Shifting Tides – The Temporary Nature of Bankruptcy Court Jurisdiction Debating the Limits of Related-to Jurisdiction in New England

Christopher J. Somma

GOODWIN PROCTER LLP

Often overlooked and commonly ignored by bankruptcy attorneys, the jurisdiction of the bankruptcy court in an adversary proceeding is inextricably linked to the underlying Chapter 7 proceeding, and like Chapter 7 cases, shifts over time. The Rhode Island Bankruptcy Court recently examined the shifting jurisdiction of the bankruptcy court in Travers v. Bank of America, N.A., (In re Travers), 507 B.R. 62 (Bankr. D.R.I. 2014) and concluded that the jurisdiction of the Bankruptcy Court is indeed temporal in nature. When Adversary Proceedings remain on the docket well past the Chapter 7 discharge and closing of the main bankruptcy case, the Court may find itself in a situation where it no longer has the ability to retain jurisdiction. The consequence may be the dismissal of the adversary proceeding.

When can a bankruptcy court dismiss an adversary proceeding where it once had

jurisdiction? Do the parties have the ability to consent to jurisdiction or request the bankruptcy to retain jurisdiction? This article and presentation investigates and discusses the temporal nature of bankruptcy court jurisdiction and how these issues are treated by bankruptcy courts in New England.

I. INTRODUCTION

To appreciate what kind of matters survive dismissal of the underlying case, and which

may not, we turn to the basics of bankruptcy jurisdiction. Federal courts are courts of limited jurisdiction. Ins. Corp. of Ireland, Ltd. v. Compagnie de Guinee, 456 U.S. 694, 701 (1982). The matters that federal courts have the authority to hear and decide are set out in Article III of the Constitution. Article III functions as a restriction on federal power. There is nothing parties to a lawsuit can do to confer jurisdiction on a federal court if it does not otherwise exist. Consent of a party is irrelevant to the issue of jurisdiction. Every federal court has a duty to examine subject matter jurisdiction on its own motion before proceeding to the merits of a case. Id. at 702.

Consequently, parties cannot agree to subject matter jurisdiction. Binder v. Price

Waterhouse & Co., L.L.P. (In re Resorts Int’l, Inc.), 372 F.3d 154, 161 (3d Cir. 2004) (Citation omitted.) Likewise, a Court cannot “write its own jurisdictional ticket.” Zerand-Bernal Group, Inc. v. Cox (In re Cary Metal Products, Inc.), 23 F.3d 159, 164 (7th Cir. 1994). Federal courts presume that they lack jurisdiction and the burden is on the party to provide the basis for such jurisdiction. Poplar Run Five Limited Partnership v. Virginia Electric & Power Co. (In re Popular Run Five Limited Partnership), 192 B.R. 848, 855 (Bankr. E.D. Va. 1995) (citing Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994)). Similarly, a party removing an action to federal court has the burden of proving jurisdiction. Telluride Asset Resolution, LLC v. Telluride Global Development, LLC (In re Telluride Income Growth LP), 364 B.R. 390, 399 n. 6 (10th Cir. BAP 2007).

A. Bankruptcy Courts Are Courts of Limited Jurisdiction.

The filing of a voluntary bankruptcy petition commences a case in the bankruptcy court, and creates a bankruptcy estate comprised of every interest held by a debtor in property of any kind as of the petition date. See 11 U.S.C. §§ 301, 303, and 541. The bankruptcy court in which the case is commenced is the proper forum for its administration. Administration includes

motions and adversary proceedings brought by or against the debtor, by the bankruptcy trustee, or by third parties regarding the property of the debtor or the debtor’s estate.

Bankruptcy court jurisdiction derives from 28 U.S.C. §§ 1334 and 157. Resorts Int’l, 372

F.3d at 161. Title 28 § 1334(e) expands bankruptcy jurisdiction in two ways. First, § 1334(e)(1) grants the district court exclusive jurisdiction “of all the property, wherever located, of the debtor as of the commencement of such case, and of property of the estate.” Second, § 1334(e)(2) grants the district court exclusive jurisdiction over “all claims or causes of action” that involve employment of professional persons in bankruptcy cases.

