THE PREEMPTION OF STATE COURT CLAIMS
with the two motions it had filed in the bankruptcy action. Id.
Carmen was not satisfied with the bankruptcy sanctions alone, however. Carmen then filed an additional action in state court, alleging abuse of process based on the same bankruptcy petition. Murpenter moved to dismiss the case, arguing that federal law preempted any state law claim based on abuse of the bankruptcy process.
The trial court agreed with Murpenter, revisiting the analysis of the Pennsylvania Supreme Court in Stone Crushed P’ ship v. Jackson, 908 A. 2d 875( Pa. 2006). The court noted that bankruptcy law provides for sanctions that are similar to relief under state abuse of process claims, suggesting that recognizing a separate claim would be akin to allowing double recovery. It also discussed the allencompassing nature of bankruptcy, as well as the constitutional indication that bankruptcy law be uniform across the country. Finally, the Carmen court found that allowing abuse of process claims in state courts may chill debtors from exercising their bankruptcy rights, a considerable public policy concern. The court thus concluded that Pennsylvania has rightly sided with the majority of states in holding that state abuse of process claims are preempted by federal bankruptcy law. See e. g. Longnecker v. Deutsche Bank Nat’ l Trust Co., No. 3-806 / 12-2304, 2013 Iowa App. LEXIS 1303( Iowa Ct. App. 2013); see also PNH, Inc. v. Alfa Laval Flow, Inc., 958 N. E. 2d 120( Ohio 2011).
When“ It Seems Only Fair” to Invoke Preemption
While the Carmen court treated the filing of a petition as a black hole for any abuse of process claim, the Pennsylvania Superior Court also recently discussed the issue, providing more nuance to preemption. The case of Oberdick v. Trizechahn Gateway began when Trizechahn obtained a $ 3.3 million judgment against Oberdick in connection with unpaid rent for his law firm’ s office space. Oberdick v. Trizechahn, 2017 Pa. Super. 112, * 4( Apr. 19, 2017). As part of its collection efforts, Trizechahn filed a state court action against Oberdick under the Pennsylvania Uniform Fraudulent Transfer Act. Id. After moving to dismiss the action, Oberdick filed a voluntary Chapter 7 bankruptcy petition and notice of removal in the state court action. Id. at 4-5.
The Trizechahn claim then proceeded as an adversary action in the bankruptcy court. Id. After Oberdick was victorious, he filed suit against Trizechahn under the Dragonetti Act, Pennsylvania’ s statute governing the wrongful use of civil proceedings. Id. Oberdick argued that the Trizechahn claim was“ procured, initiated and continued in Pennsylvania state court,” and thus was not preempted by federal law. Id. at 9. The trial court agreed, but also included the requisite language for a permissive appeal to the Superior Court. Id. at n. 6.
The Superior Court reversed, returning to the principles of Stone Crushed. Id. at 12. After discussing the general intent of Congress to preempt the entire field of bankruptcy, as well as the different bankruptcy provisions providing for“ equivalent protection” to the Dragonetti Act, the Superior Court analyzed the specific allegations from Oberdick’ s Amended Complaint. These included claims that Trizechahn failed to timely respond to discovery requests during the bankruptcy action, disregarded deadlines set by the court, failed to respond to efforts for resolution, and presented no specific allegedly fraudulent transfers to support its cause of action. Id. at 12. Each of these claims, the Superior Court pointed out, referred to conduct of Trizechahn“ in bankruptcy court.” Id. at 12( emphasis in original). Additionally, Oberdick had voluntarily removed the case from state court, and declined to seek sanctions while the matter was still pending in bankruptcy court. Id. at 12-13. The appellate division thus reasoned that“ as a matter of policy, it seems only fair that [ Oberdick ] should now be precluded from benefitting from a similar state cause of action.” Id. at 13.
Everything’ s Bigger in Texas – Including Recovery for Frivolous Bankruptcy Actions
The appellate division’ s discussion of when the conduct occurred, as well as the plaintiff’ s voluntary use of the bankruptcy process, offers potential distinctions that are similar to those discussed in minority jurisdictions as justification for avoiding preemption. See N. J. Lawyers’ Fund for Client Prot. v. Fornaro( In re Fornaro), 402 B. R. 104( Bankr. D. N. J. 2009); see also Rosenberg v. DVI Receivables, XIV, LLC( In re Rosenberg), 471 B. R. 307( Bankr. S. D. Fla. 2012)( disagreeing with Florida appeals court decision that held abuse of process claims are not preempted by bankruptcy law). These minority jurisdictions typically point to a Texas Supreme Court opinion that analyzed both sides of the issue, ultimately finding that only some abuse of process claims are preempted.
In Graber v. Fuqua a debtor accused one of his creditors of frivolous filings in a bankruptcy action. 279 S. W. 3d 608, 610( Tex. 2009). Specifically, the debtor brought a state court suit alleging that an adversary action filed against him in bankruptcy court was improperly filed. Id. The case eventually reached the Texas Supreme Court, which discussed each of the concerns typically considered in majority jurisdictions.
The Graber Court began by noting that preemption occurs when( 1) Congress sufficiently evidences the intent to exclusively occupy a field of law, or( 2) when simultaneous compliance is impossible or creates an obstacle
National Association of Consumer Bankruptcy Attorneys Summer 2017 CONSUMER BANKRUPTCY JOURNAL 43