Case Name: INTEGRATED SOLUTIONS, INC., v. SERVICE SUPPORT SPECIALTIES, INC.; Gary Hillman, an individual; Paul Sherman, an individual; Aaron Cruise, an individual; Joseph O'Neill, an individual; Midlantic National Bank; United Jersey Bank, Integrated Solutions, Inc. ("ISI"), Appellant
Court: United States Court of Appeals for the Third Circuit
Jurisdiction: United States
Decision Date: 1997-08-22
Citations: 213 F.3d 487
Docket Number: No. 96-5597
Parties: INTEGRATED SOLUTIONS, INC., v. SERVICE SUPPORT SPECIALTIES, INC.; Gary Hillman, an individual; Paul Sherman, an individual; Aaron Cruise, an individual; Joseph O’Neill, an individual; Midlantic National Bank; United Jersey Bank, Integrated Solutions, Inc. (“ISI”), Appellant.
Judges: Before: MANSMANN, NYGAARD, Circuit Judges, and ROSENN, Senior Circuit Judge.
Reporter: West's Bankruptcy Reporter
Volume: 213
Pages: 487–499

Head Matter:
INTEGRATED SOLUTIONS, INC., v. SERVICE SUPPORT SPECIALTIES, INC.; Gary Hillman, an individual; Paul Sherman, an individual; Aaron Cruise, an individual; Joseph O’Neill, an individual; Midlantic National Bank; United Jersey Bank, Integrated Solutions, Inc. (“ISI”), Appellant.
No. 96-5597.
United States Court of Appeals, Third Circuit.
Argued June 13, 1997.
Decided Aug. 22, 1997.
Susan Stryker, Sterns & Weinroth, Trenton, NJ, Paul J. Hayes, Dean G. Bostock (Argued), Weingarten, Sehurgin, Gagnebin & Hayes, Boston, MA, for Appellant.
Stuart Gold (Argued), Budd, Larner, Gross, Rosenbaum, Greenberg & Sade, Short Hills, NJ, for Appellees.
Before: MANSMANN, NYGAARD, Circuit Judges, and ROSENN, Senior Circuit Judge.

Opinion:
OPINION OF THE COURT
NYGAARD, Circuit Judge:
Integrated Solutions, Inc., appeals an order dismissing its state law claims against Service Support Specialties, Inc., and certain individuals working for that company (collectively "Service Specialties"). The district court concluded that Integrated lacked standing to pursue the state law claims because its purchase of the claims from a trustee in bankruptcy was void ab initio under New Jersey law. On appeal, Integrated argues that federal law preempts the New Jersey state law prohibition against assigning prejudgment tort claims and permits a bankruptcy trustee to assign tort claims in executing its duties to liquidate and distribute the bankruptcy estate. We disagree and will affirm.
I.
On July 22, 1994, Machine Technology, Inc. filed a petition for relief under Chapter 11 of the Bankruptcy Code. Before filing for bankruptcy protection, Machine Technology had financed its operations through loans from both Midlantie Bank and United Jersey Bank. The debt was secured by separate security agreements in assets such as accounts, inventory, machinery and equipment. On September 6, 1994, Integrated purchased certain assets of Machine Technology through the banks which held security interests in the assets.
On August 1 and 2,1994, certain individual defendants who were former Machine Technology employees entered Machine Technology's offices and took or copied various documents, diagrams, specifications and drawings of an allegedly proprietary nature. On August 3, these individual defendants incorporated Service Specialties. Less than one week later, Service Specialties' opened for business and began servicing Machine Technology accounts until September 6, when Integrated purchased the Machine Technology assets from the banks.