While Congress can pass statutes that create certain rights, it cannot not “abrogate the

Article III minima.” Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 100 (1979). For example, Congress cannot erase Article III’s requirement that the complaining party must have standing. Raines v. Byrd, 521 U.S. 811, 820 n. 3 (1997). Congress also cannot waive the actual “case or controversy” requirement. O’Shea v. Littleton, 414 U.S. 488, 493 n.2 (1974). The statutory scheme upon which bankruptcy jurisdiction is based must, of course, operate within the limits imposed by Article III on general federal jurisdiction. Illinois Investment Trust No. 92-7163 v. Allied Waste Industries, Inc. (In re Resource Technology Corp.), 624 F.3d 376, 382 (7th Cir. 2010).

In 1995, the United States Supreme Court described bankruptcy court jurisdiction as

follows:

The jurisdiction of the bankruptcy courts, like that of other federal courts, is grounded in, and limited by, statute. Title 28 U.S.C. § 1334(b) 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.” The district courts may, in turn, refer “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.” 28 U.S.C. § 157(a). Here, the Bankruptcy Court’s jurisdiction to enjoin respondents’ proceedings against Northbrook must be based on the “arising under,” “arising in,” or “related to” language of §§ 1334(b) and 157(a).

Celotex Corp. v. Edwards, 514 U.S. 300, 307 (1995). “Proceedings ‘related to’ the bankruptcy include (1) causes of action owned by the debtor which become property of the estate pursuant to 11 U.S.C. § 541, and (2) suits between third parties which have an effect on the bankruptcy estate. Id. at 308, n. 5 (citing 1 Collier on Bankruptcy ¶ 3.01 [1] [c] [iv], p. 3-28 (15th ed. 1994)).” Id. n. 5. In an attempt to strike an appropriate balance, the Third Circuit in Pacor, Inc. v. Higgins, 743 F.2d 984 (1984) devised the following test for determining the existence of “related to” jurisdiction:

The usual articulation of the test for determining whether a proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in

bankruptcy….Thus, the proceeding need not necessarily be against the debtor or against the debtor’s property. An action is related to bankruptcy if the outcome could alter the debtor’s rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate. Id. at 994 (emphasis in original; citations omitted).

Celotex Corp. 514 U.S. at 308 n. 6. (citations omitted).

Bankruptcy Court jurisdiction is established and limited by 28 U.S.C. § 1334, which lists four types of matters over which the district court has bankruptcy jurisdiction:

1) cases “under” title 11 (which are the bankruptcy cases themselves, initiated by the

filing of a Chapter 7, Chapter 11, etc. petition);

2) proceedings “arising under” title 11 (such as a preference recovery action under § 547);

3) proceedings “arising in” a case under title 11 (such as plan confirmation); and 4) proceedings “related to” a case under title 11 (such as a collection action against third

party for a pre-petition debt). See Wood v. Wood (In re Wood), 825 F.2d 90, 92 (5th Cir. 1987).

Each of New England’s district courts have issued orders that effect the referral of these

four types of matters to their respective bankruptcy courts for hearing and adjudication consistent with the order of reference. Jurisdiction is then further broken down by 28 U.S.C. § 157, which grants full judicial power to bankruptcy courts not only over cases “under “ title 11 but also over “core” proceedings, § 157(b)(1); however it grants only limited judicial power over “related” or “non-core” proceedings, § 157(c)(1). Wood, 825 F.2d at 91. This core/non-core distinction is important, because it defines the extent of the bankruptcy court’s jurisdiction and the standard by which the district court (or bankruptcy appellate panel) reviews the factual findings. Halper v. Halper, 164 F.3d 830, 838 (3d Cir. 1999).

