333 Conn. 1
Conn.2019Background
- Metcalf (plaintiff) and his business filed bankruptcy; creditors (including Ion Bank) initiated an adversary proceeding alleging fraud and other misconduct; the Bankruptcy Court dismissed that adversary proceeding after Metcalf produced contrary evidence.
- Metcalf then sued defendants in Connecticut Superior Court for vexatious litigation (against all defendants) and CUTPA violations (against Fitzgerald and the bank), seeking statutory and punitive damages and attorneys’ fees.
- Defendants Alderman and Alderman & Alderman moved to dismiss, arguing federal bankruptcy law preempted the state claims; the trial court granted the motion and, on its own motion, dismissed the remaining counts for lack of subject matter jurisdiction.
- The trial court relied on the Appellate Court’s decision in Lewis holding that the Bankruptcy Code preempts state vexatious litigation and CUTPA claims arising from bankruptcy proceedings.
- Metcalf appealed to the Connecticut Supreme Court, arguing the Bankruptcy Code does not preempt his state claims under express, field (occupy the field), or conflict preemption principles.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Bankruptcy Code expressly preempts state vexatious litigation and CUTPA claims | Metcalf: No express preemption language exists in the Code, so express preemption does not apply | Defendants: Federal bankruptcy regime provides exclusive remedies so state causes are displaced | Held: No express preemption found (Code contains no explicit preemption provision) |
| Whether Congress implicitly occupied the field of sanctions/penalties for abuse of the bankruptcy process (field preemption) | Metcalf: Congress intended only a uniform estate administration; state remedies (vexatious litigation/CUTPA) would not disrupt distributions | Defendants: Bankruptcy Code and rules create a comprehensive remedial scheme for sanctions, displacing state remedies | Held: Implied field preemption applies; Congress occupied the field of bankruptcy sanctions, displacing state claims |
| Whether state claims conflict with federal objectives such that they are preempted (conflict/obstacle preemption) | Metcalf: State and federal law can be complied with simultaneously; different remedies do not create a conflict | Defendants: State remedies would undermine uniformity and allow collateral attacks that frustrate federal objectives | Held: Even though dual compliance is possible, state claims constitute an obstacle to Congress’ uniform bankruptcy scheme and are preempted |
| Whether advisory notes or similarity to Fed. R. Civ. P. 11 (and its note permitting independent malicious-prosecution actions) allow state actions despite Fed. R. Bankr. P. 9011 | Metcalf: Rule 11’s advisory note suggests independent state claims remain viable; rule 9011 parallels rule 11 so that intent carries over | Defendants: Advisory committee notes are nonbinding; Congress’ comprehensive scheme governs and displaces state remedies | Held: Advisory notes to rule 11 do not control rule 9011 or congressional intent; bankruptcy rules and Code indicate preemption |
Key Cases Cited
- Lewis v. Chelsea G.C.A. Realty Partnership, L.P., 86 Conn. App. 596, 862 A.2d 368 (Conn. App. 2004) (held bankruptcy law preempted state CUTPA and vexatious litigation claims)
- Eastern Equipment & Services Corp. v. Factory Point Nat’l Bank, 236 F.3d 117 (2d Cir. 2001) (Bankruptcy Code’s comprehensive scheme and exclusive federal jurisdiction compel preemption of state claims challenging bankruptcy-related conduct)
- MSR Exploration, Ltd. v. Meridian Oil, Inc., 74 F.3d 910 (9th Cir. 1996) (federal bankruptcy forum and detailed Code preclude state malicious-prosecution claims based on bankruptcy proceedings)
- In re Volpert, 110 F.3d 494 (7th Cir. 1997) (affirming use of §105 to sanction abuse of bankruptcy process)
- Graber v. Fuqua, 279 S.W.3d 608 (Tex. 2009) (Texas Supreme Court minority view rejecting preemption for state malicious-prosecution claims; discussed and rejected by Connecticut Supreme Court)