In re Tribune: Third Circuit Upholds Bankruptcy Jurisdiction to Decide Personal Injury Claims Based on Implied Consent | Practical Law

In re Tribune: Third Circuit Upholds Bankruptcy Jurisdiction to Decide Personal Injury Claims Based on Implied Consent | Practical Law

In Younge v. Tribune Company (In re Tribune Media Company), the US Court of Appeals for the Third Circuit affirmed the decisions of the US District and Bankruptcy Courts for the District of Delaware in holding that the Bankruptcy Court had statutory and constitutional authority to disallow a dismissed employee's hostile workplace and wrongful termination claims because he failed to raise such jurisdictional objections in the Bankruptcy Court and therefore, impliedly consented to the court's jurisdiction.

In re Tribune: Third Circuit Upholds Bankruptcy Jurisdiction to Decide Personal Injury Claims Based on Implied Consent

by Practical Law Bankruptcy & Restructuring
Published on 21 Sep 2018USA (National/Federal)
In Younge v. Tribune Company (In re Tribune Media Company), the US Court of Appeals for the Third Circuit affirmed the decisions of the US District and Bankruptcy Courts for the District of Delaware in holding that the Bankruptcy Court had statutory and constitutional authority to disallow a dismissed employee's hostile workplace and wrongful termination claims because he failed to raise such jurisdictional objections in the Bankruptcy Court and therefore, impliedly consented to the court's jurisdiction.
On September 5, 2018, in Younge v. Tribune Company (In re Tribune Media Company), the US Court of Appeals for the Third Circuit affirmed the decisions of the US District and Bankruptcy Courts for the District of Delaware in holding that the Bankruptcy Court had statutory and constitutional authority to disallow a dismissed employee's hostile workplace and wrongful termination claims because he failed to raise such jurisdictional objections in the Bankruptcy Court and therefore, impliedly consented to the court's jurisdiction ().

Background

Tribune Media Company (Tribune) was a media company that owned WPHL, a Philadelphia television station. WPHL terminated Mr. Younge, an African-American man, following a dispute with a Causasian co-worker. Younge filed a complaint with the Pennsylvania Commission on Human Relations in June 2008 alleging he was subjected to a hostile work environment and wrongfully terminated because of his race and/or color.
In December 2008, when the Commission's investigation was still ongoing, Tribune filed for Chapter 11 bankruptcy. Younge responded by filing a proof of claim in the Bankruptcy Court. Tribune objected to it. Because Younge was not represented by counsel at the time, he filed a pro se response to Tribune’s objection. When he obtained counsel, the Bankruptcy Court held a hearing on the claim and allowed Younge’s counsel to file a supplemental response that included additional evidence.
Tribune, in turn, filed a supplemental reply. After the parties completed briefing, the Court notified them that it was reviewing Tribune’s objection, and construed it as a motion for summary judgment. The Court sustained the objection and disallowed Younge's claim in its entirety concluding that he was not subject to a hostile work environment nor was he wrongfully terminated because of his race and/or color.
Younge appealed to the District Court, objecting to the Bankruptcy Court’s jurisdiction for the first time. He challenged the Bankruptcy Court’s decision on his hostile work environment and wrongful termination claims and argued that the proceedings violated his due process rights and Seventh Amendment right to a jury trial. The District Court noted that Younge failed to raise the issue of jurisdiction during bankruptcy proceedings. Alternatively, he litigated his claim to a final judgment, filing two responses to Tribune’s claim objection, appearing at a hearing, and acknowledging that the Court would fully evaluate his claim.
The Court held that Younge waived any objection to a Bankruptcy Court decision and impliedly consented to its jurisdiction. The Court also found that the Bankruptcy Court did not violate Younge’s due process rights, because he was given ample opportunities to submit additional evidence, and it did not violate his Seventh Amendment right to a jury trial by disallowing his claim. Finally, the District Court affirmed the rulings on Younge’s hostile work environment and wrongful termination claims, following the same reasoning as the Bankruptcy Court. Younge appealed to the US Court of Appeals for the Third Circuit.

Outcome

The Third Circuit affirmed the lower courts' decisions holding that Younge had impliedly consented to the Bankruptcy Court's statutory and constitutional authority to hear his claims by failing to raise jurisdictional objections in the Bankruptcy Court and assenting to the Bankruptcy Court's entry of final judgment on the claims.

