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Payne v. Doe

United States District Court, E.D. Virginia, Alexandria Division

March 31, 2017

DOUGLAS PAYNE, Bankruptcy Trustee, Plaintiff,
v.
JOHN DOE Defendant.

          MEMORANDUM OPINION

          T. S. Ellis, III United States District Judge

         This is a personal injury action brought by a trustee in bankruptcy pursuant to his authority under 11 U.S.C. § 704 to recover damages claimed by a debtor who was injured as a result of a hit-and-run accident allegedly caused by the negligence of an unidentified motorist.

         I.

         Plaintiff, Douglas L. Payne, is the federal trustee in the bankruptcy matter of In Re: Earl Calvin Leonard, Jr., Case No., l:15-bk-50784 (E.D. Tn.), and is responsible for protecting the creditors' rights in that case.[1] Earl Calvin Leonard ("Leonard") is the debtor in the above-cited bankruptcy action and the purported victim of a hit-and-run motor vehicle accident that occurred on May 26, 2013, in Fairfax County, Virginia. Defendant, John Doe, is the unidentified motorist who allegedly injured Leonard as a result of his or her negligent operation of a motor vehicle and who also fled the scene of the accident. Accordingly, defendant John Doe is defended by State Farm, the issuer of Leonard's uninsured motorist policy.

         As a result of the injuries Leonard suffered from the May 26, 2013 accident, he incurred significant medical and other expenses which contributed, in part, to his decision to seek bankruptcy protection. Leonard also filed a personal injury action against John Doe in Fairfax County Circuit Court in 2015. (Doc. 1-4.) However, Leonard's state court case was dismissed after the state judge found that the two year statute of limitations had expired. Plaintiff, acting as trustee of Leonard's bankruptcy estate, then filed this case in federal court against John Doe, seeking to recover $1, 000, 000 in damages on behalf of the bankruptcy estate.

         In his original complaint filed in this matter, plaintiff asserted diversity jurisdiction pursuant to 28 U.S.C. § 1332 as the only basis for federal jurisdiction. In support of his jurisdictional claims, plaintiff alleged that: (i) he is the federal bankruptcy trustee and resides in Tennessee, (ii) John Doe is represented by a Virginia insurance company, and (iii) Leonard's medical bills are approximately $1, 000, 000. On February 10, 2017, the defendant moved to dismiss plaintiffs complaint for lack of subject matter jurisdiction, arguing that diversity of citizenship was not sufficiently alleged in the original complaint. Specifically, defendant argued that because the citizenship of John Doe is unknown, true diversity of citizenship cannot be affirmatively alleged. Moreover, defendant asserted that Leonard's uninsured motorist policy issued by State Farm expressly limits liability to $50, 000, and therefore, § 1332's amount in controversy requirement was not satisfied.

         Defendant's motion to dismiss was scheduled for oral argument on March 10, 2017. At the hearing, plaintiffs counsel essentially conceded that diversity jurisdiction did not exist and moved to amend his complaint to assert an alternative ground for federal jurisdiction.[2] Plaintiffs oral motion was granted and he filed his amended complaint alleging a, separate ground for federal jurisdiction - 28 U.S.C. § 1334(c)(2). Immediately following the hearing, the plaintiff also filed a state court complaint against defendant John Doe.

         In response to plaintiffs amended federal complaint, defendant filed a second motion to dismiss, asserting:

(i) that plaintiffs state law claim is barred by res judicata and must be dismissed pursuant to Rule 12(b)(6), Fed. R. Civ. P.;
(ii) that § 1334(c)(2) mandates abstention in this case because: (a) a timely motion for abstention was filed, (b) the case is based on a state law cause of action, (c) the case is related to a title 11 bankruptcy proceeding but is not a "core" proceeding, (d) the action lacks a federal jurisdictional basis absent § 1334, and (e) a parallel state court action exists and can be timely adjudicated; and
(iii) that even if mandatory abstention is not required, permissive abstention is appropriate under § 1334(c)(1).

         Plaintiff filed a response in opposition, arguing simply that federal jurisdiction exists under § 1334 and abstention would delay the bankruptcy proceedings because the trial in this matter is scheduled for May 2017 and the trial in the parallel state court action will likely not to occur until March 2018.

         Based on the arguments raised by the parties, the following issues must be resolved: (i) whether mandatory abstention is required; (ii) whether, if mandatory abstention is not required, permissive abstention is appropriate; and (iii) whether, if abstention is inappropriate, plaintiffs claims are barred by res judicata. The mandatory abstention argument is addressed first because ...


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