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UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEW JERSEY
_____________________________________
CLAUSEN MILLER, P.C.
100 Campus Drive, Suite 112
Florham Park, NJ 07932
Phone: 973-410-4130
Carl M. Perri, Esq
Ruth V. Simon, Esq.
Attorneys for James A. Kridel, Jr.
_____________________________________
In Re:

CHAPTER 7

TERESA GIUDICE

Case No. 09-39032

Debtor.

Desc

Judge: Stacey L. Meisel

Hearing Date: 12/6/16 10:00 A.M.

_____________________________________

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MEMORANDUM OF LAW IN SUPPORT OF MOTION
FOR LEAVE TO INTERVENE BY JAMES A. KRIDEL
AND IN OPPOSITION TO MOTION BY TRUSTEE
TO APPROVE SETTLEMENT AND OTHER RELIEF

James A. Kridel, by his attorneys, Clausen Miller, P.C., submits this memorandum in
support of his motion for leave to intervene and in opposition to certain aspects of the Motion to
Approve Settlement, Vacate Stay, Substitute the Trustee as Party Plaintiff in the Kridel Law Suit
and Permit Siegel & Siegel PC to File a Fee Application Based upon Quantum Meruit (the
Motion) filed by Chapter 7 Trustee John W. Sywilok on November 1, 2016.
Mr. Kridel seeks to intervene pursuant to Bankruptcy Rule 2018(a), which authorizes the
Court to permit intervention in a bankruptcy case by any interested entity . . . generally or with
respect to any specified matter. Mr. Kridel qualifies as an interested entity given his status as
the person against whom the proposed lawsuit is sought to be filed. Intervention is permissible
under Rule 2018(a), moreover, where no other entity exists to adequately protect [the proposed
intervenors] position and that intervention would not result in undue delay or prejudice.
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Collier on Bankruptcy 2018.04[3] (Matthew Bender & Co. 2016). At present no other entity
exists in the case that purports to protect Mr. Kridels interests.
With respect to the Motion and Settlement sought to be approved, Mr. Kridel does not
oppose the requested relief in its entirety. Rather, he opposes the following aspects:
(a)

He opposes the Motion and Settlement to the extent they contemplate the

appointment of Messrs. Carlos J. Cuevas and Anthony M. Rainone as special counsel to

prosecute a legal malpractice action to be commenced in state court against Mr. Kridel. If so
permitted, Messrs. Cuevas and Rainone would proceed under an inherent and non-waivable
conflict of interest; and
(b)

He opposes the Motion and Settlement to the extent they would authorize the

lifting of the automatic stay to permit the malpractice action to proceed in state court. Given that

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the cause of action involves property of the estate arising in title 11 and is thus a core
proceeding, the cause of action is one as to which the bankruptcy court and/or district court has
original and exclusive jurisdiction under 28 U.S.C. 1334(e)(1).
BACKGROUND
Although this Court is familiar with many of the facts relating to the Motion and
Settlement, the following summary is provided for the Courts convenience.
Bankruptcy Petition and Guilty Pleas
The debtor, Teresa Giudice, filed her bankruptcy petition in October of 2009. In July of
2013 she and her husband became the subject of a federal criminal indictment. (See state court
Complaint 267, attached as Exhibit A.) In March of 2014 she pled guilty to four criminal
charges out of some 33 total charges. One was for submitting false information to various
lending institutions during the period 2001 to 2008, prior to the filing of her bankruptcy petition.

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(See Defendants Mem. in Support of Motion to Dismiss, 7-8, Exhibit B.) The other three guilty
pleas were to various charges of bankruptcy fraud.
Specifically, as to one of the three bankruptcy fraud charges, the debtor admitted
knowingly and fraudulently concealing property of the bankruptcy estate as of the date of
filing her petition, October 29, 2009. (Id. 8-9.) While Mr. Kridel prepared her petition, the
debtor admitted that she knew it was false, and never alleged that she disclosed the true facts to
Mr. Kridel or that he knowingly participated in her fraud. As to the second bankruptcy fraud
charge, the debtor admitted giving false testimony at several bankruptcy court proceedings
relating to her assets. (Id. 9.) Again, she has never claimed that Mr. Kridel had advance
knowledge concerning the falsity of the testimony she provided. The third fraud charge that she
admitted was that she signed amended financial statements knowing that they were not correct.

