Case Name: Anders S. BILLING; Diann E. Billing v. RAVIN, GREENBERG & ZACKIN, P.A.; Ravin, Greenberg & Marks, P.A.; and Howard Greenberg, Defendants/Third-Party Plaintiffs, v. ROSS & HARDIES; Helen Davis Chaitman, Third-Party Defendants, Ravin, Greenberg & Zackin, P.A.; Ravin, Greenberg & Marks, P.A.; and Howard S. Greenberg, Appellants
Court: United States Court of Appeals for the Third Circuit
Jurisdiction: United States
Decision Date: 1994-04-20
Citations: 22 F.3d 1242
Docket Number: No. 93-5289
Parties: Anders S. BILLING; Diann E. Billing v. RAVIN, GREENBERG & ZACKIN, P.A.; Ravin, Greenberg & Marks, P.A.; and Howard Greenberg, Defendants/Third-Party Plaintiffs, v. ROSS & HARDIES; Helen Davis Chaitman, Third-Party Defendants, Ravin, Greenberg & Zackin, P.A.; Ravin, Greenberg & Marks, P.A.; and Howard S. Greenberg, Appellants.
Judges: Before: SLOVITER, Chief Judge, STAPLETON, Circuit Judge, and RESTANI, Court of International Trade Judge.
Reporter: West's Bankruptcy Reporter
Volume: 167
Pages: 1242–1260

Head Matter:
Anders S. BILLING; Diann E. Billing v. RAVIN, GREENBERG & ZACKIN, P.A.; Ravin, Greenberg & Marks, P.A.; and Howard Greenberg, Defendants/Third-Party Plaintiffs, v. ROSS & HARDIES; Helen Davis Chaitman, Third-Party Defendants, Ravin, Greenberg & Zackin, P.A.; Ravin, Greenberg & Marks, P.A.; and Howard S. Greenberg, Appellants.
No. 93-5289.
United States Court of Appeals, Third Circuit.
Argued Nov. 3, 1993.
Decided April 20, 1994.
Sur Petition for Rehearing May 23, 1994.
S.M. Chris Franzblau (argued), Kenneth K. Lehn, Franzblau, Dratch & Friedman, Roseland, NJ, for appellants.
Helen Davis Chaitman (argued), Jody B. Keltz, Ross & Hardies, Somerset, NJ, for appellees.
Before: SLOVITER, Chief Judge, STAPLETON, Circuit Judge, and RESTANI, Court of International Trade Judge.
Honorable Jane A. Restani, Judge of the United States Court of International Trade, sitting by designation.
Honorable Jane A. Restani, Judge of the United States Court of International Trade, sitting by designation,

Opinion:
OPINION OF THE COURT
RESTANI, Judge:
This is an interlocutory appeal from a judgment of the United States District Court for the District of New Jersey, denying defendant-appellants' motion for a referral to the bankruptcy court, dismissal, abstention, or stay. Billing v. Ravin, Greenberg & Zackin, P.A., 150 B.R. 563, 570 (D.N.J.1993). Defendant-appellants Ravin, Greenberg & Zackin, et al., ("Ravin, Greenberg") acted as bankruptcy counsel on behalf of plaintiff-ap-pellees Anders S. Billing and Diann E. Billing ("the debtors"). After Ravin, Greenberg filed an application for fees, with the bankruptcy court, the debtors objected on the ground that the attorneys had engaged in legal malpractice.
The debtors filed a separate malpractice action in district court, invoking their right to a jury trial under the Seventh Amendment to the U.S. Constitution. The district court agreed that the debtors were entitled to trial by jury and held that bankruptcy courts did not have the authority to conduct jury trials. Id. at 567-68, 570. Therefore, it denied Ra-vin, Greenberg's motion for referral of the malpractice action to the bankruptcy court, dismissal, abstention or stay. Id. at 570. Ravin, Greenberg now appeals the district court's denial of its motion.
I.
In June 1989, the debtors filed several voluntary petitions under Chapter 11 of the bankruptcy code. Billing, 150 B.R. at 564. The debtors retained Ravin, Greenberg as bankruptcy counsel pursuant to an order of the bankruptcy court. Id. The debtors' reorganization plan, which the bankruptcy court approved on August 10, 1992, provided for the payment of attorney's fees only in such amounts as are allowed by the bankruptcy court in accordance with statutory standards. Id.; Joint Modified Plan of Reorganization, art. 2, Joint Appendix at 22.
After obtaining approval of the reorganization plan, Ravin, Greenberg presented to the bankruptcy court an application for attorney's fees in the amount of $199,043.50 plus $19,978.20 in expenses. The debtors subsequently sued the attorneys in the United States District Court for the District of New Jersey on the grounds of legal malpractice, requesting trial by jury. The complaint was filed on October 16, 1992, and entered on October 20. On or about October 16, the debtors submitted their objection to fees to the bankruptcy court, alleging that Ravin, Greenberg spent excessive amounts of time in meetings, reviewing the pleadings, and reviewing the file. Billing, 150 B.R. at 564. The debtors' primary objection, however, rested on their allegations of legal malpractice. Id. They strongly protested the award of attorney's fees while their malpractice complaint against Ravin, Greenberg was pending in district court.
