I am proud to introduce a contributing "blogger" to the Delaware Bankruptcy Litigation Blog. As a frequent author and speaker on corporate bankruptcy, Michael Temin needs no introduction. Michael is senior counsel with Fox Rothschild, a contributing author to Collier on Bankruptcy, Collier Bankruptcy Practice Guide and co-editor of the Pennsylvania Ethics Handbook (2008). The following is Michael’s summary of a recent Third Circuit decision in the Grossman’s bankruptcy. I want to thank Michael for sharing his work with us and look forward to his future posts on this blog.
In 1984 a Third Circuit panel decided that the automatic stay did not apply to a right to payment which arose under applicable state law after a bankruptcy petition was filed. Avellino & Bienes v. M. Frenville Co., 744 F.2d 332 (3d Cir. 1984). The Third Circuit tradition is that the holding of a panel in a precedential opinion is binding on subsequent panels. Until this year Frenville remained good Third Circuit law notwithstanding universal rejection by other circuits.
In In re Grossman’s Inc., 607 F.3d 114 (3d Cir. 2010), the Third Circuit en banc overruled Frenville. After discussing the conduct test (a claim arises when the acts giving rise to the defendant’s liability were performed, not when the harm caused by the acts was manifested) and the pre-petition relationship test (a claim arises from a debtor’s pre-petition tortious conduct where there is also some pre-petition relationship between the debtor and the claimant), the Third Circuit held that a tort claim arises when an individual is exposed pre-petition to a product or other conduct giving rise to an injury which underlies a “right to payment” under the Bankruptcy Code.