. 5011.1. The bankruptcy court submits the following report to the United States District Court:

1. The Zuckerman class action is pending in the United States District Court for the Northern District of Texas, the Honorable Sam A. Lindsay presiding. The parties to that class action have negotiated a settlement. The district court has set a class action settlement fairness hearing on March 10, 2003. The district court approved the form of notice to be sent to all class members. Class counsel report that the notice has been served.

2. After the settlement had been reached, Avatex filed a petition for relief under Chapter 11 of the Bankruptcy Code. Avatex is a party to the settlement. Avatex supports the settlement. Pursuant to Bankruptcy Rule 9019, Avatex will file a motion in the bankruptcy court to approve the settlement. Counsel for Avatex reports that the motion will be filed by February 3, 2003. The bankruptcy court requires 20 days notice to parties in interest before hearing the motion.

3. The Zuckerman class requests that the district court withdraw the Rule 9019 motion when it is filed to allow the motion to be heard simultaneously with the class action settlement hearing. Alternatively, the Zuckerman class requests that the bankruptcy court hear the Rule 9019 motion before the March 10, 2003, class action settlement hearing.

4. Avatex has not filed a response to the motion to withdraw the reference. Avatex does not oppose the motion. Avatex does not oppose the alternative request either.

5. The determination of a motion to approve a settlement made on behalf of a bankruptcy estate constitutes a core matter.

6. Under Fed.R.Civ.P. 23(e), the district court presides over the class action settlement hearing. The Rule 9019 motion will present a similar analysis to the bankruptcy court. See In re Cajun Elec. Power Corp., Inc., 119 F.3d 349 (5th Cir. 1997). For judicial efficiency and economy and for economy to the parties, the bankruptcy court recommends that the district court grant the motion and set a hearing on the Rule 9019 motion on March 10, 2003, with the class action settlement hearing. In the event that the district court does not withdraw the reference, the bankruptcy court has set a hearing on the Rule 9019 motion for February 28, 2003, at 1:30. Avatex will serve notice of that hearing. The bankruptcy court’s schedule will assure that the authority of Avatex to participate in the settlement will be determined prior to the March 10, 2003, hearing in the district court, should the district court not withdraw the reference.

7. The motion to withdraw the reference seeks to have a single hearing before the district judge presiding over the class action. Accordingly, the bankruptcy court further recommends that the motion to withdraw the reference be transferred to the Honorable Sam A. Lindsay.