JOHN T. LANEY, III, Chief Judge.
On October 12 the Court entered an order denying the trustee's Motion to Reopen Case and issued an opinion explaining the Court's findings and conclusions. See In re Webb, No. 09-70165-JTL, 2012 WL 4857042 (Bankr.M.D.Ga. Oct. 12, 2012). The trustee now moves the Court to reconsider that order. For the reasons set forth below, the Court will grant the trustee's motion.
Johnny Webb was diagnosed with congestive heart failure in July 2007, before his 2009 Chapter 7 filing. The cause was allegedly unknown prepetition. The debtor received a postdischarge class action settlement in a product liability case for injuries arising from medicine taken prepetition, medicine allegedly causing congestive heart failure.
The Court denied the trustee's motion. The Court held that because Georgia follows the discovery rule in tort cases
Conclusions of Law
The Court's original opinion discussed — at length — the discovery rule and relevant case law, and the Court was very
The Court's decision to reconsider and grant the motion to reopen comes from the Court's reassessment of Johnson v. Alvarez (In re Alvarez), 224 F.3d 1273 (11th Cir.2000), a decision neither the trustee nor the pro se debtor discusses in the briefs.
The Court isn't alone in its confusion about Alvarez. In Griggs v. Marion Hospital Corporation, No. 2004-CV-4241-JPG, 2005 WL 1802249 (S.D.Ill.2005), the court states,
Griggs, 2005 WL 1802249, at *1.
In Wooten v. Altamaha Bank & Trust, No. Civ.A. CV203-100, 2005 WL 2459095 (S.D.Ga.2005), the court, citing Alvarez, states, "It is well established in the Eleventh Circuit that the `accrual' of a cause of action for purposes of determining the trigger date for the statute of limitations may be different from the `accrual' of the action for, [sic] purposes of determining ownership under § 541 of the Bankruptcy Code." Wooten, 2005 WL 2459095, at *2 The court continues, "When determining whether a cause of action accrued for purposes of ownership in a bankruptcy proceeding, `the test is whether all of the elements of the cause of action had occurred as of the time that the bankruptcy case was commenced,....'" Id. (quoting In re Alipour, 252 B.R. 230, 235 (Bankr. M.D.Fla.2000)). Notwithstanding Alvarez and the test the court lays out for "accrual" for bankruptcy ownership, the court strangely uses the RICO discovery rule to determine when the debtor's RICO claims accrued: "Unlike the state law claims, a civil RICO claim `begins to accrue as soon as the plaintiff discovers, or reasonably should have discovered, both the existence and source of his injury and that the injury is part of a pattern.' It is undisputed that Plaintiffs did not discover [a defendant's] alleged embezzling activities until [postpetition]..... Thus, Plaintiffs, not the bankruptcy trustee, have standing to assert the RICO claims." Wooten, 2005 WL 2459095, at *3 (citations omitted). The court does not express confusion over Alvarez, and neither does it explain the discrepancy between its reliance on Alvarez and its actions in the case.
While not relevant to understanding Alvarez, the case In re Smith, 293 B.R. 786 (Bankr.D.Kan.2003) — discussed in the Court's original opinion and whose facts almost mirror the facts at bar — is yet another case demonstrating that the discovery rule issue is not as simple as the trustee states. The court in Smith applied Kansas's discovery rule to determine when a cause of action accrued for ownership purposes in bankruptcy. See id. at 789-90. Because the trustee did not prove what the debtor knew before filing for bankruptcy, the trustee could not prove the cause of action accrued prepetition, and the court denied the trustee's motion to reopen. Id. at 790.
The Court's original opinion referred to the language in Alvarez quoted above as dicta. Dicta — even dicta from the most well-reasoned and unconditionally valid Eleventh Circuit opinion — is not binding on this Court. The Court considered the language dicta because the issue in Alvarez was whether the professional malpractice at issue caused damages prepetition or postpetition — not whether the discovery rule applied — and the court discussed the discovery rule sua sponte in a footnote. While the Court looks at Eleventh Circuit dicta as strong authority, the Court gives more or less weight to dicta depending on how persuasive the reasoning is. The Eleventh Circuit's reasoning on this matter isn't clear, given the conflicting treatment of statutes of limitation, and the opinion as a whole has questionable continuing validity, given the Eleventh Circuit's reasoning in Witko.
But after reconsidering Alvarez, the Court concludes that the inapplicability of the discovery rule was necessary to the Eleventh Circuit's holding. The alleged malpractice was advising and filing a Chapter 7 bankruptcy instead of a Chapter 11 bankruptcy and failing to convert, resulting in the trustee selling assets at a price disagreeable to the debtor. See In re Alvarez, 224 F.3d at 1275; In re Alvarez,
The Court would like to conclude by responding to several statements in the trustee's brief. The Court's original opinion ended with a section titled "Potential Futility of Granting the Motion," where the Court reasoned that a modest settlement might leave nothing for the trustee to administer, given the debtor's unused homestead exemption and the various exemptions related to personal injury. See In re Webb, 482 B.R. at 676. The trustee responded to this section of the opinion by stating, "It was premature to decide those issues. Although they are ultimate issues in this case, they should not have been determinative in the motion to reopen." Brief in Support of Motion to Reconsider at 4, In re Webb, 482 B.R. 669 (Bankr. M.D.Ga.2012), ECF No. 33. At the hearing on the motion to reopen, the debtor made statements suggesting the settlement amount is modest — the basis of the Court's assumption — but the Court made clear that "the Court does not know the settlement size." In re Webb, 482 B.R. at 677. Moreover, those statements were made "[w]ithout deciding any future exemption issues," and those statements were "not necessary for the holding." Id. They were for the benefit of a pro se debtor who might not fully understand the repercussions of an adverse outcome on appeal or (as here) on reconsideration.
The Court will grant the trustee's motion to reopen. The Court will enter an order in accordance with this memorandum opinion.