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Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 15-2622

_____________

SARA ROSENBERG,

INDIVIDUALLY AND AS TRUSTEE OF THE 

DOUGLAS ROSENBERG 2004 TRUST, 

SEPARATELY AND AS GENERAL PARTNER OF 

THE PENNSYLVANIA LIMITED PARTNERSHIPS 

209 CHESTNUT ST. ASSOC., LP; 

1501 EDGEMONT ASSOCIATES, LP; 

1538 DEKALB ASSOCIATES, LP;

1561 MEDICAL DRIVES ASSOCIATES, LP; 

IMAGING PROPERTIES OF ILLINOIS, LP;

IMAGING PROPERTIES OF PHILADELPHIA, LP; 

IMAGING PROPERTIES OF ROXBOROUGH, LP; 

LANE LIMITED PARTNERSHIP, IV,

 Appellants

v.

DVI RECEIVABLES XVII, LLC; DVI FUNDING, LLC; 

JANE FOX; LYON FINANCIAL SERVICES INC, d/b/a 

U.S. BANK PORTFOLIO SERVICES;

U.S. BANK NA, A NATIONAL ASSOCIATION 

ORGANIZED IN MINNESOTA 

________________

Case: 15-2622 Document: 003112392387 Page: 1 Date Filed: 08/29/2016
2

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. Civil Action No. 2-14-cv-05608)

District Judge: Honorable Cynthia M. Rufe

________________

Argued March 1, 2016

Before: AMBRO, JORDAN and SCIRICA, Circuit Judges

(Opinion filed: August 29, 2016)

Lewis J. Pepperman (ARGUED)

Stark & Stark

993 Lenox Drive, Building 2

Lawrenceville, NJ 08648

Tucker H. Byrd

Scottie N. McPherson

180 Park Avenue North, Suite 2A

Winter Park, FL 32789

Counsel for Appellants

Craig A. Hirneisen

Stacey A. Scrivani

Stevens & Lee

111 North Sixth Street

P.O. Box 679

Reading, PA 19603

Case: 15-2622 Document: 003112392387 Page: 2 Date Filed: 08/29/2016
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Peter H. Levitt (ARGUED)

Jack C. McElroy

Shutts & Bowen

200 South Biscayne Boulevard

Suite 4100

Miami, FL 33131

Counsel for Appellees

________________

OPINION OF THE COURT

________________

AMBRO, Circuit Judge

This appeal presents a question of federal preemption 

law. In November 2008, DVI Funding, LLC and several 

entities known as DVI Receivables filed involuntary 

bankruptcy petitions against Maury Rosenberg and his 

affiliated businesses. After the Bankruptcy Court dismissed 

the involuntary petitions, Rosenberg recovered attorney’s 

fees, costs, and damages under § 303(i) of the Bankruptcy 

Code. Now Rosenberg’s wife and several limited 

partnerships associated with Rosenberg—persons and entities 

not named in the bankruptcy—have brought a tortious 

interference claim under state law for damages allegedly 

caused by the filing of the involuntary petitions. The District 

Court concluded that this claim was preempted by the 

Bankruptcy Code and dismissed the complaint. For the 

reasons that follow, we reverse and remand, as we conclude

that § 303(i) does not preempt the state law claims of nondebtors predicated on the filing of an involuntary bankruptcy 

petition. 

Case: 15-2622 Document: 003112392387 Page: 3 Date Filed: 08/29/2016
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I.

It is an understatement to say that the factual 

background and procedural history lurking behind this case 

are complex. Our appeal is but one fragment of more than a 

decade of ongoing litigation between Maury Rosenberg and 

his medical imaging centers on the one side and U.S. Bank

and its affiliated entities on the other. By our estimate, that 

litigation has produced 27 written opinions at almost every

level of the federal judiciary. But lucky for us (and our 

readers), this case turns on a narrow question of federal 

preemption law. 

