Bankruptcy Proceedings Related to Defamation Claims Do Not Fall Under the Personal Injury Tort Exception of 28 U.S.C. § 157(b)(2)(B)

By: Joseph Collini

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

            A bankruptcy court generally does not have jurisdiction over personal injury tort claims.[1]  28 U.S.C. § 157(b) states that bankruptcy courts have jurisdiction to hear “all core proceedings,”[2] and goes on to define which proceedings are “core.”[3] Subsection (b)(2)(B), the personal injury tort exception, removes all personal injury torts from the bankruptcy court’s jurisdiction.[4] In In re Gawker Media LLC, the Bankruptcy Court for the Southern District of New York held that the “personal injury tort” exception of 28 U.S.C. § 157(b)(2)(B) does not apply to tort claims for defamation.[5]

Charles Johnson and his company, Got News LLC, filed a complaint alleging various torts,[6] including defamation and injurious falsehood, against Gawker Media LLC for publishing and proliferating an article that allegedly falsely criticized Johnson’s professional and personal integrity.[7] Shortly after Johnson filed this lawsuit, Gawker Media filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code thereby automatically staying the civil action against Gawker.[8] Johnson, wanting to expedite the civil action against Gawker, filed Omnibus Objections[9] to the claims arguing that the bankruptcy court lacked jurisdiction because the underlying claims fell under the “personal injury tort” exception of 28 U.S.C. § 157(b)(2)(B).[10]

In analyzing whether the claims were “personal injury tort claims” within the meaning of U.S.C. § 157(b)(2), the bankruptcy court noted that there were three views of the personal injury tort exception.[11] First, some courts have adopted the narrow view, which removes from the bankruptcy court’s jurisdiction only those torts related to the plain sense meaning of the phrase “personal injury tort.”[12] Second, other courts have adopted the broad view, which expands the meaning of personal injury tort to a wide range of tort claims including those for libel and slander.[13] Finally, other courts have adopted a hybrid approach, which includes torts for libel and slander, but specifically refuses to expand the exception as far as the broad view.[14]

Here, the court adopted the “narrow view”[15], limiting the personal injury exception to “claims involving bodily injury, physical trauma, and/or a severe psychiatric impairment beyond mere shame and humiliation.”[16] In doing so, the court explained that both the canons of construction and the legislative history behind the exception support its definition.[17] Ultimately, the court decided it had jurisdiction over the case because Johnson’s claim was not a personal injury tort.[18] The court also rejected the notion that the “emotional” injuries alleged were sufficient to transform the claim into a personal injury tort subject to the exception under 28 U.S.C. § 157(b)(2)(B).[19]

            Neither Title 28 nor the Second Circuit has expressly defined the term “personal injury tort” as it pertains to § 157 and bankruptcy cases.[20] However, several lower courts in the Second Circuit have created their own interpretations of the exception, yielding the three approaches described above: the narrow view, the broad view, and the hybrid approach.[21]

The Gawker court did not adopt a novel interpretation of the personal injury tort exception with its holding. Instead, the bankruptcy court adopted the approach embraced by the Southern District of New York in Perino v. Cohen.[22] Until Congress amends the statute or the Supreme Court for the Second Circuit issues a controlling ruling, future lower courts in the Southern District of New York will have to decide for themselves which of these three approaches to adopt. These courts may even adopt a wholly different interpretation of the statute as well.