Eye Consultants of Northern Virginia P.C. v. Shaw-McDonald

• Court: Supreme Court of Virginia
• Decided: April 3, 2025
• Docket: 1240166
• Status: Published

Opinion

PRESENT: Goodwyn, C.J., Powell, Kelsey, McCullough, Chafin, and Russell, JJ., and Mims, S.J.

EYE CONSULTANTS OF NORTHERN VIRGINIA, P.C., ET AL. OPINION BY v. Record No. 240166 JUSTICE STEPHEN R. McCULLOUGH April 3, 2025 FATIMA SHAW-McDONALD

FROM THE COURT OF APPEALS OF VIRGINIA

Fatima Shaw-McDonald filed a medical malpractice action against Eye Consultants of

Northern Virginia, P.C. While this action was pending, she filed for Chapter 7 bankruptcy.

Initially, she did not disclose the medical malpractice action either to the bankruptcy court or to

opposing counsel. Upon learning of this fact, Eye Consultants moved to dismiss the medical

malpractice action on the basis that Shaw-McDonald no longer had standing. While the

bankruptcy case was still pending, Shaw-McDonald amended her bankruptcy filing to list the

medical malpractice action. She later obtained a discharge from the bankruptcy court. The

circuit court concluded that Shaw-McDonald lost standing due to her bankruptcy filing, and it

dismissed the case. The Court of Appeals reversed. Although our reasoning differs from that of

the Court of Appeals, we agree that dismissal is not appropriate in this circumstance.

BACKGROUND

Shaw-McDonald suffered a loss of vision in one eye following a cataract surgery. One

day before the statute of limitations would have expired on her medical malpractice claim, she

filed a complaint, and later an amended complaint, against Eye Consultants.

After filing this action but before trial, Shaw-McDonald filed for Chapter 7 bankruptcy.

She did not disclose the medical malpractice action in her bankruptcy petition or disclose her bankruptcy petition to Eye Consultants. 1 Eye Consultants became aware of the bankruptcy filing

on the eve of trial and, on the morning of trial, moved to dismiss her case with prejudice for lack

of standing. Eye Consultants argued that Shaw-McDonald’s interest in the medical malpractice

action was transferred to the bankruptcy trustee and, therefore, she lacked standing to pursue the

case. Because she lacked standing, Eye Consultants argued, the circuit court should dismiss the

case.

The circuit court initially deferred ruling on the motion to dismiss to afford the parties the

opportunity to brief whether the case should be dismissed. Meanwhile, Shaw-McDonald,

invoking Bankruptcy Rule 1009(a), which allows a petitioner to amend her voluntary petition as

a matter of course at any time before the case is closed, promptly filed amended bankruptcy

schedules that listed the medical malpractice action. The Joint Appendix submitted by the

parties reflects that the bankruptcy court discharged Shaw-McDonald and closed the case, but it

does not specifically reveal whether the claim was abandoned by the trustee or whether it was

treated as exempt.

Eye Consultants later filed a written motion to dismiss, again arguing that Shaw-

McDonald’s lack of standing necessitated dismissal. Eye Consultants also noted that, with no

tolling for the period of limitations applicable from the date she lost standing, the expiration of

the statute of limitations required dismissal with prejudice. Shaw-McDonald opposed the motion

to dismiss and asked the circuit court to reinstate the case on the trial docket. She argued that the

amended bankruptcy petition meant that she retained standing to pursue her action and that her

action was exempt under Code § 34-28.1.

1 Plaintiff’s counsel stated that the failure to list the medical malpractice action in the bankruptcy petition was due to a mistake or a misunderstanding.

2 The circuit court granted the motion to dismiss. Treating Kocher v. Campbell, 282 Va.

113 (2011), as dispositive, the circuit court held that Shaw-McDonald lost standing when she

filed the bankruptcy petition. The circuit court explained:

As the cause of action was neither abandoned or exempted prior to [the day the trial commenced], it remained a part of the bankruptcy estate as of that date and was enforceable solely by the trustee. That being the case, as of [the date Shaw- McDonald filed her bankruptcy petition,] Plaintiff did not have standing to pursue the cause of action.

