Opinion ID: 786599
Heading Depth: 2
Heading Rank: 1

Heading: Core Proceedings

Text: 28 28 U.S.C. § 157(b)(1) 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, referred under subsection (a) of this section, and may enter appropriate orders and judgments, subject to review under section 158 of this title. Id. 28 U.S.C. § 157(b)(2) provides a non-exhaustive list of examples of core proceedings such as matters concerning the administration of the estate, orders to turn over property of the estate, or other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship, except personal injury tort or wrongful death claims. Id. 5 We have held that a core proceeding under section 157 is one that  `invokes a substantive right provided by title 11' or one that `by its nature, could arise only in the context of a bankruptcy case.' In re Guild & Gallery Plus, 72 F.3d at 1178 (quoting In re Marcus Hook, 943 F.2d at 267). 29 The Trustee argues this matter qualifies as a core proceeding, relying on Southmark Corp. v. Coopers & Lybrand (In re Southmark Corp.), 163 F.3d 925 (5th Cir.1999). In Southmark, the court concluded that a debtor's suit against an accounting firm was a core proceeding in bankruptcy, observing that the bankruptcy court must be able to ensure that court-approved managers of the debtor's estate are performing their work conscientiously, and cost-effectively. Id. at 931. The court also noted that supervising court-appointed professionals bears directly on the distribution of the debtor's estate. If the estate is not marshaled and liquidated or reorganized expeditiously, there will be far less money available to pay creditors' claims. Id. 30 Notwithstanding the Trustee's arguments, it is difficult to see how this malpractice matter could be considered a core proceeding. It is not a proceeding that invokes a substantive right provided by title 11 or a proceeding that, by its nature, could arise only in the context of a bankruptcy case. In re Guild and Gallery Plus, 72 F.3d at 1178. 31 Unlike in Southmark, this claim arose post-plan confirmation. It does not directly affect the debtor or the liquidation of the estate's assets. Furthermore, the accounting firm's alleged malpractice in Southmark implicated the integrity of the entire bankruptcy process. Southmark's bankruptcy arose out of its involvement in Drexel Burnham Lambert, Inc.'s ill-fated junk bond investments. Southmark, 163 F.3d at 927-28. Southmark sought the appointment of an accounting firm to provide an objective, independent assessment of potential legal claims against third-parties. Id. Unbeknownst to Southmark, Drexel was one of the accounting firm's largest clients. Id. at 927-28. According to Southmark, the accounting firm committed malpractice by failing to satisfactorily investigate potential claims against Drexel. Id. Southmark alleged the accounting firm's breach of its court-appointed fiduciary duty prevented the estate from recovering from Drexel. Id. at 928. The accounting firms's failure to investigate Drexel implicated the core of the bankruptcy process. Its alleged malpractice was inseparable from the bankruptcy context. Here, Price Waterhouse's alleged malpractice, erroneously reporting that certain accrued interest belonged to one entity rather than to another and committing other errors in auditing and tax advice, even if true, is not a proceeding that could arise only in the bankruptcy context. 32 Regardless, we need not resolve whether this is a core proceeding for subject matter jurisdictional purposes because [w]hether a particular proceeding is core represents a question wholly separate from that of subject-matter jurisdiction. In re Marcus Hook, 943 F.2d at 266. Under 28 U.S.C. § 157, a bankruptcy court might have jurisdiction over a proceeding but still might not be able to enter final judgments and orders. Id. Non-core related to jurisdiction is the broadest of the potential paths to bankruptcy jurisdiction, so we need only determine whether a matter is at least related to the bankruptcy. Donaldson, 104 F.3d at 552.