515 B.R. 551
Bankr. E.D. Mich.2014Background
- Timothy R. Miller, the Chapter 7 trustee, sues Defendants for avoidance and recovery of a pre-petition transfer of Unit 17.
- Transfer of Unit 17 was from Bruemmer Development, LLC to Executive Realty, with Arthur Bruemmer as sole owner of related entities.
- Executive Realty sold Unit 17 to third parties for $175,000; Shaun Bruemmer received $167,428.26 and deposited it into her Wachovia account.
- Defendants filed a third-party complaint against Dennis Whedon seeking conspiracy damages and legal malpractice indemnity.
- Court issued Show-Cause Order questioning whether it had subject matter jurisdiction over the third-party claims.
- Defendants responded; Whedon did not, and the Court proceeded to determine jurisdiction, ultimately dismissing the third-party claims for lack of subject matter jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has related-to jurisdiction over the third-party claims | Miller argues the third-party claims may affect the estate via related-to grounds | Defendants contend Pacor test shows related-to jurisdiction because outcomes could impact estate | No related-to jurisdiction |
| Whether the court may exercise supplemental/ancillary jurisdiction | Miller did not separately press supplemental jurisdiction as a basis | Defendants cite Opti-Gage and Petrolia to justify ancillary jurisdiction | Bankruptcy court lacks supplemental jurisdiction |
| Whether the conspiracy and indemnity claims against Whedon are subject to the court’s jurisdiction | Miller's claims against Defendants are independent of third-party claims against Whedon | If conspiracy exists, related-to may extend jurisdiction to Whedon | Not within jurisdiction; third-party claims dismissed |
Key Cases Cited
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir.1984) (classic test for 'related to' jurisdiction)
- Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (Sup. Ct.1994) (burden to show jurisdiction)
- Wolverine Radio Co., Inc., 930 F.2d 1132 (6th Cir.1991) (Pacor-related approach in Michigan context)
- Celotex Corp. v. Edwards, 514 U.S. 300 (Sup. Ct.1995) (purpose of 'related to' not to widen jurisdiction)
- In re Walker, 51 F.3d 562 (5th Cir.1995) (bankruptcy courts generally lack supplemental jurisdiction)
- Petrolia Corp. v. Elam, 79 B.R. 686 (Bankr.E.D.Mich.1987) (ancillary/pendant jurisdiction historically discussed)
- In re Trans-Industries, Inc., 419 B.R. 21 (Bankr.E.D.Mich.2009) (footnotes omitted; discusses related doctrines)