Sikirica v. Harber (In re Harber)
| Decision Date | 31 May 2016 |
| Docket Number | Case No. 14–20155–GLT |
| Citation | 553 B.R. 522 |
| Parties | In re: Brent Harber and Elizabeth Ann Harber, Debtors. Jeffrey J. Sikirica, chapter 7 trustee, Movant, v. Brent Harber and Elizabeth Ann Harber, Respondents. |
| Court | U.S. Bankruptcy Court — Western District of Pennsylvania |
Jeffrey J. Sikirica, Esq., Chapter 7 Trustee
Glen R. Bartifay, Esq., Attorney for the Debtors
GREGORY L. TADDONIO
Before the Court is the Motion to Compel Turnover of Property of the Estate (the “Turnover Motion”) filed by the chapter 7 trustee, Jeffrey J. Sikirica (“Trustee”). A response in opposition was filed by Brent and Elizabeth Ann Harber. Because the Trustee has not carried his burden of proof, the Turnover Motion is DENIED.
Mrs. Harber underwent two hip replacement surgeries. The first occurred on her left hip in 2007, and was followed by a replacement of the right hip in 2008.2 In both procedures, the surgeon implanted products manufactured by DePuy Orthopaedics, Inc. (“DePuy”).
Three years later, Mrs. Harber received a letter from the Allegheny General Hospital Department of Orthopaedic Surgery advising her that a “small number of patients with the hip implant
you received have experienced problems that required additional care and potentially further treatment ...”3 Shortly after receiving this letter, the Harbers were contacted by the law firm of Beasly, Allen, Crow, Methvin, Portis & Miles, P.C. (“Beasly”) for the purpose of representing them in a personal injury lawsuit against DePuy. After the Harbers retained the services of the Beasly firm, Mrs. Harber was listed among the plaintiffs in a class action lawsuit filed against DePuy before the United States District Court for the Northern District of Ohio.
The Harbers filed a chapter 7 petition on January 14, 2014, and the Trustee was appointed the following day. Among the personal property listed on Schedule B of the bankruptcy schedules, the Harbers identified the following asset as a contingent and unliquidated claim with a value of $0.00:
Claim against DePuy Orthopaedics, Inc. for recall of wife's hip replacement; hip replacement is currently operating satisfactorily, no damages as yet
(the “Claim”). On August 27, 2014, the Trustee filed a motion to close the case and exclude the Claim from abandonment. The Harbers did not respond to the motion and the Court thereafter entered a default order on September 18, 2014 which closed the case and excepted the following asset from abandonment:
A potential claim against DePuy Orthopaedics, Inc. related to the recall of a hip replacement4
The Court's order also directed the Harbers and their bankruptcy counsel to immediately notify the Trustee in writing if “any counsel is retained to pursue the claim or if there is any recovery or offer to settle[.]”5 At no time during the bankruptcy case was Beasly authorized to act as special counsel to either the Harbers or the Trustee.
In November 2014, Beasly advised Mrs. Harber to consider a voluntary dismissal of her District Court claim because she was not required to undergo corrective surgery to either hip. DePuy took the position that plaintiffs who had not undergone corrective surgery were ineligible for compensation, and Beasly feared that if Mrs. Harber proceeded with her claim at that stage, it could be dismissed with prejudice. By voluntarily dismissing the claim without prejudice, Beasly suggested the claim could be refiled in the event revision surgery became necessary in the future.
Shortly thereafter, on November 26, 2014, Mrs. Harber learned that metal had entered her bloodstream as a result of metal-on-metal contact involving the replacement hardware on her left hip. She was advised that immediate revision of the left hip was required. Prior to this time, Mrs. Harber had not experienced any problems with her hip replacements.
Notwithstanding this discovery, Mrs. Harber executed an Election Form for Non-Revised Plaintiffs on December 3, 2014 to dismiss her claim in the District Court without prejudice. The District Court dismissed her claim without prejudice on January 9, 2015. At no time did Mrs. Harber seek approval from this Court or the Trustee to dismiss the case.
Revision surgery on Mrs. Harber's left hip occurred on January 15, 2015.
The Trustee moved to reopen the bankruptcy case in May 2015 after the Harbers' bankruptcy counsel informed him of an “offer” to settle the Claim for $142,000.6 According to the parties, Beasly is willing to refile a complaint on behalf of the Harbers in the District Court action where the DePuy claims are administered. Beasly proposed to settle the Harbers' claims for $142,000, but as of this date, DePuy has not agreed to any payment.
After the bankruptcy case was reopened, the Trustee filed a notice of assets, and creditors were instructed to file proofs of claim.7 The claims bar date has now passed and only five claims were filed against the bankruptcy estate in an aggregate amount totaling $5,979.57.8
The Trustee filed the Turnover Motion to recover any proceeds the Harbers may receive from DePuy. The Harbers oppose this request, contending that the Claim is not property of the estate because Mrs. Harber did not sustain an injury until well after the bankruptcy estate was closed.
The Court has jurisdiction over this matter under 28 U.S.C. §§ 1334
and 157(b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(E). Venue is proper under 28 U.S.C. § 1409.