Rosenberg is the “principal architect” of National 

Medical Imaging, LLC (“NMI”) and National Medical 

Imaging Holding Company, LLC (“NMI Holding”). NMI 

and NMI Holding are affiliated with various limited 

partnerships (“NMI LPs”) that operate medical imaging 

centers. To finance the purchase of medical imaging 

equipment, the NMI LPs entered into leases with DVI 

Financial Services, Inc., who transferred the leases to DVI 

Funding, LLC. DVI Funding then held onto some of the 

leases directly and securitized the rest, transferring them to 

various entities with DVI Receivables in the name. DVI 

Financial was the initial servicer of the leases and U.S. Bank 

acted as trustee. When DVI Financial entered bankruptcy in 

2004, Lyon Financial, a subsidiary of U.S. Bank, acquired the 

servicing contracts. 

During litigation in state court over money the NMI 

LPs owed under the leases, DVI Funding and five DVI 

Receivables entities filed involuntary bankruptcy petitions 

against Rosenberg, NMI, and NMI Holding in the United 

States Bankruptcy Court for the Eastern District of 

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Pennsylvania. Rosenberg transferred his case to the Southern 

District of Florida, where the Bankruptcy Court there 

dismissed the involuntary petition because, among other 

things, DVI Funding and the DVI Receivables were not 

Rosenberg’s creditors. In re Rosenberg, 414 B.R. 826, 840–

41 (Bankr. S.D. Fla. 2009), aff’d, 472 Fed. App’x 890 (11th 

Cir. 2012) (per curiam). The petitions against NMI and NMI 

Holding remained in the Eastern District of Pennsylvania, 

where its Bankruptcy Court gave collateral estoppel effect to 

the Florida decision and dismissed the petitions. In re Nat’l 

Med. Imaging, LLC, 439 B.R. 837, 854 (Bankr. E.D. Pa. 

2009), aff’d, __ Fed. App’x __, No. 15-1996, 2016 WL 

1743475 (3d Cir. 2016). 

Rosenberg then filed in the Southern District of 

Florida Bankruptcy Court an adversary action under 11 

U.S.C. § 303(i) against DVI Funding, the DVI Receivables

entities, Lyon, and U.S. Bank. He sought to recover costs, 

attorney’s fees, and damages for the bad faith filing of the 

involuntary bankruptcy petition. The Court awarded 

Rosenberg fees and costs after a bench trial, In re Rosenberg, 

No. 09-13196, 2012 WL 3990725 (Bankr. S.D. Fla. Sept. 11, 

2012), aff’d in part, 779 F.3d 1254 (11th Cir. 2015), cert. 

denied, 136 S. Ct. 805 (2016), and transferred the claim for 

damages to the District Court for a jury trial. After trial, the 

jury awarded Rosenberg $1.1 million in compensatory 

damages and $5 million in punitive damages. The District 

Court initially overturned the punitive damages award in its 

entirety and limited compensatory damages to $360,000, but 

the Eleventh Circuit held that U.S. Bank’s post-trial motion 

was untimely and reinstated the jury’s verdict. Rosenberg v. 

DVI Receivables, XIV, LLC, No. 12-22275, 2014 WL 

4810348 (S.D. Fla. Sept. 29, 2014), rev’d in part, 818 F.3d 

1283 (11th Cir. 2016).

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With the stage set, we turn to the litigation currently on 

appeal. In August 2013, Sara Rosenberg (Maury’s wife), the 

Rosenberg Trust, and several NMI Real Estate Partnerships 

(together with Mrs. Rosenberg and the Rosenberg Trust, the 

“Rosenberg Affiliates”) brought suit to recover damages 

stemming from the involuntary bankruptcy petitions filed 

against Maury Rosenberg, NMI, and NMI Holding. All of 

the plaintiffs are affiliated with Maury Rosenberg, but none 

of them were parties to the involuntary bankruptcies. 

The complaint stated a single claim of tortious 

interference with contracts and business relationships. The 

NMI Real Estate Partnerships owned the medical imaging 

facilities subject to mortgages with various lenders. The 

Rosenberg Affiliates alleged that the DVI Receivables

entities, DVI Funding, Lyon Financial, Jane Fox (an agent for 

Lyon who signed the involuntary bankruptcy petitions), and

U.S. Bank (collectively, the “Defendants”), orchestrated the 

filing of the involuntary bankruptcy petitions with the intent 

to cause the NMI Real Estate Partnerships to default on their

underlying mortgages. As a result, the Partnerships were 

declared in default, all but one of the properties have been 

lost, and Sara Rosenberg lost her interest in one of the 

Partnerships. The Rosenberg Affiliates also alleged that the 

Rosenberg Trust suffered losses on investments in the 

Partnerships and life insurance for Maury Rosenberg. 

