United States Court of Appeals,
Fifth Circuit.
No. 93-3182.
Roosevelt E. COAR, Sr., Administrator of the Estate of the minor
child, Brian C. Coar, Plaintiff-Appellant,
v.
NATIONAL UNION FIRE INSURANCE CO., Defendant-Appellee.
April 26, 1994.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before JONES and DeMOSS, Circuit Judges, and SCHWARTZ,* District
Judge.
EDITH H. JONES, Circuit Judge:
The father of a boy who witnessed an airplane crash sued the
airline's liability insurer under Louisiana's direct action
statute. The district court ruled that it had jurisdiction over
the case under 28 U.S.C. § 1334 because it related to the
tortfeasor's pending bankruptcy case. The father appeals the
jurisdictional ruling and the amount of damages awarded. We
affirm.
BACKGROUND
Roosevelt Coar, Sr., acting on behalf of his son, Brian C.
Coar, brought suit against National Union Fire Insurance Company
under Louisiana's direct action statute, La.Rev.Stat. § 22:655, in
Louisiana state court. National Union insured L'Express, a small
Louisiana-based commercial airline operating in a Chapter 11
*
District Judge of the Eastern District of Louisiana,
sitting by designation.
1
reorganization.1 In July, 1991, its pilot attempted to land an
airplane in the midst of a thunderstorm and crashed into a
residential neighborhood in Birmingham, Alabama. Brian Coar, then
11 years old, witnessed the crash at close range and went near the
wrecked airplane to offer aid. He observed the grim results of the
crash, including the victims and a surviving passenger. He was
also exposed to flames and smoke when the airplane caught fire.
Roosevelt Coar, Sr. claims that his son suffers post-traumatic
stress disorder as a result of witnessing the crash, and he sought
damages for intentional and negligent infliction of mental
distress.
National Union removed the case to federal court in the
Eastern District of Louisiana pursuant to 28 U.S.C. § 1452,
asserting that the case related to the pending bankruptcy case of
L'Express under 28 U.S.C. § 1334(b). The district court denied
Coar's motion to remand, reasoning that the bankruptcy estate might
be affected by the outcome of the case against National Union. The
district judge later referred the case to a magistrate judge with
both parties' consent under 28 U.S.C. § 636(c). Such referral of
a non-core personal injury case was permissible under 28 U.S.C. §
636(c). Matter of Nix, 864 F.2d 1209, 1210-11 (5th Cir.1989).
National Union effectively stipulated that L'Express was negligent
at the pretrial conference. The magistrate judge held a hearing,
found for the plaintiff, and awarded $11,835 in damages. Coar
appeals the jurisdictional ruling and the amount of damages and
1
The bankruptcy was later converted to a Chapter 7 case.
2
attorney fees awarded.
DISCUSSION
28 U.S.C. § 1334 grants to 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." The
main question in this case is whether the appellant's direct action
against the debtor's insurer vested jurisdiction in the district
court as an action related to the bankruptcy of L'Express.2
In finding jurisdiction, the district judge discussed the
possibility that issues such as the extent of insurance coverage,
the insured's negligence, and the plaintiff's damages might all be
decided in such a way as to affect the bankruptcy estate. She did
not explicitly rule that the insurance policy or its proceeds were
the property of the debtor's estate. The district judge knew,
however, that other suits arising out of the airplane crash were
pending against L'Express or National Union.3 At the time of
removal the choice-of-law issue was in dispute. If Alabama's
wrongful death statute applied in these cases, punitive damages of
$5 million to $15 million per death were possible. National
Union's policy limits are $50 million.
The district judge was also aware of contemporaneous
2
The case was briefed and decided in the district court on
the question of § 1334 jurisdiction, and that is the issue we
decide. In oral argument, however, it was conceded by appellant
that diversity jurisdiction probably also exists. 28 U.S.C. §
1332(c)(1).
3
It is unclear whether the district judge knew the exact
number of pending claims. At oral argument counsel informed this
court that three suits are currently in litigation.
3
proceedings occurring in the bankruptcy case (also filed in the
Eastern District of Louisiana). Coar's attorney had appeared at a
creditors' committee meeting for L'Express, had represented
Roosevelt Coar to be a creditor in papers filed with the bankruptcy
court, and had filed a motion with that court to dismiss the
bankruptcy proceedings. Finally, during the removal dispute the
bankruptcy judge issued an order requiring his approval for all
proposed settlements arising from the July 1991 crash.
Given the facts before us and before the district court, we
agree that Coar's lawsuit against the debtor's insurer "related to"
the pending bankruptcy case. As has been noted, there were
multiple claims on the liability policy, the possibility of very
high punitive damages awards to crash claimants, one or more
crash-related claims in the bankruptcy proceedings, and an order by
the bankruptcy judge compelling his approval of all proposed
settlements arising out of the crash. These circumstances
constituted a cognizable threat that unless the claims against the
policy were marshalled in accord with the bankruptcy proceeding,
the policy proceeds would not cover plaintiffs' claims and could
expose the debtor's estate. Houston v. Edgeworth, 993 F.2d 51, at
56 n. 21 (5th Cir.1993). As the district court put it, the
question here was not whether the bankruptcy affects the tort
action, but whether the tort action affects the bankruptcy.4 This
4
Compare two cases focusing on how the tort action affected
the bankruptcy estate; Wedgeworth v. Fibreboard, 706 F.2d 541,
546-48 (5th Cir.1983) (approves denying joinder of bankrupt
asbestos manufacturers' insurance companies under Louisiana
direct action statute in ongoing tort suit against other asbestos
4
court need not go so far as to apply the broad definition of § 1334
"related to" jurisdiction alluded to by this court in Matter of
Wood, 825 F.2d 90, 93 (5th Cir.1987), in holding that under the
circumstances, the tort suit under Louisiana's direct action
statute "related to" the debtor's estate and therefore to its
pending bankruptcy proceeding so closely as to establish federal
court jurisdiction.
Appellant made no effort to support his conclusional argument
that the federal court should have abstained from hearing this case
under 28 U.S.C. § 1334(c)(1). We reject it.
Further, we have reviewed Coar's arguments concerning the
amount of damages and attorneys fees awarded but do not find any
abuse of discretion.
The judgment of the district court is therefore AFFIRMED.
manufacturers); In re Davis, 730 F.2d 176, 184 (5th Cir.1984)
(bankruptcy court has power to stay actions against debtor's
insurers, officers and directors under certain circumstances).
5