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(Id. 9-10.) Once again, she never claimed that Mr. Kridel was knowledgeable of the true facts
that made her statements knowingly false.

State Court Lawsuit Against Mr. Kridel

The bankruptcy case closed in September of 2014, with the debtor earlier having waived
her right to a discharge. (Rec. Doc. Nos. 140, 176.) In July of 2015, however, the debtor filed in
New Jersey state court the malpractice action against Mr. Kridel, her bankruptcy attorney. (See
Exhibit A.) One of the attorneys appearing on the state court Complaint was Mr. Cuevas.
(Exhibit A.) In filing that Complaint, the debtor and Mr. Cuevas effectively tried to blame Mr.
Kridel for the criminal conduct to which she pled guilty. Her Complaint admits that in as many
words. It alleges that because of the conduct of Mr. Kridel, she is now in federal penitentiary
and now a felon. (Exhibit A 4.)

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According to the Trustee, the fact that the state court action was filed was hidden from
the Trustee by the debtors attorneys. (Rec. Doc. 240-1, Sywilok Certification 3.) It was
hidden because, again according to the Trustee, the Kridel law suit is property of the estate.
(Id. 10.A.1.) Of course, if the law suit is property of the bankruptcy estate, it was not an action
that the debtor had standing to bring in her own right. This was a point made by Mr. Kridel in
state court as part of a motion to dismiss. (Exhibit B (Memorandum in Support of Motion to
Dismiss) pp. 18-19.) The point was opposed by the debtor in her opposition memorandum filed
by Mr. Cuevas (See Exhibit C pp. 21-24), and in her opposition to reconsideration filed by both
Messrs. Cuevas and Rainone (Exhibit D pp. 5-18).1
Reopening of Bankruptcy Case
Upon learning of the state court lawsuit, the Trustee immediately moved, on April 29,

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2016, to reopen the bankruptcy case before this Court, agreeing with Mr. Kridel that the lawsuit
constituted property of the estate. (Rec. Doc. Nos. 177-1, 186 .) The debtor opposed the

reopening of the case, once again taking the position that the malpractice action was not the
property of the estate but the debtors personal property. (Rec. Doc. No. 180-2 pp. 13-24.) The
opposition was signed by Messrs. Cuevas and Rainone. On May 24, 2016, this Court entered an
order reopening the bankruptcy case, although the Court made no determination at that time
concerning ownership of the malpractice cause of action against Mr. Kridel. (Rec. Doc. No.
188.) Two days later, on May 26, 2016, the state court dismissed the debtors malpractice action
based on the then newly reopened bankruptcy case. (See Exhibit E.)
Subsequently, the Trustee filed an application with this Court to retain the Siegel &
Siegel law firm to prosecute the malpractice action. (Rec. Doc. No. 202.) That application was
opposed by the debtor, through Mr. Cuevass declaration.
1

The New Jersey Superior Court dismissed the case prior to deciding the reconsideration motion.

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(Rec. Doc. No. 204.)

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declaration, among other things, claimed that the Trustee lacked standing to pursue the claim
against Mr. Kridel because the debtor owns it; and it further impliedly threatened to withhold the
cooperation of the debtor if the Siegel firm were to be retained. (Id. 4, 33, 50-54.) The
Trustee also issued a subpoena to the debtor for documents and her Rule 2004 examination, for
purposes of resolving any potential fact issues concerning ownership of the malpractice cause of
action. The subpoena was served on both the debtor and Messrs. Cuevas and Rainone, who took
no steps to obtain the debtors compliance thereby forcing the Trustee to move for contempt.
(Rec. Doc. Nos. 215 and 215-1.) During a hearing a few days later, on July 18, 2016, however,
this Court ordered the Trustee to mediate with Messrs. Cuevas and Rainone.2 (Rec. Doc. No.
240-1 7.)
The Trustees current Motion is thus based on the Settlement apparently reached as the

