Adams v. Cumberland Farms

May 7, 1996
[Not for Publication]
[Not for Publication]

United States Court of Appeals
United States Court of Appeals
For the First Circuit
For the First Circuit

No. 95-1736

CHERYL ADAMS, RICHARD WAUGH, BRENT ADAMS, RONALD RING,
PATRICIA ADAMS, ROBERT RAVITZ, CARRIE BURKE, WELDON ADAMS,
ELIZABETH TARGEE, TINA LEVESQUE AND MELISSA SMITH RAPA,

Plaintiffs - Appellants,

v.

CUMBERLAND FARMS, INC.
AND LANCE CURLEY, ET AL.,

Defendants - Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M. Gorton, U.S. District Judge]

Before

Torruella, Chief Judge,

Bownes, Senior Circuit Judge,

and Stahl, Circuit Judge.

Stanley R. Cohen for appellant.

Barbara D. Gilmore, with whom Kathleen Provost and Sullivan &

Worcester, were on brief for appellee.

STAHL, Circuit Judge. This appeal involves the
STAHL, Circuit Judge.

review of an order entered by the bankruptcy court that

effectively estimated and discharged the appellants' claims.

The appellants, Cheryl Adams and ten other former employees

of the debtor (collectively "Adams"), claim that the

bankruptcy court lacked authority to enter the order because

the claims constituted "personal injury tort claims." We

affirm.

I.
I.

Background
Background

Cheryl Adams and ten other former employees of

Cumberland Farms, Inc. ("CFI"), filed proofs of claim against

CFI in the bankruptcy court for the District of

Massachusetts. The claims stemmed from a pending civil

action in which Adams alleged that various CFI officers and

supervisors had conspired to recoup inventory losses by

falsely accusing Adams and other low-level CFI employees of

stealing money and merchandise from CFI stores. Adams

further alleged that these same CFI officials had knowingly

coerced Adams and other employees into confessing to the

alleged thefts notwithstanding that Adams and the other

employees had not committed them. The complaint in the case

asserted claims of false imprisonment, wrongful termination,

malicious prosecution, abuse of process, defamation,

intentional infliction of emotional distress, and violation

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of Massachusetts civil rights laws (collectively the "loss

prevention claims").

In 1993, CFI reached a tentative settlement in a

separate class action suit involving similar loss prevention

claims (the "Curley suit"). The Curley suit had been brought

in New Jersey federal district court by a different group of

former CFI employees that did not include Adams. As part of

the proposed Curley settlement, the parties to that agreement

filed a joint motion in the Massachusetts bankruptcy court

requesting the creation of a mandatory class that would

include all loss prevention claimants who had filed proofs of

claim in the Massachusetts bankruptcy proceeding (e.g.,

Adams). Moreover, the parties further requested that the

Massachusetts bankruptcy court use the Curley settlement

agreement as a vehicle for estimating and discharging all of

the loss prevention claims alleged by individuals in this

newly created class. Adams objected to this motion. On

August 30, 1993, the bankruptcy court granted the motion.

Adams appealed to the Massachusetts federal district court,

and the district court affirmed. Additionally, the New

Jersey district court ultimately approved, and the Third

Circuit affirmed, the proposed settlement agreement in the

Curley suit. See Curley v. Cumberland Farms, Inc., 27 F.3d

556 (3d Cir. 1994).

II.
II.

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Discussion
Discussion

On appeal to this court, Adams's principal

complaint is that the bankruptcy court lacked the authority

to enter a final order discharging her claims. Adams also

raises several additional arguments including an attack on

the bankruptcy court's estimation of her claims and an

assertion that the bankruptcy court's order violated her

Seventh Amendment right to a jury trial. We begin with a

brief overview of the statutory framework and follow with a

discussion of Adams's assignments of error.

A. Statutory Overview

Title 28 U.S.C. 1334 vests in the district court

a broad grant of subject-matter jurisdiction over all

bankruptcy-related matters, expressly providing that the

"district court shall have original and exclusive

jurisdiction of all cases under title 11" and "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(a), (b); see also Celotex Corp. v.

