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Meredith Post v. Lettera

Superior Court of Connecticut, Judicial District of Stamford-Norwalk, Stamford

May 16, 2017

Meredith Post et al.
v.
James Lettera, M.D

          MEMORANDUM OF DECISION RE MOTION TO STRIKE (231.00)

          EDWARD R. KARAZIN, JR., JUDGE.

         This medical malpractice action was originally commenced in April 2011 by the plaintiffs, Meredith Post and Frank Post. On March 2, 2017, the plaintiffs filed the operative fourth amended complaint against the defendants, Dr. James Lettera, and Connecticut Vascular and Thoracic Surgical Associates, PC. On January 25, 2017, the plaintiffs filed a motion to substitute the plaintiff in this action.[1] The plaintiffs' motion represented that on April 8, 2016, the plaintiffs filed an application for Chapter 7 bankruptcy in the United States Bankruptcy Court for the District of Connecticut. See In re Post, Case No. 16-50487 (AST). The plaintiffs' motion also represents that Attorney Coan was appointed as trustee of the plaintiffs' bankruptcy estate. The motion also states that on August 2, 2016, plaintiffs' counsel was appointed special counsel for the bankruptcy estate for the purposes of the instant litigation. On January 26, 2017, the plaintiffs withdrew their motion to substitute for the reason that " the United States Bankruptcy Court granted a partial exception to the plaintiffs with regard to the outcome of the instant litigation. Therefore, plaintiffs continue to have an interest in the outcome of the litigation." [2]

         On March 9, 2017, the defendants filed the present motion to strike the fourth amended complaint in its entirety, accompanied by a memorandum of law in support. The defendants challenge the plaintiffs' standing to pursue this action because they have filed a petition for bankruptcy and, as a result, their interest in this lawsuit " has been reassigned to the bankruptcy estate." The defendants also submit, as an exhibit, the application filed by the bankruptcy trustee in the bankruptcy court to employ special counsel on behalf of the estate to pursue the plaintiffs' interest in the present action. On March 20, 2017, the plaintiffs, in response, filed a memorandum of law in opposition to the defendants' motion to strike, with a copy of 11 U.S.C. § 522 (2016) attached. The matter was heard at short calendar on April 24, 2017, and May 1, 2017.[3]

         Although the defendants challenge the court's subject matter jurisdiction through a motion to strike, the court treats the motion to strike as a motion to dismiss.[4] " [O]nce the question of lack of jurisdiction of a court is raised, [it] must be disposed of no matter in what form it is presented . . . and the court must fully resolve it before proceeding further with the case." (Internal quotation marks omitted.) Bongiorno v. J& G Realty, LLC, 162 Conn.App. 430, 436, 131 A.3d 1230, cert. denied, 320 Conn. 924, 133 A.3d 878 (2016); see Bruno v. The Travelers Companies, 172 Conn.App. 717, 723 (2017) (determining that the trial court should have treated the motion to strike implicating the court's subject matter jurisdiction as a motion to dismiss).

         " Subject matter jurisdiction involves the authority of the court to adjudicate the type of controversy presented by the action before it . . . [A] court lacks discretion to consider the merits of a case over which it is without jurisdiction . . . The subject matter jurisdiction requirement may not be waived by any party, and also may be raised by a party, or by the court sua sponte, at any stage of the proceedings." (Internal quotation marks omitted.) Sousa v. Sousa, 322 Conn. 757, 770, 143 A.3d 578 (2016). " It is axiomatic that a party must have standing to assert a claim in order for the court to have subject matter jurisdiction over the claim." (Internal quotation marks omitted.) Scarfo v. Snow, 168 Conn.App. 482, 497, 146 A.3d 1006 (2016). " Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy . . . Where a party is found to lack standing, the court is consequently without subject matter jurisdiction to determine the cause." (Internal quotation marks omitted.) 21st Mortg. Corp. v. Schumacher, 171 Conn.App. 470, 484-85, 157 A.3d 714 (2017). " Because standing implicates the court's subject matter jurisdiction, the plaintiff bears the burden of establishing standing." (Internal quotation marks omitted.) Heinonen v. Gupton, 173 Conn.App. 54, 59 (2017). " If . . . the plaintiff's standing does not adequately appear from all materials of record, the complaint must be dismissed." (Internal quotation marks omitted.) Burton v. Dominion Nuclear Connecticut, Inc., 300 Conn. 542, 550, 23 A.3d 1176 (2011). " [I]n determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged." (Internal quotation marks omitted.) Financial Consulting, LLC v. Commissioner of Insurance, 315 Conn. 196, 226, 105 A.3d 210 (2015).

