536 B.R. 566
Bankr. S.D.N.Y.2015Background
- Claimants Pamela D. Longoni (and as guardian for Lacey Longoni) and Jean M. Gagnon filed claims in the ResCap bankruptcy that incorporate causes of action from a prior Nevada foreclosure suit, including intentional infliction of emotional distress (IIED).
- The court previously overruled the Trust’s objections and allowed the IIED claim to survive the pleadings stage, based in part on an affidavit describing physical manifestations of distress (weight loss, vomiting, prescription medication use, humiliation).
- The parties did not consent to final adjudication by the Bankruptcy Court, triggering the question whether the IIED claim is a “personal injury tort” under 28 U.S.C. § 157(b)(5), which would require trial in a district court absent consent.
- The Trust argued the IIED claim is not a personal injury tort because it alleges no bodily trauma beyond shame/humiliation and is ancillary to contract/foreclosure claims; alternatively it argued the IIED claim is not the gravamen of the dispute.
- The Claimants argued IIED is a personal injury tort and non-core (Stern), so the bankruptcy court cannot enter final judgment; they also sought abstention to district court.
- The Bankruptcy Court applied a hybrid (middle) approach for § 157(b)(5) analysis, considered Nevada IIED law and the context of foreclosure-related claims, and concluded the IIED claim is not a personal injury tort for § 157(b)(5) purposes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the IIED claim is a “personal injury tort” under 28 U.S.C. § 157(b)(5) | IIED based on foreclosure is a personal injury tort/non-core; bankruptcy court cannot enter final judgment absent consent | IIED alleges no physical trauma beyond shame/humiliation and stems from contractual/foreclosure conduct, so it is not a § 157(b)(5) personal injury tort; alternatively, IIED is not the gravamen | The IIED claim is not a personal injury tort under § 157(b)(5); Bankruptcy Court may finally adjudicate it |
| Whether the gravamen/context of the claims requires district-court trial despite limited physical manifestations | Claimants: IIED is central and thus non-core | Trust: IIED is ancillary to financial/property/contract claims; gravamen is foreclosure/economic harm | Court: Context shows IIED arises from foreclosure/contract matters and is not the gravamen requiring district trial |
| Proper analytic framework for deciding § 157(b)(5) personal injury question | (implied) bankruptcy court should treat IIED as personal injury under broad view | Court should use hybrid/middle approach to avoid permitting easy escape from bankruptcy adjudication | Court adopts hybrid approach (more searching when claim stems from financial/property torts) |
| Effect of refusal to consent on final adjudication | If IIED is a personal injury tort, lack of consent requires district-court trial | If IIED is not a personal injury tort, bankruptcy court can enter final judgment | Because IIED is not a § 157(b)(5) personal injury tort here, lack of consent does not bar final adjudication by the Bankruptcy Court |
Key Cases Cited
- Stern v. Marshall, 131 S. Ct. 2594 (U.S. 2011) (bankruptcy courts’ authority to enter final judgments depends on nature of claims; §157(b)(5) non-jurisdictional and can be waived by consent)
- In re Ice Cream Liquidation, Inc., 281 B.R. 154 (Bankr. D. Conn. 2002) (advocates hybrid view; more searching analysis when personal-injury-type claims arise from financial/property contexts)
- In re Cohen, 107 B.R. 453 (S.D.N.Y. 1989) (narrow view: personal injury torts involve bodily trauma or psychiatric impairment beyond mere shame/humiliation)
- Franchise Tax Bd. of State of Cal. v. Hyatt, 335 P.3d 125 (Nev. 2014) (elements and Nevada standards for IIED; sliding scale requiring stronger proof of physical injury for less extreme conduct)
- In re Thomas, 211 B.R. 838 (Bankr. D. S.C. 1997) (focus on gravamen: if emotional distress is the claim’s core, §157(b)(5) applies; otherwise bankruptcy court may retain adjudication)