Adams v. Cumberland Farms

• Court: Court of Appeals for the First Circuit
• Decided: May 7, 1996
• Docket: 95-1736
• Status: Published

Opinion

USCA1 Opinion

May 7, 1996

                                [Not for Publication]
                                [Not for Publication]



                            United States Court of Appeals
                            United States Court of Appeals

                                For the First Circuit
                                For the First Circuit

                                 ____________________



        No. 95-1736


CHERYL ADAMS, RICHARD WAUGH, BRENT ADAMS, RONALD RING,

             PATRICIA ADAMS, ROBERT RAVITZ, CARRIE BURKE, WELDON ADAMS, 

               ELIZABETH TARGEE, TINA LEVESQUE AND MELISSA SMITH RAPA,



                               Plaintiffs - Appellants,



                                          v.



                               CUMBERLAND FARMS, INC. 

                              AND LANCE CURLEY, ET AL.,



                               Defendants - Appellees.



                                 ____________________



                     APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                   [Hon. Nathaniel M. Gorton, U.S. District Judge]
                                              ___________________



                                 ____________________



                                        Before



                                Torruella, Chief Judge,
                                           ___________

                            Bownes, Senior Circuit Judge,
                                    ____________________

                              and Stahl, Circuit Judge.
                                         _____________



                                 ____________________



            Stanley R. Cohen for appellant.
            ________________

            Barbara  D. Gilmore,  with whom  Kathleen Provost  and Sullivan  &
            ___________________              ________________      ___________

        Worcester, were on brief for appellee.
        _________

                                 ____________________



                                 ____________________



STAHL,  Circuit  Judge.   This appeal  involves the
                      STAHL,  Circuit  Judge.
                              ______________



            review of  an  order entered  by  the bankruptcy  court  that



            effectively estimated and  discharged the appellants' claims.



            The appellants,  Cheryl Adams and ten  other former employees



            of  the  debtor  (collectively   "Adams"),  claim  that   the



            bankruptcy court lacked authority  to enter the order because



            the  claims constituted  "personal injury  tort claims."   We



            affirm.



                                          I.
                                          I.
                                          __



                                      Background
                                      Background
                                      __________



                      Cheryl  Adams  and ten  other  former employees  of



            Cumberland Farms, Inc. ("CFI"), filed proofs of claim against



            CFI   in   the  bankruptcy   court   for   the  District   of



            Massachusetts.    The claims  stemmed  from  a pending  civil



            action  in which Adams alleged that  various CFI officers and



            supervisors  had  conspired  to  recoup  inventory losses  by



            falsely accusing  Adams and other low-level  CFI employees of



            stealing  money  and  merchandise  from CFI  stores.    Adams



            further alleged  that these same CFI  officials had knowingly



            coerced  Adams and  other  employees into  confessing to  the



            alleged  thefts  notwithstanding  that Adams  and  the  other



            employees  had not committed them.  The complaint in the case



            asserted claims of false imprisonment,  wrongful termination,



            malicious   prosecution,   abuse   of  process,   defamation,



            intentional infliction of  emotional distress, and  violation


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of Massachusetts civil  rights laws  (collectively the  "loss



            prevention claims").



                      In 1993,  CFI reached  a tentative settlement  in a



            separate  class action suit involving similar loss prevention



            claims (the "Curley suit").  The Curley suit had been brought



            in  New Jersey federal district court by a different group of



            former CFI employees that did not include Adams.  As part  of



            the proposed Curley settlement, the parties to that agreement



            filed a  joint motion  in the Massachusetts  bankruptcy court



            requesting  the  creation of  a  mandatory  class that  would



            include all loss prevention claimants who had filed proofs of



            claim  in  the  Massachusetts  bankruptcy  proceeding  (e.g.,
                                                                    ____



            Adams).   Moreover,  the parties  further requested  that the



            Massachusetts  bankruptcy  court  use  the  Curley settlement



            agreement as a vehicle for estimating and discharging  all of



            the  loss prevention  claims alleged  by individuals  in this



            newly  created class.   Adams  objected to  this motion.   On



            August  30, 1993,  the bankruptcy  court granted  the motion.



