Miles v. Okun

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: RODNEY CASSIMER MILES, 
aka Rodney C. Miles, Rod Miles,
Debtor,
ANN R. MILES,
Appellant,
v.
DAVID B. OKUN; SHEILA REISER-
OKUN; DAVID B. OKUN, M.D.,
F.A.C.P., a California Medical
Corporation, aka Okun No. 03-55963
Corporation; DAVID B. OKUN,
M.D., F.A.C.P., a Medical
 BAP No.
CC-02-01528-KJP
Corporation Money Purchase Plan,
aka Okun Pension Plan; OKUN
FAMILY TRUST U/D/T/ MARCH 10,
1988; EMMANUEL & ANN S.N.
REISER REVOCABLE TRUST, aka
Reiser Trust; ANDREW K. MAUTHE;
M. STEPHEN COONTZ; MILBURN A.
MATTHEWS; COONTZ & MATTHEWS
LLP; LAUREN ELIZABETH MURPHY;
SUSAN A. SPITZO; VERA J.
FERGUSON; NANCY M. VOLD,
Appellees.

16175
16176 IN RE: MILES
In re: RODNEY CASSIMER MILES, 
aka Rodney C. Miles, Rod Miles,
Debtor,
MELINDA MILES,
Appellant,
v.
DAVID B. OKUN; SHEILA REISER-
OKUN; DAVID B. OKUN, M.D.,
F.A.C.P., a California Medical
Corporation, aka Okun No. 03-55964
Corporation; DAVID B. OKUN,
M.D., F.A.C.P., a Medical
 BAP No.
CC-02-01529-KJP
Corporation Money Purchase Plan,
aka Okun Pension Plan; OKUN
FAMILY TRUST U/D/T/ MARCH 10,
1988; EMMANUEL & ANN S.N.
REISER REVOCABLE TRUST, aka
Reiser Trust; ANDREW K. MAUTHE;
M. STEPHEN COONTZ; MILBURN A.
MATTHEWS; COONTZ & MATTHEWS
LLP; LAUREN ELIZABETH MURPHY;
SUSAN A. SPITZO; VERA J.
FERGUSON; NANCY M. VOLD,
Appellees.

IN RE: MILES 16177
In re: RODNEY CASSIMER MILES, 
aka Rodney C. Miles, Rod Miles,
Debtor,
KELLY CUNNINGHAM,
Appellant,
v.
DAVID B. OKUN; SHEILA REISER-
OKUN; DAVID B. OKUN, M.D.,
F.A.C.P., a California Medical
Corporation, aka Okun No. 03-55965
Corporation; DAVID B. OKUN,
M.D., F.A.C.P., a Medical
 BAP No.
CC-02-01537-KJP
Corporation Money Purchase Plan,
aka Okun Pension Plan; OKUN
FAMILY TRUST U/D/T/ MARCH 10,
1988; EMMANUEL & ANN S.N.
REISER REVOCABLE TRUST, aka
Reiser Trust; ANDREW K. MAUTHE;
M. STEPHEN COONTZ; MILBURN A.
MATTHEWS; COONTZ & MATTHEWS
LLP; LAUREN ELIZABETH MURPHY;
SUSAN A. SPITZO; VERA J.
FERGUSON; NANCY M. VOLD,
Appellees.

16178 IN RE: MILES
In re: RODNEY CASSIMER MILES, 
aka Rodney C. Miles, Rod Miles,
Debtor,
MELINDA MILES,
Appellant,
v.
DAVID B. OKUN; SHEILA REISER-
OKUN; DAVID B. OKUN, M.D.,
F.A.C.P., a California Medical
Corporation, aka Okun No. 03-55966
Corporation; DAVID B. OKUN,
M.D., F.A.C.P., a Medical
 BAP No.
CC-02-01544-KJP
Corporation Money Purchase Plan,
aka Okun Pension Plan; OKUN
FAMILY TRUST U/D/T/ MARCH 10,
1988; EMMANUEL & ANN S.N.
REISER REVOCABLE TRUST, aka
Reiser Trust; ANDREW K. MAUTHE;
M. STEPHEN COONTZ; MILBURN A.
MATTHEWS; COONTZ & MATTHEWS
LLP; LAUREN ELIZABETH MURPHY;
SUSAN A. SPITZO; VERA J.
FERGUSON; NANCY M. VOLD,
Appellees.

IN RE: MILES 16179
In re: RODNEY CASSIMER MILES, 
aka Rodney C. Miles, Rod Miles,
Debtor,
ANN R. MILES,
Appellant,
v.
DAVID B. OKUN; SHEILA REISER-
OKUN; DAVID B. OKUN, M.D.,
F.A.C.P., a California Medical
Corporation, aka Okun No. 03-55967
Corporation; DAVID B. OKUN,
M.D., F.A.C.P., a Medical
 BAP No.
CC-02-01545-KJP
Corporation Money Purchase Plan,
aka Okun Pension Plan; OKUN
FAMILY TRUST U/D/T/ MARCH 10,
1988; EMMANUEL & ANN S.N.
REISER REVOCABLE TRUST, aka
Reiser Trust; ANDREW K. MAUTHE;
M. STEPHEN COONTZ; MILBURN A.
MATTHEWS; COONTZ & MATTHEWS
LLP; LAUREN ELIZABETH MURPHY;
SUSAN A. SPITZO; VERA J.
