American Bankruptcy Institute
Join Renew Refer a Colleague Partners Search ABI Store Contact Us Site Map
 
American Bankruptcy Institute
 
About ABIABI MembershipMeetings & EventsOnline ResourcesPublicationsNews RoomConsumer Bankruptcy Center
Bankruptcy Statistics
 
Bankruptcy Reports, Research and Testimony
 
Bankruptcy-Related Organizations
 
National Bankruptcy Review Commission Archive
   
Submission Abstract
   
Working Group Proposals
   
Meeting Agendas
   
ABI Testimony
   
Meeting Minutes
 
Bankruptcy Visuals
 
Bankruptcy Research Database
             
 Print this page
 
 
News Room

IMPROVING JURISDICTION AND PROCEDURE

PROPOSAL #5: PERSONAL INJURY AND WRONGFUL DEATH CLAIMS


Background

Section 157(b)(2)(B) of title 28 provides that the allowance and disallowance of claims against the estate are core proceedings, which, under section 157(b)(1), bankruptcy judges may hear and determine, that is, they may conduct the hearing and enter a final order adjudicating the dispute. However, section 157(b)(2)(B) expressly provides an exception for a claim against the estate based on personal injury tort or wrongful death. It may not be estimated or liquidated in the bankruptcy court for purposes of distribution in a title 11 case. Section 157(b)(5) requires the district court in the district where the bankruptcy case is pending to order that such claims be tried either in that district court or in the district court where the claim arose. Additionally, 28 U.S.C. § 1411 preserves the right to jury trial as it may exist under nonbankruptcy law for a personal injury tort or wrongful death claim.

These provisions were added to the Judicial Code in 1984 as part of the Bankruptcy Amendments and Federal Judgeship Act. Similar provisions did not exist in prior bankruptcy legislation.

Proposal

Section 157(b)(2), (4), and (5), should be amended to delete the special provisions referring to personal injury tort and wrongful death claims. Section 1411 should be repealed in its entirety because subsection (a) relates to the special provisions under discussion and the reasons for subsection(b), unrelated to this discussion, have not existed since 1984.

Reasons for Change

There is no sound reason of bankruptcy law policy or efficient use of the federal judicial system that supports treating the adjudication of personal injury and wrongful death claims against an estate differently from claims of all other types, whether contractual, statutory, governmental, liquidated, unliquidated, contingent, noncontingent, or unmatured.

The Bankruptcy Code in section 101(5) defines "claim" very broadly so as to encompass within the proof and allowance, distribution and discharge schemes of the Code essentially claims of all kinds and types. It was purposely intended to effect a change from the prior Bankruptcy Act of 1898 which made a personal injury claim nonprovable because an action on it had not been commenced prepetition (Section 63a(7)). (If it was nonprovable, it was nonallowable and nondischargearble.)

As enacted in 1978, all claims were allowable, and, therefore, entitled to distribution, and, except as provided in section 523(a), all claims were dischargeable.

The proof and allowance of claims is a routine, albeit major part, of the bankruptcy process that rests singularly in the bankruptcy court. When a proof of claim of a creditor is filed, it is deemed allowed unless an objection is made to it (section 502(a)). Because claims allowance is an inherent part of the bankruptcy process, Congress placed it in the category of core proceedings in which the bankruptcy judge may enter the final order, in keeping with the Supreme Court’s decision in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982).

The deletion of the special exception in section 157(b)(2)(B) would necessitate deletion of paragraphs (4) (making such proceeding not subject to mandatory abstention under section 1334(c)(2)) and (5) (placing adjudication in the district court) of section 157(b)(2). There also would be no need for the special retention of the right to jury trial in section 1411(a) since the allowance of a proof of claim alleging injuries for a personal injury tort would no longer go to the district court.

Section 1411(b) should also be repealed. It was necessary under the Bankruptcy Reform Act of 1978 which as part of the pervasive jurisdiction given the bankruptcy court, retained the right to jury trial as it existed by statute on September 30, 1979. (28 U.S.C. § 1480, repealed). On that date, Section 19 of the Bankruptcy Act gave a statutory right to jury trial to a debtor in a proceeding on an involuntary petition. The purpose of what is now section 1411(b) was to convert the right to jury trial in an involuntary petition proceeding to a discretionary matter for the judge to determine. In 1984, there was no longer a statutory right to jury trial on an involuntary petition but present section 1411(b) was inadvertently carried forward.

Competing Considerations

The only issue is whether personal injury claimants should be treated differently from all other types of entities that have claims against the bankrupt estate. No reason appears to exist.

 

© 2014 American Bankruptcy Institute, All Rights Reserved