Petition for Cert. Filed to Settle Circuit Split re application of 28 U.S.C. § 1367 to Bankruptcy Jurisdiction

Per Petition for Writ of Certiorari, Sasson v. Sokoloff, 2006 WL 655063 (Mar. 10, 2006) (No. 05-1171):

The current grant of jurisdiction to the federal district courts over bankruptcy matters was enacted as part of the Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, and is codified at section 1334 of title 28. As relevant here, section 1334(b) grants the district courts "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b).

There is a deep and longstanding circuit split on the question whether the grant of "related to" jurisdiction in section 1334 precludes the bankruptcy courts from exercising supplemental jurisdiction under section 1367. The Third, Fifth, Seventh, and Eleventh Circuits have held that bankruptcy courts cannot exercise section 1367's supplemental jurisdiction. See supra p. 5 n.1. As the Fifth Circuit reasoned: "Congress has gone to great lengths to determine what proceedings may be tried by bankruptcy courts, and the exercise of ancillary and pendent jurisdiction could subsume the more restrictive 'relate[d] to' and 'arising in' jurisdiction, such that the latter would be rendered substantially, if not entirely, superfluous." Walker v. Cadle Co. (In re Walker), 51 F.3d 562, 573 (5th Cir. 1995) (internal quotation omitted); see also Bass v. Denney (In re Bass), 171 F.3d 1016, 1024 (5th Cir. 1999) (same). The Third, Seventh, and Eleventh Circuits have reached the same conclusion. See Bobroff v. Continental Bank (In re Bobroff), 766 F.2d 797, 802 (3d Cir. 1985); Wisconsin Dep't of Indus., Labor & Human Relations v. Marine Bank Monroe (In re Kubly), 818 F.2d 643, 645 (7th Cir. 1987); Miller v. Kemira (In re Lemco Gypsum, Inc.), 910 F.2d 784, 789 (11th Cir. 1990).

By contrast, the Second and Ninth Circuits have permitted bankruptcy courts to exercise the broader form of supplemental jurisdiction granted to the district courts by section 1367. As the Ninth Circuit explained in the decision below: "at present, the bankruptcy court's 'related to' jurisdiction also includes the district court's supplemental jurisdiction pursuant to 28 U.S.C. § 1367." Pet. App. 5a; see also Klein v. Civale & Trovato, Inc. (In re Lionel Corp.), 29 F.3d 88, 92 (2d Cir. 1994) ("The bankruptcy court had jurisdiction over the Owners' claims against CTI under principles of supplemental jurisdiction. See 28 U.S.C. § 1367.").

The division in the district courts and bankruptcy courts is equally pronounced, with more than a dozen cases on each side of the issue. In addition, the disagreement among the courts on this issue has received a great deal of scholarly attention. See Susan Block-Lieb, The Case Against Supplemental Jurisdiction: A Constitutional, Statutory and Policy Analysis, 62 Fordham L. Rev. 721, 756 (1994) ("the majority of courts that have addressed the issue have concluded that ... bankruptcy courts are empowered to exercise supplemental bankruptcy jurisdiction"); Ralph Brubaker, On the Nature of Federal Bankruptcy Jurisdiction: A General Statutory and Constitutional Theory, 41 Wm. & Mary L. Rev. 743, 928 (2000) ("many courts have concluded more recently that bankruptcy courts have no 'supplemental' bankruptcy jurisdiction whatsoever"); see also William L. Norton, Jr., 1 Norton Bankr. Law & Practice 2d, § 4:70 (2005) (noting both that "it has been held that § 1367(a) may be invoked as a basis for the exercise of jurisdiction by the bankruptcy court" and that "[u]nder developing case law, it appears that a bankruptcy court cannot exercise supplemental jurisdiction"). This Court should grant certiorari to resolve this entrenched division of authority among the courts of appeals.


The Ninth Circuit held in the case upon which the Petition is based, In re Sasson, 424 F.3d 864 (9th Sept. 13, 2005):

In addition to continuation of the bankruptcy court's pre-Code jurisdiction and the specific grant of new powers, the Bankruptcy Code provided for the exercise of "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b). A bankruptcy court's "related to" jurisdiction is very broad, "including nearly every matter directly or indirectly related to the bankruptcy." Mann v. Alexander Dawson (In re Mann), 907 F.2d 923, 926 n. 4 (9th Cir.1990). The bankruptcy court's "related to" jurisdiction granted by the Bankruptcy Code derives directly from the Bankruptcy Clause, which grants Congress the power "[t]o establish ... uniform Laws on the subject of Bankruptcies throughout the United States." U.S. Const., art. 1, § 8. Congress expanded the Bankruptcy Court's Article I jurisdiction by granting federal district courts with "original and exclusive jurisdiction of all cases under title 11." 28 U.S.C. § 1334(a). Thus, at present, the bankruptcy court's "related to" jurisdiction also includes the district court's supplemental jurisdiction pursuant to 28 U.S.C. § 1367 "over all other claims that are so related to claims in the action within [the court's] original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." See Montana v. Goldin (In re Pegasus Gold Corp.), 394 F.3d 1189, 1195 (9th Cir.2005); Sec. Farms v. Int'l Bhd. of Teamsters, 124 F.3d 999, 1008 n. 5 (9th Cir.1997).