Opinion ID: 806790
Heading Depth: 3
Heading Rank: 1

Heading: Principles of “Related To” Jurisdiction

Text: Section 1334(b) provides that “district courts . . . have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334(b) (emphasis added). In Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984), overruled in part by Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 134–35 (1995), we established that a proceeding is “related to” a Chapter 11 proceeding if the “outcome of [the] proceeding could conceivably have any effect on the estate being administered in bankruptcy.” Id. at 994 (emphasis added). The key inquiry no doubt is conceivability. “Certainty, or even likelihood [of effect on the estate being administered in bankruptcy,] is not a requirement.” Copelin v. Spirco, Inc., 182 F.3d 174, 179 (3d Cir. 1999) (quoting Halper v. Halper, 164 F.3d 830, 837 (3d Cir. 1999)) (alteration in original). An action thus generally is “related to” a bankruptcy proceeding “if the outcome could alter the debtor’s rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.” Pacor, 743 F.2d at 994. The Supreme Court endorsed Pacor’s conceivability standard with the caveats that “related to” jurisdiction “cannot be limitless,” and that the critical component of the Pacor test is that “bankruptcy courts have no jurisdiction over proceedings that have no effect on the estate of the debtor.” Celotex Corp. v. Edwards, 514 U.S. 300, 308 & n.6 (1995). In addition, “related to” jurisdiction does not exist if another action would need to be filed before the current action could 17 affect a bankruptcy proceeding. See W.R. Grace, 591 F.3d at 172; In re Fed.-Mogul Global, Inc., 300 F.3d 368, 382 (3d Cir. 2002). Conceivability is determined at the time a lawsuit is filed. See Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570–71 (2004) (“It has long been the case that ‘the jurisdiction of the Court depends upon the state of things at the time of the action brought.’” (quoting Mollan v. Torrance, 22 U.S. (9 Wheat.) 537, 539 (1824))). Although we once declined to apply the time of filing rule in a federal question case, New Rock Asset Partners, L.P. v. Preferred Entity Advancements, Inc., 101 F.3d 1492 (3d Cir. 1996), subsequent Supreme Court decisions demonstrate the continuing vitality of the rule. See Grupo Dataflux, 541 U.S. at 582 (“We decline to endorse a new exception to a time-offiling rule that has a pedigree of almost two centuries. Uncertainty regarding the question of jurisdiction is particularly undesirable, and collateral litigation on the point particularly wasteful.”); Dole Food Co. v. Patrickson, 538 U.S. 468, 478 (2003) (“[J]urisdiction of the Court depends upon the state of things at the time of the action brought.” (quoting Keene Corp. v. United States, 508 U.S. 200, 207 (1993))). Indeed, the strength and longevity of this rule has led courts to hold that confirmation of a bankruptcy plan does not divest a district court of related-to jurisdiction over preconfirmation claims. See, e.g., Newby v. Enron Corp. (In re Enron Corp. Sec.), 535 F.3d 325, 336 (5th Cir. 2008); ConocoPhillips Co. v. SemGroup, L.P. (In re SemCrude, L.P.), 428 B.R. 82, 96–98 (Bankr. D. Del. 2010). There is one twist to the otherwise straightforward application of Pacor’s conceivability standard. If an action is brought after the confirmation of a plan in a related bankruptcy proceeding, the post-confirmation context of the dispute alters the “related to” inquiry. Because a bankruptcy 18 court’s jurisdiction wanes after the confirmation of a case, “retention of bankruptcy jurisdiction may be problematic. . . . At the most literal level, it is impossible for the bankrupt debtor’s estate to be affected by a post-confirmation dispute because the debtor’s estate ceases to exist once confirmation has occurred.” Binder v. Price Waterhouse & Co., LLP (In re Resorts Int’l, Inc.), 372 F.3d 154, 164–65 (3d Cir. 2004). Nonetheless, “courts do not usually apply Pacor’s ‘effect on the bankruptcy estate’ test so literally as to entirely bar postconfirmation bankruptcy jurisdiction.” Id. at 165. Instead, they apply varying standards that focus on whether the action could conceivably affect the implementation of the confirmed plan. See id. at 166; U.S. Tr. v. Gryphon at the Stone Mansion, Inc., 166 F.3d 552, 556 (3d Cir. 1999) (applying Pacor to hold that a post-confirmation action for fees was related to the bankruptcy proceeding “because it directly relates to the debtor’s liabilities—in fact it creates a liability—and could impact the handling and administration of the estate”).