Post-Petition Lawsuit Not Property of Estate
Where the debtor had not suffered any injury from her hip replacement until postdischarge , the claim against the medical device provider was not property of the bankruptcy estate even though the hip replacement took place pre-petition . Sikirica v . Harber ( In re Harber ), 2016 Bankr . LEXIS 2168 , No . 14-20155 ( Bankr . W . D . Pa . May 31 , 2016 ).
Elizabeth Harber underwent two hip replacement surgeries using implants produced by DePuy Orthopaedics . Three years later , she received notice that some of the implants were problematic and she was listed among the plaintiffs in a class action lawsuit against DePuy . Three years later , the she and her husband , Brent Harber , filed for chapter 7 bankruptcy . They listed the lawsuit in their schedules as a contingent , unliquidated claim with a value of $ 0 . At that time , Ms . Harber had suffered no injury as a result of the implants . The Harbers ’ bankruptcy case was closed with the potential claim against DePuy excepted from abandonment . Ms . Harber then discovered that metal had entered her bloodstream due to the implants and she was advised to have the hip replacement revised . Nonetheless , Ms . Harber dismissed her civil suit without prejudice as a “ non-revised ” plaintiff . She had the hip revision shortly thereafter . The Harbers ’ bankruptcy attorney informed the court of a potential civil case against DePuy . The bankruptcy case was reopened and the trustee filed a turnover motion seeking to require the Harbers to contribute
any settlement they might receive to the bankruptcy estate . The Harbers objected arguing that any settlement would not be property of the estate because Ms . Harber did not suffer any injury until after the bankruptcy case was closed .
The bankruptcy court began its analysis with the elements necessary to support a turnover motion under section 541 : 1 ) the property is part of the bankruptcy estate , 2 ) it is in the possession of someone else , and 3 ) it has more than inconsequential value to the estate . With respect to the question of whether the civil action was property of the estate the court considered two approaches . The first was the “ accrual approach ,” advanced by the Harbers , under which the claim comes into existence when the claimant has the right to file it under state law . The second approach , advanced by the trustee , looks to whether the genesis of the lawsuit is “ sufficiently rooted ” in the pre-bankruptcy past .
Under Pennsylvania law a cause of action “ accrues ” when the plaintiff could institute the lawsuit . Damages which are “ physically objective and ascertainable ” are an essential element of a personal injury tort action . In the case of a medical implant which may function without problems for years before it causes injury , the court held that a cause of action for a latent injury accrues when the plaintiff “ discovers , or reasonably should discover , that she has been injured and that her injury has been caused by another party ’ s conduct .”
Applying state law , the court found that , while many of the circumstances giving rise to Ms . Harber ’ s claim existed at the time of the petition , the claim did not accrue until the day she learned she had been injured by the hip replacement . Up to that point she had not suffered an ascertainable injury and neither she nor the trustee , derivatively , could have filed a valid lawsuit against DePuy . The accrual test , therefore , dictated that Ms . Harber ’ s claim against DePuy was not property of the bankruptcy estate .
The trustee argued that the court should not apply Pennsylvania ’ s accrual test , but rather , the test set forth in In re Grossman , 607 F . 3d 114 ( 3rd Cir . 2010 ) ( en banc ), where the court held that a personal injury claim accrues when the plaintiff is exposed to a product pre-petition that causes later injury . Grossman involved exposure to asbestos and the issue was whether a “ claim ” against the debtor existed under section 101 ( 5 ). The court found the question of whether a creditor had a “ claim ” against the debtor was different from the question of whether the debtor had an actionable claim against another party at the time she filed her petition . The definition of “ claim ” for purposes of asserting a claim against a debtor in bankruptcy is broad because the purpose of filing claims is to make sure the bankruptcy deals with all of the debtor ’ s financial liabilities . Accrual of a cause of action
32 CONSUMER BANKRUPTCY JOURNAL Summer 2016 National Association of Consumer Bankruptcy Attorneys