Sara Rosenberg v. DVI Receivables XVII LLC
835 F.3d 414
| 3rd Cir. | 2016Background
- In 2008 DVI Funding and several DVI Receivables entities filed involuntary bankruptcy petitions against Maury Rosenberg and affiliated companies; those petitions were dismissed by bankruptcy courts.
- Rosenberg recovered fees, costs, and damages under 11 U.S.C. § 303(i) after bench and jury proceedings; punitive and compensatory awards were ultimately reinstated on appeal.
- Rosenberg’s wife, the Rosenberg Trust, and several NMI real estate limited partnerships (the Rosenberg Affiliates)—none of whom were debtors—sued DVI entities, Lyon, Jane Fox, and U.S. Bank in state law for tortious interference, alleging the involuntary petitions caused mortgage defaults and loss of properties and investments.
- Defendants removed/transferred and moved to dismiss, arguing § 303(i) of the Bankruptcy Code preempts state-law claims by non-debtors based on the filing of an involuntary petition; the District Court agreed and dismissed.
- The Third Circuit reviews de novo and holds that § 303(i) does not field-preempt state-law claims by non-debtors arising from the filing of an involuntary bankruptcy petition; it reverses and remands.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 303(i) preempts state-law tort claims by non-debtors for damages caused by filing an involuntary bankruptcy petition | Rosenberg Affiliates: § 303(i) does not displace state-law remedies for non-debtors; they retained tort remedies for harms caused by the petitions | Defendants: § 303(i) (and the Bankruptcy Code) occupies the field and provides the exclusive remedy for harms from involuntary petitions, so state claims are preempted | Court: § 303(i) does not manifest clear and manifest congressional intent to preempt state-law claims by non-debtors; no field preemption; reverse and remand |
| Whether silence in § 303(i) implies Congress intended to bar non-debtor remedies | Plaintiffs: silence does not show intent to deprive non-debtors of remedies; presumption against preemption controls | Defendants: Congress provided remedies for debtors only, so non-debtors cannot circumvent that scheme in state court | Held: Silence insufficient to overcome presumption against preemption; cannot infer exclusivity |
| Whether Ninth Circuit’s In re Miles compels preemption | Plaintiffs: Miles is unpersuasive and in tension with Third Circuit precedent; preemption presumption remains | Defendants: Miles found § 303(i) completely preempts state claims, so this case should follow Miles | Held: Miles not persuasive; Third Circuit declines to follow its preemption analysis |
| Whether court should affirm dismissal on statute-of-limitations ground | Plaintiffs: accrual timing unclear; statute defense not suitable on this record | Defendants: statute of limitations may bar claims | Held: Declines to affirm on that alternate ground because accrual timing unclear; left to district court on remand |
Key Cases Cited
- In re Miles, 430 F.3d 1083 (9th Cir. 2005) (held § 303(i) completely preempted state-law claims by non-debtors)
- Paradise Hotel Corp. v. Bank of Nova Scotia, 842 F.2d 47 (3d Cir. 1988) (§ 303(i) not an exclusive remedy in related context)
- U.S. Express Lines Ltd. v. Higgins, 281 F.3d 383 (3d Cir. 2002) (rejected federal preemption of state abuse-of-process claims arising from federal litigation)
- Wyeth v. Levine, 555 U.S. 555 (2009) (presumption against preemption; federalism considerations)
- Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984) (Congress unlikely to abolish all remedies for injuries by silence)