FERGUSON; NANCY M. VOLD,
Appellees.

16180 IN RE: MILES
In re: RODNEY CASSIMER MILES, 
aka Rodney C. Miles, Rod Miles,
Debtor,
KELLY CUNNINGHAM,
Appellant,
v.
DAVID B. OKUN; SHEILA REISER-
OKUN; DAVID B. OKUN, M.D.,
F.A.C.P., a California Medical No. 03-55969
Corporation, aka Okun
Corporation; DAVID B. OKUN,
M.D., F.A.C.P., a Medical
 BAP No.
CC-02-01546-KJP
Corporation Money Purchase Plan, OPINION
aka Okun Pension Plan; OKUN
FAMILY TRUST U/D/T/ MARCH 10,
1988; EMMANUEL & ANN S.N.
REISER REVOCABLE TRUST, aka
Reiser Trust; ANDREW K. MAUTHE;
M. STEPHEN COONTZ; MILBURN A.
MATTHEWS; COONTZ & MATTHEWS
LLP; LAUREN ELIZABETH MURPHY;
SUSAN A. SPITZO; VERA J.
FERGUSON; NANCY M. VOLD,
Appellees.

Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Perris, Jellen, and Klein, Bankruptcy Judges, Presiding
Argued and Submitted
February 16, 2005—Pasadena, California
Filed December 12, 2005
IN RE: MILES 16181
Before: Andrew J. Kleinfeld, Kim McLane Wardlaw, and
Marsha S. Berzon, Circuit Judges.
Opinion by Judge Wardlaw;
Concurrence by Judge Berzon
16184 IN RE: MILES
COUNSEL
Rodney C. Miles, Laguna Niguel, California, for the appel-
lants.
Nanette D. Sanders and Michael B. Reynolds, Snell & Wil-
mer L.L.P., Irvine, California, for the appellees.
OPINION
WARDLAW, Circuit Judge:
Ann Miles, Melinda Miles, and Kelly Cunningham (collec-
tively “Appellants”) appeal from a decision of the United
States Bankruptcy Appellate Panel of the Ninth Circuit
(“BAP”) affirming the removal and dismissal of their state
law causes of action for damages resulting from the filing of
involuntary bankruptcy petitions against their relatives. We
hold that because 11 U.S.C. § 303(i) completely preempts
state law tort causes of action for damages predicated upon
the filing of an involuntary bankruptcy petition, the bank-
ruptcy court had “arising under” jurisdiction over the proceed-
ings, and thus did not err in denying Appellants’ motions to
remand. Further, because Appellants lack standing to seek
damages under § 303(i), the bankruptcy court properly dis-
missed their complaints.
I.
BACKGROUND
David Okun, Sheila Reiser-Okun, and several entities
owned by or affiliated with the Okuns filed ten involuntary
bankruptcy petitions against Rodney Miles, Ann Miles, and
related businesses owned by or affiliated with the Miles’s.
The bankruptcy court dismissed Rodney’s case on the ground
IN RE: MILES 16185
that he was generally paying his undisputed debts as they
became due. It dismissed the remaining nine involuntary
bankruptcy cases, including the one filed against Ann, on
multiple grounds, one of which was that the petitions were
filed in bad faith.1 The bankruptcy court retained jurisdiction
to determine the alleged debtors’ rights to attorneys’ fees,
costs, and damages under 11 U.S.C. § 303(i).
After the bankruptcy court dismissed the involuntary bank-
ruptcy cases, Ann and the Miles’s daughters, Melinda Miles
and Kelly Cunningham, filed three substantially identical tort
actions in California state court seeking damages for the filing
and prosecution of the involuntary petitions. The complaints
alleged state law causes of action for negligence, defamation,
false light, abuse of process, intentional and negligent inflic-
tion of emotional distress, and negligent misrepresentation.
No Appellant sought damages arising from an involuntary
petition filed against her. Rather, each Appellant sought dam-
ages arising solely from an involuntary petition filed against
one or two of her relatives. The causes of action asserted by
Melinda and Kelly were based on the bankruptcy court’s find-
ing that the involuntary petition against their mother, Ann,
was filed in bad faith, and the bankruptcy court’s dismissal of
the involuntary petition against their father, Rodney, on the
basis that he was generally paying his undisputed debts as
they became due. The causes of action asserted by Ann were
based solely on the bankruptcy court’s dismissal of the invol-
untary petition against her husband, Rodney. The named
defendants included the petitioning creditors in the involun-
tary bankruptcy actions, their lawyers, and the law firm’s par-
alegals and secretaries who worked on the cases (collectively
“Appellees”).
Appellees removed the three actions from state court to
1
In a memorandum disposition filed contemporaneously with this opin-
ion, we address the bankruptcy court’s dismissal of the involuntary bank-
ruptcy cases, including the factual findings of bad faith.
16186 IN RE: MILES
bankruptcy court pursuant to 28 U.S.C. § 1452(a). They then
filed motions to dismiss the removed complaints, contending
that federal law preempted all of the state law causes of action
pleaded in the complaints. While these motions were pending,
Appellants moved for remand under 28 U.S.C. § 1452(b) on
the premises that the removal was untimely and that there was
no federal jurisdiction over damages claims by third parties
resulting from the filing of an involuntary bankruptcy peti-
tion.