Edwards, 115 S. Ct. 1493, 1498-99 (1995) (discussing

comprehensive scope of 1334 jurisdictional grant). The

bankruptcy court, in turn, is authorized to hear matters, not

as an independent entity, but as "a unit of the district

court." 28 U.S.C. 151. Subject-matter jurisdiction

remains in the district court, which is authorized, in

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appropriate circumstances, to refer matters "to the

bankruptcy judges of th[at] district." Id. 157; cf.

Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458

U.S. 50 (1982) (holding unconstitutional previous statutory

scheme that authorized bankruptcy courts to exercise

independently all jurisdiction conferred to the district

courts under the bankruptcy laws). The district court's

power of referral extends to any case or proceeding for which

it has subject-matter jurisdiction under 1334. See 28

U.S.C. 157. The district court, however, may withdraw any

matter referred under this provision for cause shown on its

own motion or by the request of either party. Id. 157(d).

While the district court may refer all matters for

which it has jurisdiction under 1334, the power of the

bankruptcy judge to enter final orders in a referred

proceeding is limited. See 28 U.S.C. 157. In general, a

bankruptcy judge may hear and finally determine only core

bankruptcy proceedings. Id. 157(a). Core proceedings are

those that involve rights that are created by, and depend on,

the bankruptcy laws for their existence. In re G.S.F. Corp.,

938 F.2d 1467, 1475 (1st Cir. 1991); see also In re Arnold

Print Works, Inc., 815 F.2d 165, 166-67 (1st Cir. 1987)

(reading the legislative history as indicating that a

bankruptcy court's core authority should be interpreted

broadly). Section 157 sets forth a nonexhaustive list of

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"core proceedings" that includes such obvious matters as

"allowance or disallowance of claims against the estate," 28

U.S.C. 157(b)(2)(B), as well as a final broadly-phrased

catchall covering most "other proceedings affecting the

liquidation of the assets of the estate," id. 157(b)(2)(O).

A bankruptcy judge may also hear a properly

referred non-core proceeding otherwise falling within the

district court's bankruptcy jurisdiction, but, in general,

may only issue proposed findings of fact and recommended

conclusions of law subject to the district court's de novo

review. Id. 157(c)(1). This non-core authority extends to

those matters that, while not directly dependent on the

bankruptcy laws for their existence, are nonetheless

sufficiently connected to the restructuring of the

debtor/creditor relationship to come within the district

court's broad jurisdictional grant. The bankruptcy court is

authorized, on its own motion or on the "timely motion of a

party," to determine whether a proceeding comes within the

court's core or non-core authority. Id. 157(b)(3).

Finally, with the consent of the parties, a bankruptcy court

may hear and finally determine non-core proceedings within

the district court's bankruptcy jurisdiction. Id.

157(c)(2).

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Significantly, personal injury tort and wrongful

death claims are afforded special status under the bankruptcy

laws. Several express exceptions address and limit the

authority of the bankruptcy court over such claims. See,

e.g., 28 U.S.C. 157(b)(2)(B), (O), and 157(b)(5).1 For

example, the estimation of unliquidated or contingent

personal injury tort claims for the purposes of distribution

1. Subsection 157(b)(2) provides, in relevant part, that
core proceedings include:

(B) allowance or disallowance of claims
against the estate or exemptions from
property of the estate, and estimation of
claims or interest for the purposes of
confirming a plan under chapter 11, 12 or
13 of title 11 but not the liquidation or

estimation of contingent or unliquidated
personal injury tort or wrongful death

claims against the estate for purposes of
distribution in a case under title 11
. . .
(O) other proceedings affecting the
liquidation of the assets of the estate
or the adjustment of the debtor-creditor
or the equity security holder
relationship, except personal injury tort

or wrongful death claims.

28 U.S.C. 157(b)(2) (emphasis added). Subsection 157(b)(5)
provides that:

The district court shall order that
personal injury tort and wrongful death

claims shall be tried in the district
court in which the bankruptcy case is
pending, or in the district court in the
district in which the claim arose, as
determined by the district court in which
the bankruptcy case is pending.