         In support of their motion, the defendants argue that the court lacks subject matter jurisdiction over this case because the plaintiffs, as bankruptcy debtors, do not have standing to pursue causes of action that are the rightful property of the bankruptcy estate. The defendants contend that the plaintiffs' interest in the present action was divested when they petitioned for bankruptcy and listed the potential damage award from this lawsuit as an asset. Thus, the defendants argue that the court lacks subject matter jurisdiction because this cause of action belongs to the trustee of the bankruptcy estate, who has not been made a party to this action. In opposition to the motion, the plaintiffs argue that they do have standing because they are the real parties in interest since they are the victims of the defendants' negligence. The plaintiffs also assert that they have an interest in this case with regard to a damage award that exceeds the amount of unsecured debt discharged through bankruptcy and that they enjoy two statutory exceptions that exempt the potential damage award from the bankruptcy estate.

         There can be no dispute that the plaintiffs lack standing to bring a claim based upon a potential damage award that is part of the bankruptcy estate; instead, the legal right to pursue such an action belongs to the bankruptcy trustee. " When a debtor files for bankruptcy protection, a bankruptcy estate is created . . . Title 11 of the United States Code, § 541, prescribes the property interests of the debtor that comprise the bankruptcy estate. Subject to a few exceptions, such property is defined as 'all legal or equitable interests of the debtor in property as of the commencement of the case.' . . . 11 U.S.C. § 541(a)(1) (2016). It is well settled that such property includes causes of action possessed by the debtor at that time . . . A bankruptcy debtor does not have standing to pursue claims that constitute property of a bankruptcy estate." (Citations omitted; emphasis altered; internal quotation marks omitted.) Weiss v. Smulders, 313 Conn. 227, 239-40, 96 A.3d 1175 (2014); see Manning v. Feltman, 149 Conn.App. 224, 232-33, 91 A.3d 466 (2014). Consequently, " once a trustee is appointed to administer the bankruptcy estate, the trustee takes control of all the assets in the estate . . . including the ability to pursue, abandon, and make decisions in legal actions." (Citation omitted.) Gladstein v. Goldfield, 163 Conn.App. 579, 581 n.1, 137 A.3d 60 (2016), cert. dismissed, 325 Conn. 418, (2017).

         Nevertheless, the totality of the plaintiffs' assets do not unconditionally become part of the bankruptcy estate; rather, a portion of the assets may be excluded from the estate pursuant to several exemptions enumerated in 11 U.S.C. § 522 (2016). Specifically, § 522(b) provides in relevant part: " Notwithstanding section 541 of this title . . . an individual debtor may exempt from property of the estate the property . . . (2) that is specified under [§ 522(d)]." Section 522(d) provides a list of twelve different types of exemptions that may exclude certain types of property from the bankruptcy estate. In particular, the plaintiffs claim that the exemptions in § § 522(d)(5) and 522(d)(11)(D) exclude the potential recovery of damages in the present action from the bankruptcy estate. Section 522(d)(5) is a broad exemption that provides that the debtor may exempt his or her " aggregate interest in any property, not to exceed in value $1, 250 plus up to $11, 850 of any unused amount of the [the residence exemption] provided under paragraph (1) of this subsection." Section 522(d)(11)(D) exempts from the bankruptcy estate " the debtor's right to receive, or property that is traceable to . . . a payment, not to exceed $23, 675, on account of bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor . . ."