1. What are core proceedings or matters? “Core” proceedings are matters “arising under” and “arising in” cases under title 11.

Wood, 825 F.2d at 96. Matters “arise under” title 11 if they involve a cause of action created or determined by a statutory provision of title 11. Wood, 825 F.2d at 96. Matters “arise in” a bankruptcy if they concern the administration of the bankruptcy case and have no existence outside of the bankruptcy. Wood, 825 F.2d at 97. Bankruptcy judges may hear and determine core proceedings and enter final orders and judgments. 28 U.S.C. § 157(b)(1). 28 U.S.C. § 157(b)(2) contains a nonexclusive list of core proceedings.

Section 157(b)(2) provides that core proceedings include but are not limited to the following:

(A) matters concerning the administration of the estate;

(B) allowance or disallowance of claims against the estate or

exemptions from property of the estate, and estimation of claims or interests 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;

(C) counterclaims by the estate against persons filing claims against

the estate;

(D) orders in respect to obtaining credit;

(E) orders to turn over property of the estate;

(F) proceedings to determine, avoid, or recover preferences;

(G) motions to terminate, annul, or modify the automatic stay;

(H) proceedings to determine, avoid, or recover fraudulent conveyances;

(I) determinations as to the dischargeability of particular debts;

(J) objections to discharges;

(K) determinations of the validity, extent, or priority of liens;

(L) confirmation of plans;

(M) orders approving the use of lease of property, including the use of

cash collateral;

(N) orders approving the sale of property other than property resulting from claims brought by the estate against persons who have not filed claims against the estate;

(O) other proceedings affecting the liquidation of the assets of the

estate of the adjustment of the debtor-creditor or the equity security holder relationship, except personal injury tort or wrongful death claims; and

(P) recognition of foreign proceedings and other matters under chapter

15 of title 11

28 U.S.C. § 157(b)(2). When claims do not fit neatly into any one of these categories, litigants will utilize the so called catch-all provisions of 28 U.S.C. § 157(b)(O). “This provision, while written broadly, is not to be construed broadly – rather it must be construed to conform to the constitutional proscription of Marathon.” See Hayim v. Goetz (In re SOL, LLC), 419 B.R. 498, 506 (Bankr. S. D. Fla. 2009) (citing Matter of Wood, 825 F.2d 90, 95 (5th Cir. 1987)). As the court observed in SOL, LLC

The Court in Tidewater Lodging, 2009 Bankr. LEXIS 926, at *2, recognized that a matter cannot be deemed to be core merely because the debtor holds a claim which, if successful, could increase the assets of the estate. The court wrote: “[i]f this Court conferred jurisdiction on that basis, however, virtually any claim which could increase the assets of the estate would entitle the bankruptcy court to ignore the constitution proscription set forth in Marathon.” Id. (quoting from Marill Alarm Systems, 81 B.R. at 123). Even if payment of creditors’ claims were entirely dependent upon recovery of the claimed commission, as the Trustee here contends, this would still not be enough to confer core jurisdiction on the bankruptcy court. Peterson v. 610 W. 142 Owners Corp. (In re 610 W. 142 Owners Corp.), 219 B.R. 363, 370, 372 (Bankr. S.D.N.Y. 1998) (to permit core jurisdiction to be exercised on such a basis would “emasculate” the Supreme Court’s decision because every recovery can change the size of a bankruptcy estate).

SOL, LLC, 419 B.R. at 506; see also In re Frazier, 2006 Bankr. Lexis 2468, at * 1. In the event that the litigant’s claims do not fit within the catch-all provision, the bankruptcy court then examines whether the claim while non-core, may nevertheless be related. 2. What are non-core but related-to proceedings?