Integrated filed a complaint in the district court alleging a series of state law claims and a federal copyright infringement claim against Service Specialties and the individual defendants. Integrated specifically claimed that the defendants had misappropriated Machine Technology assets, used these assets to set up Service Specialties, and were unlawfully competing with Integrated. Integrated also sought a preliminary injunction to enjoin the defendants from destroying and concealing doeuménts and information, using confidential commercial information, infringing on Integrated copyrights, and engaging in unfair competition during the suit. On March 15, 1995, the district court denied Integrated's request for an injunction on the ground that Integrated was not "a successor in interest to MTI [Machine Technology], did not purchase all general intangibles of MTI, and thus [had] no standing to assert claims which MTI might have had against defendants for misappropriation of confidential information." Integrated Solutions, Inc. v. Service Support Specialties, Inc., 193 B.R. 722, 725 (D.N.J.1995).
In an effort to cure its standing problem, Integrated subsequently purchased all of Machine Technology's remaining assets from Machine Technology's bankruptcy trustee. According, to the Bill of Sale, Integrated purchased, inter alia, all general intangibles, all intellectual property, and "[a]ll claims and causes of action; including the right to recover for any past and future damages, arising out of or relating to the Assets.... " J.A. at 2615-16. This purchase and sale was authorized and approved by the Bankruptcy Court.
In response, Service Specialties filed a motion for summary judgment seeking the dismissal of Integrated's state law claims. Service Specialties argued that the bankruptcy trustee's sale of Machine Technology's claims violated New Jersey law which prohibited assigning prejudgment tort claims and hence, Integrated had no standing to pursue the state law causes of action. The district court agreed and dismissed Integrated's state law claims. This timely appeal followed.
II.
On appeal, Integrated argues that New Jersey's common law prohibition against assigning state tort law claims before judgment is preempted by federal bankruptcy law. New Jersey law is preempted, Integrated maintains, because by preventing the sale of prejudgment tort claims belonging to the estate, New Jersey law serves to defeat a primary purpose of the Bankruptcy Code: namely, the expeditious liquidation and distribution of the bankruptcy estate to its creditors. As such, Integrated concludes, New Jersey law must yield to the conflicting federal interest under the Supremacy Clause.
Our review is plenary. In re Roach, 824 F.2d 1370, 1372 (3d Cir.1987).
III.
Whether federal bankruptcy law preempts New Jersey state law prohibiting the assignment of prejudgment tort claims requires us to resolve three separate questions: (1) Does New Jersey law prohibit the assignment of prejudgement tort claims?; (2) Are a debt- or's prejudgment tort claims "property of the estate" under 11 U.S.C. § 541?; and (3) Did Congress intend to preempt state law restrictions on the assignability of tort claims under federal bankruptcy law? We will address each question in turn.
A.
The relevant New Jersey statute dealing with assignability is section 2A:25-1, which provides in pertinent part:
All contracts for the sale and conveyance of real estate, all judgments and decrees recovered in any of the courts of this state or of the United States or in any of the courts of any other state of the United States and all choses in action arising in contract shall be assignable, and the as-signee may sue thereon in his own name.
N.J. Stat. Ann. § 2A:25-1. Because the statute does not address causes of action arising from tort claims, we look to case law for guidance. New Jersey courts have consistently held that, as a public policy matter, tort claims cannot be assigned before judgment. Village of Ridgewood v. Shell Oil Co., 289 N.J.Super. 181, 673 A.2d 300, 307-08 (1996); Costanzo v. Costanzo, 248 N.J.Super. 116, 590 A.2d 268, 271 (1991) ("[I]n New Jersey, as a matter of public policy, a tort claim cannot be assigned."); East Orange Lumber Co. v. Feiganspan, 120 N.J.L. 410, 199 A. 778, 779 (1938); see also Conopco, Inc. v. McCreadie, 826 F.Supp. 855, 865-67 (D.N.J.1993) ("It is clear that under New Jersey law, choses in action arising out of tort are not assignable prior to judgment.").
Integrated concedes this general principle, but argues, without citation, that New Jersey's non-assignability rule does not apply to intentional torts or in the bankruptcy context. To bolster its argument, Integrated contends that the non-assignment rule "has never been expanded to intentional torts . or to persons appointed and acting under the authority of the federal bankruptcy statute." Appellant's Reply Br. at 5. Integrated, however, points to no support for its argument that the rule is intended to be limited in the manner it suggests, nor have we found any such limit in the case law. As such, we find Integrated's attempts to place its tort claims outside the New Jersey rule without support and unpersuasive. New Jersey law clearly forbids the assignment of prejudgment tort claims, and applies to the tort claims at issue here.
