Mason v. Smith

672 A.2d 705, 140 N.H. 696, 1996 N.H. LEXIS 20
CourtSupreme Court of New Hampshire
DecidedMarch 7, 1996
DocketNo. 94-660
StatusPublished
Cited by24 cases

This text of 672 A.2d 705 (Mason v. Smith) is published on Counsel Stack Legal Research, covering Supreme Court of New Hampshire primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mason v. Smith, 672 A.2d 705, 140 N.H. 696, 1996 N.H. LEXIS 20 (N.H. 1996).

Opinion

THAYER, J.

The plaintiff, William R. Mason, appeals an order of the Superior Court (McHugh, J.) granting summary judgment to the defendants, Raymond E Smith, Louis Guevin, and Marc Crandall. The issue on appeal is whether the trial court erred in ruling that the plaintiff’s State law tort claims for the allegedly wrongful filing of an involuntary bankruptcy petition are preempted [698]*698by section 303(i) of the United States Bankruptcy Code. See 11 U.S.C. § 303(i) (1988). We affirm.

The plaintiff filed suit in superior court, claiming that the defendants, as officers of Rockingham County Trust and its successor New Hampshire Savings Bank (together, the “bank”), maliciously caused the bank to file an involuntary bankruptcy petition under chapter 7 of the Bankruptcy Code against the plaintiff, a debtor of the bank. The complaint alleged that the defendants knew that the bank could not by itself properly file an involuntary petition because the plaintiff had more than twelve creditors. See 11 U.S.C. § 303(b) (1988). The plaintiff’s claims, all sounding in tort, include abuse of process, intentional and negligent misrepresentation, interference with business or contractual relations, breach of fiduciary duties, and malicious prosecution.

The defendants moved for summary judgment on the ground that the plaintiff’s claims are preempted by section 303(i) of the Bankruptcy Code, which provides a penalty scheme for wrongful filings of involuntary petitions. See 11 U.S.C. § 303(i). “Summary judgment is an appropriate means of avoiding the expense and time of a full trial when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” High Country Assocs. v. N.H. Ins. Co., 139 N.H. 39, 41, 648 A.2d 474, 476 (1994). In reviewing a motion for summary judgment, we consider the evidence in the light most favorable to the party opposing the motion, taking all reasonable inferences that may be drawn from the evidence in that party’s favor. Id.

An involuntary bankruptcy petition may be filed, with exceptions not relevant here, against a person who qualifies as a debtor under chapter 7 or chapter 11 of the Bankruptcy Code. 11 U.S.C. § 303(a) (1988). Debtors have a remedy for wrongfully filed involuntary petitions under section 303(i). This section provides:

If the court dismisses a petition under this section other than on consent of all petitioners and the debtor, and if the debtor does not waive the right to judgment under this subsection, the court may grant judgment —
(1) against the petitioners and in favor of the debtor for
(A) costs; or
(B) a reasonable attorney’s fee; or
(2) against any petitioner that filed the petition in bad faith, for —
(A) any damages proximately caused by such filing; or
[699]*699(B) punitive damages.

It is undisputed that the plaintiff and the bank consented to dismissal of the involuntary petition and that accordingly the plaintiff was not entitled to collect damages under section 303(i) in the underlying bankruptcy proceedings.

State law is preempted under the supremacy clause of the United States Constitution, U.S. CONST, art. VI, cl. 2, in three circumstances. “First, Congress can define explicitly the extent to which its enactments pre-empt state law.” English v. General Electric Co., 496 U.S. 72, 78 (1990). “Second, in the absence of explicit statutory language, state law is pre-empted where it regulates conduct in a field that Congress intended the Federal Government to occupy exclusively.” Id. at 79. “Finally, state law is pre-empted to the extent that it actually conflicts with federal law.” Id.

The defendants have not made a claim of express preemption under section 303(i), and our review of the Bankruptcy Code reveals no explicit statement preempting state law claims based on the wrongful filing of an involuntary petition. Instead, the defendants point to the specific remedies in section 303(i) for wrongful filings and to the fact that Congress has conferred exclusive bankruptcy jurisdiction on the federal courts to arrive at the conclusion that state law remedies for wrongful filings are impliedly preempted. Implied preemption may be found where there exists a

scheme of federal regulation so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it, or where an Act of Congress touches a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject.

Id. (quotations, ellipses, and brackets omitted). Where the field to be preempted includes areas traditionally occupied by the States, however, Congress’ intent to supersede state law must be “clear and manifest.” Id. (quotation omitted). The defendants also argue that an actual conflict exists in this case because State tort remedies stand as an obstacle to the accomplishment of the objectives of Congress in enacting section 303(i) of the Bankruptcy Code. See id.

We recently examined the issue of state law preemption in the bankruptcy context. In Wenners v. Great State Beverages, Inc., 140 N.H. 100, 663 A.2d 623 (1995), cert. denied, 116, S. Ct. 926 (1996), we held that the plaintiff’s common law cause of action for wrongful [700]*700termination was not preempted by section 525(b) of the Bankruptcy Code, which prevents private employers from terminating or discriminating against the employment of a debtor in bankruptcy for specified reasons related to the bankruptcy. The defendant in Wenners argued that the plaintiff’s common law claims should be preempted because the plaintiff had a statutory remedy for wrongful termination under section 105(a) of the Bankruptcy Code, which provides the bankruptcy court with a general grant of power to effectuate the Code’s provisions. Id. at 102-03, 663 A.2d at 625. We rejected the defendant’s argument, noting that section 525(b) itself offers no means for enforcing claims for wrongful termination and that employment and employment discrimination are fields traditionally occupied by the States. Id. at 103-04, 663 A.2d at 625-26.

In the case at bar, however, section 303(i) of the Bankruptcy Code provides specific remedies for the conduct complained of by the plaintiff. When the bankruptcy court dismisses a petition other than on consent of the parties, and if the debtor does not waive the right to judgment, the debtor can recover costs or a reasonable attorney’s fee or, if the petition was filed in bad faith, consequential or punitive damages.

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Bluebook (online)
672 A.2d 705, 140 N.H. 696, 1996 N.H. LEXIS 20, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mason-v-smith-nh-1996.