U.S. Court of Appeals for the Second Circuit – Bankruptcy – Jurisdiction – Arising In and Arising out of Jurisdiction
Kirschenbaum v. U.S. Department of Labor
Judges Katzmann, Lohier and Droney
Background: The Chapter 7 bankruptcy trustee appealed from an order that held that the Bankruptcy Court did not have jurisdiction to order the trustee and his retained professionals be compensated for their services using the assets of a 401(k) plan governed by the Employee Retirement Income Security Act.
Ruling: The Second Circuit affirmed. The court noted that a bankruptcy court had jurisdiction over proceedings that are found to be arising under the Bankruptcy Code and to hear a proceeding that is otherwise related to a case under the Bankruptcy Code. The payment of compensation for ERISA plan administrators is an issue that arises outside of bankruptcy. Moreover, there is no substantive rights created by Section 704(a)(11) of the Bankruptcy Code, which merely provides a procedural vehicle for the assertion of a right under some other body of law.
Steven B. Sheinwald of Kirschenbaum & Kirschenbaum for the trustee-appellant; Leonard H. Gerson of the United States Department of Labor for the appellee