B.
The Bankruptcy Code defines a bankrupt's estate broadly to encompass all kinds of property, including intangibles and causes of action. As § 541 reads in pertinent part:
(a) The commencement of a ease under section 301, 302, or 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held:
(1) Except as provided in subsection (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case....
(e)(1) Except as provided in paragraph (2) of this subsection, an interest of the debtor in property becomes property of the estate . notwithstanding any provision in an agreement, transfer instrument, or applicable nonbankruptcy law—
(A) that restricts or conditions transfer of such interest by the debtor____
11 U.S.C. § 541 (emphasis added). As the legislative history for this section specifies, "The scope of this paragraph is broad. It includes all kinds of property, including tangible or intangible property, causes of action . and all other forms of property currently specified in section 70a of the Bankruptcy Act...." H.R.Rep. No. 95-595, at 367 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6323 (emphasis added). Moreover, the House Report clearly explained that the purpose of section 541 was to move away from the "complicated melange of references to State law," and to "determine! ] what is property of the estate by a simple reference to what interests in property the debtor has at the commencement of the ease. This includes all interests, such as . tangible and intangible property, choses in action, [and] causes of action . whether or not transferable by the debtor." Id. at 175-76, 1978 U.S.C.C.A.N. at 6136 (emphasis added).
Relying on the legislative history and the obvious broad sweep of § 541(a)(1), numerous courts have concluded that "[s]ection 541 eliminated the requirement that property must be transferable or subject to process in order to become initially part of the estate." In re Geise, 992 F.2d 651, 655 (7th Cir.1993) (citation omitted); see also In re Cottrell, 876 F.2d 540, 542-43 (6th Cir.1989) (holding that a personal injury action was estate property notwithstanding that the action was nontransferable under Kentucky state law); Sierra Switchboard Co. v. Westinghouse Electric Corp., 789 F.2d 705, 709 (9th Cir.1986) ("By adopting a comprehensive definition of property, the Bankruptcy Reform Act reduced the bankruptcy court's cumbersome reliance on state law analysis for determining property to be included in the estate."); Tignor v. Parkinson, 729 F.2d 977, 980-81 (4th Cir.1984) (holding that an unliquidated personal injury claim was estate property notwithstanding that the claim was nontransferable under Virginia law); see also L. King, Collier on Bankruptcy, ¶ 541.07 (15th ed. rev.1996) ("[Ujnder the Code, all interests of the debtor in property come into the estate pursuant to section 541(a)(1) regardless of whether they are transferable, or whether creditors could have by some means reached them."). These courts have clearly found that state laws restricting the transfer or assignment of property, including causes of action and personal injury claims, do not preclude the property from passing to the bankrupt's estate under § 541.
While we have not decided the issue, we have previously noted the broad sweep of § 541 and the fact that the section expressly includes "causes of action" as property interests included in the estate. See, e.g., In re Nejberger, 934 F.2d 1300, 1301-02 (3d Cir.1991); Counties Contracting & Constr. Co. v. Constitution Life Ins. Co., 855 F.2d 1054, 1057 n. 3 (3d Cir.1988). Given § 541's broad scope, its legislative history, and the weight of authority from other jurisdictions, we conclude that state laws prohibiting the assignment or transfer of property, including causes of action and tort claims, do not prevent the inclusion of such property in the bankruptcy estate. Accordingly, we hold that the district court correctly determined that Machine Technology's state law tort claims were part of the property of the estate under § 541.
C.
Having determined both that New Jersey law prohibits transferring the tort claims at issue here and that the tort claims were part of the property of the estate, we are left to decide whether the trustee in Machine Technology's bankruptcy was permitted to sell the company's prejudgment tort claims to Integrated notwithstanding clear New Jersey state law prohibiting the assignment. In essence, this question raises a basic preemption issue: whether Congress intended to permit bankruptcy trustees to dispose of tort claims belonging to the estate in violation of state laws that forbid the assignment of such claims.