On November 23, 1992, Ravin, Greenberg gave notice of its motion to dismiss the debtors' malpractice action, or, in the alternative, to stay the proceedings until the bankruptcy court had resolved the fee dispute. The district court issued an opinion denying the motions on January 27,1993. The court held that: 1) the proceeding is a core proceeding under the meaning of the bankruptcy code; 2) the debtors' claims are legal and thus give rise to a right to jury trial; and 3) bankruptcy courts cannot conduct jury trials, and therefore the dispute must be resolved in district court. Id. at 567-570. The district court denied Ravin, Greenberg's motion for reconsideration in light of the recently decided ease of Travellers Int'l AG. v. Robinson, 982 F.2d 96 (3d Cir.1992), cert. denied, — U.S. -, 113 S.Ct. 1946, 123 L.Ed.2d 651 (1993). Billing v. Ravin, Greenberg & Zackin, P.A., Civ. Action No. 92-4278 (D.N.J. Feb. 23,1993) (denial of motion for reconsideration).
On March 25, 1993, the district judge granted Ravin, Greenberg's motion to certify the following questions for interlocutory appeal: 1) whether the debtors' action for malpractice constitutes a core proceeding; 2) whether a bankruptcy court is empowered to conduct a jury trial in a core proceeding; and 3) whether the debtors "waived" their right to a trial by jury by submitting to the equitable jurisdiction of the bankruptcy court. Billing v. Ravin, Greenberg & Zackin, P.A., Civ. Action No. 92-4278, at 2 (D.N.J. Mar. 25, 1993) (order certifying questions for interlocutory appeal and denying stay pending appeal).
II.
The district court took subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1334 (1988). Billing v. Ravin, Greenberg & Zackin, P.A., 150 B.R. 563, 564 (D.N.J. 1993). Section 1334 grants jurisdiction to the district courts over cases under title 11 of the United States Code, arising under title 11, or arising in or related to cases under title 11. 28 U.S.C. § 1334(a), (b). The district court determined that the debtors' malpractice claims arose under title 11 because of the claims' connection with the debtors' bankruptcy petitions. See Billing, 150 B.R. at 564. We find that jurisdiction in the district court was proper under § 1334.
We have appellate jurisdiction pursuant to 28 U.S.C. § 1292(b) (1988). An appellate court may permit an interlocutory appeal if the district court certifies that its order involves a controlling question of law as to which there exists substantial controversy and that an immediate appeal will advance the termination of the litigation. Id. On March 25, 1993, the district court issued an order certifying this case for interlocutory appeal. This court granted permission to appeal on May 12, 1993. Thus, we have appellate jurisdiction.
Because this case centers on issues of law rather than fact, the standard of review is plenary. In re Data Access Sys. Sec. Litig., 843 F.2d 1537, 1539 (3d Cir.), cert. denied, 488 U.S. 849, 109 S.Ct. 131, 102 L.Ed.2d 103 (1988). Although the scope of review on an interlocutory appeal is generally constrained to the questions certified for review by the district court, we may consider any grounds justifying reversal. Id.
III.
As a preliminary matter, we note that the parties do not contest the district court's holding that the debtors' malpractice claim constitutes a core proceeding under the meaning of the bankruptcy code. Therefore, the first question certified for interlocutory appeal will not be addressed by this court. The second question, whether bankruptcy courts have the power to conduct jury trials, is not reached, as we find in answer to the third question that the debtors have no right to a jury trial in this instance.
A.
The Seventh Amendment provides, "[i]n Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved." U.S. Const, amend. VII. The Supreme Court interprets "suits at common law" to mean cases involving legal rights; no jury right attaches to equitable claims. Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 41, 109 S.Ct. 2782, 2790, 106 L.Ed.2d 26 (1989). In determining whether a claim is equitable or legal,
[f]irst, we compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, we examine the remedy sought and determine whether it is legal or equitable in nature. The second stage of this analysis is more important than the first. If, on balance, these two factors indicate that a party is entitled to a jury trial under the Seventh Amendment, we must decide whether Congress may assign and has assigned resolution of the relevant claim to a non-Article III adjudicative body that does not use a jury as factfinder.
Id. at 42, 109 S.Ct. at 2790 (citations omitted). An action for money damages based on a breach of contract is traditionally a legal claim. See Dairy Queen, Inc. v. Wood, 369 U.S. 469, 477, 82 S.Ct. 894, 899, 8 L.Ed.2d 44 (1962). Actions sounding in tort "for damages to a person or property" are also generally considered to be actions at law. See Ross v. Bernhard, 396 U.S. 531, 533, 90 S.Ct. 733, 735, 24 L.Ed.2d 729 (1970).
One bankruptcy court decision has directly addressed the issue of whether a claim for legal malpractice of bankruptcy counsel satisfies the first two prongs of the Granfinanci-era test. The court stated:
[generally, negligence which gives rise to legal malpractice is based upon the attorney's breach of his duty of care. The essence of such an action is in tort.
In re SPI Communications & Mktg., Inc., 112 B.R. 507, 512 (Bankr.N.D.N.Y.1990). The bankruptcy court determined that the malpractice claim sounded in law rather than equity and that money damages for malpractice constituted a legal remedy. See id. Without discussing the third prong of Gran-financiera or the possible limitations of Granfinanciera implicit in other Supreme Court precedent, the bankruptcy court concluded that the attorney had a right to jury trial on the malpractice claim against him. Id.
The first two prongs of the Granfinanci-era test do not provide a complete answer, however. Inquiry into the third prong of the test may reveal exceptions to the rule. In the third prong, the Supreme Court discussed whether Congress had permissibly assigned to non-Artiele III tribunals the adjudication of disputes arising in or related to bankruptcy proceedings. Granfinanciera, 492 U.S. at 42, 109 S.Ct. at 2790. The Court determined that Congress may assign disputes involving "public rights" to a tribunal that does not use a jury as a factfinder without violating the Seventh Amendment. Id. at 51, 109 S.Ct. at 2795.
