430 F.3d 1083 (9th Cir. 2005), 03-55963, In re Miles

Docket Nº:03-55963, 03-55964, 03-55965, 03-55966, 03-55967, 03-55969.
Citation:430 F.3d 1083
Party Name:In re Rodney Cassimer MILES, aka Rodney C. Miles, Rod Miles, Debtor, Ann R. Miles, Appellant, v. David B. Okun; Sheila Reiser-Okun; David B. Okun, M.D., F.A.C.P., a California Medical Corporation, aka Okun Corporation; David B. Okun, M.D., F.A.C.P., a Medical Corporation Money Purchase Plan, aka Okun Pension Plan; Okun Family Trust u/d/t/ March 10,
Case Date:December 12, 2005
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 1083

430 F.3d 1083 (9th Cir. 2005)

In re Rodney Cassimer MILES, aka Rodney C. Miles, Rod Miles, Debtor,

Ann R. Miles, Appellant,

v.

David B. Okun; Sheila Reiser-Okun; David B. Okun, M.D., F.A.C.P., a California Medical Corporation, aka Okun Corporation; David B. Okun, M.D., F.A.C.P., a Medical Corporation Money Purchase Plan, aka Okun Pension Plan; Okun Family Trust u/d/t/ March 10, 1988; Emmanuel & Ann S.N. Reiser Revocable Trust, aka Reiser Trust; Andrew K. Mauthe; M. Stephen Coontz; Milburn A. Matthews; Coontz & Matthews LLP; Lauren Elizabeth Murphy; Susan A. Spitzo; Vera J. Ferguson; Nancy M. Vold, Appellees.

In re Rodney Cassimer Miles, aka Rodney C. Miles, Rod Miles, Debtor,

Melinda Miles, Appellant,

v.

David B. Okun; Sheila Reiser-Okun; David B. Okun, M.D., F.A.C.P., a California Medical Corporation, aka Okun Corporation; David B. Okun, M.D., F.A.C.P., a Medical Corporation Money Purchase Plan, aka Okun Pension Plan; Okun Family Trust u/d/t/ March 10, 1988; Emmanuel & Ann S.N. Reiser Revocable Trust, aka Reiser Trust; Andrew K. Mauthe; M. Stephen Coontz; Milburn A. Matthews; Coontz & Matthews LLP; Lauren Elizabeth Murphy; Susan A. Spitzo; Vera J. Ferguson; Nancy M. Vold, Appellees.

In re Rodney Cassimer Miles, aka Rodney C. Miles, Rod Miles, Debtor,

Kelly Cunningham, Appellant,

v.

David B. Okun; Sheila Reiser-Okun; David B. Okun, M.D., F.A.C.P., a California Medical Corporation, aka Okun Corporation; David B. Okun, M.D., F.A.C.P., a Medical Corporation Money Purchase Plan, aka Okun Pension Plan; Okun Family Trust u/d/t/ March 10, 1988; Emmanuel & Ann S.N. Reiser Revocable Trust, aka Reiser Trust; Andrew K. Mauthe; M. Stephen Coontz; Milburn A. Matthews; Coontz & Matthews LLP; Lauren Elizabeth Murphy; Susan A. Spitzo; Vera J. Ferguson; Nancy M. Vold, Appellees.

In re Rodney Cassimer Miles, aka Rodney C. Miles, Rod Miles, Debtor,

Melinda Miles, Appellant,

v.

David B. Okun; Sheila Reiser-Okun; David B. Okun, M.D., F.A.C.P., a California Medical Corporation, aka Okun Corporation; David B. Okun, M.D., F.A.C.P., a Medical Corporation Money Purchase Plan, aka Okun Pension Plan; Okun Family Trust u/d/t/ March 10, 1988; Emmanuel & Ann S.N. Reiser Revocable Trust, aka Reiser Trust; Andrew K. Mauthe; M. Stephen Coontz; Milburn A. Matthews; Coontz & Matthews LLP; Lauren Elizabeth Murphy; Susan A. Spitzo; Vera J. Ferguson; Nancy M. Vold, Appellees.

In re Rodney Cassimer Miles, aka Rodney C. Miles, Rod Miles, Debtor,

Ann R. Miles, Appellant,

v.

David B. Okun; Sheila Reiser-Okun; David B. Okun, M.D., F.A.C.P., a California Medical Corporation, aka Okun Corporation; David B. Okun, M.D., F.A.C.P., a Medical Corporation Money Purchase Plan, aka Okun Pension Plan; Okun Family Trust u/d/t/ March 10, 1988; Emmanuel & Ann S.N. Reiser Revocable Trust, aka Reiser Trust; Andrew K. Mauthe; M. Stephen Coontz; Milburn A. Matthews; Coontz & Matthews LLP; Lauren Elizabeth Murphy; Susan A. Spitzo; Vera J. Ferguson; Nancy M. Vold, Appellees.

In re Rodney Cassimer Miles, aka Rodney C. Miles, Rod Miles, Debtor,

Kelly Cunningham, Appellant,

v.

David B. Okun; Sheila Reiser-Okun; David B. Okun, M.D., F.A.C.P., a California Medical Corporation, aka Okun Corporation; David B. Okun, M.D., F.A.C.P., a Medical Corporation Money Purchase Plan, aka Okun Pension Plan; Okun Family Trust u/d/t/ March 10, 1988; Emmanuel & Ann S.N. Reiser Revocable Trust, aka Reiser Trust; Andrew K. Mauthe; M. Stephen Coontz; Milburn A. Matthews; Coontz & Matthews LLP; Lauren Elizabeth Murphy; Susan A. Spitzo; Vera J. Ferguson; Nancy M. Vold, Appellees.

