Case Information
UNITED STATES BANKRUPTCY COURT DISTRICT OF IDAHO ______________________________________________________ Re DARICE JONES, Bankruptcy Case No. ‐ ‐ JDP
Debtor. ______________________________________________________ DARICE JONES behalf of
herself THE ESTATE OF
DARICE JONES,
Plaintiff, vs. Adv. Proceeding No. ‐ 6050 STATE FARM MUTUAL AUTO
INSURANCE COMPANY,
Defendant. ______________________________________________________ MEMORANDUM OF DECISION RE: DEFENDANT’S MOTION TO DISMISS ______________________________________________________ Appearances:
Kurt Holzer, HOLZER EDWARDS, CHARTERED, Boise, Idaho, Attorneys for Plaintiff.
Julianne S. Hall, GJORDING & FOUSER, Boise, Idaho, Attorneys for Defendant.
Introduction In adversary proceeding, State Farm Mutual Auto Insurance Company filed a “Motion Dismiss, or, the Alternative, Motion Requesting Abstention Notice Removal the U.S. District Court for the State Idaho.” Adv. Docket No. 8. motion was briefed by parties, after which conducted hearing November 18, took issues raised motion under advisement. This decision resolves motion. [2]
Facts Unless otherwise noted, following facts are dispute. On March 3, 2004, Plaintiff Darice Jones was involved in an automobile accident with Goldie L. Patterson. Ms. Patterson was at fault. Plaintiff retained counsel, February 28, 2006, sued Ms. Patterson in state court. Ms. Patterson’s policy of insurance, issued her by Allstate Insurance Company (“Allstate”), limited Allstate’s liability Ms. Patterson’s negligence $25,000 per incident. Plaintiff incurred approximately $60,000 in medical expenses as result injuries suffered accident. was insured policy issued Defendant (“Policy”). Adv. Docket No. 26, Ex. 9. Policy included “underinsured” motorist (“UIM”) coverage amount $25,000, well as medical payments benefits amount $10,000. Adv. Docket Nos. 11, Ex. A, 26, Ex. 3.
On March 27, 2007, Plaintiff’s counsel submitted Defendant’s representative several documents to support her claim for UIM benefits, including copies of discovery responses from the state court action, medical records and bills. [4] Adv. Docket No. 11, Ex. D. filed voluntary chapter 7 [5] petition August
2, 2007. BK Docket No. 1. On November 14, 2007, entered an order approving employment of Plaintiff’s state court counsel, Mr. Holzer, Gary L. Rainsdon, chapter 7 trustee, serve his special counsel pursue recovery of Plaintiff’s personal injury claim. BK Docket No. 26.
Although record does not indicate specific date, at some point, Defendant paid $10,000 directly Plaintiff’s medical providers. Adv. Docket No. 26, Ex. 8. That amount was eventually reimbursed to Defendant by Allstate.
On June 11, 2008, Allstate offered pay amounts remaining Patterson policy’s liability coverage Plaintiff. BK Docket No. 33, Ex. A. attorney informed Defendant about Allstate’s settlement offer letter dated June 12, 2008. Adv. Docket Nos. 11, Ex. G, and 26, Ex. 4. In letter, counsel sought Defendant’s permission to accept Allstate’s policy limits offer. letter demanded that Defendant pay Plaintiff $10,000 medical payments, as well as the $25,000 UIM benefits provided Policy. On September 2, 2008, approved proposal as compromise between Plaintiff, trustee, Allstate. BK Docket No. 43.
When did make payment Plaintiff demanded, July Plaintiff, acting individually on behalf trustee estate, commenced against Defendant. Adv. Docket No. complaint, sought a judgment against Defendant for $25,000 UIM benefits, $10,000 medical benefits, together with prejudgment interest, attorney fees and costs as provided Idaho Code ‐ 1839. Id .
On July 25, 2008, forty ‐ two days after June 12, letter, and ten days after this adversary proceeding was commenced, Defendant paid Plaintiff $35,000. Adv. Docket No. 26, Ex. 7.
On August 4, 2008, filed an amended complaint seeking only prejudgment interest amount $483.42, well as attorney fees costs amount $11,827.80. Adv. Docket No. 5. Defendant responded September with instant motion dismiss. Adv. Docket No.
Analysis Disposition Defendant’s Motion Dismiss asserts alternate grounds. Initially, Defendant moves dismissal adversary Federal Rule Civil Procedure 12(b)(1) because, argues, Court lacks subject matter jurisdiction over this action. the alternative, and assuming jurisdiction, Defendant asks Court to abstain from adjudicating dispute, instead “remand” action to state court. Finally, alternatively, contends action should “removed” United States District Court.
As discussed below, none of Defendant’s arguments have merit. A. Legal Standard Applicable Motion Dismiss.
