645 B.R. 609
S.D. Ind.2022Background
- Vladimir and Angela Mikhov filed Chapter 7 in April 2017 and received a discharge in December 2017; the Government sued them on July 5, 2022 under 26 U.S.C. § 7402 to reduce federal tax assessments (tax years 2008–2014) to judgment.
- The Amended Complaint also seeks a declaration that federal tax liens attach to real property titled in Commercial and Residential Construction Services, LLC (C&R), an entity tied to the Mikhovs’ daughter.
- The Mikhovs filed a "Notice of Filing of Notice of Removal" attempting to remove the district-court action to the Bankruptcy Court under 28 U.S.C. § 1452(a); the Government moved to declare that removal void.
- The Mikhovs separately moved for confirmation (or, alternatively, an order) that the case be referred to the Bankruptcy Court under the district’s Local Rule 83-8, asserting the dispute involves dischargeability.
- The Government argued the suit arises under Title 26 (tax law), not Title 11, so §1452 removal and automatic referral to bankruptcy court are improper; the district court agreed, declared the removal void, and denied referral, retaining the case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a party may remove a district-court action to the district's Bankruptcy Court under 28 U.S.C. § 1452(a) | §1452 permits removal only to the district court where the action is pending (not to the bankruptcy court of the same district); removal to bankruptcy court from district court is a nullity. | §1452 authorizes removal to the bankruptcy court; their Notice of Removal to the Bankruptcy Court is proper. | Removal to the Bankruptcy Court was void; §1452 does not authorize removal from a district court to its bankruptcy court. |
| Whether Local Rule 83-8 automatically referred this tax action to the Bankruptcy Court | The action arises under Title 26, not Title 11, so automatic referral does not apply. | Local Rule 83-8 automatically refers all proceedings that arise under or relate to Title 11; this matter involves dischargeability and thus should be referred. | Denied referral: the suit arises under Title 26; a dischargeability defense does not convert it into a Title 11 proceeding for automatic referral. |
| Whether the dispute "arises under" or "arises in" Title 11 so the Bankruptcy Court has core-jurisdiction | Reducing tax assessments to judgment is a Title 26 action; bankruptcy defenses do not create Title 11 jurisdiction; Bankruptcy Court likely lacks jurisdiction over non-debtor property claims (C&R). | The dispute implicates dischargeability under § 523 and thus is a core bankruptcy proceeding that "arises in" or "arises under" Title 11. | The court held the case does not arise under or in Title 11 for purposes of referral; district court will retain and adjudicate the matter. |
Key Cases Cited
- Celotex Corp. v. Edwards, 514 U.S. 300 (1995) (bankruptcy-court jurisdiction is statutory and limited).
- Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982) (constitutional limits on non–Article III adjudication).
- Stern v. Marshall, 564 U.S. 462 (2011) (limits on bankruptcy courts’ authority to finally adjudicate certain claims).
- In re Ortiz, 665 F.3d 906 (7th Cir. 2011) (distinguishing proceedings that arise under, arise in, or are related to Title 11).
- In re Repository Tech., Inc., 601 F.3d 710 (7th Cir. 2010) (defining "arise under" and "arise in" categories).
- Grausz v. Englander, 321 F.3d 467 (4th Cir. 2003) ("arising in" jurisdiction applies where claim would have no existence outside the bankruptcy).
- Zerand-Bernal Grp., Inc. v. Cox, 23 F.3d 159 (7th Cir. 1994) ("arising in" jurisdiction concerns administration of the bankruptcy estate).