“Non-core” proceedings are those that do not depend on the bankruptcy laws for their

existence and that could proceed in another court even in the absence of bankruptcy. Wood, 825 F.2d at 96. The First Circuit has adopted the widely used Pacor, Inc. v. Higgins, 743 F.3d 984, 994 (3rd Cir. 1984) test to determine if a proceeding is related: the proceeding is related if it “potentially [could] have some effect on the bankruptcy estate, such as altering debtor’s rights, liabilities, options, or freedom of action, or otherwise have an impact upon the handling and administration of the bankruptcy estate.” In re G.S.F. Corp., 938 F.2d 1467, 1475 (1st Cir. 1991) (quoting In re Smith, 866 F.2d 576, 580 (3d. Cir. 1989)).

Bankruptcy courts have jurisdiction over non-core proceedings if they are at least “related

to” a case under title 11. 28 U.S.C. § 157(c)(1) (“A bankruptcy judge may hear a proceeding that

is not a core proceeding but that is otherwise related to a case under title 11.”) However, unless all parties consent otherwise, 28 U.S.C. § 157(c)(2), bankruptcy judges do not enter final orders or judgments in such non-core proceedings. Rather, they submit proposed findings of fact and conclusions of law to the district court, which enters final orders and judgments after de novo review. 28 U.S.C. § 157(c)(1); Fed. R. Bankr. P. 9033. See also Orion Pictures Corporation v. Showtime Networks, Inc. (In re Orion Pictures Corporation), 4 F.3d 1095, 1100-1101 (2nd Cir. 1993) (discussing Section 157’s classification scheme); see also Exec. Benefits Ins. Agency v. Arkison, 133 S. Ct. 2880 (2013) (finding in Stern type claims the bankruptcy court “should hear the proceeding and submit proposed findings of fact and conclusions of law to the district court for de novo review and entry of judgment).

Conversely, the bankruptcy court lacks jurisdiction over matters that are not at least

“related to” the bankruptcy case. Celotex, 514 U.S. at 308 n. 6. (“[W]hatever test is used…bankruptcy courts have no jurisdiction over proceedings that have no effect on the estate of the debtor.”). See also Resorts Int’l, 372 F.3d at 164 (citing Celotex).

B. Bankruptcy Court Jurisdiction is Temporal in Nature and Shifts over

the Course of the Case.

“The jurisdiction over property, however, is temporal.” Angel Fire Resort Operations, LLC v. Scarborough (In re Angel Fire Corp.), 2012 Bankr. LEXIS 5444, * 21 (Bankry.N.M., November 20, 2012). The Bankruptcy Code grants exclusive jurisdiction over property “as of the commencement” of the case, and of “property of the estate” which would include earnings on estate property and recoveries of property by a trustee or debtor-in-possession. When property is no longer “property of the estate,” the court’s jurisdiction ends. Gardner v. United States (In re Gardner), 913 F.2d 1515, 1518 (10th Cir. 1990).

At the outset of the case, the bankruptcy court has jurisdiction over disputes regarding

alleged property of the bankruptcy estate. In re Xonics, Inc., 813 F.2d 127, 131 (7th Cir. 1987). When property leaves the bankruptcy estate, the bankruptcy court’s jurisdiction typically lapses, In re Hall’s Motor Transit Co., 889 F.2d 520, 523 (3d Cir. 1989); In re Xonics, Inc., 813 F.2d at 131; In re Muller, 72 Bankr. 280, 284 (C.D. Ill. 1987), aff’d, 851 F.2d 916 (7th Cir. 1988), cert. denied, 490 U.S. 1007 (1989), and the property’s relationship to the bankruptcy proceedings comes to an end. See In re Hall’s Motor Transit Co., 889 F.2d at 523.

