NOTE: Criminal Resource Manual articles 185 through 197 are
adapted from
the September 2001 monograph "Bankruptcy Jurisdiction and Sovereign
Immunity"
prepared by:
J. Christopher Kohn
Director
Commercial Litigation Branch
Civil Division
P.O. Box 875
Ben Franklin Station
Washington, D.C. 20044
Telephone: (202) 514-7450
John T. Stemplewicz
Senior Trial Counsel
Commercial Litigation Branch
Civil Division
P.O. Box 875
Ben Franklin Station
Washington, D.C. 20044
Telephone: (202) 307-1104
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1. Cases
The district courts have original and exclusive jurisdiction over all
bankruptcy "cases." 28 U.S.C. § 1334(a).
2. Proceedings.
The district courts have original but not exclusive jurisdiction over all
"civil proceedings" arising under the Code, or arising in or related to a
bankruptcy case. 28 U.S.C. § 1334(b).
a. "arising under" the Code: proceeding seeking relief affordable
only under a substantive Bankruptcy Code provision (e.g., a
preference action under § 547). Bethlahmy, IRA v.
Kuhlman (In re ACI-HDT Supply Co.), 205 B.R. 231 (B.A.P.
9th Cir. 1997); Ehrlich v. Am. Express Travel Related Servs.
Co. (In re Guilmette), 202 B.R. 9 (Bankr. N.D.N.Y. 1996);
Artra Group, Inc. v. Salomon Bros. Holding Co. (In re
Emerald Acquisition Corp.), 170 B.R. 632, 640 (Bankr. N.D.
Ill. 1994).
b. "arising in" a case under the Code: proceeding involving the
administration and structuring of the estate (e.g., attorney
fee application; order confirming plan; borrowing order) that
would have no existence but for the bankruptcy case. See
In re Wood, 825 F.2d 90, 97 (5th Cir. 1987); Dall v.
Bank One, Chicago (In re Dally), 202 B.R. 724 (Bankr. N.D.
Ill. 1996).
c. "related to" a case under the Code: most courts hold that a
case is related to bankruptcy if "the outcome of that
proceeding could conceivably have any effect on the estate
being administered in bankruptcy. . . . An action is
related to bankruptcy if the outcome could alter the debtor's
rights, liabilities, options, or freedom of action (either
positively or negatively) and which in any way impacts upon the
handling and administration of the bankrupt estate." Pacor,
Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984) (emphasis
in original); accord New Horizon of New York LLC v.
Jacobs, 231 F.3d 143 (4th Cir. 2000), cert. denied,
121 S. Ct. 2192 (2001); In re Munford, Inc., 97 F.3d 449
(11th Cir. 1996); Specialty Mills, Inc. v. Citizens State
Bank, 51 F.3d 770, 774 (8th Cir. 1995); Walker v. Cadle
Co. (In re Walker), 51 F.3d 562, 568-69 (5th Cir. 1995);
Mich. Employment Sec. Comm'n v. Wolverine Radio Co. (In re
Wolverine Radio Co.), 930 F.2d 1132 (6th Cir. 1991);
Robinson v. Mich. Consol. Gas Co., 918 F.2d 579, 583-
584 (6th Cir. 1990); Gardner v. United States (In re
Gardner), 913 F.2d 1515, 1518 (10th Cir. 1990); Miller
v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784,
788 and n.19 (11th Cir. 1990); Fietz v. Great W. Sav. (In re
Fietz), 852 F.2d 455, 457 (9th Cir. 1988); A.H. Robins
Co. v. Piccinin, 788 F.2d 994, 1002 n.11 (4th Cir. 1986);
see also In re G.S.F. Corp., 938 F.2d 1467, 1475
(1st Cir. 1991) (recognizing Pacor as the "usual
articulation" of the related to jurisdiction without expressly
adopting it for all cases).
The Second and Seventh Circuits have adopted slightly different
tests. See Pettibone v. Easley, 935 F.2d 120,
123 (7th Cir. 1991); Elscint, Inc. v. First Wis. Fin. Corp.
(In re Xonics, Inc.), 813 F.2d 127, 131 (7th Cir. 1987)
(both requiring that resolution of the case "affects the amount
of property available for distribution or the allocation of
property among the creditors"); Turner v. Ermiger (In re
Turner), 724 F.2d 338 (2d Cir. 1983) (litigation must have
a "significant connection" with bankruptcy proceeding).
Compare Boco Enters., Inc. v. Saastopankkien
Keskus-Osake-Pankki (In re Boco Enters.), 204 B.R. 407
(Bankr. S.D.N.Y. 1997) (action by creditor against guarantor of
debtor's obligation was within "related to" bankruptcy
jurisdiction) with Freeland v. HPA Asset, L.L.C. (In
re White Trailer Corp.), 222 B.R. 322 (Bankr. N.D. Ind.
