On August 29, 2016, the Third Circuit released a precedential opinion (the “Opinion”) which opined on whether filing an involuntary bankruptcy petition could qualify as tortious interference under state law. The Third Circuit’s Opinion is available here. This Opinion was issued in Rosenberg v. DVI Receivables XVII, LLC, Case No. 15-2622. The District Court had ruled that the tortious interference claim was preempted by § 303(i) of the Bankruptcy Code. The Third Circuit reversed and remanded this case back to District Court. While the background and history of the underlying conflict is extensive, this decision was issued to resolve a narrow question of preemption law. Opinion at *4.
Prior to the instant conflict, Maury Rosenberg and several companies were the target of involuntary bankruptcy petitions. Mr. Rosenberg succeeded in having the involuntary petitions dismissed as the purported creditors were determined not to be their creditors. After a jury trial in Florida District Court, he was awarded compensatory and punative damages totaling $6.1 million.
In August, 2013, Mrs. Sara Rosenberg and several entities, related to those against whom involuntary petitions were filed, brought suit to recover damages stemming from the involuntary petitions. Opinion at *6. Mrs. Rosenberg and the related entities alleged that they suffered extensive losses due to the filing of the involuntary bankruptcy petitions. The defendants argued that these suits were preempted, and the District Court for the Eastern District of Pennsylvania agreed, dismissing the complaint. Thereupon, Mrs. Rosenberg and the related entities appealed to the Third Circuit. After oral arguments, the Opinion was issued.
According to the plain language of Section 303(i), a debtor can recover against involuntary petitioners. However, the litigants in this case were not debtors. As the Third Circuit stated, “As they were not debtors, the Rosenberg Affiliates cannot recover damages from the Defendants under § 303(i).” Opinion at *8. The Third Circuit then examines in detail the principle of federal preemption, holding that preemption does not apply in this case. As provided by the Third Circuit, “we do not lightly infer from congressional silence the intent to deprive some persons of a judicial remedy…” Opinion at *10.
This Opinion creates a split in the Circuits – the Ninth Circuit applied preemption more broadly in the case In re Miles, 430 F.3d 1083 (9th Cir. 2005). Opinion at *13-14. The Third Circuit found that the Miles decision was not persuasive on the issue of preemption. Opinion at *14. The Third Circuit’s reasoning is summarized in the last statement of its analysis: “Absent evidence that Congress actually meant for § 303(i) to be an exclusive remedy, we do not make the same inference.” Opinion at *15.