Opinion ID: 686447
Heading Depth: 2
Heading Rank: 1

Heading: jurisdiction

Text: 6 We first address the threshold issue whether the bankruptcy court properly exercised jurisdiction by entering a judgment on the adversary proceeding following the dismissal of Porges' bankruptcy case. Conclusions of law made by either the bankruptcy court or the district court on a bankruptcy appeal are subject to de novo review. In re Brody, 3 F.3d 35, 38 (2d Cir.1993); In re Manville Forest Prods., 896 F.2d 1384, 1388 (2d Cir.1990). 7 In its order of dismissal of Porges' bankruptcy case, the bankruptcy court retained jurisdiction pursuant to 11 U.S.C. Sec. 349 to issue a decision in the pending adversary proceeding. Although Porges concedes that the bankruptcy court possessed the authority to determine whether Gruntal's proofs of claim should be allowed, he argues that the dismissal of his case deprived the bankruptcy court of jurisdiction to enter a judgment. 8 This issue presents a question of first impression in this Circuit. We join several other circuits in adopting the general rule that related proceedings ordinarily should be dismissed following the termination of the underlying bankruptcy case. This general rule favors dismissal because a bankruptcy court's jurisdiction over such related proceedings depends on the proceedings' nexus to the underlying bankruptcy case. See In re Querner, 7 F.3d 1199, 1201-02 (5th Cir.1993); In re Morris, 950 F.2d 1531, 1533 (11th Cir.1992); In re Smith, 866 F.2d 576, 580 (3d Cir.1989). Notwithstanding this general rule, however, nothing in the Bankruptcy Code requires a bankruptcy court to dismiss related proceedings automatically following the termination of the underlying case. See, e.g., In re Querner, 7 F.3d at 1201-02; In re Carraher, 971 F.2d 327, 328 (9th Cir.1992) (per curiam); In re Morris, 950 F.2d at 1534; In re Roma Group, 137 B.R. 148, 150 (Bankr.S.D.N.Y.1992); In re Pocklington, 21 B.R. 199, 202 (Bankr.S.D.Cal.1982). Indeed, section 349 of the Bankruptcy Code authorizes bankruptcy courts to alter the normal effects of the dismissal of a bankruptcy case if cause is shown. See 11 U.S.C. Sec. 349 (setting forth consequences of dismissal unless the court, for cause, orders otherwise). Accordingly, we hold that the dismissal of an underlying bankruptcy case does not automatically strip a federal court of jurisdiction over an adversary proceeding which was related to the bankruptcy case at the time of its commencement. The decision whether to retain jurisdiction should be left to the sound discretion of the bankruptcy court or the district court, depending on where the adversary proceeding is pending. 9 In this appeal the district court, following several decisions in other circuits, analogized the bankruptcy court's exercise of jurisdiction over the adversary proceeding to a district court's jurisdiction over pendent state claims following dismissal of all federal claims. See, e.g., In re Carraher, 971 F.2d at 328; In re Smith, 866 F.2d at 580. In such cases a district court is not required to dismiss the state claims, although dismissal of such claims is the general rule. 2 See DiLaura v. Power Authority of New York, 982 F.2d 73, 80 (2d Cir.1992). Rather, a court must consider four factors in determining whether to continue to exercise jurisdiction: judicial economy, convenience to the parties, fairness and comity. See Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n. 7, 108 S.Ct. 614, 619, 98 L.Ed.2d 720 (1988); DiLaura, 982 F.2d at 80. 10 The bankruptcy court considered these factors and properly concluded that it possessed jurisdiction over the adversary proceeding following the dismissal of Porges' bankruptcy case. Porges, 157 B.R. at 215. The court had conducted a trial on all contested issues and had issued a decision, and the matter awaited only the filing of findings of fact and conclusions of law and the entry of a judgment. To have declined jurisdiction at that stage would have served no useful purpose, and would have wasted the resources already invested by the parties and the court. See In re Smith, 866 F.2d at 580; see also In re Roma Group, 137 B.R. at 150-51; In re Stardust Inn, 70 B.R. 888, 890-91 (Bankr.E.D.Pa.1987). Further, it would be unfair to compel Gruntal to relitigate the matter, particularly where, as here, a debtor voluntarily submitted himself to the jurisdiction of the bankruptcy court and thereby forced a creditor to litigate its claims in that forum. See In re Pocklington, 21 B.R. at 202; In re Roma Group, 137 B.R. at 151. Accordingly, we find that the above grounds amply support the bankruptcy court's decision to retain jurisdiction over Porges' adversary proceeding following the dismissal of his bankruptcy petition.