28 U.S.C. 157(b)(5) (emphasis added).

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is explicitly excluded from 157's list of core proceedings.

Id. 157(b)(2)(B). Moreover, the district court is

instructed to order that personal injury tort and wrongful

death claims shall be tried in the district court in which

the bankruptcy case is pending or in the district in which

the claims arose. Id. 157(b)(5). This special status

apparently stems from Congress's recognition that most

personal injury tort and wrongful death victims stand in a

somewhat different relationship with the bankruptcy debtor

because they did not voluntarily enter into dealings with the

debtor (and accept the risk of loss) in the same sense as

traditional bankruptcy claimants. See Matter of Poole

Funeral Chapel, Inc., 63 B.R. 527, 530 (Bankr. N.D. Ala.

1986) (quoting statements of Sen. DeConcini).

B. Personal Injury Torts

Adams challenges the bankruptcy court's authority

to enter a final order with respect to her claims.

Essentially, she contests the bankruptcy court's implicit

determination that her claims constituted core proceedings.

Adams argues that her claims are non-core because they fall

within at least one of several specific exceptions provided

for "personal injury tort" claims. Therefore, she contends

that, because the proceeding was non-core, the bankruptcy

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court lacked the authority to enter a final order effectively

estimating and discharging her claims.2

Whether or not Adams's claims constitute personal

injury tort claims is a close question. Compare In re Atron

Inc. of Michigan, 172 B.R. 541, 542-45 (Bankr. W.D. Mich.

1994) ("personal injury tort" should be read narrowly to

exclude emotional distress and other nontraditional personal

injury claims), with Poole, 63 B.R. at 529-30 ("personal

injury tort" should be read broadly to include claims for

emotional and mental distress). We decline, however, to

reach the issue in this case. Adams failed to argue that her

claims constituted personal injury tort claims in her

objection to the joint motion before the bankruptcy court

and, again, in her opening brief before the district court.

Accordingly, she has waived consideration of the issue on

appeal to this court. See, e.g., Fish Market Nominee Corp.

2. Adams does not contend that her claims against the estate
were outside the district court's broad grant of subject-
matter jurisdiction under 28 U.S.C. 1334. This is not
surprising. The district court's "related to" jurisdiction
under 1334(b) is expansive. See Celotex Corp. v. Edwards,

115 S. Ct. 1493, 1499 (1995) ("Congress did not delineate the
scope of `related to' jurisdiction, but its choice of words
suggests a grant of some breadth."). "`The usual
articulation of the test for determining whether a civil
proceeding is related to bankruptcy is whether the outcome of
that proceeding could conceivably have any effect on the
estate being administered in bankruptcy.'" In re G.S.F., 938

at 1475 (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994

(3d Cir. 1984)). We have little doubt that proceedings, such
as this one, involving the estimation and discharge of proofs
of claim filed against the estate by a bankruptcy creditor
come within this broad range.

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v. Pelofsky, 72 F.3d 4, 6 (1st Cir. 1995) (arguments not

raised in bankruptcy court are waived on appeal); In re Mark

Bell Furniture Warehouse, Inc., 992 F.2d 7, 9 (1st Cir. 1993)

(same).

At bottom, Adams's claim is that she was denied her

right to an Article III judge. That right, which derives

from the language of Article III, 1, is a personal right

and is subject to waiver upon a party's failure to assert it.

See Commodity Future Trading Comm'n v. Schor, 478 U.S. 833,

848-50 (1986). Schor, however, makes clear that Article III,

1, protects other non-waivable institutional interests by

barring "congressional attempts to transfer jurisdiction [to

non-Article III tribunals] for the purpose of emasculating

constitutional courts." Id. at 850 (citations and quotation

marks omitted). No such concerns are at issue in this case.

The present appeal does not involve a challenge to Congress's

allocation of authority to a non-Article III bankruptcy judge

to resolve personal injury and wrongful death claims.

Indeed, the specific provisions in question, viz 28 U.S.C.