“Where an asset has been abandoned by the Trustee, that asset is no longer a part of the

bankruptcy estate.” In re Bray, 288 B.R. 305, 307 (Bankr. S.D.Ga. 2001) (citation omitted). “As a result, the property reverts back to its pre-bankruptcy status, and that asset is properly removed from the jurisdiction of the bankruptcy court.” Id. (citing Dewsnup v. Timm (In re Dewsnup), 908 F.2d 588, 591 (10th Cir. 1990) aff’d, 502 U.S. 410 (1992); accord. State v. Lange (In re Lange), 120 B.R. 132, 135 (B.A.P. 9th Cir. 1990), e.g., DeVore v. Marshack (In re DeVore), 223 B.R. 193, 200 (B.A.P. 9th Cir. 1998)). After abandonment, the property revests in the debtor, and he alone has the right to pursue any claims regarding the property (personal or real) in a forum other than the bankruptcy court.

Regardless of judicial discretion, any decision by a Bankruptcy Court lacking in jurisdiction may be vacated. Gardner, 913 F.2d at 1518. This proposition is echoed by other bankruptcy cases involving similar jurisdictional challenges. For example, a Bankruptcy Court cannot entertain jurisdiction of a private controversy which does not relate to matter pertaining to bankruptcy. Associated Electronic Supply Co. of Omaha v. C.B.S. Electronic Sales Corporation, 288 F.2d 683 8th Cir. 1961). Likewise, a bankruptcy court lacks jurisdiction over controversy solely and exclusively between third parties which does not involve, at least indirectly, the bankrupt or its property. Central States Corp. v. Luther, 215 F.2d 38 (10th Cir. 1954). Furthermore, a bankruptcy court ordinarily lacks jurisdiction over controversy between parties concerning a matter in which the trustee asserts no interest. In re Burton Coal Co., 126 F.2d 447 (7th Cir. 1942).

C. Bankruptcy Court Discretion in Related-to Adversary Proceedings

When the Underlying Bankruptcy Proceedings Terminate.

Despite the temporal nature of the estate’s interest in property of the estate and bankruptcy court jurisdiction over related-to proceedings, the bankruptcy court has discretion to retain jurisdiction over cases that have been dismissed or where the bankruptcy proceedings have been terminated, i.e., the entering of the discharge or dismissal of the main bankruptcy case. As a general rule, the dismissal of a bankruptcy case should result in the dismissal of all remaining adversary proceedings. In re Pocklington, 21 B.R. 199, 202 (Bankr. S.D. Cal. 1982); accord, In re Rush, 49 B.R. 158 (Bankr. N.D. Ala. 1985). This is particularly true of adversary proceedings which are “related” to the bankruptcy case because related proceedings can only be heard by a bankruptcy court because of their nexus to the debtor’s bankruptcy case. See generally Pacor v. Higgins, 743 F.2d 984 (3d Cir. 1984). So, then, what factors govern the court in the exercise of that discretion and how much discretion does that court actually have? Various Circuits that have examined this issue have concluded that only in certain circumstances should the Bankruptcy Court retain jurisdiction. Porges v. Gruntal & Co., Inc. (In re Porges), 44 F.3d 159, 163 (2d Cir. 1995); Querner v. Querner (In re Querner), 7 F.3d 1199, 1201-1202 (5th Cir. 1993); Carraher v. Morgan Elecs., Inc. (In re Carraher), 971 F.2d 327, 328 (9th Cir. 1992); Fidelity & Deposit Co. v. Morris (In re Morris), 950 F.2d 1531, 1535 (11th Cir. 1992); and Smith v. Commercial Banking Corp. (In re Smith), 866 F.2d 576, 580 (3d Cir. 1989)). The issue then turns on what relevant factors Courts take into consideration in deciding whether to retain jurisdiction.