The bankruptcy court refused to remand the state law
causes of action, holding that it had “arising under” jurisdic-
tion over those causes of action because they were completely
preempted by 11 U.S.C. § 303(i). It then dismissed the com-
plaints on the basis that § 303(i) does not authorize damages
for third parties who claim to be harmed by the filing of an
involuntary bankruptcy petition. The BAP affirmed the rea-
soning and ultimate decision of the bankruptcy court in a pub-
lished opinion, Miles v. Okun (In re Miles), 294 B.R. 756
(B.A.P. 9th Cir. 2003), and this appeal ensued. Because
appeals from the BAP are subject to de novo review, we inde-
pendently review the bankruptcy court’s decision. Liberty
Tool, & Mfg. v. Vortex Fishing Sys., Inc. (In re Vortex Fishing
Sys., Inc.), 277 F.3d 1057, 1064 (9th Cir. 2002).
II.
REMOVAL JURISDICTION
Appellants challenge the bankruptcy court’s exercise of
removal jurisdiction. To analyze this issue, we must deter-
mine whether jurisdiction over Appellants’ state law tort
actions existed in the district court to support the bankruptcy
court’s derivative jurisdiction. See Dunmore v. United States,
358 F.3d 1107, 1113 (9th Cir. 2004).
[1] Jurisdiction was premised on 28 U.S.C. § 1452(a),
which provides for removal of a state action “to the district
IN RE: MILES 16187
court for the district where such civil action is pending, if
such district court has jurisdiction of such claim or cause of
action under section 1334 of this title.” 28 U.S.C. § 1452(a).
Section 1334(b), in turn, provides that “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.” 28 U.S.C. § 1334(b).
The bankruptcy court and the BAP held that because 11
U.S.C. § 303(i) completely preempts state law tort actions for
damages resulting from the filing of an involuntary bank-
ruptcy petition, Appellants’ complaints necessarily “arise
under” title 11, and thus were removable under 28 U.S.C.
§ 1452(a). See In re Miles, 294 B.R. at 762. Appellants con-
tend that their claims are not preempted and that, in any event,
removal based on complete preemption was improper. We
review de novo the denial of a motion to remand an action to
state court for want of removal jurisdiction. Young v. Antho-
ny’s Fish Grottos, Inc., 830 F.2d 993, 996 (9th Cir. 1987).
A. General Principles of “Arising Under” Jurisdiction
The “arising under” language of 28 U.S.C. § 1334(b) is
analogous to the “arising under” language of 28 U.S.C.
§ 1331. See New England Power & Marine, Inc. v. Town of
Tyngsborough (In re Middlesex Power Equip. & Marine,
Inc.), 292 F.3d 61, 68 (1st Cir. 2002); 1 Collier on Bankruptcy
¶ 3.01[4][c][i] (L. King et al. eds., 15th rev. ed. 2001). There-
fore, we draw freely from authorities discussing the circum-
stances under which a case “arises under” federal law within
the meaning of § 1331. See Hunter v. United Van Lines, 746
F.2d 635, 639 (9th Cir.), cert. denied, 474 U.S. 863 (1985).
[2] In general, “a cause of action arises under federal law
only when the plaintiff’s well-pleaded complaint raises issues
of federal law.” Metro. Life Ins. Co. v. Taylor, 481 U.S. 58,
63 (1987). A defense is not part of a plaintiff’s properly
pleaded statement of his claim. See Gully v. First Nat’l Bank
16188 IN RE: MILES
in Meridian, 299 U.S. 109, 113 (1936). Therefore, “a case
may not be removed to federal court on the basis of a federal
defense, including the defense of pre-emption, even if the
defense is anticipated in the plaintiff’s complaint, and even if
both parties concede that the federal defense is the only ques-
tion truly at issue.” Caterpillar Inc. v. Williams, 482 U.S. 386,
393 (1987); see also Franchise Tax Bd. v. Constr. Laborers
Vacation Trust, 463 U.S. 1, 12 (1983).
[3] The “complete preemption doctrine” provides an excep-
tion to this general proposition. The Supreme Court has con-
cluded that the preemptive force of some federal statutes is so
strong that they “completely preempt” an area of state law.
Taylor, 481 U.S. at 63-64. “In such instances, any claim pur-
portedly based on that preempted state law is considered,
from its inception, a federal claim, and therefore arises under
federal law.” Balcorta v. Twentieth Century-Fox Film Corp.,
208 F.3d 1102, 1107 (9th Cir. 2000).
The Supreme Court has construed only three federal stat-
utes to so preempt their respective fields as to authorize
removal of actions seeking relief exclusively under state law:
section 301 of the Labor and Management Relations Act
(“LMRA”), 29 U.S.C. § 185; section 502 of the Employee
Retirement Income Security Act of 1974 (“ERISA”), 29
U.S.C. § 1132; and sections 85 and 86 of the National Bank
Act, 12 U.S.C. §§ 85, 86. See Avco Corp. v. Machinists, 390
U.S. 557, 561-62 (1968); Taylor, 481 U.S. at 65-67; Benefi-
cial Nat’l Bank v. Anderson, 539 U.S. 1, 6-11 (2003). Most
recently, in Beneficial National Bank, the Court clarified that
removal is proper under the complete preemption doctrine
only when Congress intended the federal cause of action to be
exclusive. Beneficial Nat’l Bank, 539 U.S. at 8-9 & n.5. Find-
ing that sections 85 and 86 of the National Bank Act provided
the exclusive cause of action for usury claims against national
banks, the Court held that the plaintiffs’ cause of action arose
under federal law, and therefore could be removed to federal
court. Id. at 11.
