Longaker v. Boston Scientific Corp.

Summarized by Brendan Gage , Goulston & Storrs PC
12 years 10 months ago

Citation:

No. 12-2482 (8th Cir. Apr. 26, 2013)

Tag(s):

Ruling:

To have standing to assert a breach of contract action where the debtor seeks monies that allegedly constitute earnings for postpetition services that are exempt from property of the estate under § 541(a)(6), the debtor must have actually rendered postpetition services. Affirming the District Court (the “DC”), the Eighth Circuit Court of Appeals held that the debtor’s breach of contract action was properly dismissed for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) because section 541(a)(6)’s exception to property of the estate only applies when there is a postpetition payment attributable postpetition services. The debtor had never rendered postpetition services. Consequently, even if Boston Scientific (“BS”), the debtor’s former employer, was required to make payments under the debtor’s employment agreement, the payments would be property of the bankruptcy estate rather than property of the debtor. Moreover, because the payments due under the employment agreement were neither attributable nor conditioned on the debtor’s postpetition services, they were most analogous to severance payments rather than payments tied to services. Circuit Judge Bye dissented, contending that the majority had confused the issue of the debtor’s standing to bring its breach of contract claim with the validity of the claim itself. Moreover, Judge Bye argued that the payments allegedly due under the employment agreement were earnings for postpetition services under § 541(a)(6).

Procedural context:

BS moved to dismiss the debtor’s claim under rule 12(b)(1), asserting, inter alia, that the debtor lacked standing to assert the breach of contract claim. The DC granted BS’s motion to dismiss. The DC held that the debtor lacked standing to assert his breach of contract claim because his interest in the guaranteed payments, although contingent at the time he filed for bankruptcy, was part of the bankruptcy estate. The debtor appealed.

Facts:

The debtor had a three-year employment agreement with BS to work as a sales representative. Pursuant to the agreement, BS paid the debtor an annual base salary and an annual commission. The agreement guaranteed the debtor these payments unless he quit or was terminated for certain reasons. The debtor filed bankruptcy. BS terminated the contract postpetition.

Judge(s):

Wollman, Bye, and Benton, Circuit Judges.

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