BANKRUPTCY CORNER
COURT
COUNSEL
BANKRUPTCY CORNER
When is the Debtor ’ s Products Liability Claim an Asset of the Estate ?
JASON S . RIGOLI
A bankruptcy estate consists of “ all legal or equitable interests of the debtor in property as of the commencement of the case ,” with certain exceptions . 11 U . S . C . § 541 ( a ). The estate is determined by federal law , but a debtor ’ s property interest is determined by state law . Medley v . Scharrer ( In re Medley ), Case No . 8:23- cv-02455 , 2024 U . S . Dist . LEXIS 228396 at * 5 ( M . D . Fla . Dec . 18 , 2024 ) ( citing In re
Thomas , 883 F . 2d 991 , 995 ( 11th Cir . 1989 )).
When Does a Claim Arise ?
Consistent with Thomas , courts “‘ look to state law to determine when a claim arises , and if it arises on or before the commencement of the bankruptcy case , it is part of the bankruptcy estate .’” Medley , 2024 U . S . Dist . LEXIS 228396 at * 6 ( citing In re Bracewell , 454 F . 3d 1234 , 1242 ( 11th Cir . 2006 ); In re Alvarez , 224 F . 3d at 1278 ). In other words , "[ w ] hether the claim belongs to the trustee is determined by when the claim accrues : if it accrues on or before the commencement of the bankruptcy case , it is part of the bankruptcy estate ."
Medley , 2024 U . S . Dist . LEXIS 228396 at * 6 ( citations omitted ).
Product Liability and Fraud Claims are Subject to Delayed Discovery Doctrine
Under Florida law a claim accrues when the last element constituting the cause of action occurs . See Alvarez , 224 F . 3d at 1276 ( citing Fla . Stat . Ann . § 95.031 ( 1 )). “‘ In the context of products liability , the basic elements of a negligence cause of action apply : ( 1 ) duty of care toward the plaintiff ; ( 2 ) breach of that duty ( or negligence ); [ and ] ( 3 ) proximate cause .’” Medley , 2024 U . S . Dist . LEXIS 228396 at * 6 ( citations omitted ). Additionally , “‘ the plaintiff also must establish that the product was defective or unreasonably dangerous .’” Id . ( citations omitted ).
An exception for product liability claims exists under Florida Statute section
95.031 , “[ a ] n action for products liability under s . 95.11 ( 3 ) must be begun within the period prescribed in this chapter , with the period running from the date that the facts giving rise to the cause of action were discovered , or should have been discovered with the exercise of due diligence ...." Id . at * 6-7 ( quoting Fla . Stat . § 95.031 ( 2 )( b )). “ The Florida Supreme Court has interpreted this part of the statute to mean that ‘[ a ] n exception is made for claims of fraud and products liability in which the accrual of the causes of action is delayed until the plaintiff either knows or should know that the last element of the cause of action occurred .’” Id . at * 7 ( quoting Davis v . Monahan , 832 So . 2d 708 , 709 ( Fla . 2002 ) ( citing Fla . Stat . Ann . § 95.031 )). This is known as the “ delayed discovery doctrine .”
In Medley , “[ t ] he Debtor was exposed to a toxic substance beginning in 1987 . She was diagnosed with some medical malady in 2007 . She received a discharge in 2010 . In 2015 , the World Health Organization revealed a causal link between this product and cancer . The Debtor learned of that in 2018 .” 2024 U . S . Dist . LEXIS 228396 at * 3-4 . In 2021 , the debtor reached a settlement with Roundup , and the trustee sought to reopen the debtor ’ s bankruptcy to administer the asset . Id . at * 4 . The bankruptcy court ruled the claim was property of the estate . The district court , however , reversed based upon the delayed discovery doctrine under Fla . Stat . § 95.031 . Medley , 2024 U . S . Dist . LEXIS 228396 at * 10 .
Conclusion
In this Circuit , the accrual test applies to product liability claims and is highly dependent on the underlying state law claim giving rise to the underlying claim .
This article was submitted by Jason S . Rigoli , Esq ., Furr and Cohen , P . A ., 2255 Glades Road , Suite 419A , Boca Raton , FL 33431 , jrigoli @ furrcohen . com
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