A personal injury claim resulting from the pre-bankruptcy implantation of a defective medical device was not property of the estate because it was not “sufficiently” rooted in the pre-bankruptcy past, according to District Judge Joseph F. Bianco of Central Islip, N.Y.
Judge Bianco reached the same result as a bankruptcy judge in Pennsylvania one year ago in a case involving the pre-bankruptcy installation of a medical device that was later found to be defective. Click here to read ABI’s discussion of that case and the question of whether the Supreme Court’s 1966 decision in Segal v. Rochelle remains good law.
A woman had a mesh pelvic sling implanted in 1999. She got a discharge in 2005. In 2011, the FDA issued an advisory opinion regarding possible defects in the device. The woman contacted counsel in 2012 and reached a $105,000 settlement. The chapter 7 trustee reopened the case, claiming that the settlement proceeds were estate property.
The bankruptcy judge ruled in favor of the woman and was upheld in a May 9 opinion by Judge Bianco.
The trustee conceded that the personal injury claim had not accrued before bankruptcy but argued that the settlement was estate property since it was “sufficiently rooted in the pre-bankruptcy past,” citing Segal v. Rochelle, 382 U.S. 375, 380 (1966). Judge Bianco disagreed; the claim was rooted in the past, but not “sufficiently,” he said.
The past, Judge Bianco said, had not created “an interest that manifested itself in the settlement agreement.” The settlement resulted from a combination of post-bankruptcy events such as the FDA’s announcement and the debtor’s awareness that she might have a claim.
The “most critical element,” Judge Bianco said, was the “discovery” after bankruptcy “that there was a defect with the medical device.” Therefore, he said, the claim was rooted but not “sufficiently rooted” in the pre-bankruptcy past to bring the claim into the estate.