Juannelious Murray, Sr. v. Safir Law P.L.C.

NOT RECOMMENDED FOR PUBLICATION
File Name: 21a0419n.06
No. 20-1910
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
In re: JUANNELIOUS BENJAMIN MURRAY, SR. ) FILED
) Sep 03, 2021
Debtor. ) DEBORAH S. HUNT, Clerk
)
)
JUANNELIOUS BENJAMIN MURRAY, SR., )
ON APPEAL FROM THE
)
UNITED STATES DISTRICT
Plaintiff-Appellant, )
COURT FOR THE EASTERN
)
DISTRICT OF MICHIGAN
v. )
)
SAFIR LAW P.L.C., )
)
Defendant-Appellee. )
)
BEFORE: COLE, CLAY, and GRIFFIN, Circuit Judges.
GRIFFIN, Circuit Judge.
Defendant Safir Law P.L.C. represented plaintiff Juannelious Benjamin Murray, Sr. in a
lawsuit against Murray’s insurer. While the insurance lawsuit was pending, plaintiff initiated a
bankruptcy case in 2016. Safir Law secured a settlement in the insurance lawsuit and Murray
wanted it to be administered in his 2016 bankruptcy case. But before he could make that happen,
his bankruptcy case was dismissed.
Plaintiff believed that defendant improperly retained possession of the settlement money
from the insurance lawsuit. To get that money, plaintiff filed an adversary complaint against
defendant as part of another bankruptcy case that he started in 2019. The bankruptcy court,
however, dismissed his adversary complaint because it dismissed the underlying 2019 bankruptcy
No. 20-1910, Murray v. Safir Law P.L.C
case. Murray contends that the bankruptcy court’s dismissal of his adversary complaint was
improper because dismissal of an underlying bankruptcy case does not automatically deprive a
federal court of residual jurisdiction to adjudicate collateral matters. For the reasons below, we
affirm the district court’s judgment regarding counts one, three, four, five, and six of his adversary
complaint. But regarding count two, we vacate the district court’s judgment and remand with
instructions to remand the case to the bankruptcy court so that it may exercise its discretion to
consider whether to retain residual jurisdiction over count two.
I.
In 2015, plaintiff initiated a personal injury lawsuit against his insurer for medical benefits
in a Michigan state court. Defendant represented plaintiff in that lawsuit. While the insurance
lawsuit was pending, plaintiff commenced a Chapter 13 bankruptcy case (“2016 Bankruptcy
Case”). Plaintiff listed the insurance lawsuit as an asset in the 2016 Bankruptcy Case. Three
months after the onset of the bankruptcy case, Safir Law settled the insurance lawsuit allegedly
without the informing the bankruptcy trustee or gaining the approval of the bankruptcy court.
Pursuant to the settlement, the insurer drew a $61,000 check that was payable to defendant.
The same day, defendant emailed plaintiff’s bankruptcy attorney a list of plaintiff’s medical
expenses that would be paid pursuant to the settlement. About a month later, attorneys
representing plaintiff in the 2016 Bankruptcy Case sent Safir Law a letter. The attorneys indicated
that (1) they were aware that defendant was “retained by [plaintiff] with respect to a non-
bankruptcy legal matter”; (2) “[t]he Trustee [of the 2016 Bankruptcy Case] may hold an interest
in any recovery arising from debtor’s legal claims of action”; and (3) “[a]ny interest [defendant]
or others may have in the prospective recovery could be affected by an interest the [2016
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Bankruptcy Case’s] estate may hold.”1 The bankruptcy court later dismissed the 2016 Bankruptcy
Case “[f]or failure to comply with the terms and conditions set forth in the Order Adjourning
Hearing entered on or about August 8, 2016” and “for the Debtor’s failure to be 100% current on
Trustee records on or before October 17, 2016.”
Roughly a week later, the state court approved the settlement in the insurance lawsuit. The
total settlement amount was $61,000.00. Out of that sum, $20,298.55 were attorney fees.