Shaw-McDonald appealed to the Court of Appeals. In a published opinion, a panel of

that Court reversed the circuit court’s judgment. Shaw-McDonald v. Eye Consultants of N. Va.,

79 Va. App. 576, 586 (2024). The Court of Appeals observed that Shaw-McDonald

unquestionably had standing when she initially filed her medical malpractice action, id., and

noted that the defendants did not dispute this point, id. at 585. Moreover, although the

Bankruptcy Code temporarily transferred control of her claim to the trustee for administration by

operation of 11 U.S.C. § 541(a)(1) and 11 U.S.C. § 704, once the trustee abandoned that claim

by choosing not to pursue it for the benefit of the bankruptcy estate, control of the claim reverted

back to Shaw-McDonald and procedurally restored its status to what it was before the time she

filed her bankruptcy petition. Id. at 585-86 (explaining that “[o]nce a claim is abandoned, ‘[i]t

reverts to the debtor and stands as if no bankruptcy petition was filed,’” such that “the

abandonment of the [medical malpractice] claim by the trustee when the bankruptcy case closed

. . . restored it to Shaw-McDonald ‘as if’ no bankruptcy petition had been filed”) (quoting In re

Dewsnup, 908 F.2d 588, 590 (10th Cir. 1990), aff'd on other grounds sub nom. Dewsnup v.

Timm, 502 U.S. 410 (1992); 5 Collier on Bankruptcy ¶ 554.02[3], at 554-6 (16th ed. 2015)

(same); and Sessions v. Romadka, 145 U.S. 29, 51-52 (1892)). Consequently, the Court of

3 Appeals held that Shaw-McDonald had standing to maintain the timely-filed medical malpractice

action. Id. at 586.

We awarded Eye Consultants an appeal from this decision.

ANALYSIS

Eye Consultants assigns the following error:

The Court of Appeals erred in reversing the circuit court’s ruling dismissing the case because Plaintiff filed for bankruptcy and thus transferred her claims to the bankruptcy estate and lost standing to maintain the action.

We review de novo the legal issue of whether a plaintiff has standing. Kelley v. Stamos,

285 Va. 68, 73 (2013).

“The concept of standing concerns itself with the characteristics of the person or entity

who files suit. The point of standing is to ensure that the person who asserts a position has a

substantial legal right to do so and that his rights will be affected by the disposition of the case.”

Cupp v. Board of Supervisors of Fairfax County, 227 Va. 580, 589 (1984) (citation omitted).

Standing also “serves to prevent the judicial process from being used to usurp the powers of the

political branches.” Clapper v. Amnesty Int’l USA, 568 U.S. 398, 408 (2013). When we “ask[]

whether a person has standing, we ask, in essence, whether he has a sufficient interest in the

subject matter of the case so that the parties will be actual adversaries and the issues will be fully

and faithfully developed.” Cupp, 227 Va. at 589. A party must be able to “show an immediate,

pecuniary, and substantial interest in the litigation, and not a remote or indirect interest.” Harbor

Cruises, Inc. v. State Corp. Comm., 219 Va. 675, 676 (1979) (per curiam).

Whether a litigant has standing to bring an action in a Virginia court is a question of

Virginia law. Kocher, 282 Va. at 117. “[A]n action filed by a party who lacks standing is a legal

4 nullity.” Kocher, 282 Va. at 119. When an action is filed by a plaintiff who lacks standing, it

should be dismissed. Johnston Mem. Hosp. v. Bazemore, 277 Va. 308, 312-13 (2009).

In some instances, a case must be dismissed because the plaintiff lacked standing from

the outset of the case. Standing also can become an issue when a plaintiff who originally had

standing loses standing at some point during the course of the litigation. When a party who has

standing at the inception of the litigation loses it due to intervening events, the inquiry is really

one of mootness. See Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 189

(2000) (mootness is “the doctrine of standing set in a time frame: The requisite personal interest

that must exist at the commencement of the litigation (standing) must continue throughout its

existence (mootness).”) (quotation marks omitted). See, e.g., Bd. of Supervisors v. Ratcliff, 298

Va. 622, 622-23 (2020) (dispute regarding the interpretation of a zoning ordinance was moot

once the petitioner sold the property); Alvarez v. Hill, 667 F.3d 1061, 1064 (9th Cir. 2012)

(release of prisoner mooted his claim that prison officials violated his religious rights under

RLUIPA).

The issue we address in this case is one of first impression: whether a plaintiff, who

originally had standing when she filed her medical malpractice action, loses that standing by

filing for bankruptcy such that the state court action must be dismissed.

It is common ground that the commencement of a bankruptcy case “creates an estate”

which “is comprised of . . . all legal or equitable interests of the debtor in property as of the

commencement of the case.” 11 U.S.C. § 541(a). This means that, “upon the filing of a petition

in bankruptcy, a bankruptcy estate is created by operation of law.” Kocher, 282 Va. at 117. The

property of the debtor that transfers to the bankruptcy estate includes “those causes of action

which are pending in court.” Id.