 IN RE: MILES 16189
[4] Appellants’ properly pleaded complaints allege only
California state law causes of action and seek relief exclu-
sively under those laws. Therefore, the dispositive question is
whether Congress intended 11 U.S.C. § 303(i) to provide “the
exclusive cause of action” for damages resulting from the fil-
ing of an involuntary bankruptcy petition. See id. at 8-9 & n.5;
see also Lippitt v. Raymond James Fin. Servs., Inc., 340 F.3d
1033, 1042 (9th Cir. 2003) (analyzing whether plaintiff’s state
law cause of action was completely preempted by section 27
of the 1934 Securities and Exchange Act). If so, then Appel-
lants’ causes of action necessarily arise under title 11, and
their claims are removable under 28 U.S.C. § 1452(a). If not,
then Appellants’ complaints do not arise under title 11 and are
not removable under § 1452(a) pursuant to the “arising under”
provision of 28 U.S.C. § 1334(b).
B. Congress’s Intent with Respect to 11 U.S.C. § 303(i)
[5] The Bankruptcy Code and its legislative history are
silent on whether Congress intended 11 U.S.C. § 303(i) to
provide the exclusive basis for awarding damages predicated
upon the filing of an involuntary bankruptcy petition. There-
fore, we look to the structure and purpose of the Bankruptcy
Code to determine whether Congress did indeed intend for
§ 303(i) to provide the exclusive cause of action. See Air Con-
ditioning & Refrigeration Inst. v. Energy Res. Conservation &
Dev. Comm’n, 410 F.3d 492, 495 (9th Cir. 2005). Although
we have not addressed this precise issue, we have previously
held that state law malicious prosecution actions are com-
pletely preempted by the structure and purpose of the Bank-
ruptcy Code. See MSR Exploration, Ltd. v. Meridian Oil, Inc.,
74 F.3d 910, 916 (9th Cir. 1996).
[6] In MSR Exploration, plaintiffs brought a state law
action for malicious prosecution against defendants in federal
district court, claiming that the defendants had maliciously
filed and pursued creditors’ claims in the plaintiffs’ Chapter
11 bankruptcy proceeding. Id. at 911. The district court dis-
16190 IN RE: MILES
missed for lack of jurisdiction, finding the action completely
preempted by the Bankruptcy Code. Id. We agreed that state
malicious prosecution actions for events taking place within
bankruptcy court proceedings are completely preempted by
the Bankruptcy Code. Id. at 916. Our reasoning was based on
(1) Congress’s placement of bankruptcy jurisdiction exclu-
sively in the federal district courts as an initial matter, id. at
913-14; (2) the “complex, detailed, and comprehensive provi-
sions of the lengthy Bankruptcy Code,” which “create a whole
system under federal control which is designed to bring
together and adjust all of the rights and duties of creditors and
embarrassed debtors alike,” and which needs to be “jealously
guard[ed] . . . from even slight incursions and disruptions”
from state malicious prosecution actions, id. at 914; (3) the
Founders’ grant of power to Congress “to establish . . . uni-
form Laws on the subject of Bankruptcies throughout the
United States,” Art. I, § 8, cl. 4, for the purpose of uniform
administration and regulation of the parties before the bank-
ruptcy court; and (4) the extensive federal remedies for
improper conduct in bankruptcy proceedings provided by the
Bankruptcy Code, which “suggests that Congress has consid-
ered the need to deter misuse of the process and has not
merely overlooked the creation of additional deterrents.” MSR
Exploration, 74 F.3d at 915.
[7] We are compelled by the logic of our decision in MSR
Exploration to hold that Congress intended 11 U.S.C. § 303(i)
to provide the exclusive basis for awarding damages predi-
cated upon the filing of an involuntary bankruptcy petition.
See id. at 913-16; see also Gonzales v. Parks, 830 F.2d 1033,
1035-36 (9th Cir. 1987) (holding that state courts lack juris-
diction over a claim that the filing of a bankruptcy petition
constitutes an abuse of process). As we noted in MSR Explo-
ration, Congress provided a number of remedies in the Bank-
ruptcy Code to deter misuse of the bankruptcy process,
including § 303(i). See MSR Exploration, 74 F.3d at 915. The
Revision Notes and Legislative Reports to the Bankruptcy
Reform Act of 1978 indicate that Congress utilized both the
IN RE: MILES 16191
bonding requirements of § 303(e) and the damages provision
of § 303(i) as means of regulating abuse of the involuntary
bankruptcy process it created:
The court may, under subsection (e), require the peti-
tioners to file a bond to indemnify the debtor for
such amounts as the court may later allow under sub-
section (i). Subsection (i) provides for costs, attor-
neys fees, and damages in certain circumstances.