Defendant received the “[s]ettlement proceeds check sometime thereafter.”
Years later, plaintiff commenced another Chapter 13 bankruptcy case (“2019 Bankruptcy
Case”). He filed an ex parte motion to re-open the 2016 Bankruptcy Case to administer the
disputed insurance lawsuit settlement assets. Two weeks later, the bankruptcy court entered an
order that re-opened the 2016 Bankruptcy Case. The court, however, was “advised that [plaintiff
already] ha[d] a pending bankruptcy case” (i.e., the 2019 Bankruptcy Case). Because he “[wa]s
not permitted to have two pending open bankruptcy cases,” the bankruptcy court vacated its earlier
order that re-opened the 2016 Bankruptcy Case and closed that case. Additionally, the court
ordered that “[a]ny future pleadings shall be filed in [plaintiff’s] pending case” (i.e., the 2019
Bankruptcy Case).
Subsequently, plaintiff filed an adversary complaint against Safir Law in the 2019
Bankruptcy Case against Safir Law P.L.C. The pleading contained six counts: (1) an independent
action for relief from the dismissal of the 2016 Bankruptcy Case; (2) a turnover claim, a violation-
of-the-automatic stay claim, and an attorney-fees claim; (3) a state-law unjust enrichment claim
for the insurance lawsuit’s settlement money; (4) a state-law unjust enrichment claim for attorney
1
Plaintiff observes that the use of the term “prospective recovery” suggests that defendant
had not told his bankruptcy attorney that the insurance lawsuit had settled.
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fees defendant obtained from the insurance lawsuit; (5) a state-law common law conversion claim;
and (6) a state-law statutory conversion claim.
The bankruptcy court, however, dismissed the 2019 Bankruptcy Case “[f]or [plaintiff’s]
failure to comply with the terms and conditions set forth in the Order Regarding Trustee’s Motion
to Dismiss . . . by failing to be 100% on trustee records one week prior to confirmation.” The
bankruptcy court also dismissed the adversary complaint without resolving its merits. Instead, in
a one-sentence order, the bankruptcy court dismissed the adversary complaint “[a]s a result of the
[underlying 2019] Chapter 13 [bankruptcy] case having been dismissed.”
Plaintiff appealed the bankruptcy court’s dismissal of his adversary complaint to the district
court. He did not, however, appeal the dismissal of the underlying 2019 Bankruptcy Case. The
district court affirmed. It concluded that the bankruptcy court never had subject-matter jurisdiction
over the adversary complaint, even at the moment it was filed, because the adversary complaint
lacked the necessary nexus with the 2019 Bankruptcy Case. And because the bankruptcy court
never had subject-matter jurisdiction over the adversary complaint to begin with, it reasoned that
there was no subject-matter jurisdiction for the bankruptcy court to “retain” after dismissing the
2019 Bankruptcy Case.
Plaintiff timely appealed.
II.
“When reviewing an order of a bankruptcy court on appeal from a decision of a district
court,” as is the case here, “we review the bankruptcy court’s order directly and give no deference
to the district court’s decision.” In re Lee, 530 F.3d 458, 463 (6th Cir. 2008).
The bankruptcy court—in a one-sentence order—dismissed the adversary complaint “[a]s
a result of the [underlying 2019] Chapter 13 case having been dismissed.” Though the bankruptcy
court did not say so explicitly, it appeared to be following the “general rule [that] the dismissal of
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a bankruptcy case should result in the dismissal of ‘related proceedings’ because the court’s
jurisdiction of the latter depends, in the first instance, upon the nexus between the underlying
bankruptcy case and the related proceedings.” In re 5900 Assocs., Inc., 468 F.3d 326, 330 (6th
Cir. 2006) (quoting In re Smith, 866 F.2d 576, 580 (3d Cir. 1989)). In other words, the bankruptcy
court apparently declined to exercise residual jurisdiction over the adversary complaint after it had
dismissed the underlying 2019 bankruptcy case. We review this type of decision for an abuse of
discretion. In re Javens, 107 F.3d 359, 364 n.2 (6th Cir. 1997) (“Since dismissal of an underlying
bankruptcy case does not automatically strip a federal court of residual jurisdiction to dispose of
matters after the underlying bankruptcy case has been dismissed, exercise of such jurisdiction is
left to the sound discretion of the trial court[.]” (quoting In re Lawson, 156 B.R. 43, 45 (B.A.P.