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result of the mediation. The settlement concerns the insistence by Messrs. Cuevas and Rainone
that they alone be permitted to prosecute the malpractice action against Mr. Kridel, and it sets

forth the financial terms under which they will prosecute that action. In brief, according to the
Term Sheet that accompanies the Motion (Rec. Doc. No. 240-2), Mr. Cuevas and Mr.
Rainones law firm (Brach Eichler) are to serve as special counsel for the Trustee in
representing the interests of the estate in pursuing the action against Mr. Kridel. The debtor is to
receive 55 percent of the net proceeds of recovery, if any, less administrative costs, which
include attorneys fees for Messrs. Cuevas and Rainone. The Trustee is to receive 45 percent for
distribution to creditors, which include the IRS. The settlement also contemplates that the
Trustee will substitute in as the plaintiff in the malpractice action. (Rec. Doc. No.240.)

This Court issued an order on August 1, 2016 (Rec. Doc. No. 224) authorizing the limited retention of
Siegel & Siegel, although the proposed Settlement, if approved, would appear to make such retention unnecessary.

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ARGUMENT
At the outset, the Court should be aware that Mr. Kridel believes that the malpractice
claims asserted against him are totally false and should be dismissed. He is confident, moreover,
that once the appropriate court becomes aware of the utter absurdity of the claims and of the
bankruptcy crimes to which the debtor has admitted and of which she has been convicted, the
malpractice litigation should quickly come to an end. Mr. Kridels innocence of any wrongdoing
notwithstanding, he believes that two aspects of the settlement contemplated by the Motion must
be rejected as being contrary to the Bankruptcy Code and the jurisdictional requirements of any
lawsuit asserted against him.
I.

MESSRS. CUEVAS AND RAINONE (AND HIS LAW FIRM) ARE

DISQUALIFIED FROM PROSECUTING ANY ACTION AGAINST MR.
KRIDEL ON BEHALF OF THE DEBTORS ESTATE BECAUSE OF THEIR
CONFLICTS OF INTEREST

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The first is the retention of Messrs. Cuevas and Rainone to represent the interests of the

debtors bankruptcy estate in prosecuting the malpractice action. These two attorneys (including
Brach Eichler, Mr. Rainones law firm) are disqualified by virtue of the conflicts of interest
inherent in the positions they have advocated and continue to advocate on behalf of the debtor.
Even though an adverse party, moreover, Mr. Kridel has standing and an obligation to raise the
conflicts of interest before this Court. He initially addresses standing.
A.

Mr. Kridel Has Standing to Raise the Cuevas/Rainone Conflicts

Mr. Kridel has standing to raise the conflicts of interest for the same reasons that certain
defendant excess insurers had standing to object to a debtors retention of special insurance
counsel in In re Congoleum Corp., 426 F.3d 675 (3d Cir. 2005). The law firm involved in that
case, the Gilbert firm, had done pre-petition insurance counseling on behalf of asbestos claimants
against the debtor. Id. at 681. The debtor then filed for reorganization under the Bankruptcy
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Code and sought bankruptcy court approval to retain Gilbert as special insurance counsel. Id. at
682. Among the responsibilities to be undertaken by the firm were steps necessary to assert
claims and recover insurance proceeds from the insurers. Id. Certain of the insurers objected to
Gilberts participation because of conflicts of interest arising by virtue of the duties the firm
owed individual claimants it earlier represented. Id. at 683. The bankruptcy court granted
approval for Gilberts participation despite the conflicts.

Id.

