In re Gary Brew Enterprises Ltd., Bankruptcy No. 96-12643-A7. Adv. No. 96-90279.

• Decision Date: 22 July 1996
• Docket Number: Bankruptcy No. 96-12643-A7. Adv. No. 96-90279.
• Citation: 198 BR 616
• Court: U.S. Bankruptcy Court — Southern District of California
• Parties: In re GARY BREW ENTERPRISES LTD., d/b/a National City Jeep Eagle, Debtor. Donald J. THOMAS, Plaintiff, v. Adam ADAMS, Jr., Gary W. Brugh, and Joyce Brugh, and Gary Brew Ent. Ltd., Defendants.

198 B.R. 616 (1996)

In re GARY BREW ENTERPRISES LTD., d/b/a National City Jeep Eagle, Debtor.

Donald J. THOMAS, Plaintiff, v. Adam ADAMS, Jr., Gary W. Brugh, and Joyce Brugh, and Gary Brew Ent. Ltd., Defendants.

Bankruptcy No. 96-12643-A7. Adv. No. 96-90279.

United States Bankruptcy Court, S.D. California.

July 22, 1996.

Donald J. Thomas, San Diego, California, pro se.

Teryl Murabayashi, Christopher Celentino, Luce, Forward, Hamilton & Scripps, Los Angeles, California, for Chapter 7 Trustee.

ORDER

JOHN L. PETERSON, Chief Judge, Sitting by Designation.

Pending in this adversary proceeding is the Plaintiff's motion to remand this action to the U.S. District Court for the Southern District of California, after the action was removed to this Court by the Chapter 7 Trustee of the Defendant Gary Brew Ent. Ltd., Debtor.¹ Gary W. Brugh and Joyce Brugh are also Chapter 7 Debtors in Bankruptcy Case 95-00538-B7. An adversary proceeding by Thomas against Debtors Brugh is pending in case 96-09302-B7 seeking a determination of non-dischargeability under 11 U.S.C. § 523(a)(6). Both adversary proceedings have been assigned to this Court. The basis for the non-dischargeability complaint in cause 96-90302 is based on the same complaint and circumstances in this pending adversary proceeding, which is the alleged racial discrimination in employment under 42 U.S.C. § 1981 (42 U.S.C. § 2000(e)). It is also conceded that the Plaintiff filed Proofs of Claim in each Chapter 7 case seeking unliquidated damages of $100,000 against each Debtor based on the racial discrimination allegations.

Procedurally, the Plaintiff initially filed the racial discrimination complaint in the U.S. Bankruptcy Court in adversary proceeding no. 93-90264. That action was dismissed by Order of June 28, 1994, due to lack of prosecution. Plaintiff then renewed the action in the United States District Court on June 24, 1995, and filed the Second amended complaint on February 20, 1996. On February 15, 1996, the Chapter 7 Trustee filed objection to the Thomas Proof of Claim. On May 2, 1996, the Chapter 7 Trustee removed the District Court action to this Court. On May 6, 1996, the Trustee filed an answer to complaint. Plaintiff, on June 3, 1996, filed the pending motion to remand to District Court. This Court held a telephone conference hearing on the motion on July 11, 1996, after briefs were filed by the Plaintiff and the Chapter 7 Trustee. Brughs have not appeared in support or opposition to the remand motion. Further, on August 29, 1995, Defendant Adams filed a motion to dismiss the complaint under F.R.Civ.P. 12(b)(6) on the basis the action against Adams is barred by the applicable statute of limitations. Both parties have filed briefs on the Rule 12(b)(6) motion, which is still pending. Adams, however, filed an answer to the complaint on April 19, 1996, alleging, in part, an affirmative defense of the statute of limitations. In addition, there is a separate ground argued by Adams for dismissal that the complaint fails to allege that the plaintiff sought an administrative right to sue letter against Adams as required by 42 U.S.C. § 2000e-5(f)(1), which Adams contends must be affirmatively plead in the complaint.

MOTION TO REMAND

In re S.G. Phillips Constructors, Inc., 45 F.3d 702, 704-705 (2nd Cir.1995) states:

The Bankruptcy Code provides a non-exclusive list of matters that Congress considered to be within the bankruptcy court\'s core jurisdiction, including the "allowance or disallowance of claims against the estate." Id. § 157(b)(2)(B). In a case closely analogous to this case, we held that when a creditor files a proof of claim, the bankruptcy court has core jurisdiction to determine that claim, even if it was a prepetition contract claim arising under state law. In re Manville, 896 F.2d at 1396-97 896 F.2d 1384 (2nd Cir.1990). Phillips also analyzed whether an exception to the above general jurisdictional rule applied, one of which exceptions is based on In re Castlerock, 781 F.2d 159 (9th Cir.1986). Castlerock concedes that where a creditor files a proof of claim voluntarily, the matter on resolution of that claim is a core proceeding. Id. at 162. Where the creditor has not voluntarily filed a proof of claim, but has taken other "defensive" action in the case to protect its interests, Castlerock holds that such "defensive" maneuvering does not constitute voluntary appearance consenting to core jurisdiction. Id. at 163; see, In re BKW Systems, 66 B.R. 546, 548 (Bankr.D.N.H.1986)(Castlerock involved a unique situation in which the creditor was not given an opportunity to freely elect whether or not to assert a claim in the bankruptcy proceeding).

