Murray v. Safir Law P.L.C. (In re Murray)

Case Type:
Case Status:
22-1514 (6th Circuit, Mar 29,2023) Not Published
The U.S. Court of Appeals for the Sixth Circuit concluded that a bankruptcy court did not abuse its discretion in declining to exercise residual jurisdiction over claims alleged in an adversary complaint that constituted "core proceedings" after the bankruptcy court had dismissed the debtor's chapter 13 case,
Procedural context:
In a 2021 appeal in this case, the Sixth Circuit described the scope of a bankruptcy court's statutory subject matter jurisdiction, including its jurisdiction over "core proceedings" under 28 U.S.C. § 157(b). The circuit court explained that a bankruptcy court retains jurisdiction to adjudicate core proceedings--such as a claim for turnover, a claim for violation of the automatic stay, and a request for a determination about attorney fees -- after an underlying bankruptcy petition has been dismissed. The circuit court also clarified that a bankruptcy court must use its sound discretion when deciding whether to exercise residual jurisdiction and, to guide its use of discretion, a bankruptcy court should consider four factors: economy, convenience, fairness, and comity. In this new appeal, the Sixth Circuit was asked to determine whether the bankruptcy court abused its discretion when, on remand, it declined to exercise residual jurisdiction.
Debtor/Appellant Juannelious Benjamin Murray, Sr. filed a lawsuit against Allstate Insurance Company in 2015 seeking no-fault insurance benefits. He then filed a chapter 13 petition in the U.S. Bankruptcy Court for the Eastern District of Michigan in 2016. The bankruptcy court dismissed his case in October 2016 for failure to make payments under his proposed plan. Just over a week later, the state court approved a monetary settlement in the insurance case. Debtor's state court counsel, Safir Law P.L.C., retained one-third of the settlement amount as legal fees. In 2018, Debtor sued Safir Law in state court. After the firm moved for a summary disposition in that case, Debtor filed a new bankruptcy case and attempted to remove the state court lawsuit to the bankruptcy court. When that failed, Debtor filed a multi-count adversary proceeding in the bankruptcy court alleging similar claims against Safir Law. The bankruptcy court dismissed both the new bankruptcy case and the adversary complaint in full. Debtor appealed and the district court affirmed the bankruptcy court's orders. But the Sixth Circuit reversed and remanded the adversary proceeding to the bankruptcy court as to one count of the complaint (alleging a turnover claim, a violation-of-the-automatic-stay claim, and an attorney-fee claim) to decide whether, in its discretion, it would exercise its retained subject-matter jurisdiction to address these claims, applying a four-factor test: economy, convenience, fairness, and comity. On remand, the bankruptcy court invited briefing on the issue, but Debtor did not address the four factors in his filing. The bankruptcy court then issued an oral ruling declining to exercise residual jurisdiction over the claims against Safir Law in the adversary proceeding, finding the claims lacked merit and explaining its application of the four factors in reaching that discretionary decision. Debtor appealed to the district court, which affirmed. It found the bankruptcy court properly considered both the merits of Debtor's claims and the four discretionary factors, and noted Debtor waived his argument on the four factors in the district court by not addressing them in his briefs. Debtor then appealed to the Sixth Circuit.

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