The bonding requirement will discourage frivolous
petitions as well as spiteful petitions based on a
desire to embarrass the debtor (who may be a com-
petitor of a petitioning creditor) or to put the debtor
out of business without good cause. An involuntary
petition may put a debtor out of business even if it
is without foundation and is later dismissed.
11 U.S.C. § 303 (Historical and Statutory Notes, Revision
Notes and Legislative Reports, 1978 Acts). Moreover, as the
BAP noted, § 303(i)’s remedial scheme is comprehensive in
that it specifically addresses the full range of remedies, from
costs and attorneys’ fees for dismissed involuntary petitions
to compensatory and punitive damages for involuntary peti-
tions filed in bad faith. See 11 U.S.C. § 303(i).
Congress’s authorization of certain sanctions under § 303(i)
for involuntary bankruptcy petitions filed in bad faith suggests
that Congress rejected other penalties, including the kind of
substantial damage awards that might be available in state
court tort actions. See id.; Gonzales, 830 F.2d at 1035-36. A
debtor who believes an involuntary petition was filed in bad
faith has a comprehensive scheme of remedies available in the
federal courts. The existence of this comprehensive scheme
precludes collateral attacks on such filings in state courts.
Glannon v. Garrett & Assocs., Inc., 261 B.R. 259, 264 (D.
Kan. 2001).
Furthermore, as a policy matter, the potential costs of filing
an involuntary bankruptcy petition should not be governed by
16192 IN RE: MILES
state law. “[I]t is for Congress and the federal courts, not the
state courts, to decide what incentives and penalties are appro-
priate for use in connection with the bankruptcy process and
when those incentives and penalties shall be utilized.” Gon-
zales, 830 F.2d at 1036. Congress created involuntary bank-
ruptcy proceedings to enable creditors who are unable to
extract preferences or unequal transfers from distressed debt-
ors to achieve equitable treatment. See In re Miles, 294 B.R.
at 760. Allowing state court remedies for wrongful filings
may well interfere with the filings of involuntary bankruptcy
petitions by creditors and with other necessary actions that
they, and others, must or might take within the confines of the
bankruptcy process. See MSR Exploration, 74 F.3d at 916.
Finally, here, as in MSR Exploration, the threat exists that
the exclusive jurisdiction of the bankruptcy court will be
invaded and that uniformity will be undercut. “Congress has
expressed its intent that bankruptcy matters be handled in a
federal forum by placing bankruptcy jurisdiction exclusively
in the district courts as an initial matter.” Id. at 913 (citing 28
U.S.C. § 1334(a)). Furthermore, the need for uniformity in the
administration of the bankruptcy laws persuaded the Framers
to expressly grant Congress the power “to establish . . . uni-
form Laws on the subject of Bankruptcies throughout the
United States.” Art. I, § 8, cl. 4. Permitting state courts to
decide whether the filing of an involuntary bankruptcy peti-
tion was appropriate would subvert the exclusive jurisdiction
of the federal courts and undermine uniformity in bankruptcy
law by allowing state courts to create their own standards as
to when a creditor may properly file an involuntary petition.
See MSR Exploration, 74 F.3d at 913-15.
Therefore, we hold that 11 U.S.C. § 303(i) provides the
exclusive cause of action for damages predicated upon the fil-
ing of an involuntary bankruptcy petition. The “highly com-
plex” nature of the Bankruptcy Code, id. at 914, and “the
unique, historical, and even constitutional need for uniformity
in the administration of bankruptcy laws,” id. at 915, under-
IN RE: MILES 16193
mine the argument that we can infer from Congress’s failure
to create a federal remedy for third parties that it intended to
allow such parties to pursue state court litigation as a form of
collateral attack on involuntary bankruptcy proceedings.
When Congress enacted the comprehensive Bankruptcy
Reform Act of 1978 after a decade-long debate, it could not
have gone unrecognized that debtors’ immediate family mem-
bers might also suffer the same types of harm or emotional
distress as their family members who are subject to involun-
tary bankruptcy proceedings. Yet Congress determined that
bankruptcy courts could award damages predicated on the bad
faith filing of involuntary petitions only to the debtors
themselves—those participants in involuntary bankruptcy
proceedings who suffer most directly the harm from frivolous
or spiteful filings. The relevant Senate and House Reports
state:
[I]f a petitioning creditor filed the petition in bad
faith, the court may award the debtor any damages
proximately caused by the filing of the petition.
These damages may include such items as loss of
business during and after the pendency of the case,
and so on.
H.R. Rep. No. 95-595, at 324 (1977), reprinted in 1978
U.S.C.C.A.N. 5963, 6280 (emphasis added); S. Rep. No. 95-
989, at 34 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5820
(identical text). Because Congress intended the Bankruptcy
Code to create a whole scheme under federal control that
would adjust all of the rights and duties of creditors and debt-
ors alike, see MSR Exploration, 74 F.3d at 914, we can infer
from Congress’s clear intent to provide damage awards only
to the debtor in federal proceedings predicated upon the bad
faith filing of an involuntary petition that Congress did not
intend third parties to be able to circumvent this rule by pur-
suing those very claims in state court.