5 Eye Consultants argues that our decision in Kocher is controlling and requires us to

dismiss the medical malpractice action. Kocher, however, is distinguishable from this case. A

timeline of the sequence of events in Kocher may be helpful to understand our reasoning in that

case:

• April 26, 2004 – Plaintiff is involved in a motor vehicle accident.

• October 1, 2005 – Plaintiff files a voluntary bankruptcy petition without listing the personal injury cause of action.

• January 6, 2006 – Plaintiff obtains a bankruptcy discharge.

• February 3, 2006 – Plaintiff files a complaint and later nonsuits it.

• April 2006 – Plaintiff refiles a complaint.

• April 2007 – Plaintiff serves the complaint.

• January 4, 2008 – Plaintiff takes another nonsuit.

• February 14, 2008 – Plaintiff reopens the bankruptcy case and amends the bankruptcy schedules to include the personal injury claim as an asset.

• May 27, 2008 – Plaintiff files a third complaint but does not serve it.

• March 2009 – Plaintiff serves this complaint on the defendant.

• May 29, 2009 – The bankruptcy court enters an order holding that the plaintiff “properly exempted” the cause of action.

Id. at 115-16.

In Kocher, the salient fact was that the plaintiff filed a Chapter 7 bankruptcy petition

before filing his personal injury lawsuit. 282 Va. at 115-16. The plaintiff did not list the

personal injury claim on any of his bankruptcy schedules. He then obtained a standard

bankruptcy discharge. Id. at 116. When the plaintiff filed his personal injury lawsuit, the

defendant moved to dismiss for lack of standing. Id. at 116. The plaintiff then obtained a

belated reopening of his bankruptcy case. More than six years after the automobile accident

6 occurred, the bankruptcy court entered an order holding that the plaintiff had “properly

exempted” the cause of action. Id. at 116.

We agreed with the defendant that the plaintiff lacked standing at the time any of the

complaints were filed. We explained that, upon filing for bankruptcy, the personal injury claim

automatically passed to the bankruptcy estate by operation of federal law. Id. at 117.

“Thereafter, the cause of action was one that could only be asserted by the trustee in bankruptcy

. . . unless and until it was restored to the plaintiff by the bankruptcy court.” Id. (citation

omitted). See also Martineau v. Wier, 934 F.3d 385, 391 n.3 (4th Cir. 2019) (“[I]n the context of

a Chapter 7 bankruptcy, it is the bankruptcy trustee and not the debtor who is the real party in

interest with respect to property of the estate, with the right to bring any legal claims that belong

to the estate.”). The bankruptcy trustee can restore the cause of action to the petitioner through

abandonment or it can be exempted, but neither of those things timely happened in Kocher. Id.

at 117. At the time plaintiff filed his successive complaints, he “lacked standing to assert the

cause of action because it remained in the bankruptcy estate, enforceable only by the trustee.”

Id. at 118. Although the reopened bankruptcy case ultimately resulted in a May 29, 2009 ruling

that Kocher had properly exempted the personal injury claim in his amended bankruptcy

schedules that were filed in February of 2008, by the time the claim reverted to him, the two-year

statute of limitations period applicable to the claim, commencing on April 26, 2004, had long

since run without him ever having filed a complaint based on it at a time when he had standing to

sue.

The facts before us differ markedly from those in Kocher. In Kocher, we noted that

an action filed by a party who lacks standing is a legal nullity. It has no tolling effect on the statute of limitations and furnishes no basis for a nonsuit. Standing acquired after the statute of

7 limitations has run cannot be retroactively applied to cure the lack of standing that existed when the action was filed.

Id. at 119. Unlike in Kocher, Shaw-McDonald did have standing at the time the medical

malpractice action was filed. She did not acquire her standing after the statute of limitations had

run.

The question we confront in this case, which we did not have occasion to address in

Kocher, is whether a plaintiff, who had standing when she filed her medical malpractice action,

loses that standing the moment she files her bankruptcy petition. We conclude that she does not

lose standing in that circumstance. Bankruptcy law contemplates that certain assets will be or

can be returned to the petitioner – assuming those assets are properly disclosed on the

bankruptcy schedule. First, the trustee can abandon the asset. 11 U.S.C. § 554(c) (“Unless the

court orders otherwise, any property scheduled under section 521(a)(1) of this title not otherwise

administered at the time of the closing of a case is abandoned to the debtor and administered for

purposes of section 350 of this title.”). Second, some assets can be exempted through a

combination of state and federal law. 11 U.S.C. § 522. Virginia has exempted personal injury

actions. See Code § 34-28.1 (exempting “all causes of action for personal injury or wrongful

death and the proceeds derived from court award or settlement”). Consequently, as to the assets

that are exempted or abandoned, bankruptcy operates as a suspension of a plaintiff’s standing in

a pending action rather than a termination of the plaintiff’s standing. The Bankruptcy Code does

not contemplate automatic, permanent deprivation of the debtor’s right to proceed with an action

in every case; instead, it contemplates giving the trustee sufficient time and information to

determine whether to incur the expense of pursuing the action for the potential benefit of the