No right to trial by jury exists in cases "where the Government is involved in its sovereign capacity under an otherwise valid statute creating enforceable public rights. Wholly private tort,' contract, and property cases, as well as a vast range of other cases, are not at all implicated." Id. (quoting Atlas Roofing Co. v. Occupational Safety & Health Review Comm'n, 430 U.S. 442, 458, 97 S.Ct. 1261, 1270, 51 L.Ed.2d 464 (1977)). The category of public rights may include seemingly private rights, if they are closely integrated into a public regulatory scheme assigned to an administrative agency. Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 593-94, 105 S.Ct. 3325, 3339-40, 87 L.Ed.2d 409 (1985); Beard v. Braunstein, 914 F.2d 434, 441 (3d Cir.1990).
Whereas the argument is made that the restructuring of debtor-creditor relations in bankruptcy may constitute a public right, the right of a debtor to recover contract damages to augment the estate is private. Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 71-72, 102 S.Ct. 2858, 2871-72, 73 L.Ed.2d 598 (1982). The right of a trustee of the debtor's estate to reclaim a fraudulent conveyance made in anticipation of bankruptcy also implicates a private rather than public cause of action. Granfinanciera, 492 U.S. at 55, 109 S.Ct. at 2797. A debtor's action to recover damages for legal malpractice, arising from an attorney's tortious negligence, is likewise a private rather than a public right, and thus ordinarily would implicate a right to jury trial.
In support of its argument to the contrary, Ravin, Greenberg relies in particular on In re Brenner, 119 B.R. 495 (Bankr.E.D.Pa. 1990). Brenner involved claims by a successor bankruptcy trustee against the predecessor trustee and his counsel for breach of fiduciary duty. Id. at 495. The bankruptcy court found that actions between trustees were generally founded in equity, and that even if monetary relief was sought, the remedy would take the equitable form of an accounting. Id. at 497. Therefore, it determined that the first two prongs of the Gran-financiera test were not satisfied. Id. at 496-97. The court stated further that the action involved a trustee engaged in "the 'public' business of the administration of the Debtors' bankruptcy case." Id. at 497. The court distinguished SPI on the ground that SPI "targeted alleged wrongful acts of the respective debtors' counsel." Id.
We need not go so far as the bankruptcy court appeared to do in Brenner. That is, we do not find that every matter involving the administration of the debtor's bankruptcy case evokes public rights. Rather, legal claims that may involve private rights nonetheless may, in certain bankruptcy contexts, be decided in equity.
B.
The third prong of the Granfinanciera test suggests a limitation on the Seventh Amendment right to trial by jury in addition to the public rights doctrine. This restriction, less well articulated, has emerged in connection with creditors' demands for a jury trial in actions brought by the trustee in bankruptcy. Thus, a discussion of the creditor's right to a jury trial provides a necessary backdrop to our analysis of the debtor's right to a jury trial.
In addressing a creditor's Seventh Amendment rights under the modern bankruptcy code, the Granfinanciera Court examined Katchen v. Landy, 382 U.S. 323, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966), which considered the creditor's right to a jury trial under the Bankruptcy Act of 1898. Granfinanciera, 492 U.S. at 57, 109 S.Ct. at 2798. The 1898 Act forbade the allowance of a creditor's claim if the creditor had received a preferential transfer from the debtor prior to the date of bankruptcy. Katchen, 382 U.S. at 330, 86 S.Ct. at 473. The creditor in Katchen, after filing a proof of claim, invoked his Seventh Amendment right to a jury trial when the trustee objected to the claim on the ground of preference. See id. at 327-28, 86 S.Ct. at 471-72.
The Court first noted Congress' intent to render the administration of the bankruptcy estate inexpensive, efficient and prompt. Id. at 328, 86 S.Ct. at 471. Under the 1898 Act, the resolution of disputed claims was meant to occur in the context of summary proceedings conducted by the bankruptcy court rather than through the slower and more expensive proceedings at law. Id. at 329, 86 S.Ct. at 472. As part of its power to allow or disallow claims, the bankruptcy court could summarily adjudicate the trustee's objections to a creditor's claim. Id. at 330, 86 S.Ct. at 473. The Court in Katchen therefore concluded that
although petitioner might be entitled to a jury trial on the issue of preference if he presented no claim in the bankruptcy proceeding and awaited a federal plenary action by the trustee, Schoenthal v. Irving Trust Co., 287 U.S. 92 [53 S.Ct. 50, 77 L.Ed. 185] [ (1932) ], when the same issue arises as part of the process of allowance and disallowance of claims, it is triable in equity.
Katchen, 382 U.S. at 336, 86 S.Ct. at 476. There is no right to trial by jury where the claims allowance process is implicated, because the Bankruptcy Act "converts the creditor's legal claim into an equitable claim to a pro rata share of the res." Id.
In Schoenthal v. Irving Trust Co., the trustee of the bankrupt's estate brought a suit in equity against two individuals for the recovery of an allegedly preferential transfer. 287 U.S. at 93, 53 S.Ct. at 51. The Court stated, "[s]uits to recover preferences constitute no part of the proceedings in bankruptcy but concern controversies arising out of it." Id. at 94-95, 53 S.Ct. at 51. The Court then determined that the suit should be heard at law because the defendants, who apparently had neither counterclaimed nor filed a claim against the estate, had done nothing to indicate a willingness that the case be heard in equity. Id. at 96-97, 53 S.Ct. at 52.
