• Who Decides Whether Bankruptcy Jurisdiction Exists after Removal from State Court?
  • February 15, 2017 | Author: Regan Loper
  • Law Firm: Burr & Forman LLP - Birmingham Office
  • Imagine that while a bankruptcy case is pending, the debtor-in-possession or bankruptcy trustee files a state law claim against one of the estate's creditors. Presumably, if the debtor wins its state law claim, that recovery augments the bankruptcy estate and increases the amount available to pay the debtor's creditors.1 The creditor, seeking to avoid litigating the action in the debtor's home state court, timely removes the lawsuit to federal court as permitted under 28 U.S.C. § 1452(a).2 The creditor argues that the case should proceed in federal bankruptcy court because that court has bankruptcy jurisdiction over the matter under 28 U.S.C. § 1334(b).3 That provision says that bankruptcy jurisdiction exists over all proceedings "related to cases under title 11."4 The debtor responds by arguing that the state law claims have nothing to do with bankruptcy. Even if they did, the bankruptcy court should abstain and allow the state court to hear the lawsuit.5