Under the narrow interpretation of “personal injury tort,” a claim for defamation and a related claim for intentional infliction of emotional distress may be tried in bankruptcy court, according to Bankruptcy Judge David T. Thuma of Albuquerque, N.M.
The chapter 7 case before Judge Thuma involved a domestic dispute and turned on 28 U.S.C. § 157(b)(5), which provides, “The district court shall order that personal injury tort and wrongful death claims shall be tried in the district court . . . .”
The debtor had a dispute with her estranged husband at her home. The debtor called the police and said she was assaulted and was the victim of domestic abuse. She also filed a petition in state court for an order of protection, based on the same allegations. According to the husband, the allegations made him the subject of a grand jury investigation.
The husband sued in state court on claims of defamation and intentional infliction of emotion distress, or IIED.
The wife filed a chapter 7 petition and received a discharge in her “no-asset” case. The husband, a lawyer, had removed the lawsuit to bankruptcy court. Later, he filed a motion to withdraw the reference.
Judge Thuma had already ruled that the husband was not entitled to a jury trial. With the tort claims ready for trial, Judge Thuma tackled the question of whether he could hold the trial or must send the case to district court for trial under Section 157(b)(5).
In his March 11 opinion, Judge Thuma cited cases with three interpretations of the section, which he called the narrow, broad and hybrid definitions.
The Three Interpretations
Neither the Tenth Circuit nor the circuit’s bankruptcy appellate panel had settled on a definition. Judge Thuma was persuaded to adopt the narrow interpretation espoused by Bankruptcy Judge Stuart M. Bernstein in In re Gawker Media LLC, 571 B.R. 612 (Bankr. S.D.N.Y. 2017). To read ABI’s report, click here.
Judge Bernstein defined the narrow interpretation as requiring trauma, bodily injury or psychiatric impairment beyond shame or humiliation. The broad view encompasses an invasion of personal rights, including libel, slander and mental suffering.
The hybrid approach, according to Judge Bernstein, allows the bankruptcy court to try claims with the earmarks of financial, business or property claims, even though they might appear to be personal injury tort claims.
Like Judge Bernstein, Judge Thuma concluded that personal injury tort claims must be similar to wrongful death claims and must entail physical trauma.
Judge Thuma gave nine reasons for the narrow approach. Among them are:
- Legislative history likened personal injury tort claims to claims arising from automobile accidents.
- The doctrine noscitur a sociis requires giving “personal injury tort” a meaning similar to “wrongful death.”
- The bankruptcy court has constitutional authority to try tort claims.
- The first definition of a “personal injury tort” in Black’s Law Dictionary references bodily injury, like cuts and broken bones.
- The broad definition would equate “personal injury tort” with any tort, reading “personal injury” out of the statute; and
- The hybrid approach is a judicially crafted compromise rather than a construction of the statute.
Judge Thuma held that the defamation claim was not a personal injury tort. But what about the IIED claim?
Looking at state laws, Judge Thuma said that the “great weight of authority” holds that defamation cannot be the basis for an IIED claim. Even if it were a viable claim, Judge Thuma said that the “gravamen” of the IIED claim was the alleged defamation. He said that the husband did not allege any wrongful conduct aside from the defamation.
Judge Thuma decided that he could try the IIED claim.
Deference to the District Court on Withdrawal
The husband’s motion to withdraw the reference was pending in district court. Judge Thuma recommended that the withdrawal motion be denied, but he postponed trial until the district court rules on withdrawal.
“If the district court has a different view,” Judge Thuma said, “it can supersede the Court’s decision(s) when it rules on the Reference Withdrawal Motion.”
Under the narrow interpretation of “personal injury tort,” a claim for defamation and a related claim for intentional infliction of emotional distress may be tried in bankruptcy court, according to Bankruptcy Judge David T. Thuma of Albuquerque, N.M.
The chapter 7 case before Judge Thuma involved a domestic dispute and turned on 28 U.S.C. § 157(b)(5), which provides, “The district court shall order that personal injury tort and wrongful death claims shall be tried in the district court . . . .”
The debtor had a dispute with her estranged husband at her home. The debtor called the police and said she was assaulted and was the victim of domestic abuse. She also filed a petition in state court for an order of protection, based on the same allegations. According to the husband, the allegations made him the subject of a grand jury investigation.
The husband sued in state court on claims of defamation and intentional infliction of emotion distress, or IIED.
The wife filed a chapter 7 petition and received a discharge in her “no-asset” case. The husband, a lawyer, had removed the lawsuit to bankruptcy court. Later, he filed a motion to withdraw the reference.
Judge Thuma had already ruled that the husband was not entitled to a jury trial. With the tort claims ready for trial, Judge Thuma tackled the question of whether he could hold the trial or must send the case to district court for trial under Section 157(b)(5).
In his March 11 opinion, Judge Thuma cited cases with three interpretations of the section, which he called the narrow, broad and hybrid definitions.