Federal Judiciary

Eleventh Circuit Discusses Split Re whether Requirements of § 303(b) Are Jurisdictional

By A. Benjamin Spencer

[T]he circuits, and other courts, are split on whether the requirements of § 303(b) must be satisfied to convey subject matter jurisdiction over an involuntary case upon the bankruptcy court or whether, instead, they are merely ?substantive matters which must be proved or waived for petitioning creditors to prevail in involuntary proceedings.? In re Rubin, 769 F.2d 611, 614 n.3 (9th Cir.1985). In other words, do the commencement requirements of § 303(b) in Title 11 address the jurisdictional power of the court to hear an involuntary case or, rather, does Title 28 contain the jurisdictional grant and do § 303(b)'s requirements simply constitute elements that must be established to sustain an involuntary proceeding?

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The Second Circuit, on the other hand, has held that § 303(b)'s requirements are subject matter jurisdictional. In re BDC 56 LLC, 330 F.3d 111, 118 (2d Cir.2003). . . . Most courts to consider the issue have reached the conclusion that § 303(b)'s filing requirements are not subject matter jurisdictional. See, e.g., Rubin, 769 F.2d at 614-15; In re Earl's Tire Serv., 6 B.R. 1019, 1022-23 (D.Del.1980); In re Saunders, 379 B.R. 847, 855-57 (Bankr.D.Minn.2007); In re MarketXT Holdings Corp., 347 B.R. 156, 161-62 (Bankr.S.D.N.Y.2006); In re Coppertone Commc'ns, Inc., 96 B.R. 233, 234-35 (Bankr.W.D.Mo.1989); In re Alta Title Co., 55 B.R. 133, 136-37 (Bankr.D.Utah 1985). . . . we find the reasoning of the decisions that hold § 303(b)'s requirements are not subject matter jurisdictional to be more persuasive. . . .

Full post as published by Split Circuits on April 25, 2008 (boomark / email).