A defendant civil may move dismiss complaint for
lack subject matter jurisdiction pursuant Federal Rule Civil
Procedure 12(b)(1) one two ways.
Plum Creek Timber Co., Inc. v. Trout
Unlimited
,
Construing Defendant’s motion fairly, the concludes it mounts a facial attack invocation the bankruptcy court’s subject matter jurisdiction. To resolve such challenge jurisdiction Rule 12(b)(1), the trial court should apply the same standard utilized resolving Rule 12(b)(6) motions, which requires the court “consider the allegations the complaint true construe them in light most favorable plaintiff.” Id . at ‐ (citing Love v. United States , F.2d (9th Cir. 1989)).
B. Determining Subject Matter Jurisdiction.
While question whether court jurisdiction over particular always fact ‐ dependent, legal framework within which those facts are examined well ‐ established.
Bankruptcy courts are legislative courts, created by Congress under
Article I Constitution administer federal Bankruptcy Code,
found title United States Code. connection with sweeping revisions laws made Congress courts’ was significantly expanded, measure the
Supreme found be constitutionally flawed few years later.
Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.
,
To address development, Congress again revised bankruptcy court jurisdiction, time conferring jurisdiction for bankruptcy cases related matters upon district courts. U.S.C. § 1334. At same time, Congress designated bankruptcy courts as jurisdictional “units” those district courts, U.S.C. § Under this new system, district courts were authorized refer all bankruptcy cases matters courts. U.S.C. § 157(a). Referred cases matters could be withdrawn district court appropriate cases, U.S.C. § 157(d), they could stayed if abstention was justified. 1334(c).
Because constitutional issues targeted Marathon , Congress apparently recognized courts, Article I courts, could render final judgments all disputes falling within broad it had granted district courts. To avoid another Marathon , revised jurisdictional statutes provided while bankruptcy courts could hear finally determine certain matters, for others, the courts would instead be required submit a report recommendation the district courts for final action, which recommendation district courts would review de novo. 28 U.S.C. § 157(b).
More particularly, under revised jurisdictional scheme, Congress bestowed district courts over ʺ all civil proceedings arising under title 11, or arising or related cases under title 11. ʺ 28 1334(b). turn, 28 U.S.C. § 157(a) provides district court “may provide any or all cases under title 11 any or all proceedings arising title or arising or related case under title shall referred judges district.” The district court District Idaho has made such reference. See General Order No. Thus, determine whether court may enter final judgment order resolving dispute, must determine whether arises under, arises in, or related case under title
C. Subject Matter Jurisdiction Over this Proceeding Because it “Related To” Bankruptcy Case.
In proceeding, sues Defendant, her insurer, recover interest, attorneys fees costs. Obviously, such an action does not “arise under” title terminology in jurisdictional statute which essentially refers cases. re Vylene Enters., Inc. , 968 F.2d (9th Cir. 1992) (“Bankruptcy courts may enter final orders judgments cases title (the Bankruptcy Code) core proceedings.”)
This dispute does not, special parlance bankruptcy jurisdiction, “arise in” case.
Proceedings ʺ arising ʺ cases are generally referred as ʺ core ʺ proceedings, and essentially are proceedings would exist outside bankruptcy, such ʺ matters concerning administration estate, ʺ ʺ orders turn over property estate, ʺ and ʺ proceedings determine, avoid, recover preferences. ʺ
Montana v. Goldin (In re Pegasus Gold Corp.)
,
However, 1334(b), district court, this court its reference, vested with subject matter over those proceedings are ʺ related ʺ case. Pegasus Gold Corp. , F.3d at Ninth Circuit adopted so ‐ called ʺ Pacor test ʺ determining scope ʺ related ʺ jurisdiction. Fietz v. Great W. Sav. (In re Fietz) , F.2d (9th Cir. 1988). Under analytical standard, must ask whether: outcome proceeding could conceivably have
any effect estate being administered in . Thus, need not necessarily against debtor against the debtor ʹ s property. An related to if outcome could alter debtor ʹ s rights, liabilities, options, or freedom action (either positively or negatively) which in any way impacts upon handling and administration bankrupt estate.
Id
. (quoting
Pacor, Inc. v. Higgins
,
Defendant insists lacks subject matter over Pacor test because Plaintiff’s claims against are personal injury tort. further argues that because cause did arise until July, after Plaintiff received a discharge, any recovery would not property the estate. will consider these contentions, taking as true all allegations in Plaintiff’s amended complaint, construing the facts in a light most favorable Plaintiff.