The district court affirmed,

suggesting that the insurers may have had an inappropriate motivation in opposing Gilberts
retention. Id. at 684.
The Third Circuit, however, reversed. It initially addressed the question of standing,
finding that the insurers who, like Mr. Kridel, would be the target of the proposed attorneys
representation had standing. Id. at 685. The court noted, among other things, that the retention

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of the Gilbert firm could affect not only the rights of the insurers but also the underlying

claimants. Id. Importantly, the court went a step further to observe that counsel for the insurers
had:
a responsibility, if not a duty, to alert the Court to ethical conflicts. Rules
governing professional conduct are often viewed as even more necessary and
applicable in bankruptcy cases than in other contexts.
Id. at 686 (emphasis added). The court made reference to the tactical use of disqualification
motions to harass opposing counsel, but nonetheless concluded that counsel for the insurers had
standing to raise and challenge unethical procedures on the part of opposing lawyers. Id.
On the merits of the representation, the Third Circuit analyzed both the New Jersey Rules
of Professional Conduct applicable to conflicts of interest and the relevant bankruptcy

requirements for the retention of counsel. As to the former, the court found that a conflict could
be waived upon informed consent, but that sufficient evidence of waiver was lacking. Id. at

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688, 691. The bankruptcy requirements were contained primarily in 11 U.S.C. 327(a) and (e).
See id. 688-89. Section 327(a) restricts the retention of counsel to disinterested persons who
do not hold or represent an interest adverse to the estate. Section 327(e) likewise restricts the
retention of attorneys to those who are not adverse to the estate, but otherwise permits the
retention of attorneys for a specified special purpose if the attorney earlier represented the
debtor. In Congoleum, the court found that section 327(e) was inapplicable, that the Gilbert firm
was not disinterested under section 327(a), and that waivers under section 327(a) are ordinarily
not effective. Id. at 692. The court therefore reversed the order approving the retention of the
Gilbert firm. Id. at 694.
Similar to the insurers in Congoleum, Mr. Kridel and his counsel have standing to raise
conflicts of interest by Messrs. Cuevas and Rainone as a basis for their disqualification because

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of, among other things, their responsibility, if not a duty, to alert the Court to ethical conflicts.
426 F.3d at 686.
B.

The Conflicts of Interest and Lack of Disinterestedness Disqualify Messrs.

Cuevas and Rainone from Serving as Counsel to the Trustee in Prosecuting
the Malpractice Action
1.

The Actions of Messrs. Cuevas and Rainone Clearly Demonstrate a

Conflict

The Trustee himself has succinctly described why Messrs. Cuevas and Rainone are
disqualified from representing the Trustee. In the response to the debtors opposition to the
application to retain the Siegel & Siegel firm, the Trustee, through his counsel, stated:
Cuevas and Rainone are disqualified from representing the Trustee in Bankruptcy
in the Kridel Lawsuit because they have taken positions adverse to the interest of
estate; to wit, that the Debtor is the owner of the claims in the Kridel lawsuit and
they have refused to cooperate in producing the Debtor pursuant to the Trustees
Amended Rule 2004 Subpoena returnable as to document demand on July 13,
2016 and to testimony of the Debtor on July 20, 2016 at 10:00 a.m.

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(Rec. Doc. No. 223 8 (emphasis added).) The adversity of these two attorneys to the interests
of the estate, including their lack of cooperation, is longstanding and continues:
(a)

One of them filed the state court malpractice action without informing the
Trustee, so as to hide it from the Trustee based on their incredulous theory that the
lawsuit was not the property of the estate, a position directly contrary to the
interests of the estate. (Rec. Doc. 240-1 10.A.1.)

(b)

They repeatedly took the same adverse position in response to Mr. Kridels
motion to dismiss in state court. (Exhibit C pp. 21-24, Exhibit D pp. 5-18.)

(c)

In this Court Messrs. Cuevas and Rainone took an adverse position to the Trustee
and the interests of the estate by opposing the re-opening of this bankruptcy case
and filing a 25-page brief in which they argued that the malpractice cause of

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action was not the property of the estate. (Rec. Doc. No. 180-2.)

(d)

Again in this Court, Messrs Cuevas and Rainone took an adverse position to the
Trustee and the interests of the estate by opposing retention of the Siegel & Siegel
law firm to prosecute the malpractice action, arguing once more that the cause of
action belonged to the debtor, not to the estate. (Rec. Doc. No. 204 4, 33.)

