In re Jones
| Citation | 410 B.R. 632 |
| Decision Date | 10 February 2009 |
| Docket Number | Bankruptcy No. 07-01203-JDP.,Adversary No. 08-6050. |
| Parties | In re Darice JONES, Debtor. Darice Jones on behalf of herself and the Estate of Darice Jones, Plaintiff, v. State Farm Mutual Auto Insurance Company, Defendant. |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Idaho |
Kurt Holzer, Holzer Edwards, Chartered, Boise, ID, for Plaintiff.
Julianne S. Hall, Gjording & Fouser, Boise, ID, for Defendant.
In this adversary proceeding, Defendant State Farm Mutual Auto Insurance Company has filed a "Motion to Dismiss, or, in the Alternative, Motion Requesting Abstention or a Notice of Removal to the U.S. District Court for the State of Idaho." Adv. Docket No. 8.1 The motion was briefed by the parties, after which the Court conducted a hearing on November 18, 2008, and took the issues raised by the motion under advisement. This decision resolves the motion.2
Unless otherwise noted, the following facts are not in dispute.
On March 3, 2004, Plaintiff Darice Jones was involved in an automobile accident with Goldie L. Patterson. Ms. Patterson was at fault. Plaintiff retained counsel, and on February 28, 2006, sued Ms. Patterson in state court. Ms. Patterson's policy of insurance, issued to her by Allstate Insurance Company ("Allstate"), limited Allstate's liability for Ms. Patterson's negligence to $25,000 per incident. Plaintiff incurred approximately $60,000 in medical expenses as a result of injuries suffered in the accident.3
Plaintiff was insured under a policy issued by Defendant ("Policy"). Adv. Docket No. 26, Ex. 9. The Policy included "underinsured" motorist ("UIM") coverage in the amount of $25,000, as well as medical payments benefits in the amount of $10,000. Adv. Docket Nos. 11, Ex. A, and 26, Ex. 3.
On March 27, 2007, Plaintiff's counsel submitted to Defendant's representative several documents to support her claim for UIM benefits, including copies of discovery responses from the state court action, medical records and bills.4 Adv. Docket No. 11, Ex. D.
Plaintiff filed a voluntary chapter 75 bankruptcy petition on August 2, 2007. BK Docket No. 1. On November 14, 2007, the Court entered an order approving the employment of Plaintiff's state court counsel, Mr. Holzer, by Gary L. Rainsdon, chapter 7 trustee, to serve as his special counsel to pursue recovery of Plaintiff's personal injury claim. BK Docket No. 26.
Although the record does not indicate a specific date, at some point, Defendant paid $10,000 directly to Plaintiff's medical providers. Adv. Docket No. 26, Ex. 8. That amount was eventually reimbursed to Defendant by Allstate.
On June 11, 2008, Allstate offered to pay the amounts remaining under the Patterson policy's liability coverage to Plaintiff. BK Docket No. 33, Ex. A. Plaintiff's attorney informed Defendant about Allstate's settlement offer in a letter dated June 12, 2008. Adv. Docket Nos. 11, Ex. G, and 26, Ex. 4. In that letter, counsel sought Defendant's permission to accept Allstate's policy limits offer. The letter also demanded that Defendant pay Plaintiff the $10,000 in medical payments, as well as the $25,000 in UIM benefits provided for by the Policy. On September 2, 2008, the Court approved this proposal as a compromise between the Plaintiff, trustee, and Allstate. BK Docket No. 43.
When Defendant did not make payment to Plaintiff as demanded, on July 15, 2008, Plaintiff, acting individually and on behalf of the trustee and bankruptcy estate, commenced this adversary proceeding against Defendant. Adv. Docket No. 1. In the complaint, Plaintiff sought a judgment against Defendant for the $25,000 UIM benefits, the $10,000 medical benefits, together with prejudgment interest, attorney fees and costs as provided by Idaho Code § 41-1839. Id.
On July 25, 2008, forty-two days after the June 12, 2008 letter, and ten days after this adversary proceeding was commenced, Defendant paid Plaintiff $35,000. Adv. Docket No. 26, Ex. 7.
On August 4, 2008, Plaintiff filed an amended complaint seeking only prejudgment interest in the amount of $483.42, as well as attorney fees and costs in the amount of $11,827.80. Adv. Docket No. 5. Defendant responded on September 4, 2008, with the instant motion to dismiss. Adv. Docket No. 8.