The Bankruptcy Appellate Panel for the First Circuit recently discussed this discretionary retention by the bankruptcy court. “The dismissal of a bankruptcy case normally results in dismissal of related proceedings because federal jurisdiction is premised upon the nexus between the underlying bankruptcy case and related proceedings….This general rule is not without exception.” Melo v. GMAC Mortg., LLC (In re Melo), 496 B.R. 253, 256 (B.A.P. 1st Cir. 2013) (internal quotations marks and citations omitted) (quoting Hamilton v. Appolon (In re Hamilton), 399 B.R. 717, 720 (B.A.P. 1st Cir. 2009)). “In Hamilton v. Appolon, the Panel remanded the matter to the bankruptcy court for a determination of whether the court should retain jurisdiction based upon several court decisions affirming bankruptcy courts’ retention of jurisdiction over

adversary proceedings in which the underlying bankruptcy cases had been dismissed.” Travers, 507 B.R. at 73 (quoting Hamilton, 399 B.R. at 722 & n. 7). On remand, Judge Feeney adopted the Second Circuit’s approach to determine whether she should retain jurisdiction of the adversary proceeding:

We join several other circuits in adopting the general rule that related proceedings ordinarily should be dismissed following the termination of the underlying bankruptcy case. This general rule favors dismissal because a bankruptcy court’s jurisdiction over such related proceedings depends on the proceedings’ nexus to the underlying bankruptcy case. See In re Querner, 7 F.3d 1199, 1201-1202 (5th Cir. 1993); In re Morris, 950 F.2d 1531, 1533 (11th Cir. 1992); In re Smith, 866 F.2d 576, 580 (3d Cir. 1989). Notwithstanding this general rule, however, nothing in the Bankruptcy Code requires a bankruptcy court to dismiss related proceedings automatically following the termination of the underlying case. See, e.g., In re Querner, 7 F.3d at 1201-1202; In re Carraher, 971 F.2d 327, 328 (9th Cir. 1992) (per curiam); In re Morris, 950 F.2d at 1534; In re Roma Group, 137 B.R. 148, 150 (Bankr.S.D.N.Y.1992); In re Pocklington, 21 B.R. 199, 202 (Bankr. S.D.Cal.1982). Indeed, section 349 of the Bankruptcy Code authorizes bankruptcy courts to alter normal effects of the dismissal of a bankruptcy case if cause is shown. See 11 U.S.C. § 349 (setting forth consequences of dismissal “unless the court, for cause, orders otherwise”). Accordingly, we hold that the dismissal of an underlying bankruptcy case does not automatically strip a federal court of jurisdiction over an adversary proceeding which was related to the bankruptcy case at the time of its commencement. The decision whether to retain jurisdiction should be left to the sound discretion of the bankruptcy court or the district court, depending on whether the adversary proceeding is pending.

Hamilton v. Appolon (In re Hamilton)¸2009 Bankr. LEXIS 4626, at * 6 (Bankr. D. Mass. July 15, 2009) (emphasis supplied) (quoting Porges v. Gruntal & Co., Inc. (In re Porges v. Gruntal & Co., Inc. (In re Porges), 44 F.3d 159, 162 (2d. Cir. 1995)). In making this determination, Judge Feeney employed the four factors adopted in the Second Circuit. “[A] court must consider four factors in determining whether to continue to exercise jurisdiction: judicial economy, convenience to the parties, fairness and comity.” Porges, 44 F.3d at 162-163 (citing Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n. 7 (1988); DiLaura v. Power Authority of New York, 982 F.2d 73, 80 (2d Cir. 1992)). The case history of Hamilton is convoluted as it spanned approximately five years and was appealed once. Distilled to its bare essentials, when Judge Feeney was confronted with dismissing the case the facts were as follows. The Chapter 13 case, from which the adversary proceeding had originated, had already been dismissed and a second amended complaint had been filed. Hamilton v. Appolon (In re Hamilton)¸2009 Bankr. LEXIS 4626, at * 23 (Bankr. D. Mass. July 15, 2009). To make matters worse, the second amended complaint was filed approximately “eight months after the commencement of the adversary proceeding and nine months after the sale of the property which gave rise to” adversary proceeding. Id. As the merits