16194 IN RE: MILES
C. Complete Preemption
[8] Like section 301 of the LMRA, section 502 of ERISA,
and sections 85 and 86 of the National Bank Act, § 303(i) of
the Bankruptcy Code “provide[s] the exclusive cause of
action for the claim[s] asserted and also set[s] forth proce-
dures and remedies governing that cause of action.” Benefi-
cial Nat’l Bank, 539 U.S. at 8. Therefore, complete
preemption is appropriate here, despite Appellants’ argument
that if they do not have standing to recover damages under
§ 303(i), their causes of action cannot “arise under” title 11.2
The test for complete preemption set forth by the Supreme
Court in Beneficial National Bank does not also require that
Congress permit third parties to recover under the exclusive
federal cause of action it created as a predicate to federal
removal jurisdiction. See id. at 11 (holding that the plaintiffs’
cause of action arose under federal law because sections 85
and 86 of the National Bank Act provide the exclusive cause
of action for usury claims against national banks, and thus
there is “no such thing as a state-law claim of usury against
a national bank”). Any possible error made by Congress in
granting or designing relief does not affect the jurisdiction of
the bankruptcy court. See Caterpillar, 482 U.S. at 391 n.4
(“ ‘The nature of the relief available after jurisdiction attaches
is, of course, different from the question whether there is
jurisdiction to adjudicate the controversy.’ ” (quoting Avco,
390 U.S. at 561)).3 It is for Congress to decide what penalties
2
In Part III of this Opinion, we hold that Appellants lack standing to
recover damages under 11 U.S.C. § 303(i).
3
Our cases holding that there is no ERISA preemption when the plain-
tiff lacks standing to bring a federal claim are not helpful to Appellants.
See, e.g., Curtis v. Nev. Bonding Corp., 53 F.3d 1023, 1027 (9th Cir.
1995) (establishing that “a plaintiff’s standing to enforce ERISA is a pre-
requisite to both subject matter jurisdiction and ERISA preemption”);
Harris v. Provident Life & Accident Ins. Co., 26 F.3d 930, 934 (9th Cir.
1994) (holding that, for plaintiffs outside the enumerated categories of
those able to seek relief under ERISA’s civil enforcement provisions, their
IN RE: MILES 16195
are appropriate for use in connection with the bankruptcy pro-
cess, when those penalties shall be utilized, and who may ben-
efit from them. See Gonzales, 830 F.2d at 1036. If
individuals, such as Appellants, are not satisfied with the rem-
edies available under the Bankruptcy Code, they should look
to Congress, not the state courts, to supplement the available
remedies. See Glannon, 261 B.R. at 266-67 (holding that
plaintiff could not avoid the effect of limited federal remedies
by filing a state law claim against defendants who were not
liable or subject to sanction under federal law).
[9] We do not hold that all state actions related to bank-
ruptcy proceedings are subject to the complete preemption
doctrine. We recognize that “because the common law of the
various states provides much of the legal framework for the
operation of the bankruptcy system, it cannot be said that
Congress has completely preempted all state regulation which
may affect the actions of parties in bankruptcy court.” Koff-
man v. Osteoimplant Tech., Inc., 182 B.R. 115, 124 (D. Md.
1995). However, “[r]emedies and sanctions for improper
behavior and filings in bankruptcy court . . . are matters on
state claims were not preempted). First, as we explained in Peralta v. His-
panic Business, Inc., these were claims “only loosely related to ERISA,”
with an “insufficient relation to the benefit plan for preemption to attach.”
419 F.3d 1064, 1069 (9th Cir. 2005). By contrast, the state law claims
raised by Appellants here would force state courts to pass judgment on
involuntary bankruptcy petitions and tread heavily into an area where
Congress has created an exclusive federal remedy. Second, the ERISA
cases were decided before Beneficial National Bank v. Anderson, which
expanded the scope of the complete preemption analysis. Beneficial Nat’l.
Bank, 539 U.S. 1, 16-17 (Scalia, J., dissenting). After Beneficial National
Bank, we are instructed to focus not on the parties protected but on
whether Congress intended to provide an “exclusive cause of action.” Id.
at 9 & n.5. We believe that Congress intended § 303(i) to do so. Finally,
as discussed above, bankruptcy has “unique, historical and even constitu-
tional need[s] for uniformity” which are absent from the ERISA context
and further justify a finding of complete preemption. MSR Exploration, 74
F.3d at 915.
16196 IN RE: MILES
which the Bankruptcy Code is far from silent and on which
uniform rules are particularly important.” Id. Therefore, we
hold that 11 U.S.C. § 303(i) completely preempts state law
tort actions for damages predicated upon the filing of an
involuntary bankruptcy petition.
[10] As in MSR Exploration, Appellants’ complaints are
“self-consciously and entirely one[s] which seek[ ] damages
for [claims] filed and pursued in the bankruptcy court.” MSR
Exploration, 74 F.3d at 912. The complaints state on their
faces that Appellants seek damages for the filing and prosecu-
tion of the involuntary bankruptcy petitions against their rela-
tives. Appellants go so far as to specifically allege that
“[t]hese various bankruptcy filings and/or prosecution of them
caused great emotional, physical, mental and psychological
suffering and distress, embarrassment, anxiety, fear, worry
and humiliation to [Appellants] and other members of the
family.” Because Appellants’ complaints allege state law tort
causes of action for damages entirely predicated upon the fil-
ing and prosecution of involuntary bankruptcy petitions, they
necessarily “arise under” title 11,4 and thus were removable
under 28 U.S.C. § 1452(a). Accordingly, the bankruptcy court
did not err in denying Appellants’ motions to remand.5
4
Because we find that the bankruptcy court had “arising under” jurisdic-
tion, we need not address whether it had “arising in” or “related to” juris-
diction. See 28 U.S.C. § 1334(b).