1.
We begin our analysis with the legal principles underlying the preemption doctrine. In In re Roach, 824 F.2d 1370, 1373-74 (3d Cir.1987), we examined the preemption issue specifically in the bankruptcy context. We began our analysis by noting that under Article I, § 8 of the Constitution, Congress has the power to establish uniform bankruptcy laws throughout the United States and thus, "[wjhere Congress has chosen to exercise its authority, contrary provisions of state law must accordingly give way." Id. at 1373 (citation and internal quotations omitted). Nonetheless, we immediately made clear that "the usual rule is that congressional intent to pre-empt will not be inferred lightly. Pre-emption must be either explicit, or compelled due to an unavoidable conflict between the state law and the federal law."... Id. (citations and internal quotations omitted). Because we are reluctant to assume federal preemption, we noted that any analysis should begin with "the basic assumption that Congress did not intend to displace state law." Id. (citations and inter nal quotations omitted). Relying on these general observations, we said:
Our task is to ascertain and give effect to congressional intent. However, we must approach that task with the realization that the Bankruptcy Code was written with the expectation that it would be applied in the context of state law and that federal courts are not licensed to disregard interests created by state law when that course is not clearly required to effectuate federal interests.
Id. at 1374. Thus, under Roach we adopted a restrained approach to concluding that Congress has intended to preempt state law in the bankruptcy context.
Supreme Court law attempting to balance federal and state law in the bankruptcy context has generally taken a similarly restrained approach to federal preemption. For example, in Butner v. United States, 440 U.S. 48, 54, 99 S.Ct. 914, 917-18, 59 L.Ed.2d 136 (1979), the Supreme Court emphasized that "Congress has generally left the determination of property rights in the assets of a bankrupt's estate to state law." The Court then went on to instruct that:
Property interests are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding. Uniform treatment of property interests by both state and federal courts within a State serves to reduce uncertainty, to discourage forum shopping, and to prevent a party from receiving a windfall merely by reason of the happenstance of bankruptcy.
Id. at 55, 99 S.Ct. at 918 (citations and internal quotations omitted). Accordingly, the Butner court concluded that absent a countervailing federal interest, "the basic federal rule is that state law governs." Id. at 57, 99 S.Ct. at 919; see also Nobelman v. American Sav. Bank, 508 U.S. 324, 329, 113 S.Ct. 2106, 2110, 124 L.Ed.2d 228 (1993) ("In the absence of a controlling federal rule, we generally assume that Congress has left the determination of property rights in the assets of a bankrupt's estate to state law.") (citation and internal quotations omitted).
Courts applying the Butner analysis have relied on its holding to conclude that "once a property interest has passed to the estate, it is subject to the same limitations imposed upon the debtor by applicable nonbankruptey law." In re American Freight Sys., Inc., 179 B.R. 952, 960 (Bankr.D.Kan.1995); see also In re Transcon Lines, 58 F.3d 1432, 1438 (9th Cir.1995) (noting that "nonbankruptcy law defines the nature, scope, and extent of the property rights that come into the hands of the bankruptcy estate"), cert. denied sub nom. Gumport v. Sterling Press, Inc., — U.S. -, 116 S.Ct. 1016, 134 L.Ed.2d 96 (1996); In re Sanders, 969 F.2d 591, 593 (7th Cir.1992) ("[A] bankruptcy trustee succeeds only to the title and rights in property that the debtor had at the time she filed the bankruptcy petition."); In re FCX, Inc., 853 F.2d 1149, 1153 (4th Cir.1988) ("The estate under § 541(a) succeeds only to those interests that the debtor had in property prior to commencement of the bankruptcy case."); In re Bishop College, 151 B.R. 394, 398 (Bankr.N.D.Tex.1993) (holding that a bankrupt's estate receives trust assets "subject to any restrictions imposed by state law, pre-petition").