Citing Schoenthal, the Supreme Court in Granfinanciera found that the Seventh Amendment applied to suits to recover fraudulent conveyances. Granfinanciera, 492 U.S. at 49-50, 56, 109 S.Ct. at 2794-95, 2797. Such suits "more nearly resemble state-law contract claims brought by a bankrupt corporation to augment the bankruptcy estate than they do creditors' hierarchically ordered claims to a pro rata share of the bankruptcy res." Id. at 56, 109 S.Ct. at 2798. The Court thus held that a person who has not submitted a claim against a bankruptcy estate has a right to a jury trial when sued by a trustee seeking to recover a fraudulent conveyance. Id.
The Granfinanciera Court saw no conflict between its holding and the Court's prior conclusion in Katchen that a person who has submitted a claim against the bankruptcy estate is not entitled to a jury trial on the trustee's preference action. See id. at 57, 109 S.Ct. at 2798. Granfinanciera made clear that the Court's decision in Katchen did not depend on the scope of the summary jurisdiction granted to the bankruptcy courts by the 1898 Act. Id. Instead, Katchen turned on "the bankruptcy court's having 'actual or constructive possession' of the bankruptcy estate and its power and obligation to consider objections by the trustee in deciding whether to allow claims against the estate." Granfinanciera, 492 U.S. at 57, 109 S.Ct. at 2798 (citations omitted).
The Court interpreted Schoenthal and Katchen "as holding that, under the Seventh Amendment, a creditor's right to a jury trial on a bankruptcy trustee's preference claim depends upon whether the creditor has submitted a claim against the estate." Id. at 58, 109 S.Ct. at 2799. It clarified in a footnote that
by submitting a claim against the bankruptcy estate, creditors subject themselves to the court's equitable power to disallow those claims, even though the debtor's opposing counterclaims are legal in nature and the Seventh Amendment would have entitled creditors to a jury trial had they not tendered claims against the estate.
Id. at 59 n. 14, 109 S.Ct. at 2799 n. 14. The Court found that because the creditors in Granfinanciera had not filed claims against the estate, the trustee's fraudulent conveyance action did not arise as part of the "allowance and disallowance of claims," as stated in Katchen. Id. 492 U.S. at 58, 109 S.Ct. at 2799. The Court did not further define the scope of the allowance and disal-lowance process.
The opinion held that the creditors were entitled to a jury trial despite the fact that a fraudulent conveyance action constituted a core proceeding normally adjudicated by the bankruptcy court. Id. at 58-59, 109 S.Ct. at 2799. Although Congress had given the bankruptcy courts power to decide all "core proceedings" arising in bankruptcy, the Court refused to allow this "purely taxonomic change" to strip a cause of action of its legal nature. See id. at 60-61, 109 S.Ct. at 2800. In the Court's view, Katchen "supports the result we reach [in Granfinanciera ]; it certainly does not compel its opposite." Id. at 59, 109 S.Ct. at 2799. While this statement may not be a whole-hearted embrace of the Katchen approach, it is clearly not an overruling.
Building on Katchen and Granfinanciera, the Supreme Court decided Langenkamp v. Culp, 498 U.S. 42, 111 S.Ct. 330, 112 L.Ed.2d 343 (1990) (per curiam). Langenkamp is the whole-hearted embrace of Katchen that Granfinanciera apparently avoided. Langenkamp seems to formulate a bright-line rule, holding that creditors who file proofs of claim against the estate are not entitled to a jury trial on matters affecting the allowance of those claims. 498 U.S. at 45, 111 S.Ct. at 331. The Court interpreted Granfinanciera as recognizing that by filing a proof of claim a creditor triggers the process of allowance and disallowance of claims, and thus submits itself to the bankruptcy court's equitable jurisdiction. Id. at 44, 111 S.Ct. at 331. A preference action against a creditor who has filed a claim becomes part of the elaims-allowance process and is thus integral to the restructuring of the debtor-creditor relationship. Id. Therefore, a creditor who has filed a proof of claim is not entitled to a jury trial on a trustee's preference action. Id. at 45, 111 S.Ct. at 331.
This circuit has relied on Langenkamp in holding that "the equitable jurisdiction of the bankruptcy court is exclusive when its jurisdiction has been invoked by the filing of a claim." Travellers Int'l AG. v. Robinson, 982 F.2d 96, 100 (3d Cir.1992), cert. denied, — U.S. -, 113 S.Ct. 1946, 123 L.Ed.2d 651 (1993). In Travellers, a district court had rendered judgment against Transworld Airlines, Inc. ("TWA") and in favor of Travellers in a breach of contract action decided in October 1991. Id. at 97. On November 4, TWA deposited the amount of the judgment with the clerk of the court and obtained a stay of execution pending appeal. Id.
TWA filed for bankruptcy in January 1992 and sought to recover the money judgment on the grounds that it constituted a voidable preference. Id. Travellers subsequently filed a proof of claim to the money judgment, asserting that it did not intend to waive its jury right in the pending preference action by doing so. Id. The adversary proceeding and the proof of claim were thus intimately-connected, as they both asserted rights to the same property. We held that despite Travellers' intent to protect its right to jury, it submitted itself to the equitable jurisdiction of the bankruptcy court by fifing the proof of claim. Id. at 100.
In contrast, in Beard v. Braunstein we found that a third party does not lose its right to jury trial by fifing a compulsory, post-petition counterclaim against the trustee. 914 F.2d at 442. In Beard, a trustee in bankruptcy brought an adversary proceeding in the bankruptcy court against the debtor's tenant to recover rents from the use of two buildings. Id. at 435. The tenant alleged the poor condition of the premises as a defense to his failure to pay rent, and as a basis for a separate counterclaim. Id. at 442 n. 13. He did not file a proof of claim. Id. at 435.