Defendant's Motion to Dismiss asserts alternate grounds. Initially, Defendant moves for dismissal of this adversary proceeding under Federal Rule of Civil Procedure 12(b)(1)6 because, Defendant argues, this Court lacks subject matter jurisdiction over this action. In the alternative, and assuming the Court has jurisdiction, Defendant asks the Court to abstain from adjudicating this dispute, and to instead "remand" the action to state court. Finally, and also alternatively, Defendant contends that this action should be "removed" to the United States District Court.
As discussed below, none of Defendant's arguments have merit.
A defendant in a civil action may move to dismiss a complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) in one of two ways. Plum Creek Timber Co., Inc. v. Trout Unlimited, 255 F.Supp.2d 1159, 1161-62 (D.Idaho 2003) (citing Thornhill Publ'g Co., Inc. v. General Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir.1979)). First, the defendant may challenge the complaint on its face by attacking the sufficiency of the allegations in the complaint supporting subject matter jurisdiction. Plum Creek, 255 F.Supp.2d at 1161. Second, a defendant may challenge a complaint by "attacking the existence of subject matter jurisdiction in fact." Id. at 1161 (quoting Thornhill, 594 F.2d at 733).
Construing Defendant's motion fairly, the Court concludes it mounts a facial attack on Plaintiff's invocation of the bankruptcy court's subject matter jurisdiction. To resolve such a challenge to jurisdiction under Rule 12(b)(1), the trial court should apply the same standard utilized for resolving Rule 12(b)(6) motions, which requires that the court "consider the allegations of the complaint to be true and construe them in the light most favorable to the plaintiff." Id. at 1161-62 (citing Love v. United States, 915 F.2d 1242, 1245 (9th Cir.1989)).
While the question of whether a bankruptcy court has jurisdiction over a particular action is always fact-dependent, the legal framework within which those facts are examined is well-established.
Bankruptcy courts are legislative courts, created by Congress under Article I of the Constitution to administer the federal Bankruptcy Code, found in title 11 of the United States Code. In connection with the sweeping revisions to the bankruptcy laws made by Congress in 1978, the bankruptcy courts' jurisdiction was significantly expanded, a measure the Supreme Court found to be constitutionally flawed a few years later. Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982).
To address this development, in 1984, Congress again revised bankruptcy court jurisdiction, this time conferring jurisdiction for bankruptcy cases and related matters upon district courts. 28 U.S.C. § 1334. At the same time, Congress designated bankruptcy courts as jurisdictional "units" of those district courts, 28 U.S.C. § 151. Under this new system, the district courts were authorized to refer all bankruptcy cases and matters to the bankruptcy courts. 28 U.S.C. § 157(a). Referred cases and matters could be withdrawn by the district court in appropriate cases, 28 U.S.C. § 157(d), or they could be stayed if abstention was justified. 28 U.S.C. § 1334(c).
Because of the constitutional issues targeted in Marathon, Congress apparently recognized that bankruptcy courts, as Article I courts, could not render final judgments in all disputes falling within the broad bankruptcy jurisdiction it had granted the district courts. To avoid another Marathon, the revised jurisdictional statutes provided that while bankruptcy courts could hear and finally determine certain matters, for others, the bankruptcy courts would instead be required to submit a report and recommendation to the district courts for final action, which recommendation the district courts would review de novo. 28 U.S.C. § 157(b).
More particularly, under the revised jurisdictional scheme, Congress bestowed jurisdiction in the district courts over "all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b). In turn, 28 U.S.C. § 157(a) provides that the district court "may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district." The district court in the District of Idaho has made such a reference. See General Order No. 38.7 Thus, to determine whether the bankruptcy court may enter a final judgment or order resolving a dispute, the Court must determine whether this action arises under, arises in, or is related to a case under title 11.
In this adversary proceeding, Plaintiff sues Defendant, her insurer, to recover interest, attorneys fees and costs. Obviously, such an action does not "arise under" title 11, terminology in the jurisdictional statute which essentially refers to bankruptcy cases. In re Vylene Enters., Inc., 968 F.2d 887, 889 (9th Cir.1992) ()
This dispute also does not, in the special parlance of bankruptcy jurisdiction, "arise in" a bankruptcy case.
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...for attorneys fees and costs are core proceedings, she is wrong. See id. at 912;see also Estate of Jones v. State Farm Mut. Auto Ins. Co. (In re Jones), 410 B.R. 632, 639–40 (Bankr.D.Idaho 2009) (concluding that state law insurance claim and claim for attorneys fees and costs were non-core ......
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Schmid v. Bank of Am., N.A. (In re Schmid)
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