Claimant Consented to Bankruptcy Court's Statutory Authority to Decide Personal Injury Claims

While personal injury tort claims are explicitly excluded from a bankruptcy court's jurisdiction over "core proceedings" under 28 U.S.C. Section 157(b)(5), the Third Circuit found it irrelevant to decide whether Younge's claims were personal injury tort claims, because he had consented to the Bankruptcy Court's statutory authority to hear the claims. The Third Circuit relied on the Supreme Court's decision in Stern v. Marshall, which explains that a claimant waives an objection under Section 157 when he implicates the jurisdiction of the bankruptcy court, chooses to be a party to that litigation, and thus consents to that court's resolution of his claims. (564 U.S. 462, 482 (2011)).
The Third Circuit found that Younge voluntarily submitted to a decision by the Bankruptcy Court by filing a proof of claim, a response to Tribune's objection, a supplemental response and appearing at a hearing before the Bankruptcy Court. The Third Circuit held that Younge consented to the Bankruptcy Court's jurisdiction and waived any objection under 157(b)(5) because none of his statements or filings included any objection to the Bankruptcy Court's statutory authority to decide his claims.

Claimant Impliedly Consented to Bankruptcy Court's Constitutional Authority

While Younge argued on appeal that the Bankruptcy Court was required to obtain his express consent to adjudicate his claims, the Third Circuit found that "no court has stated that a litigant must expressly consent to a Bankruptcy Court's jurisdiction ( at *5)." The Third Circuit cited the Supreme Court's opinion in Wellness Int'l Network, Ltd. V. Sharif, which held that consent to a court's constitutional authority to adjudicate a dispute requires a party's "knowing and voluntary" consent to the court's jurisdiction, and that consent may be express or implied by "actions rather than words." (135 S.Ct. 1932, 1948 n.13)(2015).)
The Third Circuit held that Younge knowingly and voluntarily consented to the Bankruptcy Court's jurisdiction, and that his consent was implied based on numerous filings which failed to raise a question of the Bankruptcy Court's constitutional authority to decide his claims and his assent to the Court's entry of judgment in his favor. The Court relied on the Fifth Circuit's reasoning in Matter of Delta Produce, L.P., which held that a party impliedly consents to bankruptcy jurisdiction when he "raises no objection when joining the case." (845 F.3d 609, 617 (5th Cir. 2016).) The Third Circuit found that implied consent avoids the danger in allowing a litigant to belatedly raise an objection to jurisdiction following an unfavorable verdict, therefore promoting judicial efficiency.

Bankruptcy Court Proceedings Did Not Deprive Claimant's Rights to Due Process, Jury Trial, or Counsel

The Third Circuit held that the Bankruptcy Court afforded Younge adequate due process because he had notice of the proceedings and had ample opportunities to be heard through multiple filings as well as a hearing. The Third Circuit found that Younge was not entitled to a jury trial before the Bankruptcy Court disallowed his claims because there is no Seventh Amendment right to a jury trial for determination of objections to claims. Even though the Bankruptcy Court viewed the claim objection as a motion for summary judgment, Younge's Seventh Amendment jury trial rights were not violated because he was an actual participant in the summary judgment proceeding and made several submissions to the Court before it decided his claims. The Third Circuit found that Younge waived his right-to-counsel argument because it was never raised before the District Court on appeal.

Case Cannot be Transferred to Another Court Because Claims Have Already Been Discharged

The Third Circuit could not transfer or remand this case to another court because the claims had been discharged under section 524 of the Bankruptcy Code. The Court reasoned that the confirmation of a plan discharges the debtor from any debt or liability on a claim that arose before the date of such confirmation. Because the claims had been discharged, Younge could not re-litigate his claims in the Eastern District of Pennsylvania or the Pennsylvania Commission on Human Relations.

Practical Considerations

The Third Circuit's decision further clarifies the statutory and constitutional authority of the Bankruptcy Court to decide employment discrimination claims when a claimant voluntarily submits through filings and appearances without any objection to the court's jurisdictional authority. In such circumstances, a claimant impliedly consents to the Bankruptcy Court's resolution of his claims and waives any argument to the contrary. The Third Circuit decision stresses the importance of raising jurisdictional objections early in order to avoid forfeiting them on appeal.