In re Bell
476 B.R. 168
Bankr. E.D. Pa.2012Background
- No-asset Chapter 7 case; adversary to determine dischargeability pending.
- Debtor Kennith Bell seeks turnover of undisputed funds from his 401(k) held by former employer NWI Orthodontics.
- NWI objects and moves for relief from automatic stay to continue prepetition federal action regarding the 401(k) funds.
- Debtor disclosed 401(k) interest as excluded from the estate under §541(c)(2); no objections to exemptions were filed.
- Adversary Proceeding 09-0339 seeks nondischargeability under §523(a)(4) and (a)(6); prior suspensions pending state and district court actions.
- Court must decide two motions: Debtor’s turnover motion under §543 and NWI’s stay-relief request; orders argued that neither motion should be granted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has subject matter jurisdiction over the Debtor’s §543(b) turnover claim. | Bell argues custodian status gives turnover right. | NWI contends no custodian; no turnover subject to §543. | Court has subject matter jurisdiction under arising-under; §543 claim lacks merit. |
| Whether §543(b) applies given NWI is fiduciary, not custodian. | Bell relies on custodian interpretation to compel turnover. | NWI as fiduciary not a custodian under §101(11); §543 inappropriate. | §543 inapplicable; not a custodian and not the trustee. |
| Whether §522(c) applies to the 401(k) funds that were not exempted, given §541(c)(2) exclusion. | Bell contends exempt property cannot be reached by creditor claims. | NWI argues setoff/claims may affect exempt funds. | §522(c) does not apply because Bell did not exempt the 401(k); exclusion under §541(c)(2) precludes §522(c). |
| Whether relief from the automatic stay should be granted to permit the District Court Action to proceed. | NWI seeks relief to pursue setoff/claims; stay should be lifted. | Relief would duplicate proceedings and burden the debtor; no justification. | Stay denied; limited relief not warranted; parallel proceedings would be duplicative. |
| Whether limited relief from stay to resolve threshold issues is appropriate. | Not expressly requested; NWI seeks broader relief. | Threshold issues may be considered without lifting full stay. | Court would not grant limited relief; would risk duplicative litigation. |
Key Cases Cited
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir.1984) (test for relation to bankruptcy: potential effect on estate)
- Stoe v. Flaherty, 436 F.3d 209 (3d Cir.2006) (arising under jurisdiction; substantive right under Code)
- In re Mullarkey, 536 F.3d 215 (3d Cir.2008) (defines core vs non-core; related to jurisdiction)
- In re Shuman, 277 B.R. 638 (Bankr.E.D.Pa.2001) (Pacor-related analysis in bankruptcy jurisdiction)
- In re Universal Mktg., Inc., 459 B.R. 573 (Bankr.E.D.Pa.2011) (core vs related; applicability to turnover)
- In re Combustion Eng’g, Inc., 391 F.3d 190 (3d Cir.2004) (broad jurisdictional framework; core/related)
- Lamie v. U.S. Trustee, 540 U.S. 526 (2004) (statutory interpretation; when to apply exemptions)
- Patterson v. Shumate, 504 U.S. 753 (1992) (ERISA exclusion history; fiduciary duties context)
- Guidry v. Sheet Metal Workers Nat’l Pension Fund, 493 U.S. 365 (1990) (plan vs sponsor as separate entities; setoff considerations)