553 B.R. 522
Bankr. W.D. Pa.2016Background
- Brent and Elizabeth Harber filed Chapter 7 on Jan 14, 2014; Schedule B disclosed a contingent, unliquidated claim against DePuy for the wife’s hip implant (valued $0.00) and noted the hip was "operating satisfactorily, no damages as yet."
- Trustee moved to close the case and except the DePuy claim from abandonment; court entered default order closing the case and excepting the potential DePuy claim, directing notice to Trustee if counsel retained or recovery offered.
- Prepetition: Mrs. Harber had hip replacements years earlier and received a hospital letter warning some implants had problems; she was listed in MDL litigation and initially participated but voluntarily dismissed without court/Trustee approval shortly before she discovered metal blood contamination.
- Mrs. Harber first learned of an actual implant injury on Nov 26, 2014 and underwent revision surgery Jan 15, 2015 — both events occurred after the bankruptcy petition and after the case was closed.
- Trustee reopened the case upon learning of a possible $142,000 settlement and filed a motion to compel turnover of any DePuy proceeds, asserting the claim/proceeds are property of the estate; Harbers contend the claim accrued postpetition and is not estate property.
Issues
| Issue | Plaintiff's Argument (Trustee) | Defendant's Argument (Harber) | Held |
|---|---|---|---|
| Whether Mrs. Harber’s DePuy personal-injury claim is property of the bankruptcy estate under §541(a) | Claim is "sufficiently rooted" in prepetition events (implant and notice) so proceeds are estate property | Claim did not accrue until Nov 26, 2014 (first manifest injury); thus it is postpetition property of Mrs. Harber, not the estate | The claim accrued postpetition and is not property of the estate; turnover motion denied |
| Proper accrual test: state-law accrual vs. broad bankruptcy "claim" test | Reliance on Third Circuit precedent (Grossman) and Segal principle to include after-acquired claims linked to prepetition conduct | Use Pennsylvania accrual law: claim accrues when injury and damages are objectively ascertainable; here injury discovered postpetition | Court applies Pennsylvania accrual rule and rejects treating Grossman §101(5) analysis as determinative for §541(a); accrual postpetition controls |
| Application of Segal’s "sufficiently rooted in the pre-bankruptcy past" test | Segal supports including after-acquired assets if rooted in prepetition past | Even if some prepetition roots exist, the claim must be "sufficiently" rooted; here critical elements (injury/damages) arose after filing | Court adopts a blended approach but finds the claim not sufficiently rooted prepetition, so Segal does not change outcome |
| Whether judicial estoppel bars Harbers from claiming the asset is excluded after they disclosed it on Schedule B and did not oppose Trustee’s abandonment motion | Trustee argues disclosure then non-opposition precludes Harbers from asserting claim is non-estate property | Harbers disclosed the claim with qualification ("no damages as yet") and did not persuade the court; non-opposition was not a contradictory assertion made in bad faith | Judicial estoppel does not apply: disclosure was qualified and not a bad-faith, inconsistent position; Harbers may pursue the claim personally |
Key Cases Cited
- Segal v. Rochelle, 382 U.S. 375 (U.S. 1966) (after-acquired assets can be estate property if "sufficiently rooted" in prepetition past)
- Butner v. United States, 440 U.S. 48 (U.S. 1979) (state law governs property rights absent federal rule)
- Barnhill v. Johnson, 503 U.S. 393 (U.S. 1992) (bankruptcy timing principles; cited re: property/claim distinctions)
- In re Grossman, 607 F.3d 114 (3d Cir. 2010) (en banc) (interpreting §101(5) "claim" for exposure-based torts; court distinguishes its §101(5) analysis from §541(a) estate-property inquiry)
- Focht v. Focht, 32 A.3d 668 (Pa. 2011) (Pennsylvania accrual rule: a cause of action accrues when plaintiff could first maintain suit; latent-injury accrual upon discovery)