9th Cir. 1993))). A bankruptcy court abuses its discretion when it (1) “relies upon clearly
erroneous findings of fact,” (2) “improperly applies the law,” or (3) “uses an erroneous legal
standard.” In re Airspect Air, Inc., 385 F.3d 915, 920 (6th Cir. 2004).
III.
A.
The district court affirmed the bankruptcy court’s dismissal of Murray’s entire adversary
complaint, including count one. In that count, Murray asked the bankruptcy court “to set aside the
dismissal of the 2016 bankruptcy case.” On appeal, however, he does not mention count one in
his statement of issues and does not advance any arguments concerning it. Murray, therefore,
forfeited his opportunity for us to consider why the bankruptcy court might have resolved count
one incorrectly. See United States v. Mahaffey, 983 F.3d 238, 240 n.2 (6th Cir. 2020) (explaining
that an appellant “forfeited [the court’s] consideration of [an] issue because he did not include it
in his statement of issues”); Williamson v. Recovery Ltd. P’ship, 731 F.3d 608, 621 (6th Cir. 2013)
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(“Issues adverted to in a perfunctory manner, without some effort to develop an argument, are
deemed forfeited.”).
B.
Murray’s adversary complaint included various state law claims in counts three through
six. He contends that the bankruptcy court retained jurisdiction over the state law claims because
“the facts in those claims [we]re integrally related to” (1) “review of . . . attorney fees [awarded]
pursuant to [the Bankruptcy Code], and concomitant disgorgement,” and (2) “turnover of the
$61,000 settlement proceeds.” We are unpersuaded.
The nature of plaintiff’s arguments regarding his state law claims is misguided. As “[t]he
party asserting subject-matter jurisdiction,” Murray “bears the burden of establishing that such
jurisdiction exists.” Hale v. Morgan Stanley Smith Barney LLC, 982 F.3d 996, 997 (6th Cir. 2020).
Instead of offering arguments concerning subject-matter jurisdiction, Murray discusses why he
believes his state-law claims should succeed on the merits. Moreover, his contention that the
bankruptcy court retained jurisdiction over the state-law claims does not answer the critical (and
antecedent) question: Whether the bankruptcy court—before the dismissal of the underlying
bankruptcy case—possessed subject-matter jurisdiction over the state-law claims that it could later
retain after the underlying bankruptcy had been dismissed. Compare In re Wolverine Radio Co.,
930 F.2d 1132, 1140–42 (6th Cir. 1991) (describing the contours of the bankruptcy subject-matter
jurisdiction inquiry) with In re Millenium Seacarriers, Inc., 458 F.3d 92, 96 (2d Cir. 2006)
(describing the contours of the bankruptcy court’s inquiry regarding retaining jurisdiction after the
underlying bankruptcy case has been dismissed).
Because Murray asserted that his state law claims were “related to” his Bankruptcy Code
claims, perhaps he intended to invoke the “proceedings ‘related to’ a case under [the Bankruptcy
Code]” category of bankruptcy court subject-matter jurisdiction. Wolverine Radio, 930 F.2d at
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1141 (quoting 28 U.S.C. § 1334). If so, he made no meaningful attempt to explain why his state-
law claims fell within that class of the bankruptcy court’s subject-matter jurisdiction. And in our
circuit, “[i]t is not sufficient for a party to mention a possible argument in the most skeletal way”
and leave us to “put flesh on its bones.” McPherson v. Kelsey, 125 F.3d 989, 995–96 (6th Cir.
1997) (citation omitted). Accordingly, we leave the district court’s judgment intact as it pertains
to Murray’s state-law claims.
