Virginia Hospital Centerarlington Health System v. Akl (In Re Akl)

397 B.R. 546, 2008 Bankr. LEXIS 3692, 2008 WL 5120740
CourtDistrict Court, District of Columbia
DecidedSeptember 4, 2008
DocketBankruptcy No. 07-00256. Adversary No. 07-10026
StatusPublished
Cited by6 cases

This text of 397 B.R. 546 (Virginia Hospital Centerarlington Health System v. Akl (In Re Akl)) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Virginia Hospital Centerarlington Health System v. Akl (In Re Akl), 397 B.R. 546, 2008 Bankr. LEXIS 3692, 2008 WL 5120740 (D.D.C. 2008).

Opinion

MEMORANDUM DECISION REGARDING MOTIONS RELATING TO THE DEFENDANT’S PURSUIT OF A COUNTERCLAIM

S. MARTIN TEEL, JR., Bankruptcy Judge.

In litigation pursued by the debtor, Ziad Akl, against it elsewhere, Virginia Hospital Center-Arlington Health System (the “Hospital”), obtained judgments against *548 Akl for attorneys’ fees it incurred in that litigation. Akl then commenced the bankruptcy case, under chapter 7 of the Bankruptcy Code (11 U.S.C.), within which this adversary proceeding is pending. The Hospital filed this adversary proceeding against him to obtain a determination that the debts owed to it by Akl were nondis-ehargeable under 11 U.S.C. § 523(a)(6) as debts for willful and malicious injury by Akl to the Hospital. When the court denied the Hospital’s motion for summary judgment, the Hospital moved to dismiss this adversary proceeding. Akl opposed the motion to dismiss, and filed a motion for leave to file a counterclaim asserting claims for abuse of process, malicious prosecution, and intentional infliction of emotional distress, all based on the Hospital’s having commenced this adversary proceeding against him. The Hospital has opposed AM's motion and moved in the alternative to dismiss the counterclaim for failure to state a claim upon which relief can be granted. For the reasons that follow, I will deny Akl’s motion for leave to file a counterclaim and grant the Hospital’s motion to dismiss the adversary proceeding.

I

Although neither party has argued that the court lacks subject matter jurisdiction, if leave were granted to permit Akl to pursue the counterclaim, that counterclaim would have to be dismissed if the court lacks subject matter jurisdiction to hear the counterclaim. Because I conclude that subject matter jurisdiction would be lacking under 28 U.S.C. § 1334(b), I will deny the motion for leave to assert the counterclaim.

On almost identical facts, the court in Salin Bank and Trust Co. v. Seybold (In re Seybold), Case No. 07-11441, Adv. No. 07-1255, 2008 WL 1321878 (Bankr.N.D.Ind. Mar.11, 2008), concluded that subject matter jurisdiction was lacking over a counterclaim which asserted a claim for abuse of process based on the filing of the complaint commencing the adversary proceeding which had sought a determination of nondischargeability. I adopt that decision’s analysis of its lack of jurisdiction under 28 U.S.C. § 1334(b) as being equally applicable here, but elaborate on its discussion of “arising in” jurisdiction.

Akl concedes that his claims arise under state law, not under the Bankruptcy Code. Accordingly, there is no “arising under title 11” jurisdiction over his counterclaim. In addition, Akl’s counterclaim arose postpetition and is therefore not property of the estate. A recovery on that counterclaim would not affect the administration of the estate. There is thus no “related to” jurisdiction even though the counterclaim raises claims by the debt- or (as opposed to a stranger to the bankruptcy case), and even though the conduct he complains of was directed against him while he was a debtor in a bankruptcy case. See Cmty. Bank of Homestead v. Boone (In re Boone), 52 F.3d 958, 960 (11th Cir.1995). The only issue is whether Akl’s counterclaim would fit within “arising in” jurisdiction as a proceeding that goes to the core of bankruptcy administration.

A.

As explained in Wood v. Wood (In re Wood), 825 F.2d 90, 92 (5th Cir.1987):

Legislative history indicates that the phrase “arising under title 11, or arising in or related to cases under title 11” was meant, not to distinguish between different matters, but to identify collectively a broad range of matters subject to the bankruptcy jurisdiction of federal courts. Congress was concerned with the inefficiencies of piecemeal adjudication of matters affecting the administration of bankruptcies and intended to give federal courts the power to adjudicate all *549 matters having an effect on the bankruptcy.

(Footnotes omitted.) Akl’s counterclaim would have an effect on him, but not on the bankruptcy case, and the counterclaim does not entail court-approved professionals of the estate over whom this court has special bankruptcy supervisory powers such as to constitute a matter affecting the administration of bankruptcy cases. Thus, the counterclaim does not “arise in” the bankruptcy case or otherwise fit within any of the categories of bankruptcy jurisdiction over matters having an effect on the bankruptcy.

B.

That this is the proper interpretation of § 1334(b) is demonstrated by a consideration of the same term (“arising in”) used in 28 U.S.C. § 157(b)(1) in describing “core proceedings” that a judge may hear and decide. Upon a referral from the district court, § 157(b)(1) authorizes the bankruptcy judge in the bankruptcy case to hear and determine “all core proceedings arising under title 11, or arising in a case under title 11,” but, without the consent of the parties under 28 U.S.C. § 157(c), the bankruptcy judge may not both hear and determine a matter that is not a core proceeding and that is only an otherwise “related to” proceeding.

“Cases under title 11, proceedings arising under title 11, and proceedings arising in a case under title 11 are referred to as ‘core’ proceedings; whereas proceedings [that are only otherwise] ‘related to’ a case under title 11 are referred to as ‘non-core’ proceedings.” In re Combustion Eng’g, Inc., 391 F.3d 190, 225 (3d Cir.2004). There theoretically could be a proceeding that arises in the bankruptcy case in the sense of being temporally related to the pendency of the bankruptcy case but that is not of a core nature because it does not go to the heart of bankruptcy administration. But I nevertheless think that Combustion Engineering got it right: if a proceeding arises during the pendency of a bankruptcy case but does not go to the heart of bankruptcy administration, it cannot be said to “arise in” the bankruptcy case in a functional sense.

This interpretation of “arising in” jurisdiction is consistent with the conclusion in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), that the adjudication of claims against third parties (as opposed to claims against the estate) asserting state-created private rights is not at the core of the federal bankruptcy power.

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Bluebook (online)
397 B.R. 546, 2008 Bankr. LEXIS 3692, 2008 WL 5120740, Counsel Stack Legal Research, https://law.counselstack.com/opinion/virginia-hospital-centerarlington-health-system-v-akl-in-re-akl-dcd-2008.