The case was initially filed in the District Court for the 

Southern District of Florida, but it transferred the case to the 

Eastern District of Pennsylvania on the motion of the 

Defendants. They then moved to dismiss, arguing that the 

Rosenberg Affiliates’ state law tortious interference claim 

was preempted by the involuntary bankruptcy provisions of

the Bankruptcy Code. The District Court agreed and 

dismissed the complaint. Rosenberg v. DVI Receivables, XIV, 

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LLC, No. 14-5608, 2015 WL 3513445 (E.D. Pa. June 4, 

2015). This appeal followed. 

II.

The District Court exercised diversity jurisdiction 

under 28 U.S.C. § 1332(a), and we have appellate jurisdiction 

to review its order dismissing the complaint under 28 U.S.C. 

§ 1291. Our review of the District Court’s grant of a motion 

to dismiss based on preemption is plenary. New Jersey 

Carpenters v. Tishman Constr. Corp. of New Jersey, 760 F.3d 

297, 302 (3d Cir. 2014). We accept all factual allegations in 

the complaint as true and draw all reasonable inferences in 

favor of the plaintiffs. Id. 

III.

Section 303 of the Bankruptcy Code governs 

involuntary bankruptcy cases. In an involuntary bankruptcy 

case it is the creditors, not the debtors, who start the 

proceedings by filing an involuntary petition under either 

Chapter 7 or 11 of the Code. 11 U.S.C. § 303(b). Important 

for our purposes is that § 303(i) provides that if an 

involuntary bankruptcy petition is dismissed, the debtor may

recover attorney’s fees, costs, and even damages from the

creditors. It reads:

(i) If the court dismisses a petition under this 

section other than on consent of all petitioners 

and the debtor, and if the debtor does not waive 

the right to judgment under this subsection, the 

court may grant judgment—

(1) against the petitioners and in favor of 

the debtor for—

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(A) costs; or

(B) a reasonable attorney’s fee; or

(2) against any petitioner that filed the 

petition in bad faith, for—

(A) any damages proximately 

caused by such filing; or

(B) punitive damages

Id. § 303(i). 

As they were not debtors, the Rosenberg Affiliates 

cannot recover damages from the Defendants under § 303(i). 

See, e.g., In re Miles, 430 F.3d 1083, 1093–94 (9th Cir. 

2005); In re Mike Hammer Prods., Inc., 294 B.R. 752, 755 

(B.A.P. 9th Cir. 2003); In re VII Holdings Co., 362 B.R. 663, 

668 (Bankr. D. Del. 2007) (Shannon, J.); Collier on 

Bankruptcy ¶ 303.33 (16th ed.). Shut off from a remedy 

under the Bankruptcy Code, the Rosenberg Affiliates are 

instead pursuing a state law tortious interference claim for 

damages caused by the involuntary bankruptcy petitions filed 

against Maury Rosenberg, NMI, and NMI Holding. The 

question for us is whether § 303(i) preempts this state law 

claim. 

Federal preemption of state law is a “necessary but 

precarious component of our system of federalism under 

which the states and the federal government possess 

concurrent sovereignty.” Sikkelee v. Precision Airmotive 

Corp., 822 F.3d 680, 687 (3d Cir. 2016). Under this dual 

system, federal and state law coexist peacefully much of the 

time. But when those laws come into conflict, the Supremacy

Clause of the Constitution requires that state law give way to 

federal law. U.S. Const. art. VI, cl. 2. 

Federal preemption of state law comes in three forms: 

express preemption, conflict preemption, and field 

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preemption. Elassaad v. Indep. Air, Inc., 613 F.3d 119, 126 

(3d Cir. 2010). Ours is a case of alleged field preemption. It 

“occurs when a field is ‘reserved for federal regulation, 

leaving no room for state regulation,’ and ‘congressional 

intent to supersede state laws [is] clear and manifest.’” Id. 

(quoting Holk v. Snapple Beverage Corp., 575 F.3d 329, 336 

(3d Cir. 2009)). 