C.
The last aspect of this appeal concerns count two of the adversary complaint. That count
includes a turnover claim, a violation-of-the-automatic-stay claim, and an attorney-fees claim, all
of which are predicated on federal bankruptcy law. The question for us is whether the bankruptcy
court abused its discretion when it dismissed this count.
A bankruptcy court is a federal court. Celotex Corp. v. Edwards, 514 U.S. 300, 307,
(1995). And like other federal courts, a “bankruptcy court is a court of limited [subject-matter]
jurisdiction,” In re Granger Garage, Inc., 921 F.2d 74, 77 (6th Cir. 1990), with “a continuing
obligation to examine [its] subject matter jurisdiction throughout the pendency of every matter
before [it].” Wolverine Radio, 930 F.2d at 1137.
Multiple federal statutes define the scope of a bankruptcy court’s subject-matter
jurisdiction. First, under 28 U.S.C. § 1334(b), “the district courts shall have original but not
exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases
under title 11.” Second, 28 U.S.C. § 157(a) authorizes the district courts to refer “any or all cases
under title 11 and any or all proceedings arising under title 11 or arising in or related to a case
under title 11 . . . to the bankruptcy judges for the district.” Additionally, 28 U.S.C. § 157(b)
allows “[b]ankruptcy judges . . . [to] hear and determine all cases under title 11 and all core
proceedings arising under title 11, or arising in a case under title 11, referred under subsection (a)
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of this section.” Count two’s claims are (1) a turnover claim; (2) a violation-of-the-automatic-stay
claim; and (3) an attorney fees claim.2 Each of count two’s claims is a “core proceeding.” See
28 U.S.C. § 157(b)(2) (“Core proceedings include, but are not limited to . . . matters concerning
the administration of the estate; . . . orders to turn over property of the estate; . . . [and] motions to
terminate, annul, or modify the automatic stay[.]”); In re Coomer, 375 B.R. 800, 803 (Bankr. N.D.
Ohio 2007) (“The adjudication of matters concerning the turnover of estate property are deemed
to be core proceedings over which this Court has the jurisdictional authority to enter final orders
and judgments.”); In re Nat. Century Fin. Enter., Inc., 423 F.3d 567, 573 (6th Cir. 2005)
(recognizing that enforcing an automatic stay “constituted a core proceeding”); In re Holiday
Towers, No. 91-3854, 1992 WL 107063, at *2 (6th Cir. May 15, 1992) (table decision)
(“Determinations of attorney’s fees are core proceedings because such determinations are
obviously matters concerning the administration of the estate.”). And as core proceedings, the
bankruptcy court would have had subject-matter jurisdiction over the claims in count two when
plaintiff filed them in the 2019 Bankruptcy Case—if the claims had concerned that bankruptcy
case.
The district court asserted that “this case does not involve bankruptcy attorney’s fees.” In
2
re Murray, No. 19-12613, 2020 WL 5291964, at *3 (E.D. Mich. Sept. 4, 2020). Although
defendant did not represent plaintiff in any bankruptcy cases, a bankruptcy court’s reach is longer
than that. Neither the district court nor defendant meaningfully confronted the fact that a
bankruptcy court is “empowered to order disgorgement of . . . attorney fees charged ‘in connection
with’ the bankruptcy case.” In re Kisseberth, 273 F.3d 714, 718–19 (6th Cir. 2001) (emphasis
added) (citing 11 U.S.C. § 329). Plaintiff alleged that the insurance lawsuit settlement money was
property of the 2016 Bankruptcy Case’s estate. He also alleged that defendant—without the
bankruptcy court’s permission—took part of that sum as attorney fees. Accordingly, defendant’s
representation of plaintiff in the insurance lawsuit was arguably “in connection with” the 2016
Bankruptcy Case. See, e.g., In re Jones, 505 B.R. 229, 233 (Bankr. E.D. Wis. 2014) (“While most
obviously applicable to bankruptcy counsel’s compensation, these provisions apply equally to
counsel employed by a debtor to provide legal services ‘in connection with’ her bankruptcy case,
such as pursuing a claim that is property of the estate.”).
