Opinion ID: 771576
Heading Depth: 2
Heading Rank: 1

Heading: The district court lacked subject matter jurisdiction

Text: 14 The district court properly held that: (1) federal law preempts the Huminskis' state tort law claims; (2) the Huminskis could have pursued remedies for purported violations of the automatic stay only in the Bankruptcy Court; and (3) the district court therefore lacked jurisdiction over the Huminskis' state law claims. 15 The Supremacy Clause of the United States Constitution, Article VI, Clause 2, provides that federal law shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any State to the contrary notwithstanding. Preemption of state law by federal authority may be express or implied, and often, an Act of Congress may touch a field of law in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject. See Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152-53 (1982). 16 The United States Bankruptcy Code provides a comprehensive federal system of penalties and protections to govern the orderly conduct of debtors' affairs and creditors' rights. See 11 U.S.C. § 101, et seq. And it provides for an automatic stay of state proceedings against the debtor. See 11 U.S.C. § 362. In this case, the question is whether damages may be sought under state law, in the district courts, for alleged violations of the automatic stay provision of the Bankruptcy Code. 17 Courts that have examined this issue have held that the federal Bankruptcy Code preempts any state law claims for a violation of the automatic stay, and precludes jurisdiction in the district courts. Any relief for a violation of the stay must be sought in the Bankruptcy Court. 18 In MSR Exploration, Ltd. v. Meridian Oil, Inc., 74 F.3d 910 (9th Cir. 1996), the Ninth Circuit determined that state tort claims alleging violations of the automatic stay provision are completely preempted by federal bankruptcy law. This preemption arises because: (1) Congress placed bankruptcy jurisdiction exclusively in the district courts under 28 U.S.C. § 1334(a); (2) Congress created a lengthy, complex and detailed Bankruptcy Code to achieve uniformity; (3) the Constitution grants Congress exclusive power over the bankruptcy law, see U.S. Const. art. I, § 8, cl. 4; (4) the Bankruptcy Code establishes several remedies designed to preclude the misuse of the bankruptcy process; and (5) the mere threat of state tort actions could prevent individuals from exercising their rights in bankruptcy, thereby disrupting the bankruptcy process. See MSR Exploration, 74 F.3d at 913-16; see also Koffman v. Osteoimplant Tech., Inc., 182 B.R. 115, 123-27 (D. Md. 1995). 19 If anywhere, therefore, state tort claims alleging violations of an automatic stay must be brought in the bankruptcy court itself, and not as a separate action in the district court. MSR Exploration, 74 F.3d at 916. District courts simply lack jurisdiction to hear claims asserting violations of the automatic stay that sound in state law. Id. 20 The Huminskis respond, however, that their complaint did not contain only state law claims. They assert that it also stated a federal claim under 11 U.S.C. § 362(h), which allows for the recovery of compensatory and punitive damages for willful violations of the automatic stay. However, again, such a claim must be brought in the bankruptcy court, rather than in the district court, which only has appellate jurisdiction over bankruptcy cases. See In re Crysen/Montenay Energy Co., 902 F.2d 1098, 1104 (2d Cir. 1990); MSR Exploration, 74 F.3d at 916. The Huminskis were not without recourse though, because they could have moved to reopen their original bankruptcy proceeding to bring this claim. Therefore, the district court was correct to hold that it had no jurisdiction over it. 21