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To What Extent Does a Bankruptcy Court Have Jurisdiction Over a Post-Confirmation Lawsuit?

By Lawrence J. Kotler
January 01, 2024

In the recent decision of Tew v. ED&F Man Capital Markets, the U.S. Bankruptcy Court for the Eastern District of Kentucky (the bankruptcy court) addressed a thorny decision for all bankruptcy courts, namely to what extent a bankruptcy court has jurisdiction over a post-confirmation lawsuit. In this case, Bernard Tew, along with his wife, Stephanie, filed a voluntary Chapter 11 petition on July 23, 2020. During the course of their bankruptcy case, the debtors filed a second plan of reorganization (the plan), in which they referenced a potential and unliquidated claim against an entity known as "ED&F Man." Although this "claim" was also listed on the debtors' schedules, no version of the plan or disclosure statement specifically identified the defendant by name or explained the nature of the claim the debtors intended to assert against this entity.

On Oct. 19, 2021, the plan was confirmed and on June 14, 2023, the debtors filed an adversary proceeding against the defendant. In addition to the debtors serving as plaintiffs, the debtors' children and 12 of their related retirement plans were also named as plaintiffs. The complaint had many counts but was primarily a complaint premised under the Racketeer Influenced and Corrupt Organizations Act (RICO), although it did include some additional state law claims for breach of contract and other business torts. As noted by the bankruptcy court, there was no injury allegedly sustained by Mrs. Tew or her children asserted in the complaint.

Following the filing of the complaint, the defendant moved to dismiss the complaint on the basis that the bankruptcy court lacked subject matter jurisdiction. In addressing the motion to dismiss, the bankruptcy court noted that under 28 U.S.C. Section 1334(b), bankruptcy courts have jurisdiction over all civil proceedings "arising under Title 11 or arising in or related to cases under Title 11." In addressing these three prongs, the bankruptcy court noted that the phrase "arising under Title 11" described proceedings that involved a claim or cause of action created or determined by the Bankruptcy Code. Noting that none of the causes of action alleged in the complaint arose under the Bankruptcy Code, the Bankruptcy Court found that the claims asserted in the complaint did not arise under the Bankruptcy Code.

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