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Plaintiff contends that “[i]t makes no difference that the transgressions complained of [in
the adversary complaint] occurred during the dismissed 2016 Chapter 13 bankruptcy case but are
brought in an adversary proceeding in the later 2019 bankruptcy case.” “It makes no difference,”
he says, “because the subject attorney fee violation rectified in In re 5900 Associates, Inc. also
occurred in a separate earlier bankruptcy case, 6 years before.” 5900 Associates resolves part of
the subject-matter jurisdiction question. The case involved a dispute over a core proceeding
(attorney fees) from a dismissed (and earlier) bankruptcy case in an active (and more recent)
bankruptcy case. 468 F.3d at 328. We noted that “[a] number of courts have held that the
bankruptcy court may retain jurisdiction over matters related to the bankruptcy even after the
underlying case has been adjudicated or dismissed.” Id. at 330. And we held that “the bankruptcy
court retains jurisdiction to approve attorney’s fees . . . after the underlying case is dismissed.” Id.5900 Associates, therefore, instructs that a bankruptcy court retains subject-matter jurisdiction to
adjudicate core proceedings after the underlying bankruptcy has been dismissed. Id. As explained
above, the claims in count two are core proceedings. Accordingly, even though the underlying
bankruptcy case had been dismissed, the bankruptcy court still retained subject-matter jurisdiction
to decide them. That conclusion, however, is not the end of the jurisdictional analysis in this
context.
Although the bankruptcy court retained subject-matter jurisdiction over count two’s claims
after the underlying bankruptcy was dismissed, the “exercise of such jurisdiction [wa]s left to [its]
sound discretion.” Javens, 107 F.3d at 364 n.2. The bankruptcy court’s dismissal was one
sentence: “As a result of the [2019] Chapter 13 case having been dismissed on August 20, 2019;
IT IS HEREBY ORDERED that the captioned adversary proceeding is also dismissed.” It appears
that the bankruptcy court employed the “general rule [that] the dismissal of a bankruptcy case
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should result in the dismissal of ‘related proceedings’ because the court’s jurisdiction of the latter
depends, in the first instance, upon the nexus between the underlying bankruptcy case and the
related proceedings.” 5900 Associates, 468 F.3d at 330 (quoting Smith, 866 F.2d at 580). The
bankruptcy court, however, should have recognized that “dismissal of an underlying bankruptcy
case does not automatically strip a federal court of residual jurisdiction to dispose of matters after
the underlying bankruptcy case has been dismissed.” Javens, 107 F.3d at 364 n.2 (quoting Lawson,
156 B.R. at 45). Thus, it should have used its “sound discretion” to determine whether to exercise
that residual jurisdiction. Id. (quoting Lawson, 156 B.R. at 45). Four factors guide that discretion:
“economy, convenience, fairness, and comity.” Peabody Landscape Constr. Inc. v. Schottenstein,
371 B.R. 276, 281 (S.D. Ohio 2007); accord Millenium Seacarriers, 458 F.3d at 96; In re Valdez
Fisheries Dev. Ass’n, Inc., 439 F.3d 545, 548 (9th Cir. 2006); In re Querner, 7 F.3d 1199, 1202
(5th Cir. 1993). We are unable to determine from the one-sentence order whether the bankruptcy
court considered the relevant factors and properly exercised its discretion. Accordingly, we
remand this case for the bankruptcy court to consider whether to exercise its retained subject-
matter jurisdiction to adjudicate the claims in count two.
IV.
For the foregoing reasons, we affirm the district court’s judgment regarding counts one,
three, four, five, and six of the adversary complaint. We vacate the district court’s judgment
regarding count two and remand with instructions for the district court to remand the case to the
bankruptcy court for it to exercise its discretion regarding whether to retain residual jurisdiction
over count two.
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