Opinion
No. HHD CV 09-6003510-S
October 12, 2011
MEMORANDUM OF DECISION RE MOTION TO DISMISS (#105)
The defendant has filed this motion to dismiss claiming this court lacks subject matter jurisdiction as to all defendants, the Johnson and Memorial Hospital and the two named physicians because the defendant-hospital has filed for bankruptcy. It is the defendant's claim that this action constitutes a pre-petition claim, and the federal bankruptcy courts have exclusive jurisdiction over matters arising under the Bankruptcy Code. The court agrees that it lacks subject matter jurisdiction as to the defendant hospital but not as to the two named physicians.
FACTS
The plaintiff has alleged that she has suffered injuries arising from the negligence of the defendant Johnson Memorial Hospital (Johnson Memorial), and the defendants Raj Biruvadol and Neil T. Moynihan, the medical doctors who cared for her while she was at the defendant hospital, for failing to diagnose a medical condition, which has caused said injuries. She alleges that she came to the emergency room of the defendant Johnson Memorial Hospital on October 27, 2006, complaining about a variety of ailments and was treated by Biruvadol and Moynihan and was discharged that same day and advised to return if her condition worsened. She returned the next day, complaining of similar ailments and was again treated by either or both doctors and transferred to Hartford Hospital for surgery. On October 31, 2006, she was admitted to Hartford Hospital and underwent surgery. In counts one, two and three, respectively, the plaintiff claims that Johnson Memorial, Biruvadol and Moynihan were negligent in several respects in their diagnosis and treatment of her condition and otherwise deviated from the standard of care.
Johnson Memorial filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq., on November 4, 2008. The plaintiff commenced this action on January 27, 2009, and Johnson Memorial gave notice of the automatic stay under 11 U.S.C. § 362 to the plaintiff on April 29, 2009. All three defendants filed this motion to dismiss on January 26, 2011, claiming the bankruptcy court has exclusive jurisdiction and that this court lacks subject matter jurisdiction.
DISCUSSION
"A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court." (Internal quotation marks omitted.) Bacon Construction Co. v. Dept. of Public Works, 294 Conn. 695, 706, 987 A.2d 348 (2010). "A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Wilcox v. Webster Ins., Inc., 294 Conn. 206, 213, 982 A.2d 1053 (2009).
"Pursuant to the rules of practice, a motion to dismiss is the appropriate motion for raising a lack of subject matter jurisdiction." St. George v. Gordon, 264 Conn. 538, 545, 825 A.2d 90 (2003). "[T]he question of subject matter jurisdiction, because it addresses the basic competency of the court, can be raised by any of the parties, or by the court sua sponte, at any time . . . Moreover, [t]he parties cannot confer subject matter jurisdiction on the court, either by waiver or by consent." (Internal quotation marks omitted.) New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 511, 518, 970 A.2d 583 (2009).
The defendants argue that the plaintiff's action against Johnson Memorial and "its affiliates" is an unsecured pre-petition claim and, pointing to 28 U.S.C. § 1334(a), and that the United States District Court has exclusive jurisdiction over the action. The plaintiff responds by pointing out that in count two, which is against Biruvodal and in count three, which is against. Moynihan, she does not make a claim for damages against either Johnson Memorial or its estate. It is her claim that she seeks damages against Biruvadol and Moynihan in their individual capacities.
The defendants attach notice of automatic stay pursuant to 11 U.S.C. § 362, but make no argument in that regard.
11 U.S.C § 541(a)(1) (2010) states, in relevant part: "[T]he commencement of a [bankruptcy] case . . . creates an estate. Such estate is comprised of . . . all legal or equitable interests of the debtor in property as of the commencement of the estate."
The plaintiff does not appear to dispute the fact that her action against Johnson Memorial cannot lie in this court.
It is true that this action constitutes a pre-petition claim, but this court can still retain jurisdiction pursuant to 28 U.S.C. § 1334. That statute provides, in relevant part: "(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11(b). Except as provided in subsection (e)(2), and notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." (Emphasis added.) 28 U.S.C. § 1334.