8 debtor’s estate and its creditors, or whether to abandon it. 2 Since not all such actions will be

deemed worth pursuing, a debtor may, and in many instances is likely to, resume the pursuit of

her cause of action as a proper plaintiff following the bankruptcy discharge. This reality

distinguishes a situation like this one from other situations where a plaintiff, who may have had

standing initially, loses standing due to a permanent change in circumstances. For example,

when a plaintiff’s standing arises because of her ownership of property, the sale of that property

removes the plaintiff’s standing and renders the case moot. The law does not contemplate a

prompt restoration of the plaintiff’s standing after a separate case is adjudicated. In contrast,

when a plaintiff who has been injured has filed an action, and while that action is pending the

plaintiff files for bankruptcy, that plaintiff is likely to resume the pursuit of that action once the

bankruptcy proceeding is final. We are dealing not with an abstract hypothetical possibility of

the plaintiff being restored to their original position but rather with a concrete and legally

recognized interest. The judicial controversy between the plaintiff and Eye Consultants is hardly

remote and contingent. In short, the concrete adversity that separated the litigants is not forever

gone in a situation like the one in the case before us. The bankruptcy filing suspended, but did

not terminate, Shaw-McDonald’s standing in her medical malpractice action. A temporary

suspension of standing to accommodate the parallel bankruptcy proceeding is not the same as a

2 See, e.g., In re Wilmoth, 412 B.R. 791, 795 (Bankr. E.D. Va. 2009) (11 U.S.C. § 704 requires a bankruptcy trustee to administer the property of the estate for the benefit of the debtor’s creditors); In re Carla Leather, Inc., 44 B.R. 457, 472 (Bankr. S.D.N.Y. 1984) (observing that “[o]ne of the trustee’s concurrent duties is that ‘of expeditiously liquidating the estate and avoiding all unreasonable expense either in its preservation or distribution,’” and that “[i]n pursuing litigation in the name of the debtor, the trustee’s ‘obligation is not that he should burden the assets of the estate with costs and expenses arising out of all manner of questions that may be presented for litigation’”) (quoting Rife v. Ruble, 107 F.2d 84, 86 (6th Cir. 1939) and In re Meadows, Williams & Co., 181 F. 911, 912 (W.D.N.Y. 1910)); In re Tobin, 202 B.R. 339, 340-341 (Bankr. D. R.I. 1996) (admonishing trustees to abandon property of a debtor that does not benefit the estate).

9 permanent loss of standing. With only a temporary suspension, the drastic remedy of dismissal

is not appropriate.

Additionally, there is no question that a bankruptcy trustee can join the plaintiff or be

substituted for the plaintiff in certain types of cases. See 11 U.S.C. § 323 (trustee is

representative of the estate and can sue and be sued). If, as Eye Consultants argues, a pending

case must be dismissed the moment the plaintiff files for bankruptcy, such a substitution would

not be possible.

A plaintiff must have standing to initiate a lawsuit. If the plaintiff does not have standing

when the case is filed, it should be dismissed. Kocher, 282 Va. at 119. If a plaintiff loses

standing after the case is filed and the parties are no longer adverse, a court should dismiss the

case as moot. Ratcliff, 298 Va. at 622-23. But where a plaintiff’s standing in a personal injury

case is suspended during the pendency of a bankruptcy case, the appropriate remedy is to hold

the personal injury case in abeyance until the plaintiff’s interest is resolved in the bankruptcy

case. Unlike the plaintiff in Kocher, who never filed a timely complaint at a point when he had

standing to sue, Shaw-McDonald unquestionably had standing at the time she timely filed her

medical malpractice action. That standing was merely suspended by operation of the Bankruptcy

Code, and not terminated, when she filed for bankruptcy. Her case should not have been

dismissed for lack of standing. In so holding, we in no way retreat from our prior holdings

addressing the consequences of a plaintiff’s initial lack of standing or loss of standing in

circumstances that differ from this one.

10 CONCLUSION

The decision of the Court of Appeals of Virginia is affirmed. We remand the case to the

Court of Appeals for purposes of a remand to the circuit court for a trial, if the parties are so

advised.

Affirmed and remanded.