5
We conclude that Appellants’ causes of action depend on title 11 for
their existence and could not proceed in another court. Therefore, the pro-
ceedings are “core” proceedings. The bankruptcy court had derivative
jurisdiction to hear, determine, and enter final orders and judgments. See
Dunmore, 358 F.3d at 1113-14 (explaining a bankruptcy court’s two tiers
of judicial authority, depending on whether the proceeding before it is
“core” or “non-core”).
IN RE: MILES 16197
III.
DISMISSAL OF APPELLANTS’ COMPLAINTS
Nor did the bankruptcy court err in dismissing Appellants’
complaints. It correctly determined that these parties lack
standing to recover damages under 11 U.S.C. § 303(i) for bad
faith filings of involuntary bankruptcy petitions.6
[11] Section 303(i) provides, in full:
(i) If the court dismisses a petition under this sec-
tion other than on consent of all petitioners and the
debtor, and if the debtor does not waive the right to
judgment under this subsection, the court may grant
judgment—
(1) against the petitioners and in favor of
the debtor for—
(A) costs; or
(B) a reasonable attorney’s fee; or
(2) against any petitioner that filed the
petition in bad faith, for—
(A) any damages proximately caused
by such filing; or
(B) punitive damages.
6
Because the state law tort causes of action alleged by Appellants are
completely preempted by 11 U.S.C. § 303(i), Appellants’ complaints are
recharacterized as alleging damages claims under § 303(i). See Stewart v.
U.S. Bancorp, 297 F.3d 953, 958 (9th Cir. 2002) (“[C]omplete preemption
‘recharacterizes’ a complaint with state law claims into one arising under
federal law.”).
16198 IN RE: MILES
11 U.S.C. § 303(i) (emphasis added). The statute is ambigu-
ous as to whether damages under § 303(i) can be awarded
only in favor of the debtor or in favor of other parties. One
possible reading is that by mentioning only the debtor and the
petitioning creditors in § 303(i)(1), Congress intended to limit
standing to the debtor. Another possible reading, however, is
that by omitting the words “and in favor of the debtor”
included in § 303(i)(1) from § 303(i)(2), Congress intended
persons other than the debtor to have standing to recover dam-
ages for bad faith filings of involuntary petitions. Because the
language is ambiguous, we consider legislative history, rele-
vant case law, and public policy to resolve the question. See
Barstow v. IRS (In re Bankr. Estate of MarkAir, Inc.), 308
F.3d 1038, 1043-46 (9th Cir. 2002) (considering legislative
history, relevant cases, and public policy considerations in
interpreting 11 U.S.C. § 724(b)).
As we noted earlier, the relevant House and Senate Reports
provide evidence that Congress intended only the debtor to
recover damages resulting from an involuntary bankruptcy
proceeding filed in bad faith:
[I]f a petitioning creditor filed the petition in bad
faith, the court may award the debtor any damages
proximately caused by the filing of the petition.
These damages may include such items as loss of
business during and after the pendency of the case,
and so on.
H.R. Rep. No. 95-595, at 324 (1977), reprinted in 1978
U.S.C.C.A.N. 5963, 6280 (emphasis added); S. Rep. No. 95-
989, at 34 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5820
(identical text).
[12] In addition, reading § 303(i)(2) to allow third parties
to seek damages could invite abuse of the system. The intro-
ductory clause to § 303(i) provides that “the debtor” may
waive the right to judgment, which would then enable the
IN RE: MILES 16199
debtor to waive the third parties’ damages. If such were the
case, “debtors could extort payments from either the petition-
ing creditors or the non-debtors seeking damages, in exchange
for either waiving or not waiving the damages claims.”
Franklin v. Four Media Co. (In re Mike Hammer Prods.,
Inc.), 294 B.R. 752, 754 (B.A.P. 9th Cir. 2003). The possible
abuse of the involuntary bankruptcy process that could result
makes it unlikely that Congress intended to permit third par-
ties to seek damages under § 303(i)(2), as it took great care
to build into the Code provisions that would prevent abuse of
the process.
[13] Finally, reading § 303(i) to limit standing to the debtor
is consistent with the admittedly rather sparse authority
addressing this issue. See id. at 755 (holding that § 303(i)(2)
“does not give standing to third parties to recover damages
from a bad-faith involuntary petitioner”); In re Ed Jansen’s
Patio, Inc., 183 B.R. 643, 644 (Bankr. M.D. Fla. 1995)
(“Even a cursory reading of this statute reveals that the relief
set forth in § 303(i) is available only to the debtor.”).7
[14] Therefore, we hold that Appellants do not have stand-
ing to recover damages under § 303(i) for bad faith filings of
involuntary bankruptcy petitions. Accordingly, the bank-
ruptcy court was correct in dismissing their complaints.
AFFIRMED.
BERZON, Circuit Judge, concurring in part and concurring in
the result:
I concur in Parts I and III of the majority opinion, except
7
We leave open, however, the question of whether non-petitioning cred-
itors may seek damages under § 303(i)(2).