These cases stand for the proposition that unless federal bankruptcy law has spe- cifícally preempted a state law restriction imposed on property of the estate, the trustee's rights in the property are limited to only those rights that the debtor possessed pre-petition. In other words, without explicit federal preemption, the trustee does not have greater rights in the property of the estate than the debtor had before filing for bankruptcy. See L. King, Collier on Bankruptcy, ¶ 541.04 ("Although [section 541(a)(1) ] includes choses in action and claims by the debtor against others, it is not intended to expand the debtor's rights against others beyond what rights existed at the commencement of the case.").
Notwithstanding these general principles, Integrated argues that certain Bankruptcy Code provisions evince a clear congressional intent to preempt state law restrictions on assigning tort claims. Specifically, Integrated points to two separate Code provisions, 11 U.S.C. § 704(1), 363(b)(1). Section 704 sets forth the trustee's duties, and subsection (1) instructs the trustee 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...." 11 U.S.C. § 704(1). Somewhat similarly, section 363 defines the permissible use, sale, or lease of estate property, with subsection (b)(1) specifying that "[t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate." 11 U.S.C. § 363(b)(1).
These Code provisions, Integrated argues, demonstrate that the "overriding purpose of the Bankruptcy Code is the expeditious and equitable distribution of the assets of the debtor's estate." Appellant's Br. at 17. Moreover, Integrated contends that these provisions create an affirmative obligation on the trustee's part to dispose of the estate's assets as quickly and efficiently as possible, in order to maximize the potential return to creditors. In light of these express purposes of the Bankruptcy Code, Integrated argues, New Jersey's state law prohibiting the assignment of tort claims is in direct conflict with federal bankruptcy law and must be preempted.
Integrated's arguments, however, lack adequate legal support. For starters, neither § 363(b)(1) nor § 704(1) expressly authorizes the trustee to sell property in violation of state law transfer restrictions. Moreover, Integrated points to nothing in the legislative history that would even raise an inference that Congress intended to give the trustee such authority under these provisions. The clear lack of Congressional intent to preempt state law restrictions on transferring property of the estate is even more telling given the explicit language that Congress uses when it intends to displace state nonbankruptcy law in other provisions of the Bankruptcy Code. See, e.g., 11 U.S.C. § 1123(a) ("Notwithstanding any otherwise applicable nonbankruptcy law, a [reorganization] plan shall ."); 11 U.S.C. § 541(c)(1) ("[A]n interest of the debt- or in property becomes property of the estate . notwithstanding any provision in . applicable nonbankruptcy law (A) that restricts or conditions transfer of such interest by the debtor ."); 11 U.S.C. § 728(b) ("Notwithstanding any State or local law imposing a tax on or measured by income, the trustee shall make tax returns of income . only if [the] estate or corporation has net taxable income for the entire period after the order for relief under this chapter during which the case is pending."); 11 U.S.C. § 363(i) ("Subject to the provisions of section 365, the trustee.may use, sell, or lease property under subsection (b) or (c) of this section . notwithstanding any provision in . applicable law that is conditioned on the insolvency or financial condition of the debtor . "). Because both Code provisions relied upon by Integrated fail to explicitly express Congress's intent to supersede state law restrictions on the transfer of estate property, Integrated's preemption claim is rendered wholly unconvincing, especially in light of our strong presumption against inferring Congressional preemption in the bankruptcy context. See In re Roach, 824 F.2d at 1373-74.
In addition, there is case law from other circuits that directly cuts against Integrated's position. For example, in In re Schauer, 835 F.2d 1222 (8th Cir.1987), the court, rejected an argument that federal bankruptcy law preempted a Minnesota farm cooperative statute, and a cooperative's bylaws promulgated thereunder, which imposed transfer restrictions on a "patronage margin certificate" held by the debtor and passed to the bankruptcy estate pursuant to § 541. In reaching its decision, the court held that since state law defined the debtor's interest in property that became part of the estate, " § 363(b)(1) and 704 do not conflict with or invalidate the bylaws' restriction on transfer-ability____" 835 F.2d at 1225. The Schauer court further reasoned:
[Tjhere is no conflict between 11 U.S.C. § 363(b)(1), 704, and state law which defines the debtor's rights in property of the estate. Sections 363(b)(1) and 704 do not expressly authorize the trustee to sell property contrary to the restrictions imposed by state and contract law. These sections are simply enabling statutes that give the trustee the authority to sell or dispose of property if the debtors would have had the same right under state law.