In deciding whether Congress has occupied a field for 

exclusive federal regulation, we begin, based on concerns of 

federalism, with a sturdy “presumption against preemption.” 

Wyeth v. Levine, 555 U.S. 555, 565 (2009). “This ‘strong 

presumption against inferring Congressional preemption’ also 

applies ‘in the bankruptcy context.’” In re Fed.-Mogul Glob. 

Inc., 684 F.3d 355, 365 (3d Cir. 2012) (quoting Integrated 

Solutions, Inc. v. Serv. Support Specialties, Inc., 124 F.3d 

487, 493 (3d Cir. 1997)). It is overcome when “a 

Congressional purpose to preempt . . . is clear and manifest.” 

Id. (quoting Farina v. Nokia Inc., 625 F.3d 97, 117 (3d Cir. 

2010), cert. denied, 132 S. Ct. 365 (2011)). To discern the 

preemptive intent of Congress, we look to the text, structure, 

and purpose of the statute and the surrounding statutory 

framework. Medtronic, Inc. v. Lohr, 518 U.S. 470, 486 

(1996). 

The inquiry we make is whether there is enough 

evidence in the text, structure, or purpose of § 303(i) or the 

Bankruptcy Code as a whole to rebut the presumption against 

preemption and say that it was Congress’s “clear and manifest 

intent” to preempt state law causes of action for non-debtors 

based on the filing of an involuntary bankruptcy petition.1 

We conclude that the evidence is insufficient for field 

preemption. 

 

1 We express no opinion on whether similar state law claims 

brought by debtors would be subject to preemption. 

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Starting with text, § 303(i) provides a remedy to the 

debtor, but is silent as to potential remedies for non-debtors

harmed by an involuntary bankruptcy petition. This suggests 

that when Congress passed the provision it either did not 

intend to disturb the existing framework of state law remedies

for non-debtors or (more likely) was not thinking about nondebtor remedies at all. In either case, field preemption does 

not apply. The Defendants ask us to infer that, by providing a 

remedy to debtors, Congress also meant to deprive nondebtors of any remedy.

2 However, we do not lightly infer 

from congressional silence the intent to deprive some persons 

of a judicial remedy for an abuse of the bankruptcy system. 

As the Supreme Court observed in a preemption case 

concerning the Atomic Energy Act, “[i]t is difficult to believe 

that Congress would, without comment, remove all means of 

judicial recourse for those injured by illegal conduct.” 

Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 251 (1984). 

Turning to structure and purpose, we see no indication

of field preemption. By giving creditors the ability to bring a 

debtor into bankruptcy, Congress created a power that could 

be abused. Given the risks of involuntary petitions, it

included a remedy for debtors to discourage abuse. In re 

Diloreto, 388 B.R. 637, 655 (Bankr. E.D. Pa. 2008), aff’d,

442 B.R. 373 (E.D. Pa. 2010) (“Involuntary petitions, even 

ones filed in good faith, can have a significant negative effect 

 

2 The Defendants also suggested at oral argument that nondebtors have some remedy under § 303, namely asking the 

Bankruptcy Court to appoint a trustee to “take possession of 

the property of the estate and to operate any business of the 

debtor.” 11 U.S.C. § 303(g). But we do not see how the 

post-petition appointment of a trustee would address the type 

of economic losses the Rosenberg Affiliates alleged in their 

complaint. 

Case: 15-2622 Document: 003112392387 Page: 10 Date Filed: 08/29/2016
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upon the interests of a putative debtor . . . . Section 303(i) was 

intended to ameliorate those negative effects by imposing 

liability upon the unsuccessful petitioning creditor . . . .”). 

Nothing in the Code suggests that Congress was also 

concerned about protecting non-debtors from the effects of 

involuntary petitions.

3

 That said, it would be inconsistent 

with the remedial purpose of § 303(i) to preempt state law 

remedies for non-debtors that can likewise be harmed by 

involuntary bankruptcy petitions. See In re John Richards 

Homes Bldg. Co., L.L.C., 298 B.R. 591, 605 (Bankr. E.D. 

Mich. 2003) (“[T]he harm from an improper involuntary 

bankruptcy petition can result not only to the debtor but also 

to the debtor’s owners, employees, suppliers, customers and 

other creditors.”).