(e)

As part of the same opposition, these attorneys through not-so-veiled threats,

suggested that the debtor might not cooperate with the Trustee if Siegel & Siegel
were retained, rather than Cuevas and Rainone, in that the debtor might withhold
privileged information, that she may not be willing to devote time to prosecute the
malpractice action, and that she generally lacked trust in the Trustee. (Id.
50-54.)

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Messrs Cuevas and Rainone further opposed the interests of the estate by refusing
to submit the debtor to discovery in response to the subpoena served by the
Trustee, requiring that he file a contempt motion. (Rec. Doc. Nos. 215 and 2151.)

(g)

Messrs. Cuevas and Rainone further demonstrated their adversity to the interests
of the estate as part of their negotiations with the Trustee over who should
represent the debtor in the malpractice action. Once again, according to the
Trustee, they threatened the lack of cooperation by the debtor by stating that she
will not cooperate with Siegel & Siegel if they were to represent her instead of
Cuevas and Rainone. (Trustees Certification in Support of Motion to approve
Settlement, Rec. Doc. No. 240-1 10 B.)

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(h)

They further demonstrated their adversity through their propensity to harass and
run up Trustees expenses until they get their way. (Id. C.)

The foregoing circumstances establish that Messrs. Cuevas and Rainone have occupied
and advocated, and continue to occupy and advocate, interests adverse to the debtors estate.
Indeed, the entire Settlement arises from that adversity. In his Certification, the Trustee states
his confidence, as he has many times before, that if this Court were to decide the matter, it
would rule that the Kridel law suit is property of the estate. (Id. 10.A.1.) Messrs. Cuevas and
Rainone, however, have never agreed to that position and continue to oppose it. That continued
opposition has resulted in their claiming for the debtor directly contrary to the interests of the
estate -- 55 percent of the proceeds from a lawsuit, from which they expect to receive a
substantial fee. Their seizing for the debtor the majority portion of the claim that is rightfully the

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property of the estate constitutes the ultimate showing of adversity and disregard that these two
attorneys have for the rights and interests of the estate and creditors.
The Settlement thus has no benefit to the estate whatever and constitutes only detriment.
Concerning in particular the faux benefit of avoiding the debtors lack of cooperation with the
Trustees chosen counsel if she does not get her way, make no mistake about it: the debtor has
an absolute obligation to cooperate with the Trustee in all his duties. 11 U.S.C. 521(a)(3)
(imposing on the debtor in a chapter 7 case the duty to cooperate with the trustee as necessary to
enable the trustee to perform the trustees duties under this title). One of those duties is to
collect and reduce to money the property of the estate . . . . 11 U.S.C. 704(a)(1). A failure
by a debtor to cooperate gives rise to sanctions for contempt. See, e.g., In re Sann, No. 1461370-7, 2016 Bankr. Lexis 1085, at *11, 16-17 (D. Mont. 2016) (noting debtors obligation to

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cooperate under section 521(a)(3) and imposing contempt sanctions for failure to do so). By

threatening the debtors lack of cooperation, Messrs. Cuevas and Rainone not only demonstrate
their contempt for the interests of the estate and its creditors, but they do so in a manner that
could give rise to sanctions against the debtor.
2.

The Conflict Disqualifies These Attorneys Both Under the Rules of

Professional Responsibility and the Bankruptcy Code

The conflict created by the actions of Messrs. Cuevas and Rainone potentially violates
New Jersey Rule of Professional Conduct 1.7(a). That rule prohibits a lawyer from representing
a client if the representation involves a concurrent conflict of interest. It further defines a
concurrent conflict of interest as existing where, in among other circumstances:

the

representation of one client will be directly adverse to another client. By representing the
debtor in the malpractice action and claiming for her 55 percent of the proceeds, while at the
same time purporting to represent the Trustee and estate in the same action, Messrs. Cuevas and
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Rainone are acting directly adverse to the estate, within the prohibition of Rule 1.7(a). Their
actions are adverse for the very reasons stated above: in the absence of the intervention of these
two attorneys, the estate would be entitled to 100 percent of any proceeds, not just 45 percent.
The conflict that arises is direct and substantial.
Rule 1.7(b) permits a waiver of the conflict, if the waiver is accomplished by informed
consent, confirmed in writing by each affected client. The Trustees Motion, however,
discloses no express waiver. And even if the Motion itself could be construed as a waiver by the
Trustee, no waivers are provided for the many creditors whose interests the Trustee represents.
See Congoleum, 426 F.3d at 691 (noting lack of effective waivers).
Apart from Rule 1.7, the retention of Messrs. Cuevas and Rainone must meet the
requirements of 11 U.S.C. 327, pertaining to the employment of professionals. Section 327(e)