of the adversary proceeding had not been reached and there were no statute of limitations issue, Judge Feeney found that judicial economy did not weigh in favor of the bankruptcy court retaining jurisdiction. As to the issue of comity, Judge Feeney found that vacating the dismissal of the Chapter 13 bankruptcy case was unwarranted and in fact prohibited under bankruptcy law. Likewise, dismissal of the adversary proceeding without prejudice so that the claims could be considered by the appropriate state court again did not weigh in favor of the bankruptcy court retaining jurisdiction. Finally, Judge Feeney found that convenience of the parties and fairness to them did not weigh in favor of retaining jurisdiction as the action could readily be filed in state court. Judge Feeney concluded her analysis stating:

The causes of action articulated by the Debtor arise under state law and are not barred by applicable statutes of limitation. Because the action against the Defendants is “related to” the bankruptcy case, this Court, absent the parties’ consent, would be required to submit proposed findings of fact and conclusions of law to the district court, see 28 U.S.C. § 157(c)(1). Thus, even assuming this Court could conduct a trial sooner than the appropriate state court, there would be delay incident to the district court’s ruling on any proposed findings of fact and rulings of law.

Hamilton, 2009 Bankr. LEXIS 4626, at * 253. The case was promptly dismissed. The Rhode Island Bankruptcy Court faced a similar situation in Travers v. Bank of America, N.A., (In re Travers), 507 B.R. 62 (Bankr. D.R.I. 2014). The debtor in Travers did not fare any better than the debtor in Hamilton. This case began with the debtor filing Chapter 13 bankruptcy petition on June 30, 2011. In her schedules, the Debtor listed an ownership in a single family house with one mortgage that was in default. On that same date, the debtor initiated an adversary proceeding against the mortgage holder. Less than one month later, on July 26, 2011, the Chapter 13 bankruptcy case converted to Chapter 7. In her bankruptcy schedules, the debtor claimed a homestead exemption. No timely objections were filed. On September 1, 2011, the Chapter 7 trustee filed her Report of No Distribution. On November 1, 2011, the debtor received her Chapter 7 Discharge and the case subsequently closed. Despite the progress of her bankruptcy case, the debtor made little progress in her adversary proceeding. Neither the defendant nor the debtor participated in any meaningful discovery and absent multiple status conferences in hopes of the settling the case, the adversary proceeding did not move to resolution. Here, after analyzing the case pursuant to the four factor test (judicial economy, convenience to the parties, fairness and comity), Judge Finkle found as follows:

This Court ceased to have jurisdiction over the Plaintiff's claims upon the

Chapter 7 Trustee's abandonment of those claims and the closing of the underlying bankruptcy case, after which there no longer was a bankruptcy estate. Retention of jurisdiction would be inappropriate based on the procedural history and particular facts of this proceeding.

Travers, at 334-335. Judge Finkle, like Judge Feeney, dismissed the adversary proceeding for lack of subject matter jurisdiction.

II. CONCLUSION

Like guests who have overstayed their welcome, adversary proceedings that remain after a Chapter 7 discharge has entered in the main bankruptcy case may find themselves out in the cold. Bankruptcy courts are courts of limited jurisdiction with the purpose of handling bankruptcy matters. In a time where there are increasing challenges to the very structure of the bankruptcy court system, this point cannot be overstated. See, e.g., Exec. Benefits Ins. Agency v. Arkison (In re Bellingham Ins. Agency), 134 S. Ct. 2165 (2014); Stern v. Marshall, 131 S. Ct. 2594 (2011). Accordingly, bankruptcy practitioners must be aware that adversary proceedings are intimately linked to the underlying bankruptcy case. As shown, bankruptcy courts across the country and New England are loathe to keep these cases on their dockets. Parties must be cognizant that the failure to efficiently litigate their cases and move them toward completion may result in dismissal of the entire adversary proceeding. Parties should not have the expectation that the bankruptcy court will allow them to resolve their problems over an extended time frame, because in the end, the court may just do it for them.