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Cloud v. Northrop Grumman Corp.11/12/1998
uded in the bankruptcy estate]; Jones v. Harrell (11th Cir. 1988) 858 F.2d 667, 669 ["A trustee in bankruptcy succeeds to all causes of action held by the debtor at the time the bankruptcy petition is filed," the debtor lacks standing to settle a personal injury claim]; Harris v. St. Louis University (E.D.Mo. 1990) 114 B.R. 647, 648 [debtor's cause of action for age and sex discrimination in employment became property of bankruptcy estate upon filing of Chapter 7 proceeding]; Cain v. Hyatt (E.D.Pa. 1989) 101 B.R. 440, 442 [debtor's cause of action for illegal termination in violation of human rights law became property of bankruptcy estate upon filing of Chapter 7 proceeding].) Complete unanimity has not been reached on this point, however. Some federal Circuits make distinctions among different types of claims, holding some to become property of the bankrupt estate and some not, depending upon their treatment under local state law. As the court noted in In re Lansberry (W.D.Pa. 1995) 177 B.R. 49, 54 " here is a split among courts of appeals on the method for determining whether a particular pre-petition cause of action becomes property of the estate. [ ] The majority have held that all pre-petition causes of action become estate property without regard to state law. See Matter of Geise, 992 F.2d 651, 655 (7th Cir. 1993); Cottrell v. Schilling, 876 F.2d 540, 542-43 (6th Cir. 1989); Sierra Switchboard Co. v. Westinghouse Electric Co., 789 F.2d 705, 709 (9th Cir. 1986); Tignor v. Parkinson, 729 F.2d 977, 980 (4th Cir. 1984). [ ] The United States Court of Appeals for the Second Circuit has rejected the per se rule adopted by the majority and has held that state law must be consulted. In particular, one must determine whether a given cause of action is transferable under state law or is subject to reach of creditors by judicial process." As the Lansberry court noted by its citation of the Ninth Circuit case of Sierra Switchboard, the Ninth Circuit follows the "per se" rule, by which all causes of action generally become the property of the bankruptcy estate. Since the bankruptcy proceeding involved here was pending in the Ninth Circuit, we look specifically to Ninth Circuit law to determine whether plaintiff's claims became assets of the bankruptcy estate.
In Sierra Switchboard, the Ninth Circuit confronted "an issue of first impression" in the Ninth Circuit: "whether the Bankruptcy Reform Act of 1978 broadened the definition of `property' to include a cause of action for emotional distress where such a cause of action could not be reached by creditors under state law." (Sierra Switchboard Co. v. Westinghouse Elec. Corp. (9th Cir. 1986) 789 F.2d 705, 707-708.) The Ninth Circuit found that even "exempt property is initially included in the bankruptcy estate under Section 541," and that " y adopting a comprehensive definition of property, the Bankruptcy Reform Act reduced the bankruptcy court's cumbersome reliance on state law analysis for determining property to be included in the estate." The Ninth Circuit thus concluded that "regardless of whether a personal injury claim is transferable or assignable under state law, such claims become part of the bankruptcy estate under section 541." (Id. at p. 708-709.) (See also In re Creviar (9th Cir. 1987) 820 F.2d 1553, 1556 [citing Sierra Switchboard with approval]; In re Transcon Lines (9th Cir. 1995) 58 F.3d 1432, 1438 [citing Sierra Switchboard with approval].) Thus the court in In re Bronner (9th Cir. 1992) 135 B.R. 645, 647 stated: "A debtor's claim for injuries to the person, even if unliquidated at the time the petition was filed, is property of the bankruptcy estate as of the commencement of the case. [citing Sierra Switchboard]." (See also In re Ellwanger (W.D.Wash. 1
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