1998) ("related to" jurisdiction requires direct effect upon
either assets of the estate or their distribution to creditors;
nexus between dispute and bankruptcy case is insufficient),
and City of Joliet v. Bank One, Chicago (In re
Green), 210 B.R. 556 (Bankr. N.D. Ill. 1997) (court lacks
"related to" jurisdiction over city's action against bank even
though chapter 11 debtor was guarantor of letter of credit bank
allegedly wrongfully dishonored).
In Celotex Corp. v. Edwards, 514 U.S. 300 (1995), after
noting the two seemingly different approaches found in the
above-cited cases decided by the courts of appeals, the Court
concluded that "whatever test is used, these cases make clear
that bankruptcy courts have no jurisdiction over proceedings
that have no effect on the debtor." Id. at 308 n.6.
However, the Court further opined that the jurisdiction of a
bankruptcy court "may extend more broadly" in a chapter 11 case
than in a chapter 7 case, id. at 310, and held that an
injunction proceeding, which admittedly did not directly
involve the debtor, was "related to" the bankruptcy case and,
thus, within the bankruptcy court's jurisdiction where the
injunction was found necessary to prevent "a direct and
substantial adverse effect on [the debtor's] ability to undergo
a successful reorganization." Id.; see
Spartan Mills v. Bank of Am. Ill., 112 F.3d 1251 (4th
Cir. 1997) (court had "related to" jurisdiction to resolve lien
dispute between two creditors where it was essential to
reorganization [one creditor, a bank, would not finance
reorganization without resolution of its lien position on the
property]). But see In re Fedpak Sys., Inc., 80
F.3d 207 (7th Cir. 1996) (rejecting Pacor's "conceivable
effect" standard as overly broad despite Celotex, noting
that Supreme Court appears to favor but has not mandated such
an approach). A majority of courts continue to apply the
Pacor standard. See, e.g., IRS v. Kaplan (In
re Kaplan), 104 F.3d 589 (3d Cir. 1997) (individual debtors
being "responsible persons" brought corporation's tax liability
dispute under bankruptcy jurisdiction); In re Munford,
Inc., 97 F.3d 449 (11th Cir. 1996); Bergstrom v. Dalkon
Shield Claimants Trust (In re A.H. Robins Co.), 86 F.3d 364
(4th Cir. 1996).
Examples of courts rejecting "related to" jurisdiction: In
re Rickel Home Ctrs., Inc., 209 F.3d 291 (3d Cir.) (suits
between purchasers of property from the bankruptcy estate and
third parties are not within court's jurisdiction), cert.
denied, 531 U.S. 873 (2000); Presidential Gardens
Assocs. v. United States ex rel. Sec'y of HUD, 175 F.3d 132
(2d Cir. 1999) (refusal to reopen case was proper because
dispute was between equity holders and HUD, not between debtors
and HUD); Black v. United States Postal Serv. (In re
Heath), 115 F.3d 521 (7th Cir. 1997) (trustee's action to
recover payment for debtor that would not benefit estate);
Torkelson v. Maggio (In re Guild & Gallery Plus, Inc.),
72 F.3d 1171 (3d Cir. 1996) (action against trustee in
individual capacity for value of goods owned by nondebtor
misplaced during administration of bankruptcy case); United
States v. Zellers (In re CNS, Inc.), 255 B.R. 198 (N.D.
Ohio 2000) (no "related to" jurisdiction to determine
non-debtor, alleged responsible person's tax liability where
such liability could have no effect on debtor corporation's
bankruptcy estate even if non-debtor's and debtor's liability
might involve common issues of fact); Green v. LifeUSA Ins.
Co., 259 B.R. 295, 299 (N.D. Ill. 2001) (no jurisdiction
over chapter 7 debtor's counterclaims where trustee had
rejected insurance policy and counterclaims would not have
affected estate); In re O'Malley, 252 B.R. 451
(Bankr. N.D. Ill. 1999) (court lacks jurisdiction to consider
claims by debtor's non-filing husband against non-debtors for
fraudulently inducing him to convey property to debtor because
they do not involve administrative matters or substantive
bankruptcy rights and would not affect the amount of property
available for distribution); Stevens v. IRS (In re
Stevens), 210 B.R. 200 (Bankr. M.D. Fla. 1997) (bankruptcy
court lacks jurisdiction to determine tax liability in no-asset
case involving only debtor and the IRS).
d. The question of bankruptcy jurisdiction, i.e., whether a
proceeding is one "arising under," "arising in," "related to,"
or none of the foregoing, is analytically distinct from the
question of the bankruptcy judges' authority to enter final
orders, i.e., whether a proceeding is "core" or "non- core."
[The latter issue is discussed below in section I.B of this
outline.] However, core proceedings are defined in 28 U.S.C.
§ 157(b)(1) as "proceedings arising under title 11, or
arising in a case under title 11." Non-core proceedings are
"otherwise related to a case under title 11." Id.
§ 157(b)(3); see Cont'l Nat'l Bank of Miami v.