We determined that an action for breach of lease agreements entered into pre-petition did not constitute a core proceeding. Id. at 445. We also rejected the argument that the debtor's tenant had "consented to the jurisdiction of the bankruptcy court" by filing a compulsory counterclaim. Id. at 442. The better rule, we found, is that a party does not waive objections to jurisdiction by asserting a compulsory counterclaim. Id. We therefore required that the case be decided in district court by a jury. Id. at 447.
A prior bankruptcy court opinion finding jurisdiction and no right to jury trial was distinguished on the ground that the prior ease involved a core proceeding in which a creditor had filed both a proof of claim and a permissive, rather than compulsory, counterclaim. Id. at 442 (citing Baldwin-United Corp. v. Thompson, 48 B.R. 49, 54, 55 & n. 5 (Bankr.S.D.Ohio 1985)). Because the bankruptcy court in the prior case determined that the trustee's action was a core proceeding, "the trustee's claims stood on their own jurisdictional footing." Id.
In the case at bar, the application for attorney's fees and the debtors' objections likewise stand on their own jurisdictional footing. The debtors commenced the bankruptcy proceeding by filing a voluntary petition. See 11 U.S.C. § 301 (1988). The debtors' counsel submitted an application for fees under a statutory provision authorizing the bankruptcy court to award reasonable compensation to bankruptcy counsel after notice and hearing. Id. § 330(a) (1988).
There is no question that the bankruptcy court had core jurisdiction over this claim, whether or not the debtors filed any objections, defenses, or affirmative counterclaims. See 28 U.S.C. § 157(b)(1), (2); see also supra Part III. Furthermore, by invoking Ravin, Greenberg's alleged malpractice as a defense, the debtors placed the issue squarely before the bankruptcy court for decision. Thus, the question is not whether the bankruptcy court had jurisdiction over the parties and their dispute, but whether the bankruptcy court had the power to decide the proceedings in equity.
C.
It is clear that a creditor who submits a proof of claim against the bankruptcy estate has no right to a jury trial on issues raised in defense of such a claim. Langenkamp, 498 U.S. at 45, 111 S.Ct. at 331. A question still exists as to whether the petitioner in bankruptcy is without jury rights in the very same dispute. This is a question of first impression for the Third Circuit.
The Seventh Circuit in In re Hallahan, 936 F.2d 1496 (7th Cir.1991), held that a debtor who filed a voluntary petition in bankruptcy has no right to a jury trial in dis-chargeability proceedings brought by a creditor who has filed a proof of claim. Id. at 1505-06. The court first applied the Gran-financiera test to determine whether the claim was legal or equitable, reaching the conclusion that a proceeding to determine dischargeability was equitable. Id. at 1505. It then asserted, in dicta, that even assuming a dischargeability action to be legal, the debt- or had no right to a jury trial because he voluntarily submitted to the equitable jurisdiction of the bankruptcy court by filing his petition. Id.
The court reasoned that if a creditor lost its right to a jury trial by filing a proof of claim, the debtor "cannot be endowed with any stronger right." Id. In a footnote, the opinion suggested that whereas the Supreme Court in Granfinanciera shied away from the application of a waiver theory to creditors, a waiver theory might more appropriately pertain to voluntary debtors. Id. at 1505 n. 10. The court in Hallahan refused to address the knotty problem of the waiver theory as applied to involuntary debtors. Id. at 1505 n. 11.
The Fifth Circuit in In re Jensen, 946 F.2d 369, 374 (5th Cir.1991), agreed with the result in Hallahan while disagreeing with the reasoning. The court in Jensen specifically rejected the waiver theory propounded in Hallahan. Id. According to the Fifth Circuit's view, the debtor in Hallahan lost its jury right when the creditor filed its proof of claim, not when the debtor filed its voluntary petition. Id. The court stated, "[f]iling a proof of claim denied both the plaintiff and the defendant, debtor, any right to jury trial that they otherwise might have had on that claim." Id.
The question presented in Jensen was "whether a debtor effectively subjects his pre-petition claims to the bankruptcy court's equitable power when he files a petition for bankruptcy." Id. at 373. The court conclud ed that a debtor does not and then elaborated:
[t]he petition for bankruptcy itself has nothing to do with whether the bankruptcy court can exercise equitable jurisdiction over a debtor's pre-petition claims. Its only effect is to pass ownership and control of the claims to the estate....
Id. The Jensen court held that an unrelated state-law suit by the debtor in possession against non-creditor third parties is not part of the process of allowance and disallowance of claims. Id. at 374. Therefore, the debt- or retains his right to jury in that circumstance despite the filing of a voluntary petition in bankruptcy. Id.
The Second Circuit's opinion in Germain v. Connecticut Nat'l Bank, 988 F.2d 1323, 1330 (2d Cir.1993), follows the reasoning of neither Hallahan nor Jensen. In Germain, the primary lender filed a proof of claim, and the trustee brought suit against it six months later for interference with the debtor's business in the post-petition period. Id. at 1325, 1326. The Second Circuit found that the tortious interference suit constituted a legal claim, giving rise to the right of trial by jury. Id. at 1328-29. It determined that the trustee, who requested a jury trial, did not surrender its right to have one in a case only incidentally related to the bankruptcy process. Id. at 1330.
The court distinguished Hallahan on the ground that the creditor in Hallahan invoked the claims allowance process by filing a claim for a pre-petition debt. See id. at 1330. Germain's post-petition tortious interference claim against the primary lender, on the other hand, had no relation to the primary lender's proof of claim for a pre-petition debt. Id. at 1328.
