Opinion ID: 74816
Heading Depth: 3
Heading Rank: 3

Heading: Related-To Bankruptcy Requirement

Text: There also is no merit to Carter’s assertion that his tort claims -- breach of fiduciary duty and reasonable care -- are “unrelated to” and “outside the scope” of the bankruptcy proceeding because they do not arise directly from substantive provisions of the Bankruptcy Code. Carter posits the theory that because his claims are unrelated to the bankruptcy proceeding, the bankruptcy court lacks jurisdiction over his lawsuit and, therefore, he was not required to obtain leave of the bankruptcy court before bringing his suit in district court. We disagree. The bankruptcy court has jurisdiction over Carter’s claims because his breach of fiduciary duty and reasonable care claims are “related to” and “within the scope” of the bankruptcy proceeding. Because Carter’s claims are related to the bankruptcy proceeding, we need not determine whether leave of the bankruptcy court is required when a debtor sues a trustee for a tort completely “unrelated to” and “outside the scope” of the bankruptcy proceeding. A proceeding is within the bankruptcy jurisdiction, defined by 28 U.S.C. § 1334(b), if it “arises under” the Bankruptcy Code or “arises in” or is “related to” a case under the Code. “‘Arising under’ proceedings are matters invoking a substantive right created by the Bankruptcy Code. The ‘arising in a case under’ category is generally thought to involve administrative-type matters, or as the . . . 7 court put it, ‘matters that could arise only in bankruptcy.’” In re Toledo, 170 F.3d 1340, 1345 (11th Cir. 1999) (citations omitted). We have stated, “[t]he usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of the proceeding could conceivably have an effect on the estate being administered in bankruptcy.” Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784, 788 (11th Cir. 1990). While Carter’s action against Defendants arose after the date of the bankruptcy petition, his suit turns solely on allegations of wrongdoing in the sale of property belonging to the bankruptcy estate.5 Any recovery would reduce the administrative expenses of the sale of the estate property and would perforce increase the amount of estate property available to satisfy creditors’ claims. See 11 U.S.C. § 541(a)(7); see, e.g., McGuirl v. White, 86 F.3d 1232 (D.C. Cir. 1996). Thus, the outcome of this case will impact Carter’s bankruptcy estate. Further, Carter sued the trustee and other court approved officers of his bankruptcy estate for alleged breaches of their bankruptcy-related duties. The 5 The instant case is quite different from that in Boone v. Community Bank of Homestead (In re Boone), 52 F.3d 958 (11th Cir. 1995), where we determined that the bankruptcy court lacked jurisdiction over a lawsuit by Chapter 7 debtors against a creditor for tortious interference. In Boone, the conduct giving rise to the claim occurred after the date of the bankruptcy petition, and it was clear that the lawsuit “ha[d] no conceivable effect on the estate or the administration of the estate,” and that the outcome of the tortious interference claim would not alter the “rights and duties arising from the petition in bankruptcy.” See Boone, 52 F.3d at 961. In the present case, while Carter’s lawsuit against Defendants also arose after the date of the bankruptcy petition, his action will have an effect on the estate and the administration of the estate. 8 Bankruptcy Code establishes the office of trustee and defines the trustees’ duties. Moreover, an action against a bankruptcy trustee for breach of bankruptcy-related fiduciary duty can only arise in a bankruptcy case. Thus, Carter’s “fiduciary claims against [the fiduciaries] are within the bankruptcy jurisdiction defined by 28 U.S.C. § 1334(b) both as ‘arising under’ the Code and ‘arising in’ a bankruptcy case.” Schechter v. Illinois (In re Markos Gurnee Partnerships), 182 B.R. 211, 222 (Bankr. N. D. Ill. 1995); see In re Toledo, 170 F.3d 1340, 1345 (11th Cir. 1999).