579 F. App'x 480
6th Cir.2014Background
- Robert and Beth Underhill filed Chapter 7 on January 6, 2010 and listed a 100% ownership interest in Golf Chic Boutique, LLC as an asset.
- Bankruptcy case closed after discharge in mid-2010; Golf Chic later lost its supplier relationship in September 2010 and ceased operations.
- Golf Chic sued Ladies Pro Shop for tortious interference and disparagement in October 2010; the parties settled for $80,000, with part of the funds paid to Beth Underhill.
- Huntington National Bank moved to reopen the Underhills’ bankruptcy to administer the settlement proceeds as estate property, arguing the claim arose from pre-petition misconduct beginning in 2009.
- Bankruptcy Court and the BAP found the claim “sufficiently rooted in the pre-bankruptcy past” (events beginning in 2009) and authorized reopening; the Sixth Circuit majority reversed.
Issues
| Issue | Plaintiff's Argument (Underhills) | Defendant's Argument (Huntington) | Held |
|---|---|---|---|
| Whether Golf Chic’s tort claims are property of the bankruptcy estate under 11 U.S.C. § 541 | Claim arose post-petition because the actionable interference (supplier termination) occurred in Sept. 2010, so proceeds belong to the debtors | The underlying misconduct began in 2009 and the claim was rooted in the pre-petition past, so estate owns the claim | Reversed BAP: claim did not arise pre-petition; absent a pre-petition injury, claim is not estate property |
| Whether pre-petition complaints/monitoring suffice as a pre-petition violation for tortious interference | Pre-petition price complaints were insufficient; no intentional procurement of breach occurred until post-petition | Prior complaints and awareness in 2009 show a continuity of wrongdoing that roots the claim pre-petition | Held for Underhills: mere pre-petition monitoring/complaints did not constitute the requisite pre-petition tortious act or injury |
| Whether Segal-style "sufficiently rooted in the pre-bankruptcy past" test supports treating the claim as estate property | Argues Segal inapplicable because no pre-petition predicates (no injury/damages) existed | Relies on Segal and related authority to treat contingent/unaccrued claims as estate property when tied to pre-petition events | Court distinguished Segal: no analogous pre-petition predicates existed here (unlike tax refunds in Segal) |
| Whether trustee abandoned the claim or the reopening motion was untimely | Trustee effectively abandoned by inaction / motion was untimely | Trustee could not abandon claims not scheduled; reopening motions to administer assets are not time-barred under § 350(b) | Court rejected abandonment and timeliness defenses but held claim nonetheless not estate property because no pre-petition injury |
Key Cases Cited
- Segal v. Rochelle, 382 U.S. 375 (U.S. 1966) (establishes the “sufficiently rooted in the pre‑bankruptcy past” test)
- Tyler v. DH Capital Mgmt., Inc., 736 F.3d 455 (6th Cir. 2013) (discusses when causes of action become estate property and that pre‑petition violation is generally required)
- In re Terwilliger’s Catering Plus, Inc., 911 F.2d 1168 (6th Cir. 1990) (federal law governs when state-law causes of action become estate property)
- In re Zingale, 693 F.3d 704 (6th Cir. 2012) (de novo review standard for bankruptcy court conclusions of law)
- In re Witko, 374 F.3d 1040 (11th Cir. 2004) (cause of action that produced no pre‑petition harm belongs to debtor, not estate)
- Fred Siegel Co. v. Arter & Hadden, 85 Ohio St.3d 171 (Ohio 1999) (defines elements of tortious interference with contract under Ohio law)