The court also refused to go as far as Jensen, rejecting the proposition that "either the creditor or the debtor automatically waives all right to a jury trial whenever a proof of claim is filed." Id. at 1330. The court agreed with Jensen only insofar as it found the right to jury to be lost through the conversion of a legal dispute to an equitable one, rather than through waiver. Id. Ger-main adhered closely to the language in Katchen, 382 U.S. at 336, 86 S.Ct. at 476, holding that denial of a jury trial will occur only where the dispute is "part of the claims-allowance process or affect[s] the hierarchical reordering of creditors' claims." Germain, 988 F.2d at 1330.
The waiver theory of Hallahan, rejected by Jensen and Germain, raises as many questions as it answers. The reason a creditor loses its jury right by filing a proof of claim is because its action not only voluntarily submits it to the jurisdiction of the bankruptcy court but also triggers the claims-allowance process, as described in Katchen. * A voluntary petition in bankruptcy does not automatically begin the process of allowance and disallowance of claims. Moreover, an involuntary debtor cannot be deemed to have waived its jury rights when its creditors force it into bankruptcy.
We do not adopt the specific holding of Jensen that any dispute between a debtor and a creditor who has filed a proof of claim is equitable in nature, for our task is to decide only the case before us. Furthermore, the case at bar is distinguishable on its facts from Germain. Germain determined that although the creditor had filed a proof of claim for a pre-petition debt, the trustee's cause of action for tortious interference arose post-petition and was therefore unrelated to the allowance of the creditor's claim. See 988 F.2d at 1328, 1329-30. This reasoning led to the conclusion that the trustee was entitled to a jury trial. Id. at 1332; but see In re Wheeling-Pittsburgh Steel Corp., 108 B.R. 82, 85 (Bankr.W.D.Pa.1989) (determining that although debtor's counterclaims related to post-petition acts, there was sufficient connection to creditor's claims for pre-petition debts that creditor had no jury right on counterclaims).
In the case at bar, the attorneys' claims for fees arose post-petition, as did the debtors' cause of action for malpractice. Moreover, the debtors' malpractice suit mirrors its objections to the allowance of attorney's fees. The court in Germain specifically addressed the situation of a malpractice claim against bankruptcy counsel and stated,
[t]o the extent that . the debtor was essentially objecting to the allowance of the attorney's claim and that the debtor's success meant the disallowance of the attorney's claim, we agree that the debtor's objection was part of the claims-allowance process.
988 F.2d at 1330 n. 9. In the case before us, the debtors' objections to attorney's fees rested heavily on their claims of malpractice. The district court recognized the interrelated nature of the actions, finding that "the merits of the malpractice claims must be resolved before there can be a resolution of the fee dispute." Billing, 150 B.R. at 570 n. 2. The close connection between the malpractice action and the objections to fees leads us to conclude that the debtors' allegations of malpractice are part of the process of allowance and disallowance of claims.
The fact that the bankruptcy court has explicit jurisdiction to award fees for bank- ruptey counsel and other supervisory powers as to bankruptcy counsel strengthens this view. Under the bankruptcy code, the bankruptcy court has the power to award "reasonable compensation for actual, necessary services" and "reimbursement for actual, necessary expenses" to bankruptcy counsel. 11 U.S.C. § 330(a)(1), (2). An attorney's claim for pre-petition fees and the debt- or's objections and counterclaims based on negligence and breach of contract "[ejlearly . arise[ ] out of the claims allowance process." In re Frost, Inc., 145 B.R. 878, 882 (Bankr.W.D.Mich.1992).
We hold that an allegation of legal malpractice raised as a defense to post-petition fees for bankruptcy counsel likewise falls within the process of the allowance and disal-lowance of claims. The debtors have no Seventh Amendment right to trial by jury, not because of specific waiver of Seventh Amendment rights, but because their claim has been converted from a legal one into an equitable dispute over a share of the estate.
Clearly, if the attorneys in this case had demanded a jury trial, their request would be refused on the ground that they had filed a claim for fees with the bankruptcy court. Under the facts, we see no reason to treat the debtors' request differently. Furthermore, the award of attorney's fees to counsel appointed by the bankruptcy court lies at the heart of the court's equitable jurisdiction. Bankruptcy fee claims do not in any way implicate the Seventh Amendment right to jury or any Article III issue. That the defense to the claim is also a common law malpractice claim does not change the relationship of the debtors and their attorneys to the bankruptcy process. Accordingly, we hold that the debtors have no right to a jury trial on the malpractice claims against their bankruptcy counsel, which are asserted as a defense to the attorneys' claim for fees.
IV.
For the foregoing reasons, the judgment of the district court will be reversed and this matter will be remanded to the district court for referral of this malpractice dispute to the bankruptcy court.
. The statute provides that "[b]ankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11 . and may enter appropriate orders and judgments," subject to ordinary appellate review by the district courts. 28 U.S.C. § 157(b)(1) (1988). Core proceedings include "matters concerning the administration of the estate" and "other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor . relationship." Id. § 157(b)(2)(A), (0) (1988). Post-petition transactions are more likely to be core proceedings. In re Ben Cooper, Inc., 896 F.2d 1394, 1399 (2d Cir.1990), cert. denied, 500 U.S. 928, 111 S.Ct. 2041, 114 L.Ed.2d 126 (1991); In re Arnold Print Works, Inc., 815 F.2d 165, 168 (1st Cir.1987); cf. Beard v. Braunstein, 914 F.2d 434, 445 (3d Cir.1990) (not relying on Ben Cooper and Arnold Print Works because the case at bar involved pre-petition contracts only). The district court ruled that the debtors' post-petition claim attacking the competency of bankruptcy counsel was a matter concerning the administration of the estate under 28 U.S.C. § 157(b)(2)(A). Billing v. Ravin, Greenberg & Zackin, P.A., 150 B.R. 563, 566 (D.N.J.1993). Therefore, the court held, and the parties do not disagree, that the debtors' malpractice claim constituted a core proceeding. Id. at 567.