            Adams appealed to the  Massachusetts federal district  court,



            and  the  district court  affirmed.    Additionally, the  New



            Jersey  district court  ultimately  approved,  and the  Third



            Circuit affirmed, the  proposed settlement  agreement in  the



            Curley suit.  See  Curley v. Cumberland Farms, Inc.,  27 F.3d
                          ___  ______    ______________________



            556 (3d Cir. 1994).



                                         II.
                                         II.
                                         ___


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Discussion
                                      Discussion
                                      __________



                      On   appeal  to   this  court,   Adams's  principal



            complaint is  that the bankruptcy court  lacked the authority



            to  enter a final order  discharging her claims.   Adams also



            raises several  additional arguments  including an attack  on



            the  bankruptcy  court's  estimation  of her  claims  and  an



            assertion  that the  bankruptcy  court's  order violated  her



            Seventh Amendment right  to a  jury trial.   We begin with  a



            brief overview of the  statutory framework and follow with  a



            discussion of Adams's assignments of error.



            A.  Statutory Overview
            ______________________



                      Title 28 U.S.C.   1334  vests in the district court



            a  broad  grant  of   subject-matter  jurisdiction  over  all



            bankruptcy-related  matters,  expressly  providing  that  the



            "district   court   shall   have   original   and   exclusive



            jurisdiction  of all cases under  title 11" and "original but



            not exclusive  jurisdiction of all  civil proceedings arising



            under title 11, or arising in or related to cases under title



            11."  28  U.S.C.    1334(a), (b); see  also Celotex Corp.  v.
                                              ___  ____ _____________



            Edwards,  115   S.  Ct.  1493,  1498-99   (1995)  (discussing
            _______



            comprehensive  scope of    1334  jurisdictional grant).   The



            bankruptcy court, in turn, is authorized to hear matters, not



            as  an independent  entity, but  as "a  unit of  the district



            court."    28  U.S.C.    151.    Subject-matter  jurisdiction



            remains  in  the  district  court, which  is  authorized,  in


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                                          4



appropriate   circumstances,   to  refer   matters   "to  the



            bankruptcy  judges  of th[at]  district."    Id.    157;  cf.
                                                         ___          ___



            Northern Pipeline Const.  Co. v. Marathon Pipe  Line Co., 458
            _____________________________    _______________________



            U.S. 50 (1982)  (holding unconstitutional previous  statutory



            scheme   that  authorized   bankruptcy  courts   to  exercise



            independently  all  jurisdiction  conferred to  the  district



            courts  under the  bankruptcy  laws).   The district  court's



            power of referral extends to any case or proceeding for which



            it has  subject-matter jurisdiction  under    1334.   See  28
                                                                  ___



            U.S.C.    157.  The district court, however, may withdraw any



            matter referred under  this provision for cause shown  on its



            own motion or by the request of either party.  Id.   157(d).
                                                           ___



                      While the district court  may refer all matters for



            which  it has  jurisdiction under    1334,  the power  of the



            bankruptcy  judge  to  enter   final  orders  in  a  referred



            proceeding  is limited.  See 28 U.S.C.    157.  In general, a
                                     ___



            bankruptcy  judge may  hear and  finally determine  only core



            bankruptcy proceedings.  Id.    157(a).  Core proceedings are
                                     ___



            those that involve rights that are created by, and depend on,



            the bankruptcy laws for their existence.  In re G.S.F. Corp.,
                                                      __________________



            938  F.2d 1467, 1475 (1st  Cir. 1991); see  also In re Arnold
                                                   ___  ____ ____________



            Print  Works,  Inc., 815  F.2d  165, 166-67  (1st  Cir. 1987)
            ___________________



            (reading  the  legislative  history  as  indicating   that  a



            bankruptcy  court's  core  authority  should  be  interpreted



            broadly).   Section 157  sets forth  a nonexhaustive list  of


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"core  proceedings"  that includes  such  obvious  matters as



            "allowance or disallowance of  claims against the estate," 28



            U.S.C.    157(b)(2)(B),  as well  as a  final broadly-phrased



            catchall  covering  most  "other  proceedings  affecting  the



            liquidation of the assets of the estate," id.   157(b)(2)(O).
                                                      ___


