Michaelson v. Wassmann (In re Promise Healthcare Group, LLC)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 11 months 4 weeks ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- No. 24-2159 (3rd Circuit, Mar 03,2025) Published
- Tag(s):
-
- Ruling:
- The Third Circuit affirmed a bankruptcy court's summary judgment ruling that a claim is not time barred when the claimant timely files a proof of claim in the bankruptcy case but does not file a complaint before the later of the expiration of a state law limitations period and thirty days after the automatic stay terminates under 11 U.S.C. § 108(c)(2). The circuit court disagreed that (1) a court should assess whether a claim is allowed as of the evaluation date, not the petition date; and (2) a creditor must timely file a non-bankruptcy action to protect its bankruptcy claim.
- Procedural context:
- After the U.S. Bankruptcy Court for the District of Delaware issued its order denying a motion for summary judgment by liquidating trustee Robert Michaelson, seeking to disallow a claim as untimely, the trustee sought leave to pursue a direct appeal to the Third Circuit. The U.S. District Court for the District of Delaware granted the motion and certified the interlocutory order for a direct appeal to the circuit pursuant to 28 U.S.C. § 158(d)(2)(A)(i) and (iii). The Third Circuit accepted the appeal. In affirming the bankruptcy court, the circuit court noted that, on remand, the district court will have to try claimant Patrick Wassmans's underlying personal injury claim pursuant to 28 U.S.C. §§ 157(b)(2)(O) and (b)(5) as the parties had not consented to having the bankruptcy court decide the dispute.
- Facts:
- Promise Healthcare Group, LLC and its affiliates, operators of hospital and nursing facilities, sought bankruptcy relief under chapter 11 on November 18, 2018. Before the proof of claim deadline passed, Appellee Patrick Wassmann filed a $10 million claim based on allegedly negligent care he'd received in a facility between March 9 and June 15, 2017. The medical malpractice claim was subject to a two-year statute of limitations under Florida law. The bankruptcy court confirmed Debtors’ reorganization plan in September 2020 and the plan went into effect on October 1, 2020. Under 11 U.S.C. § 108(c)(2), Wassmann had until November 1, 2020 to file a state court action but opted not to, seeking recovery in the bankruptcy court alone. The trustee moved for a summary judgment in February 2023, contending Wassann's claim should be disallowed. The trustee argued: "even though the claim was timely as of the petition date . . . it became untimely by the time the [t]rustee objected to it and it was evaluated. He urges that the latter date, and not the petition date, is the appropriate reference point for evaluating a claim’s validity. The [t]rustee also urges that Wassmann’s claim is barred because Wassmann failed to file a timely state court complaint in addition to his Chapter 11 proof of claim." The bankruptcy judge denied the trustee's motion, leading to this interlocutory appeal.
- Judge(s):
- RESTREPO, PORTER, and RENDELL
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