649 B.R. 885
Bankr. E.D. Mo.2023Background
- Debtors Robert and Kristina Shoults filed a joint Chapter 7 petition and later disclosed an unliquidated personal-injury claim against 3M discovered post‑petition.
- The Shoults amended Schedule C to claim an "unlimited" exemption in that unliquidated claim under Missouri common law and Mo. Rev. Stat. § 513.427.
- Chapter 7 Trustee Tracy Brown objected, arguing § 513.427 is an opt‑out of federal exemptions and does not itself create new exemptions; the Trustee also challenged the vagueness of a generic "Missouri common law" claim.
- Debtors responded asserting the Supreme Court’s decision in Rodriguez v. FDIC undermines the Eighth Circuit’s holdings in In re Benn and Abdul‑Rahim, which the Trustee relied upon.
- The Court held a hearing, received supplemental briefs (including a joint brief addressing attachment statutes), and sustained the Trustee’s objection: the unliquidated personal‑injury claim is not exempt under § 513.427.
Issues
| Issue | Shoults' Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether Mo. Rev. Stat. § 513.427 allows a Missouri debtor to exempt an unliquidated, contingent personal‑injury claim in bankruptcy | § 513.427 incorporates Missouri common‑law exemptions; Missouri common law exempts such claims from attachment/execution, so they are exempt in bankruptcy | § 513.427 is an opt‑out of federal § 522(d) and only incorporates state statutes that expressly exempt property from attachment/execution; Missouri has no statute expressly exempting unliquidated contingent PI claims | Sustained Trustee: § 513.427 does not create a new exemption for such claims; exemption disallowed |
| Whether Eighth Circuit precedent (Benn and Abdul‑Rahim) was abrogated by Rodriguez or otherwise inconsistent with Erie/Butner | Rodriguez (and Erie/Butner principles) invalidates the Eighth Circuit’s federal‑common‑law approach in Benn/Abdul‑Rahim, so those cases should not control | Benn and Abdul‑Rahim are statutory interpretations, not improper federal common lawmaking, and remain binding on this Court | Rejected Debtors’ argument: Benn and Abdul‑Rahim remain controlling; Rodriguez does not disturb them |
| Whether Missouri law permits attachment of unliquidated, contingent causes of action (relevant because § 513.427 exempts only property immune from both attachment and execution) | Attachment statute(s) do not apply to these particular claims (Debtors argued narrow reading) | Missouri statutes and rules (e.g., Mo. Rev. Stat. § 521.020, Mo. R. Civ. P. 90.01) permit attachment/garnishment of choses in action, including tort claims | Court found Missouri law permits attachment of such causes of action; therefore they are not exempt under § 513.427 |
Key Cases Cited
- Benn v. Cole (In re Benn), 491 F.3d 811 (8th Cir. 2007) (interprets § 513.427 as an opt‑out that does not itself create new exemptions)
- Abdul‑Rahim v. LaBarge (In re Abdul‑Rahim), 720 F.3d 710 (8th Cir. 2013) (extends Benn: Missouri law provides no exemption for contingent, unliquidated personal‑injury claims)
- Rodriguez v. F.D.I.C., 140 S. Ct. 713 (2020) (limits federal common law; courts should look to state law absent a uniquely federal interest)
- Butner v. United States, 440 U.S. 48 (1979) (federal law adopts state law property rules in bankruptcy unless federal interest requires otherwise)
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938) (federal courts apply state substantive law in appropriate contexts)