Opinion ID: 765605
Heading Depth: 2
Heading Rank: 3

Heading: Core Proceeding and Appellants' Right to a Jury Trial

Text: 48 Appellants argue that the lower courts erred in denying them a jury trial. This argument is intertwined with the question whether the proceeding in the bankruptcy court constituted a core proceeding. As discussed above, see supra note 4, whether the bankruptcy court correctly held that the proceeding before it was a core proceeding is pivotal with respect to whether the district court accorded proper deference to the bankruptcy court and thus whether we must remand the case for a different depth of review. Both issues turn on whether appellants' infringement allegations constituted claims in the bankruptcy court; we will address both issues concurrently. 49 Appellants first argue that their demand for a jury trial in their complaint containing patent infringement claims established their right to a jury trial. They argue that the bankruptcy court erred in holding that the proceeding was core and that appellants were therefore not entitled to a jury trial. Appellants assert that the infringement allegations in the complaint were not claims in the bankruptcy sense, and thus the complaint did not invoke 28 U.S.C. 157(b)(2)(B). Appellants continue that the case was brought to the bankruptcy court as a non-core proceeding because 1) the infringement claims were not based on the creation, recognition, or adjudication of bankruptcy rights, 2) these claims would have survived outside of bankruptcy, and 3) the resolution of the dispute had nothing to do with bankruptcy law. Cambridge responds that appellants had no right to a jury trial because the bankruptcy court correctly determined that this proceeding was a core proceeding under 157(b)(2)(B), as appellants' allegations were claims. Cambridge alternatively asserts that appellants waived their jury trial arguments by not properly raising them on appeal to the district court. 50 Both the core proceeding and jury trial issues hinge on whether the allegations in appellants' complaint were claims in the bankruptcy sense and thus whether appellants, in filing their complaint, effectively filed a proof of claim in the bankruptcy court. See 4 Collier on Bankruptcy 502.02[1][c], at 502-11 (Lawrence P. King, ed., 15th ed. 1998) (hereinafter Collier) (Explicit in the concept of filing a proof of claim is the idea that the proof of claim must set forth a claim.). The term claim is broadly defined by the bankruptcy code as 51 (A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured. . . . 52 11 U.S.C. 101(5)(A) (emphasis added). Collier on Bankruptcy observes that the legislative history supports a broad definition of claim. See 2 Collier 101.05[1], at 101-26 (By fashioning a single definition of claim in the Bankruptcy Code, Congress intended to adopt the broadest available definition of the term.). Collier also addresses the place of tort claims under the Code's definition of claim: 53 As distinguished from prior bankruptcy law, tort claims constitute claims, and thus are payable out of the estate, and constitute dischargeable debts. . . . Under the Code the fact that the tort claim may be unliquidated or disputed does not mean that it is not a claim. 54 Id. at 101.05[6], 101-36.3. Patent infringement is properly classified as a tort, albeit one created by federal statute. See, e.g., 3D Sys., Inc. v. Aarotech Lab., Inc., 160 F.3d 1373, 1378, 48 USPQ2d 1773, 1777 (Fed. Cir. 1998). 55 We agree with the bankruptcy court's conclusion that the allegations in appellants' complaint constituted bankruptcy claims. Appellants' complaint sought money damages, i.e., a right to payment, as compensation for the tort of infringement allegedly committed by Cambridge. Under the broad definition of claim provided for in 101(5), and in view of Congress's intent that the term claim should be construed liberally, we are persuaded that appellants' allegations were clearly claims. We thus conclude that appellants' complaint constituted a proof of claim. 56 We disagree with appellants that the proceeding is a non-core proceeding merely because it dealt with patent infringement and other issues which do not arise directly from the bankruptcy laws. By filing what amounted to a proof of claim, appellants initiated the allowance or disallowance of claims against the estate. . . , a core bankruptcy proceeding. See 28 U.S.C. 157(b)(2)(B). The Supreme Court and our sister circuits have repeatedly held that the filing of a proof of claim is determinative in classifying the proceeding as a core proceeding. See Langenkamp v. Culp, 498 U.S. 42, 44 (1990) (In Granfinanciera we recognized that by filing a claim against a bankruptcy estate the creditor triggers the process of 'allowance and disallowance of claims,' thereby subjecting himself to the court's equitable power. (quoting Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 58-59 & n.14 (1989)); see also Benedor Corp. v. Conejo Enters., Inc. (In Re Conejo Enters., Inc.), 96 F.3d 346, 352 (9th Cir. 1996); United States Abatement Corp. v. Mobil Exploration & Producing U.S., Inc. (In re United States Abatement Corp.), 79 F.3d 393, 398 n.9 (5th Cir. 1996); S.G. Phillips Constructors, Inc. v. City of Burlington, Vt. (In re S.G. Phillips Constructors, Inc.), 45 F.3d 702, 705 (2d Cir. 1995); In re Meyertech Corp. v. Southeastern Sprinkler Co., Inc. (In re Meyertech Corp.), 831 F.2d 410, 417 (3d Cir. 1987). The fact that the bankruptcy court must apply the patent laws to assess the merits of patent infringement and validity does not alter our conclusion; in the process of allowing or disallowing claims under 157(b)(2)(B), a bankruptcy court always applies relevant federal or state law. As noted by Collier: 57 After objection is made to a proof of claim, one of the tasks of the court is to determine the amount of the claim. In determining the amount of a claim, the court must be guided by otherwise applicable state or federal law. In so determining the amount, the court is concerned with the proper existence of the claim under state or federal law, whether the claim is liquidated or contingent and any other issues which bear upon the amount of the claim. 58 4 Collier 502.03[1][a], at 502-21; see also id. at 502.03[2][b], at 502-27 (The validity and legality of claims generally is determined by applicable nonbankruptcy law.). 59 We therefore hold that the bankruptcy court properly concluded that this proceeding, based on claims for patent infringement, was a core proceeding. As noted previously, when the proceeding is a core proceeding, the bankruptcy court may enter judgments and orders, see 28 U.S.C. 157(b)(1), in contrast to non-core related proceedings, in which the bankruptcy court may enter only proposed findings of fact and conclusions of law, see id. at 157(c)(1), unless the parties consent, see id. at 157(c)(2). See supra note 4. As a consequence, we further hold that the bankruptcy court properly rendered final judgments and orders, and that the district court correctly reviewed the bankruptcy court's findings of fact for clear error and its conclusions of law de novo while acting in its appellate capacity under 28 U.S.C. 158. 60 We also disagree with appellants that the lower courts improperly denied their request for a jury trial. The precedent is clear that once a party invokes the core jurisdiction of the bankruptcy court by filing a proof of claim, that party has no Seventh Amendment right to a jury trial. See Langenkamp v. Culp, 498 U.S. at 44-45; Granfinanciera, 492 U.S. at 58-59; see also Germain v. Connecticut Nat'l Bank, 988 F.2d 1323, 1329 (2d Cir. 1993) (holding that the Katchen [v. Landy, 383 U.S. 323 (1966)], Granfinanciera, and Langenkamp line of Supreme Court cases stand for the proposition that by filing a proof of claim a creditor forsakes its right to adjudicate before a jury any issue that bears directly on the allowance of that claim. . . .). Because we conclude that appellants were not entitled to a jury trial ab initio, we need not address Cambridge's arguments regarding waiver.