157(b)(2)(B) and 157(b)(5), strictly limit the authority of

bankruptcy judges with respect to personal injury and

wrongful death claims.

Though, in extraordinary cases, we may make an

exception to the raise-or-waive rule where our failure to do

so would result in a gross miscarriage of justice, see

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Credit Francais Int'l v. Bio-Vita, Ltd., 78 F.3d 698, 709

(1st Cir. 1996), Adams has not persuaded us that such an

exception is warranted in this case. The effect of the

bankruptcy court's order did not completely deprive Adams of

a remedy for her alleged injuries. Instead, the ruling

simply had the effect of estimating the value of her

unliquidated tort claims by ordering her to participate in

the Curley settlement agreement. Because, as we explain

infra, Adams has failed to persuade us that the Curley

settlement will provide an unreasonable estimation, we are

likewise unpersuaded that giving effect to the bankruptcy

court's order will result in a substantial miscarriage of

justice.

C. Other Matters

In her reply brief, Adams directly attacks the

bankruptcy court's use of the class action settlement as a

vehicle for estimating her claims. While title 11 authorizes

the bankruptcy court to estimate unliquidated and contingent

claims when necessary for the prompt administration of the

bankruptcy estate, see 11 U.S.C. 502(c), it does not

provide methods for conducting such estimations. Therefore,

in estimating claims, "bankruptcy courts should use whatever

method is best suited to the particular circumstances."

Lawrence P. King, 3 Collier on Bankruptcy 502.03, at 502-76

(15th ed. 1995). The bankruptcy courts are afforded

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substantial deference in this area, and errors assigned both

to its estimates and its methods for achieving such estimates

generally will be reviewed only for an abuse of discretion.

Matter of Continental Airlines, 981 F.2d 1450, 1461 (5th Cir.

1993); Bittner v. Borne Chem. Co., 691 F.2d 134, 136 (3d Cir.

1982). Moreover, in this case, because Adams did not attack

the actual estimates in her opening brief, she has, in fact,

waived consideration of this issue absent a showing that the

estimates would result in a clear miscarriage of justice.

See Indian Motocycle Assocs. v. Massachusetts Hous. Fin.

Agency, 66 F.3d 1246, 1253 n.12 (1st Cir. 1995).

On the particulars of this case, Adams has failed

to convince us that the bankruptcy court's decision to order

her participation in the Curley settlement constituted an

abuse of discretion, much less a clear miscarriage of

justice. The claims asserted in the Curley action were

brought by employees similarly situated to Adams, and arose

from essentially the same scheme that Adams alleges. In

general, we find no reason to think that a court-approved

settlement in such a strikingly parallel proceeding would not

provide a reasonable benchmark for estimating the value of

Adams's claims. Though there may be reasons that such a

method for estimation would not be appropriate in other

cases, Adams has not provided us with any compelling reason

for finding it inappropriate here.

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Adams raises several additional issues, including a

claim that the bankruptcy court's order deprived her of her

Seventh Amendment right to a jury trial. We find these

additional claims either waived, substantially without merit,

or both. Specifically, with respect to Adams's Seventh

Amendment argument, filing a proof of claim in a bankruptcy

proceeding, as Adams has done, generally waives any right to

a jury trial. See Langenkamp v. Culp, 490 U.S. 42, 44-45

(1990) (filing proof of claim invokes bankruptcy court's

equitable jurisdiction and generally waives jury trial

right). We do note, however, that 28 U.S.C. 1411(a), may

restrict this general rule with respect to personal injury

and wrongful death claims.3 Nonetheless, Adams has

forfeited the application of this provision by failing to

argue that her claims constituted personal injury tort claims

to the courts below. See, e.g., In re Mark Bell, 992 F.2d at

9.

III.
III.

Conclusion
Conclusion

For the foregoing reasons, we affirm the decision

of the district court.

3. 28 U.S.C. 1411(a) provides in relevant part that

this chapter and title 11 do not affect
any right to trial by jury that an
individual has under applicable non-
bankruptcy law with regard to a personal
injury or wrongful death tort claim.

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