. Although the Supreme Court has considered the thesis that the restructuring of debtor-creditor relations may be a public right. Marathon, 458 U.S. at 71, 102 S.Ct. at 2871, it has specifically refused to defend such a view. Granfinanciera, 492 U.S. at 55-56 & n. 11, 109 S.Ct. at 2798 & n. 11.
. In Granfinanciera, the debtors filed petitions under Chapter 11 of the bankruptcy code and a trustee in bankruptcy was subsequently appointed to represent the estate. 492 U.S. at 36, 109 S.Ct. at 2787. Under Chapter 11 reorganization proceedings, the estate may remain in the hands of the debtor in possession, or a trustee may be appointed in certain enumerated circumstances. 11 U.S.C. § 1101, 1104 (1988). These circumstances include gross mismanagement or fraud by the debtor. Id. § 1104(a)(1). The court will also designate a trustee to oversee the estate if such appointment is in the interest of the creditors. Id. § 1104(a)(2).
. The summary jurisdiction vested in the bankruptcy courts under the 1898 Act consisted of "jurisdiction over controversies involving property in the actual or constructive possession of the court." Marathon, 458 U.S. at 53, 102 S.Ct. at 2862. The bankruptcy courts also had plenary jurisdiction over disputes involving property in the possession of a third person, if the parties consented. Id.
. In the Court's view, proceedings to determine the reasonableness of attorney's fees paid prior to and in contemplation of bankruptcy served as another example of disputes within the bankruptcy court's summary jurisdiction. Katchen, 382 U.S. at 332-33, 86 S.Ct. at 474-75.
. The majority opinion rejected the dissent's argument that Katchen rested "on an accident of statutory history." Granfinanciera, 492 U.S. at 58, 109 S.Ct. at 2799. The dissent noted that, unlike the modem bankruptcy code, the 1898 Act gave the bankruptcy courts power to disallow a claim on the grounds of preference, but no express summary jurisdiction over actions to recover preferences from third parties. Id. at 72-73, 109 S.Ct. at 2806-07 (White, J., dissenting). The dissent implied that when Congress expanded the bankruptcy courts' jurisdiction to cover preference actions against third parties, it meant for third parties to have no greater Seventh Amendment rights than creditors who had tiled a proof of claim. See id.
. The Court distinguished this rationale from the notion of waiver "because creditors lack an alternative forum to the bankruptcy court in which to pursue their claims." Granfinanciera, 492 U.S. at 59 n. 14, 109 S.Ct. at 2799 n. 14.
.The problem with applying Granfinanciera to the case at bar is that Granfinanciera is not easily reconciled with Katchen and Langenkamp. The dissent attempts to reconcile the cases by describing the latter two as public rights cases. We do not go that far, but note that if actions to recover preferences from pre-petition creditors involve public rights, so must actions to recover for the post-petition malpractice of the debtor's bankruptcy attorney, an appointed officer of the court. Although both types of actions concern the administration of the bankruptcy estate, the case at hand is more integrally related to bankruptcy administration than the simple recovery of a preference.
. We interpreted Langenkamp as "expressly hold[ing] that once a defendant in a preference action has submitted a proof of claim, both the claim and the preference action 'become integral to the restructuring of the debtor-creditor relationship through the bankruptcy court's equity jurisdiction.' " Travellers, 982 F.2d at 100 n. 5 (quoting Langenkamp, 498 U.S. at 44, 111 S.Ct. at 331) (emphasis added).
. We explained that under Bankruptcy Rule 7013, it is compulsory for a parly sued by the trustee to bring any counterclaims that arose post-petition. Beard, 914 F.2d at 442 n. 13.
. The court explained that a debtor will not be discharged from its obligation to pay a debt "for willful and malicious injury by the debtor to another entity." Hallahan, 936 F.2d at 1499 (quoting 11 U.S.C. § 523(a)(6) (1988)). The creditor claimed that the debtor's willful breach of contract and tortious interference with the creditor's business relationships constituted willful and malicious injury. Id.
. The debtors in Jensen had filed suit in Texas state court against certain businesses, individuals and banks involved in the development and marketing of the debtors' invention of a high frequency ventilator designed to help premature infants to breathe. 946 F.2d at 370. The complaint alleged breach of fiduciary duty, fraud, tortious interference with business relations and conspiracy. Id.
. Subsequent to Germain, the Second Circuit decided In re Orion Pictures Corp., 4 F.3d 1095 (2d Cir.1993), which concerned the bankruptcy court's ruling as to breach of a so-called "key-man" clause in a contract that the court had been asked to assume as part of the estate. Id. at 1097. The Second Circuit's holding depended primarily upon the purpose of a motion to assume, which requires the bankruptcy judge to determine whether assuming the contract would be a good business decision or a bad one. Id. at 1098-99. A ruling on a breach of contract claim would render the use of business judgment unnecessary and was thus inappropriate in the limited context of a motion to assume. Id. at 1099. After reaching this holding, the court stated:
[ojur conclusion that the bankruptcy court erred in adjudicating the key-man issue in deciding the Motion to Assume is also informed by the fact that motions to assume always involve contracts, and allowing a bankruptcy court to decide a disputed legal contract issue in the course of deciding a motion to assume could usurp litigants' Seventh Amendment jury-trial rights. Our holding that contract issues may not be decided as part of a motion to assume eliminates the possibility that any such constitutional problems will arise.