The Defendants point out that, in the automatic stay 

provisions of the Code, Congress provided that any individual 

“injured by any willful violation” of the automatic stay “shall 

recover actual damages.” 11 U.S.C. § 362(k)(1). They argue 

this suggests that Congress knew how to provide broad 

remedies that covered non-debtors and declined to do so with 

§ 303(i). No doubt this reading is plausible. But field 

preemption requires congressional intent that is clear and 

manifest, and this is lacking when Congress is silent on what 

courts are to do with state law remedies for non-debtors. 

 

3

If we were inclined to also look at legislative history for 

clues as to Congress’s thoughts on this subject, we would still 

come out empty-handed. Section 303(i) was enacted as part 

of the Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 

92 Stat. 2549, and the House and Senate Reports discussing 

involuntary bankruptcies say nothing about non-debtors, nondebtor remedies, or preemption. 

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The Defendants also argue that permitting state law 

claims against creditors would be inconsistent with the 

comprehensive nature of the Bankruptcy Code, the exclusive 

nature of federal court jurisdiction over bankruptcies, and the 

uniform nature of bankruptcy law. They stoke fears of a 

flood of state court litigation challenging the actions of 

creditors that would chill the use of involuntary bankruptcy 

proceedings and permit state courts to rewrite bankruptcy 

law. Yet there is no evidence in the text, structure, or purpose 

of the Code that Congress was concerned with this outcome. 

Moreover, the fears of the Defendants are based more on 

conjecture than fact. They cite only a handful of state court 

cases where non-debtors brought state tort claims against 

petitioning creditors. E.g., PNH, Inc. v. Alfa Laval, Inc., 940 

N.E.2d 577, 580 (Ohio Ct. App. 2010) (purchasers of 

corporation’s debt brought tortious interference, abuse of 

process, and defamation claims against creditors who filed 

involuntary petition against corporation). In these 

circumstances, we are not convinced by a floodgates 

argument to support a finding of field preemption. 

As for concerns that permitting state law claims will 

undermine uniformity in bankruptcy law, we rejected a very

similar argument in U.S. Express Lines Ltd. v. Higgins, 281 

F.3d 383 (3d Cir. 2002). That case addressed whether the 

Federal Rules of Civil Procedure preempt state law tort 

claims based on misconduct in federal litigation. We held 

they did not but observed there were “legitimate public policy 

concerns in concluding that the federal rules foreclose state 

claims in the nature of abuse of process arising out of federal 

litigation.” Id. at 394. Even though there would be conflicts 

between the federal rules and state law and “federal 

preemption would forestall such controversies,” we were 

content to “rely on the traditional comity between the two 

systems to deal adequately and innovatively with such 

common problems.” Id. We rely on that same comity today 

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and trust that state courts faithfully will account for federal 

bankruptcy law to the extent it may be relevant to a state law 

claim against a creditor. 

Finally, the Defendants urge us to follow the Ninth 

Circuit’s decision of In re Miles, 430 F.3d at 1083, a decision 

the District Court found persuasive when it dismissed the 

Rosenberg Affiliates’ complaint. Non-debtors there were 

allegedly harmed by an involuntary bankruptcy and brought

state law tort claims against the petitioning creditors in state 

court. Id. at 1086–87. The creditors removed the case to 

federal court and the Ninth Circuit held that the state law tort 

claims were removable because they were “completely 

preempted” by § 303(i). Id. at 1093 n.6.

4 This was so 

 

4 Complete preemption is not the same as field preemption,

and the two concepts should not be confused. Complete 

preemption “operates to confer original federal subject matter 

jurisdiction notwithstanding the absence of a federal cause of 

action on the face of the complaint.” In re U.S. Healthcare, 

Inc., 193 F.3d 151, 160 (3d Cir. 1999). It applies when the 

preemptive force of a federal statute is so “extraordinary” that 

it “converts an ordinary state common-law complaint into one 

stating a federal claim for purposes of the well-pleaded 

complaint rule.” Caterpillar Inc. v. Williams, 482 U.S. 386, 

393 (1987) (quoting Metro Life Ins. Co. v. Taylor, 481 U.S. 

