Nuveen Municipal Trust v. WithumSmith Brown, P.C.

Citation:
Nuveen Municipal Trust v. Withumsmith Brown, P.C., No. 10-4633 (3d Cir. August 16, 2012)
Tag(s):
Ruling:
Affirming the district court, the Third Circuit held that the district court did have “related to” jurisdiction under 28 U.S.C. § 1334(b) to adjudicate Appellant's action against the debtor’s accounting firm and counsel regarding an audit report and opinion letter that was prepared for the pre-petition transaction. The Third Circuit enunciated the principles of "related to" jurisdiction and its "conceivability" inquiry that applies to such analyses.
Procedural context:
Case heard on appeal from the United States District Court for the District of New Jersey.
Facts:
Six months before the debtor/hospital's bankruptcy filing, Appellant and the debtor entered into a loan transaction. Appellant relied on the debtor's accounting firm's audit report and its counsel's opinion letter (both Appellees in the appeal). Appellant filed an action against Appellees, alleging fraud, misrepresentation, and malpractice regarding the audit report and opinion letter. The district court dismissed the action because Appellant did not comply with a New Jersey statute that required Appellant to file certain affidavits of merits. Appellant appealed, and the issue of the district court's jurisdiction came into question. The matter was remanded to consider the jurisdiction question. The district court held that it had "related to" jurisdiction, "because its outcome conceivably could affect the distribution of the estate's assets"--the test applied in the Third Circuit for determining "related to" jurisdiction. The damages sought by Appellant against the non-debtor Appellees would, if successful, reduce the Appellant's claim against the debtor's estate.
Judge(s):
Judges Ambro, Vanaskie, and Aldisert. (Judge Aldisert dissented to non-bankruptcy portions of the decision.)

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