A proceeding on a confession of judgment in New York is neither a “claim” nor a “cause of action” and therefore cannot be removed to federal court as an action falling under the bankruptcy court’s “related to” jurisdiction, according to District Judge Alvin K. Hellerstein of New York.

A couple signed a confession of judgment that was entered as a judgment in state court for more than $4.6 million. When the couple did not pay, the state court found them in contempt and put them in jail until they paid up.

While incarcerated, the wife filed a chapter 7 petition. The bankruptcy judge ruled that the filing automatically stayed further acts to collect the judgment and held the judgment creditor in civil contempt for a stay violation. The wife was released from jail.

Later, the husband filed his own chapter 7 petition and was released from jail.

The couple removed the state court proceedings to federal court under 28 U.S.C. § 1452(a). After removal, the judgment creditor filed a motion to remand to state court. Judge Hellerstein remanded in an opinion on November 13.

Section 1452(a) allows removal of “any claim or cause of action in a civil action . . . to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title.”

While the proceedings in state court would fall under the bankruptcy court’s “related to” jurisdiction in Section 1334(b), Judge Hellerstein questioned whether the proceedings in state court on the confession of judgment qualified as a “claim or cause of action.”

Section 3218 of the New York Civil Practice Law and Rules provides that a confession of judgment for money owing or to become due may be entered “without an action.” The statute goes on to say that the resulting judgment may be enforced just like a judgment “in an action.”

Judge Hellerstein was not writing on a clean slate. In 2019, a federal district court in New York decided that a confession of judgment is a “matter . . . separate from a judgment” and is not removable. Also in 2019, another district court in New York ruled that a confession of judgment was neither a “claim” nor a “cause of action” and could not be removed.

Judge Hellerstein held that “there is nothing here to remove to federal court” because the couple had “not properly established the existence of any ‘claim’ or ‘cause of action’ pending in state court.” He noted that the bankruptcy court had stayed the judgment creditor’s efforts to collect the judgment and had ordered the state court to retain custody of the couple’s passport.

Remanding to state court, Judge Hellerstein noted that removal jurisdiction “does not exist for matters ancillary to state court proceedings,” citing a 2024 decision by the Second Circuit.