Oberdick v. TrizecHahn Gateway, LLC
160 A.3d 215
| Pa. Super. Ct. | 2017Background
- Trizec (landlord) obtained a $3.3M state-court judgment against David Oberdick and partners for unpaid rent and later sued the Oberdicks under the Pennsylvania Uniform Fraudulent Transfer Act (PaUFTA).
- Before resolution of preliminary objections in state court, David filed Chapter 7 bankruptcy and the Oberdicks removed the PaUFTA suit to the bankruptcy court, where it became an adversary proceeding and was fully litigated.
- The bankruptcy trustee prosecuted the PaUFTA adversary; after extensive litigation the bankruptcy court entered judgment for the Oberdicks and dismissed the adversary.
- After the bankruptcy case concluded, David and Sally Oberdick sued Trizec and its counsel in state court under the Dragonetti Act (wrongful use of civil proceedings), alleging improper conduct in the PaUFTA litigation.
- Defendants moved for summary judgment arguing federal bankruptcy law and federal rules preempt the Dragonetti claims (and raising other defenses); the trial court denied summary judgment.
- The Superior Court reversed, holding the Dragonetti claims were preempted by the Bankruptcy Code and Federal Rules because the underlying claims were litigated in bankruptcy court and plaintiffs had federal remedies and sanctions available there.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state-law Dragonetti claims based on litigation removed to and litigated in bankruptcy court are preempted by federal bankruptcy law and rules | Oberdicks: claims are based on procurement/continuation of proceedings in state court and thus not preempted | Trizec: federal Bankruptcy Code and Federal Rules (e.g., Rule 11/Bankr. Rule 9011, §1927) preempt state wrongful-use claims grounded in bankruptcy litigation | Held: Preempted — the Dragonetti claims are grounded in bankruptcy proceedings and federal law provides equivalent remedies, so state claims are preempted |
| Whether acts that occurred in state court before removal remain outside preemption | Oberdicks: pre-removal state-court procurement/continuation supports a state Dragonetti claim | Trizec: plaintiffs removed immediately and the matter was fully litigated in bankruptcy court, so entire claim is effectively grounded in federal proceedings | Held: Preemption extends to the entire Dragonetti action here because plaintiffs removed early and the adversary was litigated in bankruptcy court |
| Whether plaintiffs could now pursue state tort remedies after litigating in bankruptcy court and having federal remedies available | Oberdicks: entitled to state Dragonetti relief despite having litigated in federal forum | Trizec: permitting state action would allow forum-shopping and duplicate remedies contrary to Stone Crushed policy | Held: Plaintiffs are precluded from duplicative state remedy; federal scheme provides equivalent, exclusive protections |
| Whether other federal defenses (e.g., Barton doctrine) required resolution | Oberdicks: argued various procedural defenses/requirements may bar suit | Trizec: raised Barton doctrine and other federal defenses | Held: Court based reversal on preemption alone and did not resolve remaining defenses; preemption dispositive |
Key Cases Cited
- Stone Crushed Partnership v. Kassab Archbold Jackson & O’Brien, 908 A.2d 875 (Pa. 2006) (Bankruptcy Code and federal rules preempt state wrongful-use or abuse-of-process claims grounded in bankruptcy proceedings)
- Trizechahn Gateway LLC v. Titus, 976 A.2d 474 (Pa. 2009) (affirming landlord judgment referenced in factual background)
- Werner v. Plater-Zyberk, 799 A.2d 776 (Pa. Super. 2002) (discusses federal exclusivity over bankruptcy-process remedies and preclusion of state-law remedies for abuse of bankruptcy proceedings)
- In re Miller, 730 F.3d 198 (3d Cir. 2013) (discusses application of Federal Rule 9011 in bankruptcy context as protection against frivolous filings)