" A proceeding is related to a bankruptcy case if its outcome could conceivably have any effect on the estate being administered in bankruptcy." (Internal quotation marks omitted.) Dixon v. Nationsbanc Mortgage Corp., Superior Court, Docket No. CV 97 0406469 (May 27, 1998, Hartmere, J.). Because the plaintiff's suit could end up in a judgment against the hospital, it could "conceivably have [an] effect on the estate administered in bankruptcy." The defendants rely on § 1334(a), which appears to divest state courts of jurisdiction over matters like the present case, but such a reading ignores § 1334(b). The plain language of subsection (b) makes clear that the jurisdiction that a federal court would exercise over this matter is not mandatory, as it states that they have "original but not exclusive" jurisdiction. The Appellate Court recognized this in Lewis v. Lewis, 35 Conn.App. 622, 625-26, 646 A.2d 273 (1994) stating "State courts of general jurisdiction have the power to decide cases involving federal . . . rights where . . . neither the Constitution nor statute withdraws such jurisdiction . . . In this instance, jurisdiction has not been withdrawn from state courts. 28 U.S.C. § 1334(b)." (Citations omitted; Internal quotation marks omitted.) Thus, this court does not lack subject matter jurisdiction under 28 U.S.C. § 1334.
The court is lacking in jurisdiction over Johnson Memorial, however, due to 11 U.S.C. § 362. Although the Code's automatic stay provisions are not argued in defendants' motion, the court must address this because it implicates the court's subject matter jurisdiction. See New Hartford v. Connecticut Resources Recovery Authority, supra, 291 Conn. 518. 11 U.S.C. § 362 provides in relevant part: "(a) . . . a petition filed under [the section applicable here] of this title . . . operates as a stay, applicable to all entities, of — (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title . . ."). (Emphasis added.)
Under the Code, the term "claim" is defined very broadly. Specifically, 11 U.S.C. § 101(5)(A) provides:
"The term `claim' means —
(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured . . ." "The legislative history of [the statute] demonstrates that the term `claim' in intended by this definition to be as broadly interpreted as possible so that maximum relief can be afforded to a debtor . . ." (Internal quotation marks omitted.) Larson v. Larson, 89 Conn.App. 57, 62, 872 A.2d 912, cert. denied, 274 Conn. 915, 879 A.2d 892 (2005). Here, the plaintiffs allege that the defendants owe them damages, in effect, they are claiming a "right to payment." Thus, there can be no doubt that the plaintiff made a "claim" under bankruptcy law.
The current action was filed in this court after Johnson Memorial filed its bankruptcy action in the bankruptcy court. The events that gave rise to this action occurred prior to the bankruptcy filing. Thus, this case is a post-petition filing of a pre-petition claim.
As to whether the claim is "pre-petition," "A claim will be deemed to have arisen prepetition if the relationship between the debtor and the creditor contained all of the elements necessary to give rise to a legal obligation — `a right to payment' — under the relevant non-bankruptcy law." (Internal quotation marks omitted) In re Manville Forest Products Corp., 209 F.3d 125, 129 (2nd Cir. 2000). See also, Lightowler v. Continental Ins. Co., 255 Conn. 639, 647, 769 A.2d 49 (2001). The alleged negligence in this case, if it occurred, would give rise to a right of payment. This right of payment arose at the moment the alleged negligence was complete, and is not dependent on the filing of an action or a judgment.
"Section 362 of the Bankruptcy Code stays any and all post-petition filing. Any filing constitutes a judicial act directed toward the disposition of the case in violation of the automatic stay . . . The stay of section 362 is extremely broad in scope and . . . should apply to almost any type of formal or informal action against the debtor or the [debtor's] property . . ." (Internal quotation marks omitted.) Krondes v. O'Boy, 69 Conn.App. 802, 808, 796 A.2d 625 (2002). See also, In re Floyd, 359 B.R. 431, 434 (Bankr.D.Conn. 2007) ("The filing of a bankruptcy petition `operates as a stay, applicable to all entities, of — (1) the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor.' 11 U.S.C. § 362(a)(1) . . . It is well-settled law in this Circuit that a post-petition state-court judgment entered against the debtor is void ab initio when entered in violation of § 362(a). See In re 48th Street Steakhouse, Inc., 835 F.2d 427, 431 (2d Cir. 1987) (`actions taken in violation of the stay are void and without effect'), cert. denied, 485 U.S. 1035, 108 S.Ct 1596, 99 L.Ed.2d 910 (1988); FDIC v. Hirsch (In re Colonial Realty Co.), 980 F.2d 125, 137 (2d Cir. 1992) (`even if creditor had no notice of stay, actions taken in violation of stay are generally void.')").