As noted above, test whether action is sufficiently “related to” a case establish this Court’s subject matter is “whether outcome proceeding could conceivably have any effect estate being administered bankruptcy.” Fietz , 852 F.2d at Put another way, although a “related to” action need not be targeted against debtor, it is clear it must somehow affect the property administration estate. Balboa Improvements, Ltd. , B.R. at (citing Pacor , F.2d at 994). simply incorrect asserting this adversary is, at bottom, personal injury tort claim. While tort
apparently occurred connection with auto accident which Plaintiff was injured, it was Patterson (not Defendant) who committed it, she is party action. Instead, an Idaho law recover sums due her arising out of her contract of insurance with Defendant. If Plaintiff succeeds this adversary proceeding, and recovers prejudgment interest attorneys fees she seeks from Defendant, that recovery would constitute property of Plaintiff’s bankruptcy estate. Indeed, Plaintiff never disputed estate’s entitlement any recovery. Clearly, then, because any recovery by Plaintiff from Defendant will available distribution her bankruptcy case creditors, outcome bears significantly administration Plaintiff’s estate. other words, this obviously “related to” case for purposes vesting subject matter district court.
Defendant argues Plaintiff’s claims against Defendant did not arise until July, when allegedly failed timely pay her policy claim. According Defendant, because this, since by time had received discharge, any recovery action would constitute property estate. Court disagrees.
Section 541(a) provides broad definition of property included debtor’s estate. It provides, in pertinent part: Such estate comprised of all of following property, wherever located whomever held:
(1) Except as provided [subsections not applicable here], all legal equitable interests of debtor property as of the commencement case.” 541(a)(1). Section 541(a)(6) provides proceeds property estate also constitute property estate. On August commenced her bankruptcy case by filing petition, result, estate came into existence. Plaintiff’s accident with Ms. Patterson had occurred over three years earlier. On date she filed for bankruptcy, then, Plaintiff’s claim damages against Ms. Patterson had accrued constituted property her estate. addition, contingent claim Policy recover
benefits from Defendant, event Ms. Patterson’s insurance coverage
eventually proved inadequate, had arisen. While determining the
extent Defendant’s obligations under Policy may have depended
upon subsequent events, such extent Plaintiff’s medical costs and
other recoverable damages, there can no doubt Defendant’s
potential liability was already play. As such, while Plaintiff’s claim
against Defendant under Policy may have been unliquidated, her
contractual right recover from Defendant was clearly rooted the
prebankruptcy past.
Segal v. Rochelle
,
above, judges may only hear, determine enter final judgments “arising under” “arising in” proceedings referred to them district courts. 157(b)(1). These actions are denominated “core proceedings” by statutes. Id. jurisdictional provisions contain a long, nonexclusive list of examples of core proceedings. U.S.C. § 157(b)(2)(A) ‐ (P).
By contrast, 157(c) provides that: (1) A bankruptcy judge may hear a proceeding a core proceeding but otherwise related to a case under title such proceeding, judge shall submit proposed findings fact and conclusions of law to district court, and any final order or judgment shall entered district judge after considering judge’s proposed findings and conclusions and after reviewing de novo those matters to which any party timely specifically objected.
(2) Notwithstanding provisions paragraph (1) this subsection, district court, with the consent all parties proceeding, may refer related case under title 11 judge hear determine and enter appropriate orders judgments, subject review section title. As explained above, because asserts state law claim, is a “related to” action, this proceeding non ‐ core. [9] While under 28 U.S.C. § 157(b)(1), a judge may “hear” this proceeding, because Defendant has consented entry final judgment judge, this Court must submit its recommendations for entry any final orders or judgments district court.
D. Court Declines Abstain/Remand.
If Court determines it decide issues raised in this action, Defendant requests that Court decline do so, and instead abstain in interests comity justice. concedes mandatory abstention required under U.S.C. § 1334(c)(2) does not apply in action, but requests exercise its discretion to abstain authorized U.S.C. § 1334(c)(1). That statute provides:
Except with respect case chapter of title nothing section prevents district court interest justice, or interest of comity with State courts or respect State law, from abstaining from hearing particular proceeding arising under title or arising or related to case under title 11. U.S.C. § 1334(c)(1). Ninth Circuit identified several factors the Court to
consider deciding whether abstain § 1334(c)(1):
(1) the effect or lack thereof the efficient administration of the estate if recommends abstention;
(2) the extent which state law issues predominate over bankruptcy issues;
(3) the difficulty or unsettled nature of the applicable law;
(4) the presence of related proceeding commenced in state court or other nonbankruptcy court; (5) jurisdictional basis, if any, other than U.S.C. 1334; (6) degree of relatedness remoteness of the proceeding main bankruptcy case; (7) substance rather than form an asserted “core” proceeding;
(8) feasibility severing state law claims from core matters allow judgments entered in state court with enforcement left bankruptcy court;
(9) burden [the court ʹ s] docket; (10) likelihood commencement the court involves forum shopping one parties; (11) the existence right a jury trial; (12) the presence in the nondebtor parties.
Christensen v. Tucson Estates, Inc. (In re Tucson Estates, Inc.)