Sanchez (In re Toledo), 170 F.3d 1340, 1345 n.6 (11th Cir.
1999); Tate v. NationsBanc Mortgage Corp. (In re Tate),
253 B.R. 653 (Bankr. W.D.N.C. 2000).
e. "Section 1334(b) concerns the allocation of jurisdiction
between bankruptcy courts and other 'courts,' and, of
course, an administrative agency such as the [Federal Reserve]
Board is not a 'court.'" Board of Governors of Fed. Reserve
Sys. v. MCorp Fin., Inc., 502 U.S. 32, 41- 42 (1991)
(emphasis in original); see also FCC v. NextWave
Pers. Communications, Inc. (In re NextWave Pers.
Communications, Inc), 200 F.3d 43, 54 (2d Cir. 1999)
(courts of appeals have exclusive jurisdiction over claims
against FCC in its regulatory capacity; thus, bankruptcy and
district courts lacked jurisdiction to decide whether
regulatory conditions FCC imposed upon debtor to obtain license
created a constructively fraudulent obligation), cert.
denied, 531 U.S. 924 (2000). But see FCC v. GWI
PCS 1, Inc. (In re GWI PCS 1, Inc.), 230 F.3d 788 (5th Cir.
2000) (bankruptcy court has jurisdiction to determine whether
regulatory conditions FCC imposed upon debtor to obtain license
created a constructively fraudulent obligation), cert.
denied, 121 S. Ct. 2632 (2001); ACME Music Co. v. IRS
(In re ACME Music Co.), 208 B.R. 838 (Bankr. W.D. Pa. 1997)
(in determining tax liability, bankruptcy court could also
determine claim for costs in underlying administrative
proceeding).
f. May bankruptcy courts exercise "supplemental jurisdiction"
under 28 U.S.C. § 1367, which codifies the district
court's ancillary and pendent jurisdiction? See, e.g.,
Walker v. Cadle Co. (In re Walker), 51 F.3d 562, 570-73
(5th Cir. 1995); Boyajian v. DeLuca (In re Remington Dev.
Group, Inc.), 180 B.R. 365, 371-74 (Bankr. D.R.I. 1995)
(both holding § 1367 inapplicable to bankruptcy courts and
collecting cases); see also Cumberland Farms, Inc. v.
Fla. Dep't of Envtl. Prot., 116 F.3d 16 (1st Cir. 1997)
(State's administrative expense claim for penalties for
violating underground storage tank regulations did not
authorize bankruptcy court to determine debtor's compliance
with liability insurance program regulations).
g. Bankruptcy courts have jurisdiction to enforce their own
orders. Volvo White Truck Corp. v. Chambersburg Beverage,
Inc. (In re White Motor Credit Corp.), 75 B.R. 944, 948
(Bankr. N.D. Ohio 1987).
3. Property.
The district court "shall have exclusive jurisdiction of all of the
property, wherever located, of the debtor as of the commencement of [the]
case, and of property of the estate." 28 U.S.C. § 1334(e).
"Property of the estate," see 11 U.S.C. § 541, is broad in
scope, United States v. Whiting Pools, Inc., 462 U.S. 198 (1983), and
in any given case, comprises most if not all "property of the debtor."
However, some property might be included in one category but not the other.
For example, property of the estate would include property acquired by the
estate after commencement of the case though not acquired by the debtor
personally. See 11 U.S.C. § 541(a)(7); In re Osborn, 176
B.R. 217 (Bankr. E.D. Okla. 1994) (malpractice claim acquired by debtor in
possession during chapter 11 case), aff'd mem., 83 F.3d 433 (10th
Cir. 1986). Also, property of the debtor that became property of the estate
upon commencement of the case but that the trustee subsequently abandons,
see 11 U.S.C. § 554, passes back to the debtor. Bennett v.
Commercial Credit Plan (In re Bennett), 13 B.R. 643 (Bankr. W.D. Mich.
1981). Nevertheless, 28 U.S.C. § 1334(e) provides that bankruptcy
jurisdiction extends to both categories of property.
Note: Forfeiture actions. The "relation back" doctrine under
common law and certain statutes, e.g., 21 U.S.C. § 881(h),
whereby title to forfeited property vests in the United States upon
the commission of acts giving rise to a judgment of forfeiture, could
keep such property out of the bankruptcy estate even where the
judgment of forfeiture is entered after commencement of the
bankruptcy case. See United States v. Klein (In re
Chapman), 264 B.R. 565 (B.A.P. 9th Cir. 2001) (on appeal to the
9th Circuit); see also United States v. Pelullo, 178
F.3d 196 (3d Cir. 1999).
Although § 1334(e) grants the district court sitting in
bankruptcy exclusive jurisdiction over property which may be located
in foreign countries, exercising control over such property could be
precluded without the assistance of foreign courts. See 1
Collier on Bankruptcy § 3.01[5] (15th ed. 2001).
[cited in USAM 4-4.410]
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