Biruvadol and Moynihan, however, do not enjoy the protection of the automatic stay."[I]t is fundamental under federal bankruptcy law that the automatic stay operates for the benefit of the debtor and trustee only, and gives other parties interested in the property affected by the automatic stay no substantive or procedural rights." (Internal quotation marks omitted.) Metro Bulletins Corp. v. Soboleski, 30 Conn.App. 493, 498, 620 A.2d 1314, cert. granted on other grounds, 225 Conn. 923, 625 A.2d 823 (1993) (appeal withdrawn June 4, 1993). "It is well established that a case against a bankrupt debtor and a nonbankrupt debtor, although stayed against the bankrupt debtor, may nevertheless proceed against the nonbankrupt debtor." Burritt Interfinancial Bancorporation v. Wood, 33 Conn.App. 401, 404-05, 635 A.2d 879 (1994). Furthermore, in order for a nondebtor to enjoy the protection of the stay, he "must move for the extension of the stay in the bankruptcy court." Krondes v. O'Boy, supra, 69 Conn.App. 809.
"In general, [Connecticut state courts] look to the federal courts for guidance in resolving issues of federal law." Turner v. Frowein, CT Page 21452 253 Conn. 312, 340, 752 A.2d 955 (2000). "[T]he federal courts follow this rule that the nondebtor co-defendant is not protected by the automatic stay in bankruptcy. See In re Delta Air Lines, 310 F.3d 953, 956 (6th Cir. 2002)[cert. denied, 539 U.S. 904, 123 S.Ct 2252, 156 L.Ed.2d 112 (2003)] (`the automatic stay does not halt proceedings against solvent co-defendants') . . . Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1205 (3rd Cir. 1991) (the automatic stay is not available to nonbankrupt codefendants of a debtor even if they are in a similar legal or factual nexus with the debtor) . . ." (Citations omitted.) Wood v. Great Atlantic Pacific Tea Co., Superior Court, judicial district of Middlesex, Docket No. CV 02 0099504 (March 17, 2004, Silbert, J.).
Johnson Memorial is within the ambit of § 362 by virtue of its status as a debtor that has filed for bankruptcy. The individual defendants, however, have not declared bankruptcy. Further, they have not provided any evidence that they are involved in Johnson Memorial's Chapter 11 bankruptcy plan, or that they have moved for the extension of the stay in Bankruptcy Court. While the action against Johnson Memorial is stayed pursuant to 11 U.S.C. § 362, the action against the individual non-debtor defendants should proceed. The automatic stay does not protect nondebtors merely because they are involved in the same action as a debtor. Cf. Conti v. Blau, 234 B.R. 627, 629 (Bankr.S.D.N.Y 1999) (holding that legal malpractice claim against debtor-attorney and his firm survived as to firm and other individual defendants after debtor's bankruptcy).
As noted by the court in Wood v. Great Atlantic Pacific Tea Co., supra, Superior Court, Docket No. CV 02 0099504, although federal courts follow this rule, this court notes that some federal courts have held that in certain "unusual circumstances," or when the existence of an "identity of interests" exists between the debtor and co-defendant, a suit against both parties may also be stayed as to the nondebtor co-defendants on the ground that a judgment against a nondebtor would be tantamount to one against a debtor. Specifically, the court cited A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999, cert. denied, 479 U.S. 876, 107 S.Ct. 251, 93 L.Ed.2d 177 (4th Cir. 1986) in which the court explained that "[t]his `unusual situation' . . . arises when there is such identity between the debtor and the third-party defendant that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment or finding against the debtor."
The defendants have not presented evidence that the present case involves such an unusual situation. Most of these decisions have limited the "unusual circumstances" exception to situations where there is an explicit indemnity agreement between the parties. See Queenie, Ltd. v. Nygard International, 321 F.3d 282, 288 (2d. Cir. 2003) (rejecting argument that stay applies to third parties by stating: "[The defendant] cites three other decisions for the proposition that `[s]ome courts conclude that 11 U.S.C. § 362(a)(1) applies to third parties automatically.' This argument exceeds the bounds of responsible advocacy. In two of the cited decisions the stay was granted primarily because the debtor corporation was obligated to indemnify the non-debtor defendant . . ."); A.H Robins Co. v. Piccinin, supra, 788 F.2d 999. ("An illustration of [unusual circumstances] would be a suit against a third-party who is entitled to absolute indemnity by the debtor on account of any judgment that might result against them in the case"); Forcine Concrete Construction Co. v. Manning Equipment Sales Service, 426 B.R. 520, 523 (Bankr.E.D.Pa. 2010) (citing cases and stating "[Unusual circumstances] frequently involve situations in which the debtor would be forced to indemnify its co-defendants in the event of an adverse verdict").