Id. (second and third emphasis added). The court did not engage in an in-depth Seventh Amendment analysis and we find its tentative observations unpersuasive.
.Our discussion of the creditor's right to jury in Travellers, 982 F.2d at 99, collapses the two steps of this analysis. The opinion uses language such as "Travellers has, a fortiori, waived its right to a jury trial and has constructively submitted to the equitable jurisdiction of the bankruptcy court by filing a claim." Id. Regardless of the appropriateness of the waiver theory in the context of a creditors' rights case such as Travel-lers, it does not fit the debtor's situation here. The fact that the debtor may have voluntarily submitted itself to the bankruptcy court's equitable jurisdiction does not complete the analysis. A court must also ask whether the resolution of the particular dispute at issue is necessarily part of the process of the disallowance and allowance of claims. See Katchen, 382 U.S. at 336, 86 S.Ct. at 476.
.In the latter half of part III, the dissenting opinion distinguishes Katchen and Langenkamp on the ground that the parly seeking the jury trial was the creditor rather than the trustee. Jensen and Hallaban, however, are not distinguishable on that ground. The dissent states further that because Ravin, Greenberg did not request the jury trial, there is no need to determine whether its claim for fees is integral to the claims allowance process. We believe the dissent underem-phasizes the role of the creditor's claim as a trigger of the claims-allowance process with the potential to convert rights of action held by the debtor as well as by the creditor.
. See also In re Light Foundry Assocs., 112 B.R. 134, 138 (Bankr.E.D.Pa.1990) ("even prior to Granfinanciera, we had little difficulty in concluding . that a proceeding involving counterclaims to a proof of claim was equitable in nature . as an aspect of the bankruptcy claims process"); accord In re Washington Mfg. Co., 128 B.R. 198, 202 (Bankr.M.D.Tenn.1991) ("it is the fact that the Trustee's fraudulent conveyance counterclaim is in reality an objection to the allowance of [the creditor's] secured claims which strips the Trustee of a jury right.")
. The debtors' emphasis on the fact that the malpractice complaint seeks money damages in addition to disallowance of attorney's fees is misplaced. The Supreme Court stated in Granfinan-ciera that "once a creditor has filed a claim against the estate, the bankruptcy trustee may recover the full amount of any preference received by the creditor-claimant, even if that amount exceeds the amount of the creditor's claim." 492 U.S. at 60 n. 14, 109 S.Ct. at 2800 n. 14. The logic is equally applicable to the situation presented to us here.
. The bankruptcy court may deny fees to an attorney if at any time during his representation of the estate he is not a disinterested person. 11 U.S.C. § 328(c) (1988). Initial hiring of the attorney by the trustee is also subject to the bankruptcy court's approval. Id. § 327(a) (1988); Bankruptcy Rule 2014(a). Debtors in possession, like the Billings, are subject to the same rules as regards employment of attorneys. 11 U.S.C. § 1107(a) (1988) (debtors in possession are "subject to any limitations on a trustee serving in a case under this chapter"); Bankruptcy Rule 9001(10) (" 'trustee' includes a debtor in possession in a Chapter 11 case").
. Section 330 clearly contemplates payment for services rendered post-petition. One bankruptcy court has considered the explicit statutory provision preventing unauthorized post-petition transfers as evidence of Congress' intent to deny trial by juiy on such claims. In re North Carolina Hosp. Ass'n Trust Fund, 112 B.R. 759, 762 (Bankr.E.D.N.C.1990) (citing 11 U.S.C. § 549 (1988)). The court stated, "actions to recover postpetition transfers from the bankruptcy estate arise out of actions occurring after the creation of the estate which are in violation of the equitable protections of bankruptcy law designed to preserve estate assets." Id. The court denied creditors who had not filed claims the right to a jury trial with respect to alleged post-petition transfers because it found a public right to be implicated. Id. at 760, 763. While we do not choose to find that a public right is implicated in awards of post-petition fees for bankruptcy counsel, we do note that such awards are within the bankruptcy court's equity jurisdiction.
.Other district courts and bankruptcy courts have also preferred the conversion theory to the waiver theory in the context of the debtor's right to trial by jury. The United States District Court for the Middle District of Tennessee stated that the loss of a jury right
is not based on any waiver of Seventh Amendment rights by the creditor, but is based on the idea that once the creditor makes a claim against the bankruptcy estate, any subsequent fraudulent conveyance or preference counterclaim by the trustee is equivalent to an objection to the creditor's claim, and therefore part of the claims allowance process.
In re Washington Mfg. Co., 133 B.R. 113, 117 (M.D.Tenn.1991) (citing Granfinanciera, 492 U.S. at 59 n. 14, 109 S.Ct. at 2799 n. 14). Significantly, the court found that because the creditor had already filed a proof of claim, the trustee had no right to a jury trial on its fraudulent conveyance and preference counterclaims. Id.
The bankruptcy court in Frost, 145 B.R. 878, held that a debtor does not waive all right to a jury trial by filing a voluntary petition. Id. at 882. A creditor also does not possess the power to waive the debtor's jury rights by filing a proof of claim. Id. at 883. Instead, "[sjince the adversary proceeding brought by the Debtor implicated the claims allowance process no Seventh Amendment right to a jury trial exists." Id. at 882-83.