16200 IN RE: MILES
for footnote 6, and I concur in the result reached by the major-
ity in Part II.
I agree that there was removal jurisdiction in the present
case. I write separately because my reason for so concluding
differs from that of the majority.
Gonzales v. Parks held that all actions, such as the present
one, that collaterally attack bankruptcy petitions are within
the exclusive jurisdiction of the federal courts under 28 U.S.C.
§ 1334(a). See 830 F.2d 1033, 1035 & n.6 (9th Cir. 1987)
(stating that “[f]ilings of bankruptcy petitions are a matter of
exclusive federal jurisdiction” and that “[s]tate courts are not
authorized to determine whether a person’s claim for relief
under a federal law, in a federal court, and within that court’s
exclusive jurisdiction, is an appropriate one” because “[s]uch
an exercise of authority would be inconsistent with and sub-
vert the exclusive jurisdiction of the federal courts”); id. at
1036 (“A Congressional grant of exclusive jurisdiction to the
federal courts includes the implied power to protect that
grant.”); id. (stating that “[a] state court judgment entered in
a case that falls within the federal courts’ exclusive jurisdic-
tion is subject to collateral attack in the federal courts” and
concluding that therefore “the bankruptcy court was correct in
vacating the state court judgment”). It follows that there is
original federal jurisdiction over the present case under
§ 1334(a) and removal jurisdiction under § 1441.1
1
Things Remembered, Inc. v. Petrarca held that both §§ 1441 and 1452
govern removal in bankruptcy cases. See 516 U.S. 124, 129 (1995)
(“There is no express indication in § 1452 that Congress intended that stat-
ute to be the exclusive provision governing removals and remands in
bankruptcy.”). Thus, the fact that the state court lacked jurisdiction does
not defeat removal jurisdiction. See 28 U.S.C. § 1441(f) (“The court to
which a civil action is removed under this section is not precluded from
hearing and determining any claim in such civil action because the State
court from which such civil action is removed did not have jurisdiction
over that claim.”).
IN RE: MILES 16201
I agree with the majority that the state law claims in the
present case are preempted because state law cannot add to
the remedial scheme Congress created under the Bankruptcy
Code. This result follows directly from our opinions in Gon-
zales and MSR Exploration, Ltd. v. Meridian Oil, Inc., 74
F.3d 910 (9th Cir. 1996). It is not clear to me, however, that
the state law claims are completely preempted in the sense
discussed in Beneficial National Bank v. Anderson, 539 U.S.
1 (2003), and its predecessor cases.
Unlike the majority, I do not read Beneficial National Bank
to have changed the law regarding whether standing to bring
a federal claim is necessary to find complete preemption.
Instead, I believe that the cases decided in the ERISA context
holding the contrary are still good law. See, e.g., Curtis v.
Nev. Bonding Corp., 53 F.3d 1023, 1027 (9th Cir. 1995)
(holding that “plaintiff’s standing to enforce ERISA is a pre-
requisite to . . . subject matter jurisdiction”); Harris v. Provi-
dent Life & Accident Ins. Co., 26 F.3d 930, 934 (9th Cir.
1994) (holding that because the plaintiffs are not in one of the
enumerated categories of parties entitled to seek relief under
ERISA’s civil enforcement provisions, their state claims are
not completely preempted by ERISA); see also Hobbs v. Blue
Cross Blue Shield of Ala., 276 F.3d 1236, 1240 (11th Cir.
2001) (“Under the doctrine of complete preemption, a plain-
tiff must have standing to sue under a relevant ERISA plan
before a state law claim can be recharacterized as arising
under federal law, subject to federal court jurisdiction.”).2
Indeed, the majority’s broad reading of Beneficial National
Bank would to a degree swallow the well-pleaded complaint
rule, by permitting removal to federal court in any circum-
stance in which federal law provides someone a cause of
2
Peralta v. Hispanic Business, Inc., 419 F.3d 1064 (9th Cir. 2005), is
not to the contrary, as it addressed neither Beneficial National Bank nor
the standing rationale articulated in the ERISA complete preemption
cases.
16202 IN RE: MILES
action and also precludes state law causes of action. Yet, state
courts are for the most part thought competent to deal with
such circumstances, by applying the Supremacy Clause when
a preemption defense is raised to a state law cause of action.
Only where federal law provides a particular class of plain-
tiffs with a federal cause of action is the case “completely pre-
empted” in the special sense discussed in Avco Corp. v.
Machinists, 390 U.S. 557 (1968), and its progeny. Put another
way, just because a state law cause of action is entirely pre-
empted by a federal statute, providing an iron-clad defense in
state court, does not mean that it is “completely preempted”
in the choice-of-law sense that governs removal jurisdiction.
Odd use of language, perhaps, but one that has remained con-
sistent for many years and was not changed by Beneficial
National Bank.
In short, there is removal jurisdiction under the exclusive
jurisdiction rationale described above. I see no reason to
expand the troublesome and confusing doctrine of complete
preemption, see Beneficial Nat’l Bank, 539 U.S. at 11-22
(Scalia, J., dissenting), as there is another, simpler ground for
reaching the same result. I therefore would not reach the ques-
tion of whether there is complete preemption in this case.