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applies to the trustees retention of counsel for a specified special purpose, but only where the

attorney has represented the debtor in the past and does not hold any interest adverse to the . .
. estate with respect to the matter on which such attorney is to be employed. Messrs. Cuevas
and Rainone fail under this section for two reasons. One is the language has represented the

debtor, which has been construed to mean has represented the debtor at some point prior to the
commencement of the bankruptcy case. In re J.S. II, L.L.C., 371 B.R. 311, 319 (N.D. Ill. 2007)
(citing cases). No evidence exists of record that these two attorneys represented the debtor prior
to the commencement of her bankruptcy case in 2009, and they do not qualify for that reason.
The second reason, of course, is that the two attorneys have had and continue to have an interest
in the litigation adverse to the estate, for the reasons set forth above.

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That leaves only section 327(a) as a basis for their retention. That section requires that
the professional in question not hold or represent an interest adverse to the estate and also
constitute a disinterested person. The term disinterested person requires that the attorney:
not have an interest materially adverse to the interest of the estate or any class of
creditors or equity security holders, by reason of any direct or indirect relationship
to, connection with, or interest in, the debtor, or for any other reason.
11 U.S.C. 101(14)(c). Obviously, Messrs. Cuevas and Rainone fail to qualify. It is by virtue
of their seeking to insert themselves in the estates cause of action that the estate is being
potentially deprived of 55 percent of any recovery in the lawsuit. Their lack of disinterest could
not be more obvious. See In re Marvel Entertainment Group, 140 F.3d 463, 477 (3d Cir. 1998)
(Section 327(a) presents a per se bar to the appointment of a law firm with an actual conflict).
The Motion and Settlement therefore should be rejected to the extent it involves the

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retention of Messrs. Cuevas and Rainone to prosecute the malpractice action against Mr. Kridel.
Any order approving the application for their retention should be vacated.
II.

THE MALPRACTICE ACTION SHOULD BE LITIGATED IN FEDERAL

COURT
The Trustees Notice of Motion (Rec. Doc. No. 240) and Proposed Order (Rec. Doc. No.

240-3) contemplate that, as part of the proposed Settlement, this Court would lift the automatic
stay applicable to the previously filed and now-dismissed state court malpractice action brought
against Mr. Kridel. Mr. Kridel opposes any action by this Court that would authorize litigation
against Mr. Kridel in state court. If the malpractice action is to proceed, it should and must
proceed in federal court, for the following two reasons.
First, the malpractice action involves the property of the estate, is within this Courts
arising in jurisdiction under 28 U.S.C. 1334(b), and is a core proceeding under 28 U.S.C.
157(b)(1). This Court therefore plainly has jurisdiction over the action.
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Many cases hold that malpractice actions against professionals providing services during
the course of the bankruptcy case itself involve core proceedings under section 157(b)(1).
Geruschat v. Ernst Young LLP, 505 F.3d 237 (3d Cir. 2007), for example, involved an
accounting malpractice action filed against the bankruptcy estates accountants several years
after the bankruptcy proceedings closed. Id. at 242-43. The defendant accountants removed the
action from state court to bankruptcy court, and then moved to dismiss. The state court plaintiffs
moved to remand. Id. at 242. The bankruptcy court reopened the case, denied the motion to
remand, and granted the accountants motion to dismiss. Id. One of the issues in the case was
whether the malpractice action constituted a core proceeding. The bankruptcy court held that it
did, and, on appeal to the district court, that court agreed:
We agree that [appellants] state court action arises in bankruptcy and that it is a
core matter. [Appellants] claims of professional negligence were based on
services provided during the bankruptcy, under the supervision of, and subject to
the approval of, the bankruptcy court. As such, they implicate the integrity of the
bankruptcy process.

