Chapter 4, C. Noncore: Related To

• Jurisdiction: United States

C. Noncore: Related To

Generally, a "noncore" matter is any matter that is related to a bankruptcy case. "Related to," again, is a term of art. A proceeding is "related to" the bankruptcy case if "the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy."³⁷ This provision has intentionally been interpreted very broadly. Virtually any state court lawsuit can be removed to federal court, and the debtor need not even be a party. "Related to" jurisdiction essentially includes any matter that could conceivably have an impact on the bankruptcy estate or the administration of it.³⁸ The proceeding must be capable of causing an effect on a bankruptcy estate in order for bankruptcy jurisdiction to attach.³⁹

There are various situations in which courts have found that the claims would have an effect on the bankruptcy proceeding. A proceeding to foreclose and collect on a guaranty has been held to be a related proceeding.⁴⁰ A claim against the debtors and a third party for wrongful appropriation of corporate assets was found to be a related proceeding.⁴¹ Further, a proceeding involving an indemnification agreement with the debtor was considered a related proceeding.⁴² A coverage action is typically considered a "noncore" matter.⁴³

Unlike a "core" proceeding, a bankruptcy court's orders on a "noncore" matter are not final and are not subject to the district court's appellate review. Rather, the bankruptcy court may hear the matter but can only submit proposed findings of fact and conclusions of law to the district court.⁴⁴ The district court is empowered to enter the final orders on the matter following de novo review of the bankruptcy court's proposed findings.⁴⁵ Parties are able to object to the bankruptcy court's proposed findings;⁴⁶ however, the district courts are often deferential to the bankruptcy court's proposed findings of fact and conclusions of law.

The bankruptcy court can, however, issue final orders on "noncore" matters, but only if the parties consent to the bankruptcy court being able to do so.⁴⁷ As the Supreme Court recently held, the parties can expressly consent to adjudication of their claims by the bankruptcy court.⁴⁸ At the same time, litigants should be cautious, as consent need not be expressed and their implied consent may be inferred by their actions.⁴⁹ Whether it is express or implied, the consent "must still be knowing and voluntary ... the key inquiry is whether 'the litigant or...