Jensen Electronics, Inc. v. American Computer & Telecommunications Corp. (In re American Computer & Telecommunications Corp.)

26 B.R. 512, 1983 Bankr. LEXIS 7025, 9 Bankr. Ct. Dec. (CRR) 1421
CourtDistrict Court, E.D. Virginia
DecidedJanuary 17, 1983
DocketBankruptcy No. 81-01269-A; Adv. No. 82-0116-A
StatusPublished
Cited by1 cases

This text of 26 B.R. 512 (Jensen Electronics, Inc. v. American Computer & Telecommunications Corp. (In re American Computer & Telecommunications Corp.)) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jensen Electronics, Inc. v. American Computer & Telecommunications Corp. (In re American Computer & Telecommunications Corp.), 26 B.R. 512, 1983 Bankr. LEXIS 7025, 9 Bankr. Ct. Dec. (CRR) 1421 (E.D. Va. 1983).

Opinion

MEMORANDUM OPINION

MARTIN V.B. BOSTETTER, Jr., Bankruptcy Judge.

The issues here arise from three pre-trial motions, as follows: (1) motion of the defendant debtor (“ACT”) to dismiss counts I and IV of the amended complaint1; (2) motion of defendant Stephen Thomas Schaffert and defendant-intervenor Adsoft, Inc. (“Adsoft”) to dismiss Counts I, IV and VII of the amended complaint and to dismiss Schaffert as a defendant; and (3) motion of plaintiff Jensen Electronics, Inc. (“Jensen”) for reconsideration of the Court’s order, 24 B.R. 150 (Bkrtcy.1982) dismissing Thomas K. Allen (“Allen”) from the proceeding.

The Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., - U.S. -, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), declared unconstitutional the broad grant of jurisdiction to bankruptcy judges contained in the Bankruptcy Reform Act of 1978. Although the Supreme Court stayed the effect of its decision for several months, that stay expired on December 24, 1982. This jurisdictional provision, originally enacted as Section 241 of the Bankruptcy Reform Act, later was codified as 28 U.S.C. § 1471. Specifically, the decision in Marathon, supra, held invalid the grant of jurisdiction to hear matters “related to” a bankruptcy case. Some of the motions before the Court in this proceeding involve claims that properly can be characterized only as “related to” ACT’s bankruptcy case. This Court is now operating under the Rule of the United States District Court for the Eastern District of Virginia, dated December 24, 1982. Accordingly, as to these motions involving claims which properly must be characterized only as “related to” ACT’s bankruptcy case, this opinion will be limited to recommended determinations as to the issues involved.

In the interest of clarity, the Court considers first the plaintiff’s motion for reconsideration of the dismissal of Allen as a defendant.

In support of its motion, Jensen relies upon the broad jurisdiction conferred upon bankruptcy courts by the Bankruptcy Reform Act of 1978. The relevant provision, 28 U.S.C. § 1471(b), states that bankruptcy courts shall have “original but not exclusive jurisdiction of all civil proceedings ... arising in or related to cases under title 11.” 28 U.S.C. § 1471(b). Jensen contends that its claims against Allen are “related to” a case under title 11 as a result of Jensen’s assertion that Allen is a joint tortfeasor with ACT. Accordingly, Jensen argues that policy considerations of judicial economy require the Court to retain jurisdiction over the claims against Allen.

Two of the plaintiff’s claims against Allen, those of fraud and of negligence, are common law claims sounding in tort. The basis upon which the plaintiff included Allen as a defendant was its assertion that he is a joint tortfeasor with ACT and, thus, potentially jointly and severally liable for any recovery. The basis for joinder on a third claim, violation of Virginia Code § 18.2-216, appears to be an allegation that both Allen and ACT violated the statute. The claims which Jensen asserts against Allen are strictly state law in nature, two being traditional common law actions and the third alleging violation of a Virginia statute. These claims could have been adjudicated here only under the nonexclusive, concurrent jurisdiction of the bankruptcy court as claims “related to” a case under the Bankruptcy Code.

In its previous Order of October 29, 1982, dismissing Allen as a defendant, this Court [514]*514determined that it lacked subject matter jurisdiction over the claims against Allen. The Court’s rationale then was that in the absence of financial connections between Allen and the debtor or assertions of vicarious liability the claims against Allen were not sufficiently “related to” the debtor’s bankruptcy case to confer jurisdiction on this Court. Plaintiff Jensen filed its motion for reconsideration before the decision in Marathon, supra, took effect. Accordingly, the Court will consider the chief arguments presented by Jensen in support of the aforesaid motion.

Jensen draws the Court’s attention to United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), a leading case on the subject of a federal court’s pendent jurisdiction over state or common law claims. The Gibbs case involved violation of a federal labor relations statute and state claims of conspiracy and unlawful boycott. Id. The Supreme Court, in Gibbs, stated as criteria for federal court jurisdiction that the claims must share a “common nucleus of operative facts” and the relationship between the federal and state claims also must permit the conclusion that the action comprises but one case. Id. at 725, 86 S.Ct. at 1138. However, “[t]he federal claim must have substance sufficient to confer subject matter jurisdiction on the court.” Id. This is not only an important but a crucial caveat.

The instant adversary proceeding presents no “federal claim.” Defendant ACT is undergoing reorganization under Chapter 11 of the Bankruptcy Reform Act. ACT’s assets are thus under the control of this Court, and claims against ACT properly fall within the Court’s jurisdiction. Defendant Allen, however, is not a debtor in this Court. The only basis for jurisdiction asserted is that of joint tortfeasor. Joint tortfeasors are not necessary but merely permissive parties under Rule 19 of the Federal Rules of Civil Procedure. Their joinder or dismissal, therefore, is a matter for the court’s discretion. Fed.R.Civ.P. 19, Notes of Advisory Committee on Rules; Wright and Miller, Federal Practice and Procedure, § 1623 (1972).

Jensen has cited to the Court three cases in which bankruptcy courts chose to exercise their full Section 1471 jurisdiction over matters “related to” cases under Title 11. In one of these, In re Brothers Coal Co., Inc., 6 B.R. 567 (Bankr.W.D.Va.1980), however, the non-debtor defendant was a guarantor of the debtor’s obligations. Another involved charges of collusion and fraud between the debtor and one of the non-debtor defendants. In re Zamost, 7 B.R. 859 (Bankr.S.D. CA 1980). Zamost further involved the question of dischargeability of the debt, a strictly bankruptcy determination pre-empted by Congress to the bankruptcy courts and thus a purely federal question. The third case, In re White Motors Credit Corp., 11 B.R. 294 (Bankr.N.D.Ohio 1981) did not involve non-debtor defendants.

On the basis of the discussion above, therefore, this Court would have denied Jensen’s motion for reconsideration of the dismissal of Allen as a defendant here even in the absence of the ruling by the Supreme Court in Marathon, supra. Accordingly, it is the recommendation of this Court that the motion be denied.

Defendant Schaffert also has moved for dismissal of the claims against him based on this Court’s dismissal of Allen.

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26 B.R. 512, 1983 Bankr. LEXIS 7025, 9 Bankr. Ct. Dec. (CRR) 1421, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jensen-electronics-inc-v-american-computer-telecommunications-corp-vaed-1983.