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346 B.R. at 125, quoted at 505 F.3d at 259. On further appeal, the Third Circuit agreed with the
district court that the bankruptcy court had core jurisdiction in this case, and also agreed with
the lower courts conclusion that there was arising in jurisdiction under section 1334(b) and
157(b)(1). 505 F.3d at 260; see also id. at 262 (we have no doubt that the bankruptcy and
district courts correctly found that appellants asserted their alleged malpractice claims in a core
proceeding that arises in the bankruptcy case).
Similar results have been reached in other courts. The court in Galloway v. Bond, Botes
& Stover, P.C., 597 F. Supp. 2d 767 (S.D. Miss. 2008), summarized the case law as follows:
Nearly all courts to have considered the issue have held that a debtors or
trustees suit against his attorneys or other estate professionals alleging
malpractice in a bankruptcy case is a core proceeding, reasoning that where the
malpractice occurs in the bankruptcy proceeding itself, the alleged malpractice
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could not have occurred but for the bankruptcy and thus the claim arises in the
bankruptcy.
Id. at 680 (citing 12 cases in support). See also Baker v. Simpson, 613 F.3d 346, 351 (2d Cir.
2010) (The adjudication of Bakers malpractice and other claims was an essential part of
administering the estate and therefore implicated the bankruptcy courts core jurisdiction).
No question therefore exists that the action against Mr. Kridel is one over which this
Court has jurisdiction as a core proceeding.
Second, being property of the estate and involving a core proceeding, the action against
Mr. Kridel is subject to the exclusive jurisdiction of the district court as provided for in 28
U.S.C. 1334(e)(1) as follows:
(e) The district court in which a [bankruptcy] case under title 11 is commenced or
is pending shall have exclusive jurisdiction

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(1) of all the property, wherever located, of the debtor as of the
commencement of such case, and of property of the estate . . . .

Under this section, the district court in which the bankruptcy case was commenced including
the bankruptcy court itself, which handles cases by referral from the district court (see 28 U.S.C.
157(a)) has exclusive jurisdiction of property of the bankrupt estate. Since that property
includes the kind of malpractice actions sought to be brought against Mr. Kridel, section
1334(e)(1), by its literal terms, gives the district court and/or this Court exclusive jurisdiction.
Referencing this section, for example, the court in Mata v. Eclipse Aerospace, Inc., 435 B.R.
894, 904-05 (Bkr. D. Del. 2010), found that it has exclusive jurisdiction to determine whether or
not [designated property] was property of the estate at the time of the sale. Other courts have
reached a similar conclusion and, once again, have held that determining what constitutes estate
property is a core proceeding subject to the bankruptcy courts jurisdiction pursuant to 28

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Memorandum of Law Page 16 of 16

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U.S.C. 157(b). Kraken Investments Limited v. Jacobs, 475 B.R. 9, 29 (S.D.N.Y 2012) ([T]he
determination of what property constitutes the bankruptcy estate is a core proceeding).
Accordingly, given that the cause of action involves property of the estate arising in
title 11 and thus a core proceeding, the cause of action is one as to which this Court should retain
jurisdiction under both sections 157(b) and 1334(e)(1).
III.

CONCLUSION
Accordingly, Mr. Kridel respectfully asks this Court to deny the Motion and reject the

Settlement to the extent they purport to authorize (a) Messrs. Cuevas and Rainone to prosecute
the malpractice action against Mr. Kridel, and (b) the filing or pursuit of the malpractice action in
state court. If the malpractice action goes forward, it should go forward in federal district court
or bankruptcy court with other counsel selected by the Trustee.

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Respectfully Submitted:

s/Carl M. Perri
Carl M. Perri, Esq.
Ruth V. Simon, Esq.
Clausen Miller P.C.
100 Campus Drive, Suite 112
Florham Park, NJ 07932
Phone: 973-410-4130
Dated: November 22, 2016

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