District Court Held Section 303(i) of the Bankruptcy Code Preempted Tort Claims for Wrongful Commencement of Involuntary Bankruptcy

By David Tanabe posted 02-28-2023 03:53 PM



Contributing Author: David M. TanabeWinthrop & Weinstine, P.A.

In Stursberg v. Morrison Sund, 2023 WL 23830 (D. Minn. Jan. 3, 2023), the district court granted the defendants’ motions to dismiss because the amended complaint was not authorized, and 11 U.S.C. § 303(i) preempted the plaintiff’s state common-law tort claims for wrongful commencement of an involuntary bankruptcy case. 

The defendant law firm represented the plaintiff in another action but withdrew based on unpaid legal fees. Thereafter, the defendant law firm filed an involuntary chapter 7 bankruptcy petition against the plaintiff. The bankruptcy court ordered the dismissal of the involuntary petition based on abstention under 11 U.S.C. § 305(a)(1) and later denied the plaintiff’s motion for attorney fees. The plaintiff sued the defendants in the Eastern District of Pennsylvania in the present case, and the present case was transferred to the District of Minnesota. After transfer, the defendant law firm renewed its motion to dismiss and the plaintiff filed an amended complaint. 

For the motion, the district court held the plaintiff missed his chance to amend his complaint as a matter of right under Federal Rule of Civil Procedure 15(a)(1) within 21 days after service of the defendant’s motion to dismiss under Federal Rule of Civil Procedure 12(b), and the exhaustion of this right remained after the case was transferred. Further, the district court held the plaintiff’s claims in the case were not precluded because the bankruptcy court’s agreed-to abstention and dismissal of the involuntary bankruptcy petition under § 305 was not on the merits. The bankruptcy court also denied the plaintiff’s motion for attorney fees because it would be inconsistent to decline jurisdiction based on the best interests of the parties but yet award attorney fees. 

The district court granted the motion to dismiss, and the case was dismissed with prejudice. 

To read the full opinion, click here.


C.J. Harayda, Stinson LLP
David M. TanabeWinthrop & Weinstine, P.A.

1 view