Id. (emphasis added).
Significantly, other courts have followed the Schauer court's lead and also held that § 363(b)(1) and 704 are general enabling provisions that do not expand or change a debtor's interest in property merely because it files a bankruptcy petition. See, e.g., In re FCX, 853 F.2d at 1155 ("Neither § 363(b)(1), nor § 704, is an empowering statute in the sense that new rights or powers for dealing with the property of the estate are created---- [They] evinee[ ] no intent to enlarge the trustee's rights to take such actions beyond the debtor's pre-bank-ruptcy rights."); In re Bishop College, 151 B.R. at 398-99 (holding that § 704 is merely an enabling statute that gives the trustee the authority to dispose of property "if the Debt- or would have had the same rights under state law"). The reasoning of these cases is persuasive and we conclude that neither § 363(b)(1) nor § 704(1) indicates a specific congressional intent to preempt state laws limiting the assignability of tort claims belonging to the estate. Since Machine Technology would have been prohibited from assigning its prejudgment tort claims under New Jersey state law, the trustee in Machine Technology's bankruptcy was subject to the same restriction. Accordingly, we hold that the trustee lacked legal authority to assign the tort claims and hence, Integrated does not have standing to pursue its state law tort claims.
We realize that the events giving rise to the prejudgment tort claims at issue in this case occurred after Machine Technology filed its petition for bankruptcy relief under Chapter 11. This fact, however, does not change our analysis. In our view, absent specific Congressional intent to preempt state law restrictions imposed on property of the estate, the trustee's rights in the estate property are limited to only those rights that the debtor possessed, or would have possessed, pre-petition. This is the ease regardless of whether the tort claims arise before or after a debtor's property has passed to the bankruptcy estate.
Indeed, drawing a distinction between prejudgment tort claims that arise before a debtor files a petition for bankruptcy and those that arise after the petition is filed is problematic for several reasons. First, there is simply no legal precedent for recognizing such a distinction. Second, regardless of whether prejudgment tort claims arise before or after a petition for bankruptcy has been filed, once the bankruptcy ease commences the claims belong to the property of the estate and hence should be subject to identical treatment, absent a specific Congressional intent to augment the property rights inherent in the tort claims arising post-petition.
Finally, drawing a distinction between prejudgment tort claims arising pre- and post-petition is untenable in the case of Chapter 11 reorganizations where the debtor remains in possession of the property of the estate. In such cases, the debtor-in-possession, "subject to any limitations on a trustee serving in a case under [Chapter 11], and to such limitations or conditions as the court prescribes . shall have all the rights . and powers, and shall perform all the functions and duties . of a trustee serving in a case under [Chapter .11]." 11 U.S.C. § 1107(a); see also In re Coastal Group, Inc., 13 F.3d 81, 84 (3d Cir.1994) ("Section 1107(a) . extends the rights, powers and duties of a trustee to a debtor-in-possession subject to any limitations imposed upon a trustee."). Permitting debtors-in-possession to freely assign prejudgment tort claims in violation of state laws restricting the transfer of such claims, solely because the claims happen to arise after the debtor has filed a petition for bankruptcy, is tantamount to expanding the pre-petition rights of the debtor in the property of the estate simply because the debtor has commenced bankruptcy proceedings and become a debtor-in-possession. This is akin to providing the debtor with "a windfall merely by reason of the happenstance of bankruptcy," Butner, 440 U.S. at 55, 99 S.Ct. at 918, an outcome clearly in tension with the purposes of the Code and existing caselaw.
2.