Nos. 03-55963, 03-55964, 03-55965, 03-55966, 03-55967, 03-55969.

United States Court of Appeals, Ninth Circuit
December 12, 2005
Argued and Submitted February 16, 2005—Pasadena, California.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel, BAP Nos. CC-02-01528-KJP, CC-02-01529-KJP, CC-02-01537-KJP, CC-02-01544-KJP, CC-02-01545-KJP, CC-02-01546-KJP, Penis, Jellen, and Klein, Bankruptcy Judges, Presiding.

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[Copyrighted Material Omitted]

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Rodney C. Miles, Laguna Niguel, CA, for the appellants.

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Nanette D. Sanders and Michael B. Reynolds, Snell & Wil-mer L.L.P., Irvine, California, for the appellees.

Before: Andrew J. Kleinfeld, Kim McLane Wardlaw, and Marsha S. Berzon, Circuit Judges.

WARDLAW, Circuit Judge:

Ann Miles, Melinda Miles, and Kelly Cunningham (collectively "Appellants") appeal from a decision of the United States Bankruptcy Appellate Panel of the Ninth Circuit ("BAP") affirming the removal and dismissal of their state law causes of action for damages resulting from the filing of involuntary bankruptcy petitions against their relatives. We hold that because 11 U.S.C. § 303(i) completely preempts state law tort causes of action for damages predicated upon the filing of an involuntary bankruptcy petition, the bankruptcy court had "arising under" jurisdiction over the proceedings, and thus did not err in denying Appellants' motions to remand. Further, because Appellants lack standing to seek damages under § 303(i), the bankruptcy court properly dismissed their complaints.

I.

BACKGROUND

David Okun, Sheila Reiser-Okun, and several entities owned by or affiliated with the Okuns filed ten involuntary bankruptcy petitions against Rodney Miles, Ann Miles, and related businesses owned by or affiliated with the Miles's. The bankruptcy court dismissed Rodney's case on the ground that he was generally paying his undisputed debts as they became due. It dismissed the remaining nine involuntary bankruptcy cases, including the one filed against Ann, on multiple grounds, one of which was that the petitions were filed in bad faith.1 The bankruptcy court retained jurisdiction to determine the alleged debtors' rights to attorneys' fees, costs, and damages under 11 U.S.C. § 303(i).

After the bankruptcy court dismissed the involuntary bankruptcy cases, Ann and the Miles's daughters, Melinda Miles and Kelly Cunningham, filed three substantially identical tort actions in California state court seeking damages for the filing and prosecution of the involuntary petitions. The complaints alleged state law causes of action for negligence, defamation, false light, abuse of process, intentional and negligent infliction of emotional distress, and negligent misrepresentation. No Appellant sought damages arising from an involuntary petition filed against her. Rather, each Appellant sought damages arising solely from an involuntary petition filed against one or two of her relatives. The causes of action asserted by Melinda and Kelly were based on the bankruptcy court's finding that the involuntary petition against their mother, Ann, was filed in bad faith, and the bankruptcy court's dismissal of the involuntary petition against their father, Rodney, on the basis that he was generally paying his undisputed debts as they became due. The causes of action asserted by Ann were based solely on the bankruptcy court's dismissal of the involuntary petition against her husband, Rodney.

Page 1087

The named defendants included the petitioning creditors in the involuntary bankruptcy actions, their lawyers, and the law firm's paralegals and secretaries who worked on the cases (collectively "Appellees").

Appellees removed the three actions from state court to bankruptcy court pursuant to 28 U.S.C. § 1452(a). They then filed motions to dismiss the removed complaints, contending that federal law preempted all of the state law causes of action pleaded in the complaints. While these motions were pending, Appellants moved for remand under 28 U.S.C. § 1452(b) on the premises that the removal was untimely and that there was no federal jurisdiction over damages claims by third parties resulting from the filing of an involuntary bankruptcy petition.

The bankruptcy court refused to remand the state law causes of action, holding that it had "arising under" jurisdiction over those causes of action because they were completely preempted by 11 U.S.C. § 303(i). It then dismissed the complaints on the basis that § 303(i) does not authorize damages for third parties who claim to be harmed by the filing of an involuntary bankruptcy petition. The BAP affirmed the reasoning and ultimate decision of the bankruptcy court in a published opinion, Miles v. Okun (In re Miles),, 294 B.R. 756 (B.A.P. 9th Cir. 2003), and this appeal ensued. Because appeals from the BAP are subject to de novo review, we independently review the bankruptcy court's decision. Liberty Tool, &Mfg. v. Vortex Fishing Sys., Inc. (In re Vortex Fishing Sys., Inc.), 277 F.3d 1057, 1064 (9th Cir. 2002).

II.

REMOVAL JURISDICTION

Appellants challenge the bankruptcy court's exercise of removal jurisdiction. To analyze this issue, we must determine whether jurisdiction over Appellants' state law tort actions existed in the district court to support the bankruptcy court's derivative jurisdiction. See Dunmore v. United States, 358 F.3d 1107, 1113 (9th Cir. 2004).

Jurisdiction was premised on 28 U.S.C. § 1452(a), which provides for removal of a state action "to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title." 28 U.S.C. § 1452(a). Section 1334(b), in turn, provides that "the district courts shall have 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(b).

The bankruptcy court and the BAP held that because 11 U.S.C. § 303(i) completely preempts state law tort actions for damages resulting from the filing of an involuntary bankruptcy petition, Appellants' complaints necessarily "arise under" title 11, and thus were removable under 28 U.S.C. § 1452(a). See In re Miles, 294 B.R. at 762. Appellants contend...

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