We reviewed this case in part yesterday. Here is the balance of the case, ASTON BAKER, , -against- CHARLES SIMPSON, ESQ., WINDELS MARX LANE & MITTENDORF, LLP, STANLEY GALLANT, GALSTER CAPITAL LLC, GARLSTER MANAGEMENT CORP., ALLSTATE INSURANCE COMPANY, AND JP MORGAN CHASE BANK, N.A.,
Curiously, Footnote 3 seems to say that the entire case has been dismissed. ":FOOTNOTES
3 In addition to denying appellant’s motion to remand, the bankruptcy court also dismissed appellant’s case in its entirety. (See Tr. at 18:24-19:6.) Indeed, appellee JP Morgan Chase invites the court to consider on appeal whether the bankruptcy court properly dismissed the underlying action. However, Appellant does not challenge the merits of the bankruptcy court’s dismissal of the complaint, but rather limits his appeal to review of the bankruptcy court’s assertion of jurisdiction over this matter and its refusal to abstain from considering the same. Accordingly, the court need not address the merits of appellant’s substantive claims."
However: "Appellant contends that the bankruptcy court’s jurisdiction over his claims was circumscribed by the disposal of his estate. Once all the property has been disposed of, he argues, the Title 11 proceeding terminated, and, with it, the court’s original jurisdiction under Section 1334(a) over the instant case.
The court finds that the disposal of appellant’s estate is immaterial to the jurisdictional issue for two reasons. First, "a bankruptcy court retains post-confirmation jurisdiction to interpret and enforce its own orders, particularly when disputes arise over a bankruptcy plan of reorganization." In re Millenium Seacarriers, Inc., 419 F.3d 83, 96 (2d Cir. 2005) (internal quotation [*11] marks omitted). Second, the Title 11 case ends only when it is closed under Section 350(a) of Title 11, and not, as appellant argues, with disposition of the estate. See 11 U.S.C. § 350(a) (2006).
The question of whether the bankruptcy court has exclusive jurisdiction over appellant’s claims is similarly immaterial, as is appellant’s assertion that it is unlikely that his state court claims will have any conceivable effect on the bankruptcy case. For this court to uphold the exercise of jurisdiction, the bankruptcy court need not have exclusive jurisdiction under Section 1334(a), or find that appellant’s claims are "related to" his bankruptcy petition. As set forth below, the court finds that appellant’s claims are civil proceedings arising in a case under Title 11, and are thus subject to the bankruptcy court’s jurisdiction under Section 1334(b). 28 U.S.C. § 1334(b).
District courts in this circuit have found that "[a] matter ‘arises in’ [T]itle 11 when ‘the gravamen of the proceeding arises in the particular bankruptcy case and would have no existence outside of bankruptcy,’" even if the matter is not based on any right expressly created by Title 11. D.A. Elia Constr. Corp. v. Damon & Morey, LLP, 389 B.R. 314, 317 (W.D.N.Y. 2008) [*12] (citation omitted). Since claims arising out of services rendered in connection with a debtor’s bankruptcy proceeding "are inextricably connected to the bankruptcy proceeding," courts generally find "no bar, statutory, constitutional, or otherwise, to the [b]ankruptcy [c]ourt exercising jurisdiction" over such claims. In re SPI Commc’ns & Mktg., Inc., 114 B.R. at 18.
For instance, in D.A. Elia Construction Corp., a plaintiff asserted various claims against a law firm for failure to provide adequate legal representation in connection with a Title 11 petition and related proceedings, alleging, inter alia, legal malpractice and conversion of funds belonging to the bankruptcy estate. 389 B.R. at 317. The district court found that "there can be no doubt that all of [plaintiff’s] state law claims ‘arise in’ the bankruptcy proceeding within the meaning of 28 U.S.C. § 1334 . . . But for [the law firm’s] representation of [plaintiff] in the bankruptcy case, there would be no cause of action." Id.
Similarly, in Norkin v. DLA Piper Rudnick Gray Cary, LLP, a plaintiff sued a defendant law firm alleging legal malpractice and breach of fiduciary duty for advice rendered during his personal bankruptcy [*13] and the bankruptcy of a company that he owned and managed. 05 Civ. 9137 (DLC), 2006 U.S. Dist. LEXIS 14254, 2006 WL 839079 (S.D.N.Y. March 31, 2006). The district court upheld the exercise of jurisdiction over state law claims by a bankruptcy court, finding, inter alia, that because some of the claims "arise out of advice provided by [law firm] to [plaintiff] in his bankruptcy proceeding, they cannot be considered independent of that petition." 2006 U.S. Dist. LEXIS 14254, [WL] at *3.
Here too, the gravamen in each claim is that Simpson and Windels Marx provided substandard legal services in the course of representing appellant in his Title 11 and related legal proceedings. Appellant’s case, which asserts claims of legal malpractice, conversion, negligence, fraud and intentional misrepresentation, would have no existence but for the bankruptcy. The bankruptcy court appointed Simpson and Windels Marx as bankruptcy counsel, and appellant’s relationship with all appellees arose only in connection with his Title 11 proceeding. The Galster mortgage loans that appellant complains about were authorized and approved by the bankruptcy court, as were the allegedly fixed auction sales. Moreover, to the extent that Simpson made misrepresentations during [*14] a bankruptcy court hearing and fraudulently or negligently added certain tenants to his list of creditors, this claim is inseparable from the bankruptcy context. With respect to appellant’s claims concerning the collection and disbursement of insurance proceeds, appellees respond that the JP Morgan Chase account and insurance proceeds were handled pursuant to and consistent with bankruptcy court orders. (See Tr. 12:2-21; 18:2-5.) The alleged malpractice thus implicates the integrity of the entire bankruptcy process. As such, appellant’s claims "arise in" the Title 11 case, and Section 1334(b) clearly gives the bankruptcy court jurisdiction over them. See Elia Constr. Corp., 389 B.R. at 318.
Although the Second Circuit has not directly considered whether claims of professional malpractice based on services rendered pursuant to a Title 11 petition fall within Section 1334’s scope of jurisdiction, this court’s holding is consistent with the conclusions reached by other circuit courts addressing the issue. See, e.g., In re Seven Fields Dev. Corp., 505 F.3d 237, 259, 262 (3d Cir. 2007) (internal quotation marks omitted) (finding that state law "claims of professional malpractice . . . based [*15] on services provided during the bankruptcy, under the supervision of, and subject to the approval of, the bankruptcy court," are subject to the court’s Section 1334(b) "arising in" jurisdiction); In re V&M Mgmt., Inc., 321 F.3d 6, 7 (1st Cir. 2003) (where allegations of fraud, professional malpractice, and breach of fiduciary duties by legal counsel "wholly arise out of the . . . counsel’s performance of their duties with respect to the Debtor after the petition for bankruptcy was filed," such claims are subject to the court’s jurisdiction under Section 1334(b)); Grausz v. Bradford, 321 F.3d 467, 469 (4th Cir. 2003) (holding that the district court had bankruptcy jurisdiction over a professional malpractice action filed by a Title 11 debtor against the law firm that represented him in his bankruptcy case under Section 1334(b) "because the malpractice claim arose in the bankruptcy case"); see also In re Southmark Corp, 163 F.3d 925, 931 (5th Cir. 1999); In re Ferrante, 51 F.3d 1473, 1476 (9th Cir. 1995)."