A  bankruptcy  judge  may   also  hear  a  properly



            referred non-core  proceeding  otherwise falling  within  the



            district  court's bankruptcy  jurisdiction, but,  in general,



            may  only issue  proposed  findings of  fact and  recommended



            conclusions  of law subject  to the district  court's de novo
                                                                  __ ____



            review.  Id.   157(c)(1).  This non-core authority extends to
                     ___



            those  matters  that, while  not  directly  dependent on  the



            bankruptcy   laws  for   their  existence,   are  nonetheless



            sufficiently   connected   to   the  restructuring   of   the



            debtor/creditor  relationship to  come  within  the  district



            court's broad jurisdictional grant.   The bankruptcy court is



            authorized, on its  own motion or on the  "timely motion of a



            party," to  determine whether  a proceeding comes  within the



            court's  core  or  non-core  authority.    Id.     157(b)(3).
                                                       ___



            Finally, with the consent of  the parties, a bankruptcy court



            may hear and  finally determine  non-core proceedings  within



            the   district  court's  bankruptcy   jurisdiction.    Id.   
                                                                   ___



            157(c)(2).


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                                          6



Significantly,  personal  injury tort  and wrongful



            death claims are afforded special status under the bankruptcy



            laws.    Several express  exceptions  address  and limit  the



            authority  of the  bankruptcy court over  such claims.   See,
                                                                     ___



            e.g., 28 U.S.C.    157(b)(2)(B), (O), and   157(b)(5).1   For
            ____



            example,  the   estimation  of  unliquidated   or  contingent



            personal injury tort claims  for the purposes of distribution



                                
            ____________________



            1.    Subsection 157(b)(2)  provides, in relevant  part, that

            core proceedings include: 



                      (B) allowance or  disallowance of  claims

                      against  the  estate  or exemptions  from

                      property of the estate, and estimation of

                      claims  or interest  for the  purposes of

                      confirming a plan under chapter 11, 12 or

                      13 of title 11 but not the liquidation or
                                     ___ ___

                      estimation of  contingent or unliquidated

                      personal  injury  tort or  wrongful death
                      ________  ______  ____     ________ _____

                      claims against the estate for purposes of

                      distribution in a case under title 11

                      . . . 

                      (O)   other  proceedings   affecting  the

                      liquidation  of the assets  of the estate

                      or the adjustment of  the debtor-creditor

                      or    the    equity    security    holder

                      relationship, except personal injury tort
                                    ______ ________ ______ ____

                      or wrongful death claims.
                         ________ _____


28 U.S.C.   157(b)(2) (emphasis added).  Subsection 157(b)(5)

            provides that: 



                      The  district  court  shall   order  that

                      personal injury tort  and wrongful  death
                      ________ ______ ____      ________  _____

                      claims shall  be  tried in  the  district

                      court  in  which the  bankruptcy  case is

                      pending, or in the district  court in the

                      district in  which  the claim  arose,  as

                      determined by the district court in which

                      the bankruptcy case is pending.



            28 U.S.C.   157(b)(5) (emphasis added).



                                         -7-
                                          7



is explicitly excluded from   157's list of core proceedings.



            Id.     157(b)(2)(B).     Moreover,  the  district  court  is
            ___



            instructed to  order that  personal injury tort  and wrongful



            death  claims shall be tried  in the district  court in which



            the  bankruptcy case is pending  or in the  district in which



            the  claims arose.   Id.    157(b)(5).   This  special status
                                 ___



            apparently   stems  from  Congress's  recognition  that  most



            personal  injury tort and  wrongful death victims  stand in a



            somewhat  different relationship  with the  bankruptcy debtor



            because they did not voluntarily enter into dealings with the



            debtor (and  accept the risk  of loss)  in the same  sense as



            traditional  bankruptcy  claimants.    See  Matter  of  Poole
                                                   ___  _________________



            Funeral Chapel,  Inc., 63  B.R.  527, 530  (Bankr. N.D.  Ala.
            _____________________



            1986) (quoting statements of Sen. DeConcini).



            B.  Personal Injury Torts
            _________________________



                      Adams challenges the  bankruptcy court's  authority



            to  enter  a  final  order   with  respect  to  her   claims.



            Essentially,  she contests  the  bankruptcy court's  implicit



            determination that her  claims constituted core  proceedings.