In the case sub judice, it is clear the Plaintiff not only freely and voluntarily filed a Proof of Claim in each Chapter 7 case, but the Plaintiff also took further affirmative action in filing the racial discrimination complaint in bankruptcy court as an adversary proceeding against the Debtor. In so doing, the Plaintiff necessarily became a party to the Court's core jurisdiction. Langenkamp v. Culp, 498 U.S. 42, 44, 111 S.Ct. 330, 331, 112 L.Ed.2d 343 (1990).

The above general rule would ordinarily resolve the matter against the Plaintiff's motion to remand. However, in 1984 the Congress adopted section 157(b)(5), which provides:

The district court shall order that personal injury tort and wrongful death claims shall be tried in the district in which the bankruptcy case is pending, or in the district court in the district in which the claim arose, as determined by the district court in which the bankruptcy case is pending.

Moreover, § 157(b)(2)(B) provides that core proceedings include the allowance or disallowance of claims against the estate "but not the liquidation or estimation of contingent or unliquidated personal injury torts or wrongful death claims against the estate for purposes of distribution in a case under title 11." Section 157(b)(4) then provides that non-core proceedings under § 157(b)(2)(B), i.e., personal injury tort claims, "shall not be subject to mandatory abstention provisions of section 1334(c)(2)."²

The Chapter 7 Trustee, on this issue under § 157(b)(2)(B), relies on In re Atron, Inc. of Michigan, 172 B.R. 541 (Bankr.W.D.Mich. 1994), holding section 1981 racial discrimination claims are not personal injury tort claims as that term is used in § 157. Atron relies on In re Interco, Inc., 135 B.R. 359 (Bankr.E.D.Mo.1991), and In re Cohen, 107 B.R. 453 (Bankr.S.D.N.Y.1989), while recognizing In re Boyer, 93 B.R. 313 (Bankr. N.D.N.Y.1988) and In re Smith, 95 B.R. 286 (Bankr.N.D.N.Y.1988) held civil rights actions are personal injury tort actions within the meaning of § 157(b)(2)(B) and (b)(5).³ Atron explains:

We believe, however, that drawing the distinction as did Interco, Cohen, In re Vinci 108 B.R. 439, and Bertholet v. Harman, 126 B.R. 413 between the "traditional, plain meaning sense" of the words "personal injury" and the emotional distress and humiliation of nontraditional personal injury tort claims yields the logical, preferable result.

Atron, 172 B.R. at 545. The Atron court looked to the complaint to determine the nature of the relief sought, noting an absence of allegation that "humiliation and emotional distress" were so severe that they rose to the level of a personal injury tort.

After analysis, however, I hold the Atron decision does not comport with the U.S. Supreme Court decisions dealing with civil rights actions. Two seminal decisions, Wilson v. Garcia, 471 U.S. 261, 105 S.Ct. 1938, 85 L.Ed.2d 254 (1985) and Goodman v. Lukens Steel Co., 482 U.S. 656, 107 S.Ct. 2617, 96 L.Ed.2d 572 (1987) give keen insight as to the nature of the litigation under §§ 1981 and 1983. Wilson, 471 U.S. at 276-278, 105 S.Ct. at 1947-1948, holds:

After exhaustively reviewing the different ways that § 1983 claims have been characterized in every Federal Circuit, the Court of Appeals concluded that the tort action for the recovery of damages for personal injuries is the best alternative available. Garcia v. Wilson, 731 F.2d 640, at 650-651. We agree that this choice is supported by the nature of the § 1983 remedy, and by the federal interest in ensuring that the borrowed period of limitations not discriminate against the federal civil rights remedy.

* * * * * *

The atrocities that concerned Congress in 1871 plainly sounded in tort. Relying on this premise we have found tort analogies compelling in establishing the elements of a cause of action under § 1983, Monroe v. Pape, 365 U.S. 167, at 186 81 S.Ct. 473, 483-484, 5 L.Ed.2d 492 (1961), and in identifying the immunities available to defendants, Briscoe v. LaHue, 460 U.S. 325, at 330 103 S.Ct. 1108, 1112-1113, 75 L.Ed.2d 96 (1983); City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 258 101 S.Ct. 2748, 2755, 69 L.Ed.2d 616 (1981); Pierson v. Ray, 386 U.S. 547, 553-557 87 S.Ct. 1213, 1217-1219, 18 L.Ed.2d 288 (1967). As we have noted, however, the § 1983 remedy encompasses a broad range of potential tort analogies, from injuries to property to infringements of individual liberty.

Among the potential analogies, Congress unquestionably would have considered the remedies established in the Civil Rights Act to be more analogous to tort claims for personal injury than, for example, to claims for damages to property or breach of contract. The unifying theme of the Civil Rights Action of 1871 is reflected in the language of the Fourteenth Amendment that unequivocally recognizes the equal status of every "person" subject to the jurisdiction of any of the several States. The Constitution\'s command is that all "persons" shall be accorded the full privileges of citizenship; no person shall be deprived of life, liberty, or property without due process of law or be denied the equal protection of the laws. A violation of that command is an injury to the individual rights of the person.

Relying on the language of the statute, the Court of

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