Under the Bankruptcy Code, the trustee has the exclusive authority to administer and dispose of property within the bankruptcy estate.9 Among his responsibilities, a trustee is charged with the duty to “collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest[.]”10 The corresponding duty of a chapter 7 debtor is provided in section 521(a)(4) which mandates the surrender of all estate property to the trustee.
As defined in the Bankruptcy Code, “property of the estate” includes “all legal or equitable interests of the debtor in property as of the commencement of the case.”11 The concept of estate property “was intended to sweep broadly to include ‘all kinds of property, including tangible or intangible property, [and] causes of action[.]’ ”12 A cause of action can be considered property of the bankruptcy estate “if the claim existed at the commencement of the filing and the debtor could have asserted the claim on his own behalf under state law.”13 If a cause of action falls within these parameters, the trustee may pursue the claim for the benefit of the bankruptcy estate. Conversely, a claim, cause of action, or other property acquired postpetition is generally not considered property of the estate and may be pursued by the debtor for her own personal benefit.14
If the debtor fails to dutifully surrender property of the estate, the trustee can move for turnover of the property under sections 542(a) and 521(a)(4).15 To support a cause of action for turnover, the bankruptcy trustee has the burden of proof to establish, by a preponderance of the evidence, that (1) the property is available for the trustee's use as property of the estate (or may be exempted by the debtor under section 522); (2) the property is in the possession, custody, or control of another entity; and (3) the property has more than an inconsequential value to the debtor's estate.16
In this case, it is undisputed that the Harbers are in control of the property. It is also clear that the potential value of the cause of action is not inconsequential. Based on Beasly's estimates, the claim could settle for as much as $142,000, an amount which is more than sufficient to satisfy all unsecured claims against the bankruptcy estate. It is, however, hotly disputed that the cause of action constitutes property of the estate.
The parties offer two distinct methods to determine whether a cause of action is property of the estate. The Harbers advocate the “accrual approach” whereby the courts examine when a cause of action accrued under applicable state law. Since Mrs. Harber's putative cause of action arose in the Commonwealth of Pennsylvania, the accrual approach requires an examination under Pennsylvania law to determine whether a claim existed as of the petition date. In contrast, the Trustee relies on caselaw from the United States Supreme Court to argue that a cause of action which accrues postpetition may nonetheless be property of the estate if it is “sufficiently rooted” in the debtor's pre-bankruptcy past.17 The Court will analyze the facts under each approach.
Although federal law determines when a debtor's interest in property becomes property of the estate for purposes of section 541
, state law usually controls whether the debtor has such an interest.18 Under Pennsylvania law, “a cause of action accrues only when one has the right to institute a suit.”19 As explained by the Pennsylvania Supreme Court, a claim accrues on the date “the plaintiff could have first maintained the action to a successful conclusion” by holding an enforceable claim or right after sustaining an injury that gives rise to damages.20 In the context of a personal injury tort which sounds in negligence, Pennsylvania law requires that the following elements be present: (1) the existence of a legal duty on the part of the defendant; (2) a breach of that duty by the defendant; (3) a causal connection between the defendant's breach and the resulting injury; and (4) actual damage suffered as a result.21 Additionally, in a tort case such as this, “the injury is done when the act heralding a possible tort inflicts a damage which is physically objective and ascertainable.”22
It is indisputable that implanting an artificial device in the human body imposes a duty on the medical practitioner and device manufacturer to assure that the device will not cause...
To continue reading
Request your trial
-
In re Vasquez
...claim in warranty, negligence or strict product liability to accrue, the injury must be "objectively ascertainable"); In re Harber, 553 B.R. 522, 527 (Bankr. W.D. Pa. 2016) (finding the debtor's cause of action accrued under Pennsylvania law when she discovered she was injured by the device......
-
Becker v. Bank of N.Y. Mellon Trust Co.
...is generally not considered property of the estate and may be pursued by the debtor for her own personal benefit." In re Harber, 553 B.R. 522, 527 (Bankr. W.D. Pa. 2016) (citing § 541(a) (defining property of the estate to include those interests existing "as of the commencement of the case......
-
In re Calixto
...v. Machado , 804 F.2d 1537, 1543 (11th Cir. 1986) ).56 Fed. R. Bank. P. 1009(a).57 Waldron , 536 F.3d at 1245.58 In re Harber , 553 B.R. 522, 534 (Bankr. W.D. Pa. 2016)59 Id. (quoting Ryan Operations G.P. v. Santiam–Midwest Lumber Co. , 81 F.3d 355, 362 (3d Cir. 1996) ).60 871 F.3d 1174 (11......
-
In re Carroll
...case, though, then the cause of action (and any proceeds from it) is not property of the estate. See Sikirica v. Harber (In re Harber) , 553 B.R. 522 (Bankr. W.D. Pa. 2016) (holding that potential settlement payment from debtor's personal injury claim was not property of the estate because,......
-
CHAPTER 5 UNDISCLOSED OR UNKNOWN PRE-PETITION ASSETS
...that amending the schedules would serve a significant purpose and not be inconsequential.").[19] Sikirica v. Harber (In re Harber), 553 B.R. 522, 529 (Bankr. W.D. Pa. 2016).[20] 11 U.S.C. § 541.[21] 11 U.S.C. § 541(a)(1).[22] In re Yonikus, 996 F.2d 866, 869 (7th Cir. 1993).[23] Segal v. Ro......