            Adams argues that  her claims are non-core because  they fall



            within at  least one of several  specific exceptions provided



            for "personal  injury tort" claims.   Therefore, she contends



            that, because  the  proceeding was  non-core, the  bankruptcy


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                                          8



court lacked the authority to enter a final order effectively



            estimating and discharging her claims.2



                      Whether or  not Adams's claims  constitute personal



            injury tort claims is a close question.  Compare In  re Atron
                                                     _______ ____________



            Inc. of  Michigan, 172  B.R. 541,  542-45 (Bankr.  W.D. Mich.
            _________________



            1994)  ("personal injury  tort"  should be  read narrowly  to



            exclude  emotional distress and other nontraditional personal



            injury  claims), with  Poole,  63 B.R.  at 529-30  ("personal
                             ____  _____



            injury  tort" should  be read  broadly to include  claims for



            emotional  and mental  distress).   We  decline, however,  to



            reach the issue in this case.  Adams failed to argue that her



            claims  constituted   personal  injury  tort  claims  in  her



            objection  to the  joint motion  before the  bankruptcy court



            and, again, in  her opening brief before  the district court.



            Accordingly,  she has  waived consideration  of the  issue on



            appeal to this court.   See, e.g., Fish Market  Nominee Corp.
                                    ___  ____  __________________________



                                
            ____________________



            2.  Adams does not contend that her claims against the estate

            were  outside the  district court's  broad grant  of subject-

            matter  jurisdiction under  28 U.S.C.    1334.   This  is not

            surprising.  The  district court's "related  to" jurisdiction

            under    1334(b) is expansive.  See Celotex Corp. v. Edwards,
                                            ___ _____________    _______

            115 S. Ct. 1493, 1499 (1995) ("Congress did not delineate the

            scope of `related  to' jurisdiction, but its choice  of words

            suggests   a  grant   of  some   breadth.").     "`The  usual

            articulation  of the  test  for determining  whether a  civil

            proceeding is related to bankruptcy is whether the outcome of

            that  proceeding could  conceivably  have any  effect on  the

            estate being administered in bankruptcy.'"  In re G.S.F., 938
                                                        ____________

            at  1475 (quoting Pacor, Inc.  v. Higgins, 743  F.2d 984, 994
                              ___________     _______

            (3d Cir. 1984)).  We have little doubt that proceedings, such

            as this one, involving the estimation and discharge of proofs

            of  claim filed against  the estate by  a bankruptcy creditor

            come within this broad range.



                                         -9-
                                          9



v.  Pelofsky, 72  F.3d 4,  6 (1st  Cir. 1995)  (arguments not
                ________



            raised  in bankruptcy court are waived on appeal); In re Mark
                                                               __________



            Bell Furniture Warehouse, Inc., 992 F.2d 7, 9 (1st Cir. 1993)
            ______________________________



            (same).



                      At bottom, Adams's claim is that she was denied her



            right to an  Article III  judge.  That  right, which  derives



            from the language of  Article III,    1, is a personal  right



            and is subject to waiver upon a party's failure to assert it.



            See Commodity Future Trading  Comm'n v. Schor, 478 U.S.  833,
            ___ ________________________________    _____



            848-50 (1986).  Schor, however, makes clear that Article III,
                            _____



              1, protects  other non-waivable institutional  interests by



            barring "congressional attempts  to transfer jurisdiction [to



            non-Article III  tribunals] for  the purpose  of emasculating



            constitutional courts."  Id.  at 850 (citations and quotation
                                     ___



            marks omitted).  No such concerns are at issue in  this case.



            The present appeal does not involve a challenge to Congress's



            allocation of authority to a non-Article III bankruptcy judge



            to   resolve  personal  injury  and  wrongful  death  claims.



            Indeed, the specific provisions in question, viz 28 U.S.C.   
                                                         ___



            157(b)(2)(B) and  157(b)(5), strictly limit the  authority of



            bankruptcy  judges  with  respect   to  personal  injury  and



            wrongful death claims.



                      Though, in  extraordinary  cases, we  may  make  an



            exception to the raise-or-waive rule where our failure  to do



            so  would  result in  a gross  miscarriage  of justice,   see
                                                                      ___


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                                          10



Credit Francais Int'l  v. Bio-Vita,  Ltd., 78  F.3d 698,  709
            _____________________     _______________



            (1st  Cir. 1996),  Adams has  not persuaded  us that  such an



            exception  is  warranted in  this case.    The effect  of the



            bankruptcy court's order did  not completely deprive Adams of



            a  remedy for  her  alleged injuries.    Instead, the  ruling



            simply  had  the  effect of    estimating  the  value of  her



            unliquidated tort  claims by  ordering her to  participate in



            the  Curley settlement  agreement.   Because,  as we  explain



            infra,  Adams  has  failed to  persuade  us  that  the Curley
            _____



            settlement will  provide an unreasonable  estimation, we  are



            likewise unpersuaded  that giving  effect  to the  bankruptcy



            court's  order will  result in  a substantial  miscarriage of



            justice.