         In the present case, both of the claimed exemptions are clearly set forth in the plaintiffs' memorandum, and are applicable to the plaintiffs' interest in the present action. Pursuant to § 522(d)(5), any potential damage award that the plaintiffs would receive may be partially exempt because this subsection is a catchall for " any property." Pursuant to § 522(d)(11)(D), the plaintiffs' interest may also be partially exempt because their medical malpractice claim is for bodily injury. Neither party has presented evidence to shed light on the status and/or validity of these claimed exemptions.[5] Nevertheless, the defendants do attach the application filed by the bankruptcy trustee with the bankruptcy court to employ special counsel on behalf of the estate to pursue the plaintiffs' interest in the present action. This application fails to establish that the plaintiffs lack standing for several reasons. First, it does not indicate that the bankruptcy trustee is the proper party; rather, it simply appoints the plaintiffs' current appearing counsel to pursue this action on behalf of the bankruptcy estate. Second, the application contains a " NOTICE TO DEBTOR, " which is entirely in bold typeface at the top of the first page of the application, and provides a disclaimer that a conflict of interest may arise when the appointed special counsel allocates the potential damage award. This disclaimer provides in relevant part: " SECTION 522(d)(11)(D) OF THE BANKRUPTCY CODE ALLOWS A DEBTOR TO CLAIM EXEMPT A PAYMENT ON BEHALF OF A PERSONAL INJURY WHICH DOES NOT INCLUDE PAIN AND SUFFERING . . ." It cannot be inferred from this disclaimer that the plaintiffs lack standing; rather, it further evidences that the plaintiffs would potentially be entitled to this exemption. Third, the application does not require the plaintiffs' counsel to substitute the bankruptcy trustee as the proper party in this current lawsuit. Therefore, indulging every presumption favoring jurisdiction, the court determines, for the purposes of the present motion, that the potential damage award of the present lawsuit is partially exempt from the bankruptcy estate.

         Consequently, the determination of whether the court has subject matter jurisdiction over this claim is directly dependent upon whether the plaintiffs have standing to pursue a potential damage award that is partially exempt from the bankruptcy estate. Although our appellate courts have frequently considered the standing of bankruptcy debtors as opposed to bankruptcy trustees, they have not specifically ruled as to whether a bankruptcy debtor has standing to pursue a cause of action that would belong to the trustee of the bankruptcy estate, but for a potential exemption. In the absence of any direct guidance, the court is faced with conflicting decisions.

         On one hand, several courts have determined that a debtor does not have standing to pursue claims that are exempt from the bankruptcy estate. For instance, the court in DiLieto v. County Obstetrics & Gynecology Group, Superior Court, judicial district of Waterbury, Complex Litigation Docket, Docket No. X02-CV-97-0150435-S (January 31, 2000, Sheldon, J.) (26 Conn.L.Rptr. 345, ), rev'd on other grounds, 265 Conn. 79, 828 A.2d 31 (2003), considered whether the plaintiff had standing to pursue a medical malpractice claim after she and her husband had claimed that the potential damage award may be exempt in their Chapter 7 bankruptcy petition. Partially relying upon In re Snyder, 61 B.R. 268 (Bankr.S.D.Ohio 1986), the court concluded " that neither any possible exemption that the Bankruptcy Court may grant the plaintiff for a portion of the pending claims nor any possible recovery of a judgment in excess of her indebtedness to her creditors gives the plaintiff standing to prosecute this case on her own behalf." [6] DiLieto v. County Obstetrics and Gynecology Group, supra, 26 Conn.L.Rptr. 347, ; see Lee v. Mariani, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV-09-4015581-S, (November 9, 2010, Jennings, J.T.R.) (also relying upon In re Snyder ).

         On the other hand, several courts have held that bankruptcy debtors have standing to pursue claims that are exempt from the bankruptcy estate. " If a cause of action that preexisted the filing of the bankruptcy petition is exempted from the estate . . . then it is property of the debtor and the debtor will have standing to pursue the cause of action in his or her own name." Ball v. Nationscredit Financial Services Corp., 207 B.R. 869, 872 (N.D.Ill. 1997); see Rowland v. Novus Financial Corp., 949 F.Supp. 1447, 1453-54 (D.Haw. 1996) (" [I]f a Chapter 7 debtor claims his . . . cause of action under the bankruptcy exemption, then the debtor has standing to bring the . . . action"); Wissman v. Pittsburgh Nat. Bank, 942 F.2d 867, 872 (4th Cir. 1991) (an exemption for a potential lawsuit " represents a present, substantial interest and provides the necessary standing for [the debtors] to pursue the action").

         The court is more persuaded by the decisions that hold that bankruptcy debtors have standing to pursue claims that are exempt from the bankruptcy estate. Although it is undisputed that the bankruptcy estate does have an interest in this present action, the plaintiffs still maintain an interest because of their partial exemption. Consequently, the court determines that it does have subject matter jurisdiction over this case because the plaintiffs have standing to pursue this action for the reason that their interest in the present lawsuit is potentially exempt from the bankruptcy estate.

         Accordingly, the court denies the defendants' motion to strike the entirety of the plaintiffs' complaint because the plaintiffs do have standing to pursue this action as ...


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