It is noted in DAB Three, LLC v. LandAmerica Financial Group, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. 06 5004236 (April 15, 2009, Bellis, J.) ( 47 Conn. L. Rptr. 602, 606). The court extended the "unusual circumstances/identity of interests" exception beyond the indemnity context by explaining "In the present case, there is an `identity of interest' between the debtor and the co-defendants . . . [H]ere the plaintiff's single-count complaint concerns the defendants' alleged common breach of the same contract. The plaintiff does not discern between the defendants, or any particular actions taken by them, to create the alleged breach of contract. Indeed, the plaintiff refers to the corporate and individual defendants collectively as `the defendants' in paragraph four of the complaint for purposes of the allegations contained in count one . . . Under these circumstances, the defendant Land America Financial Group, Inc., which is protected by the automatic stay as the named debtor in bankruptcy, shares an identity of interest with the other named defendants.")
Such is not the case here. In her complaint, the plaintiff charged each defendant in a separate count for their own alleged negligence. Therefore, this case is similar to Wood v. Great Atlantic Pacific Tea Co., supra, Superior Court, Docket No. CV 02 0099504, in which the court concluded that "[There is no] identity of interest between [debtor] and [co-defendant]. To the contrary, the plaintiff's negligence complaint relies upon each defendant's own breach of duty"). Furthermore, the persuasiveness of DAB Three has been questioned by the Superior Court. See J.E. Robert Co. v. Signature Properties, LLC, Superior Court, complex litigation docket at Hartford, Docket No. X04 CV 07 5026084 (January 13, 2011, Shapiro, J.).
Here, there is no allegation or evidence of an indemnity agreement between the parties. Any suggestion that Johnson Memorial may be liable to the plaintiff for the conduct of Biruvadol and Moynihan under the doctrine of respondeat superior, and thus entitling them to indemnity or contribution for Johnson Memorial is similarly unavailing. For example, in Forcine Concrete Construction Co. v. Manning Equipment Sales Service, the Bankruptcy Court for the Eastern District of Pennsylvania held that although the plaintiff alleged that the individual defendants committed their torts in the scope of their employment to aid their debtor-employee, "unusual circumstances" were not present because the employees did not have an absolute entitlement to indemnification of the employees from the debtor under the applicable law. Thus, the court determined that the stay did not extend to the nonbankrupt employees, and the action could not proceed against those defendants. Forcine Concrete Construction Co. v. Manning Equipment Sales Service, supra, 426 B.R. 525 ("Thus, if liability is ultimately adjudged as against [the employees] liability against [the debtor] may well be easily proved. It does not follow from [the debtor's] potential vicarious liability to [the plaintiff], however, that [the debtor] would be automatically forced to indemnify [the employees]. Defendants do not argue that they are entitled to any contractual indemnification. Nor do they cite to any authority for the proposition that either statutory or common law would force [debtor] to indemnify [employees] for any liability incurred as a result of [the plaintiffs] suit"). In any event, in the present case, the exact legal relationship between the debtor and the individual co-defendants is unclear, and an indemnity claim might never lie.
In sum, although § 1334 does not divest this court of jurisdiction as the defendants argue, it has no jurisdiction over the defendant Johnson Memorial due to § 362. The statutory automatic stay, which bars commencement of this suit, applies to Johnson Memorial, but not to Biruvadol and Moynihan, its nondebtor co-defendants. Thus, this court properly retains jurisdiction over Biruvadol and Moynihan. An identity of interests that is required to extend the stay to the co-defendant doctors is not present in this case. Moreover, the defendants did not provide any evidence that they applied for an extension of the automatic stay in the bankruptcy court. Metro Bulletins Corp. v. Soboleski, supra, 30 Conn.App. 497.
CONCLUSION
For the foregoing reasons, the court will deny the defendants' motion to dismiss with respect to the defendants Biruvadol and Moynihan, and will dismiss the action as to the defendant the Johnson Memorial Hospital.