            C.  Other Matters 
            _________________



                      In  her  reply brief,  Adams  directly  attacks the



            bankruptcy court's use  of the class  action settlement as  a



            vehicle for estimating her claims.  While title 11 authorizes



            the  bankruptcy court to estimate unliquidated and contingent



            claims when  necessary for  the prompt administration  of the



            bankruptcy  estate,  see  11  U.S.C.   502(c),  it  does  not
                                 ___



            provide methods for conducting  such estimations.  Therefore,



            in estimating claims, "bankruptcy courts  should use whatever



            method  is  best  suited  to  the particular  circumstances."



            Lawrence P. King, 3 Collier on Bankruptcy   502.03, at 502-76
                                _____________________



            (15th  ed.  1995).     The  bankruptcy  courts  are  afforded


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substantial deference in this  area, and errors assigned both



            to its estimates and its methods for achieving such estimates



            generally will be  reviewed only for an  abuse of discretion.



            Matter of Continental Airlines, 981 F.2d 1450, 1461 (5th Cir.
            ______________________________



            1993); Bittner v. Borne Chem. Co., 691 F.2d 134, 136 (3d Cir.
                   _______    _______________



            1982).   Moreover, in this case, because Adams did not attack



            the  actual estimates in her opening brief, she has, in fact,



            waived consideration of this issue absent a  showing that the



            estimates  would result  in a  clear miscarriage  of justice.



            See  Indian Motocycle  Assocs.  v. Massachusetts  Hous.  Fin.
            ___  _________________________     __________________________



            Agency, 66 F.3d 1246, 1253 n.12 (1st Cir. 1995).  
            ______



                      On the  particulars of this case,  Adams has failed



            to convince us that the bankruptcy court's decision to  order



            her  participation in  the Curley  settlement constituted  an



            abuse  of  discretion,  much  less  a  clear  miscarriage  of



            justice.    The claims  asserted  in the  Curley  action were



            brought by  employees similarly situated to  Adams, and arose



            from essentially  the same  scheme that  Adams  alleges.   In



            general, we find  no reason  to think  that a  court-approved



            settlement in such a strikingly parallel proceeding would not



            provide a  reasonable benchmark  for estimating the  value of



            Adams's  claims.   Though there  may be  reasons that  such a



            method  for  estimation would  not  be  appropriate in  other



            cases,  Adams has not provided us  with any compelling reason



            for finding it inappropriate here.


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                                          12



Adams raises several additional issues, including a



            claim that the  bankruptcy court's order deprived her  of her



            Seventh  Amendment  right to  a jury  trial.   We  find these



            additional claims either waived, substantially without merit,



            or  both.   Specifically,  with  respect  to Adams's  Seventh



            Amendment  argument, filing a proof of  claim in a bankruptcy



            proceeding, as Adams  has done, generally waives any right to



            a jury trial.   See  Langenkamp v. Culp,  490 U.S. 42,  44-45
                            ___  __________    ____



            (1990) (filing  proof  of claim  invokes  bankruptcy  court's



            equitable   jurisdiction  and  generally  waives  jury  trial



            right).  We  do note, however, that 28 U.S.C.    1411(a), may



            restrict this  general rule  with respect to  personal injury



            and  wrongful   death  claims.3     Nonetheless,   Adams  has



            forfeited  the application  of this  provision by  failing to



            argue that her claims constituted personal injury tort claims



            to the courts below.  See, e.g., In re Mark Bell, 992 F.2d at
                                  ___  ____  _______________



            9.



                                         III.
                                         III.
                                         ____



                                      Conclusion
                                      Conclusion
                                      __________



                      For the  foregoing reasons, we affirm  the decision



            of the district court.



                                
            ____________________



            3.  28 U.S.C.   1411(a) provides in relevant part that 



                      this chapter and title  11 do not  affect

                      any  right  to  trial  by  jury  that  an

                      individual  has   under  applicable  non-

                      bankruptcy law with regard to  a personal

                      injury or wrongful death tort claim.



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