,
Admittedly, there are factors present here weighing favor of abstention: determination issues involves only state law; there a nondebtor party; perhaps most importantly, jury trial has been requested.
Despite these considerations, Court believes abstention not appropriate here. remaining issues appear be questions law, not fact, and turn upon legal consequences the manner in which Plaintiff submitted proof loss Defendant. What did in this regard, when she did it, are in dispute; the question for resolution is merely when actions satisfied her obligations Policy state law, thereby triggering Defendant’s duty pay her. this sense, Court doubts need for a jury trial.
As compared abstaining, Court believes parties’ rights and liabilities may be resolved more efficiently if this action continues in the court. If Court abstains, a new action must be commenced state court. Based upon its experience, Court confident it can move conclusion more swiftly than a state court.
The concerned that, given relatively small amounts controversy, Defendant’s request for abstention may motivated a desire for what considers more favorable forum, perhaps simply means delay resolution merits. Prolongation the action only serves cause both parties to expend more time more money in litigation costs.
On balance, concludes factors weigh favor of retaining adversary proceeding court, not abstaining.
E. This Action May Not be ”Removed” District Court. Finally, requests this adversary be “removed” district court. It cites U.S.C. § 1452(a) support its request, which provides:
A party may remove any claim or cause action civil action [other than certain types of actions applicable here] district court for district where such civil action pending, if such district court jurisdiction such claim cause action section this title. U.S.C. § 1452(a). As discussed above, over already vested in district court: “the judges regular active service shall constitute unit district court known court district.” Therefore, proceeding cannot be “removed” to district court 28 U.S.C. § 1452(a). [12]
Conclusion In summary, Court concludes it subject matter over this proceeding because it related to case. exercise its discretion, Court declines abstain. Finally, action cannot be “removed” to district court.
Defendant’s motion dismiss for alternative relief will be denied by separate order. [13]
///
///
Dated: February 2009
Honorable Jim D. Pappas
United States Bankruptcy Judge
Notes
[1] For clarity, references docket are denoted “Adv. Docket” references case docket as “BK Docket”.
[2] addition, Darice Jones filed motion summary judgment, which was taken advisement at hearing. Docket No. Resolution motion addressed separate Memorandum.
[3] Although disputes fact, see Adv. Docket No. 24, ¶¶ 11, 14, its agent stated letter Plaintiff’s counsel “we believe value Ms. Jones’ claim at least $60,000.” Adv. Docket Nos. Ex. B Ex. Moreover, precise amount damages material issues.
[4] For unexplained reasons, Defendant disputes deeming submission a “primary proof of loss”. Adv. Docket No. 24, ¶¶ 9 ‐ 10. his letter Defendant accompanying documents, counsel states “[t]hese are primary proof of loss Ms. Jones.” Adv. Docket Nos. 26, Ex. 10, 11, Ex. D. This characterization was reiterated July 1, letter Defendant. Adv. Docket No. Ex. record is void of any evidence disputed that submission constituted primary proof loss at time. At any rate, whether term “primary proof loss” disputed not is immaterial here. As will discussed later, term “proof loss” one found statute, but is necessarily found within four corners an insurance policy.
[5] Unless otherwise indicated, all chapter section references are the Bankruptcy Code, §§ – all rule references are the Federal Rules Bankruptcy Procedure, Rules – 9037.
[6] Fed. R. Civ. P. 12(b)(1) applicable proceedings pursuant Rule 7012(b).
[7] General Order been amended several times; most recent amendment via General Order dated April 1995.
[8] While it unclear from its brief, Defendant’s argument is likely premised upon related statutory requirement personal injury tort claims tried district court which case pending, which claim arose. 157(b)(5).
[9] Bankruptcy judges may determine whether core non ‐ core. 157(b)(3).
[10] Under 157(e), if right jury trial applies an action, judge may conduct trial if parties expressly consent. While Court not solicited parties’ consent do so, light of Defendant’s refusal allow judge enter final judgment in action, presumes such consent would forthcoming.
[11] Amended Complaint seeks $11,827.80 attorneys fees $483.42 prejudgment interest total $12,311.22.
[12] As opposed “removal”, by its somewhat imprecise pleading, Defendant’s counsel was perhaps seeking an order withdrawing reference of from district court court. Such relief, however, can only be obtained from district court. 28 157(d); Rule 5011(a) (providing “A motion withdrawal a case shall heard a district judge.”).
[13] An order denying motion dismiss not final order, therefore, need make recommendation district court concerning such disposition Defendant’s motion. Catlin v. U.S. , U.S. 229, 233 (1945); Benny v. England (In re Benny) , F.2d (9th Cir. 1986); Goralnick v. Bromberg (In re Goralnick) , B.R. n.3 (9th Cir. BAP 1987).