Bankruptcy Court Authority And “Personal Injury Tort” Claims? (Arrieta v. Smith)

By: Donald L Swanson

28 U.S.C. § 157(b)(5) provides: “personal injury tort and wrongful death claims shall be tried in the district court in which the bankruptcy case is pending, or in the district court in the district in which the claim arose”

In other words, “personal injury tort” and “wrongful death” claims cannot be tried by a bankruptcy court.

So, the question is this: what qualifies as a “personal injury tort”? This question is addressed in Arrieta v. Smith (In re Smith), Case No. 24-6011 (B.A.P. 8th Cir., decided October 17, 2025), as summarized below.

Facts

Debtor files a Chapter 7 bankruptcy and schedules a former live-in partner as a disputed Creditor for an “unknown” amount.

Creditor, acting pro se, files a proof of claim for a “minimum of $59,767.14,” based upon property purchased on Debtor’s behalf and other reimbursements.

Debtor objects to Creditor’s claim and contends that Creditor abused Debtor psychologically, emotionally, and physically.

Then, Creditor obtains a lawyer, and the finger-pointing escalates.  Creditor, for example, denies Debtor’s claims of domestic abuse and alleges that Debtor is the one with a lengthy criminal history.

Then, Debtor and Creditor reach a settlement, agreeing that Creditor would file an amended claim for $9,000 and that Debtor would withdraw her objection.  But they do not formalize the agreement in writing, nor do they seek or obtain court approval. 

The day after Debtor withdraws her objection to Creditor’s amended claim, Creditor files a new $400,000 proof of claim for “personal injury,” supported by a five-count draft complaint seeking damages for assault, battery, intentional infliction of emotional distress, negligent infliction of emotional distress, and domestic abuse.  The unsigned and undated draft complaint:

• is captioned in the U.S. District Court for the District of Minnesota;
• alleges that only the District Court has jurisdiction under 28 U.S.C. § 157(b)(2)(B) and that the proceeding is “non-core”; and
• requests a jury trial. 

Creditor’s allegations in the draft complaint, applicable to all counts, are that Debtor regularly subjected Creditor to “verbal abuse, emotional abuse, assault, battery, and domestic abuse,” such as:

• using profanity when speaking to him;
• regularly pulling his hair and striking him both with open hands and closed fists, often while he was sleeping;
• once striking him with what he believed was a shoe while he was sleeping;
• giving him a black eye;
• wielding a knife at him in a threatening manner; and
• once sexually assaulting him.

Such actions, Creditor alleges:

• caused Creditor “severe emotional distress,” requiring “almost weekly professional care for over three years for several diagnosed mental health conditions”; and
• caused Creditor to suffer “physical manifestations of fatigue, panic attacks, suicidal ideation, nightmares and other sleep disorders, and stomach and other somatic pain.”

Debtor objects to the new proof of claim, denying all allegations of abusing Creditor, reasserting the years of abuse she endured from Creditor, asserting that the amended claims are untimely (i.e., beyond statutes of limitations under state law and filed more than seven months after the bankruptcy’s claims Bar Date).

Bankruptcy Court Ruling

The Bankruptcy Court conducts two hearings and then sustains Debtor’s objection and disallows Creditor’s claim.  

In its written opinion, the Bankruptcy Court cites two subsections in 28 U.S.C. § 157:

• § 157(b)(2)(B) prohibits a bankruptcy court from liquidating or estimating “personal injury tort or wrongful death claims”; and
• § 157(b)(5) provides that the district court “shall order that personal injury tort and wrongful death claims shall be tried in the district court in which the bankruptcy case is pending, or in the district court in the district in which the claim arose.”

The Bankruptcy Court then:

• observes that the Bankruptcy Code does not define the term “personal injury tort” and that no consensus exits on its definition; and
• construes “personal injury tort” narrowly—excluding from the Bankruptcy Court’s purview only those personal injury torts resulting in bodily injury, reasoning that if Congress intended a broader meaning, it would have written “all torts”;
• holds that Creditor’s claim involves a “mental health condition” and not a bodily injury tort so that the Bankruptcy Court – and not the District Court – has both the jurisdiction and authority to address Creditor’s claim; and
• disallows Creditor’s claim.

Appeal to BAP

Creditor appeals to the Eighth Circuit BAP, which reverses and remands.  What follows is a summary of the BAP opinion on the question of what the phrase “personal injury tort” means.

–“Personal Injury Tort” Claim

Creditor’s complaint states claims for physical injury and trauma arising from assault and battery. And even under the “narrowest” test for a “personal injury tort” claim, assault and battery “clearly constitute personal injury torts”: 

• the Bankruptcy Court’s characterization of Creditor’s claim as merely for damages for a “mental health condition” is an error of law and must be reversed.

–Bankruptcy Court Jurisdiction

A bankruptcy court has jurisdiction, under 28 U.S.C. § 1334(b), over the claims allowance process, but the district court must try personal injury claims for which jury trial rights are preserved. 

Courts are split on how all this works.  For example, courts are split on:

• whether it is only the trial itself that must take place before the district court or whether the bankruptcy judge, acting on pretrial matters, has power to enter dispositive rulings;
• whether the bankruptcy court’s authority is limited to ruling on bankruptcy-related defenses (e.g., timeliness of the filing of the claim) – as opposed to nonbankruptcy law defenses (e.g., a state law statute of limitations); and
• whether it is the bankruptcy court or one of the parties that must request a withdrawal of the reference, since the right to have a district court judge hear a non-core matter can be waived.

–Remand Needed

Since the Bankruptcy Court erred in holding that Creditor’s claim is not a “personal injury tort,” related issues still need to be fully developed in the Bankruptcy Court.  Such issues include:

• how Creditor’s unliquidated personal injury tort claim should (or should not) be liquidated for distribution purposes; and
• whether any defenses apply to disallow the claim.

–Ruling

The BAP rules:

• “Because the bankruptcy court erred in determining that Creditor’s claim was not a “personal injury tort” claim, we reverse and remand for further proceedings consistent with this opinion.”

Conclusion

Very interesting!

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