As a final argument for preemption, Integrated contends that permitting the operation of New Jersey law will cause significant problems in actual bankruptcy practice. To support its argument, Integrated raises two separate concerns. First, Integrated asserts that unless bankruptcy trustees are permitted to sell tort claims belonging to the estate, most claims will be abandoned by trustees because of the time and money required to pursue the claims in court. This result will in turn, Integrated argues, frustrate the Code's purpose of ensuring the expeditious and equitable distribution of the debtor's estate. Second, Integrated maintains that permitting New Jersey law to operate in the bankruptcy context will create the negative incentive of encouraging other corporate officers to engage in the type of tortious behavior exhibited by Machine Technology's former officers in this case without fear of recourse for their wrongful conduct. We should not, Integrated warns, permit either federal bankruptcy law or state law, to promote such behavior.
Neither policy concern is particularly persuasive. With respect to Integrated's first argument, although we recognize that state law restrictions on the transferability of tort claims could possibly impose additional litigation burdens on the trustee and adversely affect creditors waiting for estate liquidation, there are a number of counterbalancing factors to consider. First, we do not believe that bankruptcy trustees will be forced to abandon all tort claims belonging to the estate because of the time and resources necessary to sue on the claims. Rather, it is more likely that trustees will weigh the costs and benefits associated with pursuing each set of claims and prosecute those tort claims which, ex ante, promise to result in a net economic benefit to the estate and its creditors — something every potential litigator should do.
Second, by refusing to find preemption of state law restrictions on the transferability of estate property, we are giving effect to an equally important purpose of the Bankruptcy Code: namely, upholding the fundamental principle that the estate succeeds only to the nature and the rights of the property interest that the debtor possessed pre-petition. Indeed, were we to find federal preemption of the state law restrictions at issue here, the trustee would possess greater rights in the property interest than the debtor. Clearly, unless the Code expressly indicates an intention to augment the rights and nature of the property interest in bankruptcy, the trustee only succeeds to the same rights the debtor possessed in the property prepetition.
With respect to Integrated's second argument, it is misleading to suggest that unless we find federal preemption under the circumstances of this case, individuals will be permitted to engage in strategic, tortious behavior without fear of recourse. Indeed, this argument ignores the fact that the bankruptcy trustee retains the power to pursue state law tort claims against tortfeasors, thus subjecting them to civil and criminal liability for their wrongful conduct. Moreover, as noted above, we believe that bankruptcy trustees are likely to prosecute all tort claims that will potentially result in a net economic benefit to the estate. As such, contrary to Integrated's warnings, the failure to find federal preemption here does not give tortfeasors a "free ride" to engage in tortious behavior and to abuse the Code's protections.
IV.
In summary, we conclude that the trustee lacked the authority to assign Machine Teeh- nology's state law tort claims to Integrated, and hence, Integrated lacks standing to sue on its state law tort claims. We will affirm the order of the district court.
. Integrated stated causes of action for unfair competition, breach of the duty of loyalty, misappropriation of confidential information, interference with contractual relations, conversion, and replevin.
. The district court also concluded that Integrated had standing to pursue its copyright claim because that claim was freely assignable under federal law. The parties subsequently stipulated to dismissal of the copyright claim in order to expedite our review of the district court's dismissal of the state law claims.
. Our approach to preemption outside the bankruptcy context is similarly restrained when considering areas that have traditionally been governed by state law. For example, in Witco Corp. v. Beekhuis, 38 F.3d 682, 687 (3d Cir.1994), we made the following observations in the context of determining whether certain provisions of CERCLA preempted a Delaware probate statute:
In an area that has been traditionally occupied by the states, the court must assume that the prerogatives of the states were not to be superseded by a federal law unless it is the clear and manifest purpose of Congress____ Indeed, for preemption to occur in a field traditionally occupied by the states, there must be a "sharp" conflict between state law and federal policy.
Id. at 687 (citations omitted). Under this reasoning, since bankruptcy is a field traditionally occupied by the states, there must be a "sharp" conflict between state law and federal policy before we may conclude that federal law preempts state law in the bankruptcy context.