58, 65 (1987)). Our case deals with field preemption, a 

species of “ordinary preemption” that operates as a federal 

defense to a state law claim, and has nothing to do with 

subject matter jurisdiction. For this reason, Miles could be 

deemed distinguishable. But we recognize that finding 

complete preemption in the context § 303(i) would also

support finding field preemption in our case. 

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because “Congress intended 11 U.S.C. § 303(i) to provide the 

exclusive basis for awarding damages predicated upon the 

filing of an involuntary bankruptcy petition.” Id. at 1089. 

Once convinced that the case was properly removed, the

Court dismissed the complaint because the non-debtors 

lacked standing under § 303(i) to recover damages. Id. at 

1093. 

We do not find Miles persuasive on the preemption 

issue.

5

 To start, its analysis of § 303(i) is inconsistent with 

our decision in Paradise Hotel Corp. v. Bank of Nova Scotia, 

842 F.2d 47, 52 (3d Cir. 1988), where we held that § 303(i) is 

not an exclusive remedy for debtors who convert an 

involuntary Chapter 7 bankruptcy petition to a voluntary 

Chapter 11 reorganization. U.S. Express Lines Ltd., 281 F.3d 

at 393 n.5 (noting that Miles is in tension with Paradise 

Hotel). We also think the analysis is inconsistent with the 

presumption against preemption, which, as we have 

discussed, requires that congressional intent to preempt state 

law must be clear and manifest. In re Fed.-Mogul Glob. Inc., 

 

We also note that if complete preemption were at issue in this 

case, we doubt it would apply. The Supreme Court has found

complete preemption in three contexts: § 301 of the Labor 

Management Relations Act, § 502(a) of ERISA, and §§ 85 

and 86 of the National Bank Act. New Jersey Carpenters & 

the Trustees Thereof, 760 F.3d at 302. It has never

recognized complete preemption in the Bankruptcy Code, and 

it seems the Ninth Circuit stands alone in this regard. See In 

re Repository Techs., Inc., 601 F.3d 710, 724 (7th Cir. 2010)

(declining to follow Miles).

5 As noted above, we do agree with the Miles Court that nondebtors lack standing under § 303(i) to recover damages and 

do not take issue with this portion of its opinion. 

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684 F.3d at 365. Near the beginning of its analysis, the Miles 

Court admitted that the “Bankruptcy Code and its legislative 

history are silent on whether Congress intended 11 U.S.C. 

§ 303(i) to provide the exclusive basis for awarding damages 

predicated upon the filing of an involuntary bankruptcy 

petition.” 430 F.3d at 1089. If we apply faithfully the 

presumption against preemption, silence on the part of 

Congress should be the end of the analysis. But the Court 

went on to “infer from Congress’s clear intent to provide 

damage awards only to the debtor . . . that Congress did not 

intend [non-debtors] to be able to circumvent this rule by 

pursuing those very claims in state court.” Id. at 1091. 

Absent evidence that Congress actually meant for § 303(i) to 

be an exclusive remedy, we do not make the same inference.6

* * * * *

 

6 The Defendants argue in the alternative that we can affirm 

on the basis of the statute of limitations, an issue the District 

Court did not reach. “It is an accepted tenet of appellate 

jurisdiction that we ‘may affirm a judgment on any ground 

apparent from the record, even if the district court did not 

reach it.’” Oss Nokalva, Inc. v. European Space Agency, 617 

F.3d 756, 761 (3d Cir. 2010) (quoting Kabakjian v. United 

States, 267 F.3d 208, 213 (3d Cir. 2001)). We decline to 

affirm on that alternate ground in this case because it is 

unclear from the record when the Rosenberg Affiliates were 

injured and when their tortious interference claim accrued. 

We do not know from the complaint, for example, when the 

NMI Real Estate Partnerships defaulted on their mortgages or 

when the Rosenberg Trust suffered its losses. Accordingly, 

we will leave the statute-of-limitations issue to the District 

Court on remand. 

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In this context, we hold that Bankruptcy Code § 303(i) 

does not preempt state law claims by non-debtors for 

damages based on the filing of an involuntary bankruptcy 

petition. Accordingly, we reverse the decision of the District 

Court and remand for further proceedings. 

Case: 15-2622 Document: 003112392387 Page: 16 Date Filed: 08/29/2016