Available at: https://larc.cardozo.yu.edu/de-novo/117
Abstract
This Note examines jurisdiction over state torts that arise during a bankruptcy proceeding. Recently, the Ninth Circuit permitted a collateral attack on a state court judgment regarding malicious prosecution in Cogan v. Trabucco. The Ninth Circuit held that federal courts have exclusive jurisdiction over malicious prosecution actions and that abuse of process state torts are completely preempted by federal law. This decision left the debtor without any redress and divested state courts of jurisdiction over cases under its own tort law. This Note argues the Ninth Circuit, in Cogan, erroneously made “related to” jurisdiction exclusive and incorrectly held that federal law completely preempts state abuse of process laws. This Note further argues the Ninth Circuit abandoned its own modern preemption test which deepened a circuit split between the Third Circuit and Seventh Circuit. Finally, this Note argues that the Rooker-Feldman doctrine does apply in Cogan.
Alyssa Knecht’s recent Cardozo Law Review de novo Note, “Bankruptcy Preemption of Malicious Prosecution Actions: Cogan v. Trabucco,” examines a troubling Ninth Circuit decision that managed to turn federal bankruptcy protection into a shield against liability for allegedly abusing the bankruptcy process.
In Cogan v. Trabucco, 114 F.4th 1054 (9th Cir. 2024), Dr. Arnaldo Trabucco filed Chapter 7 bankruptcy. An attorney representing the estate of a former patient filed a nondischargeability action under §§ 523(a)(2)(A) and (a)(6), alleging that Trabucco had caused a “willful and malicious injury.” The Arizona courts subsequently found essentially no evidentiary basis for that accusation.
After the bankruptcy adversary proceeding was dismissed, Trabucco sued the attorney in Arizona state court for malicious prosecution and abuse of process. He initially obtained an $8 million jury verdict, although the Arizona Court of Appeals affirmed only the malicious-prosecution liability determination, reversed on abuse of process, and remanded on damages.
Then bankruptcy preemption swallowed the case.
The Ninth Circuit held that the malicious-prosecution claim arising from conduct in the bankruptcy proceeding was completely preempted by federal bankruptcy law and within exclusive federal jurisdiction. That also allowed a collateral attack on the Arizona judgment despite Rooker-Feldman. (Justia Law)
Preemption Without a Remedy
Knecht identifies the fundamental problem: if federal law eliminates the state-law remedy, what federal remedy replaces it?
The Ninth Circuit pointed to § 105 and Bankruptcy Rule 9011. But neither provides anything resembling a complete substitute for malicious prosecution or abuse of process. State tort law can compensate an injured person for economic loss, reputational harm, emotional distress, litigation expenses, and other damages. Bankruptcy sanctions serve a different purpose.
As Knecht summarizes the problem, the Ninth Circuit effectively replaced Arizona tort law with “no functional equivalent.”
That is a peculiar sort of “complete” preemption: completely eliminate the remedy.
It is particularly questionable under the Ninth Circuit's own modern preemption test, which asks not merely whether Congress intended to displace state law, but whether Congress supplied a substitute federal cause of action.
Even Judge Milan Smith's concurrence in Cogan questioned whether § 105 and Rule 9011 provide the necessary replacement remedy.
The Circuit Split
The Ninth Circuit's approach is hardly universal.
The Third Circuit, in Rosenberg v. DVI Receivables XVII, LLC, 835 F.3d 414 (3d Cir. 2016), and the Seventh Circuit, in In re Repository Technologies, Inc., 601 F.3d 710 (7th Cir. 2010), have taken a narrower approach to bankruptcy preemption. Both focus much more closely on congressional intent and the absence of an adequate substitute federal remedy.
That seems far more sensible. There is certainly a legitimate interest in protecting creditors and attorneys from retaliatory litigation merely because they participated unsuccessfully in a bankruptcy case. But there is an enormous difference between protecting legitimate participation in bankruptcy and granting practical immunity for abusing that process.
And Fortunately, the Fourth Circuit Is Not the Ninth
For North Carolina debtors, the most important case may be Guthrie v. PHH Mortgage Corp., 79 F.4th 328 (4th Cir. 2023).
In Guthrie, a North Carolina debtor brought state-law claims arising from a mortgage servicer's attempts to collect debt following his Chapter 13 discharge. The district court held that the claims were preempted to the extent they depended upon violation of the discharge injunction.
The Fourth Circuit reversed.
The court began with the presumption that Congress did not intend to displace state law. More importantly, it rejected the contention that the availability of contempt under § 105 meant Congress intended bankruptcy remedies to be exclusive. The Fourth Circuit observed that even a detailed federal remedial scheme does not automatically preempt state remedies and concluded that the Bankruptcy Code contains no comparable “special features manifesting Congress's desire for exclusivity.” Guthrie, 79 F.4th at 336–44. (OpenJurist)
The Fourth Circuit's practical observation is even more compelling: a creditor can comply with both bankruptcy law and state debt-collection law simply “by not seeking to improperly collect debts discharged in bankruptcy.” (OpenJurist)
There is an equally straightforward version for Cogan: an attorney can comply with both bankruptcy law and state malicious-prosecution law by not maliciously prosecuting people in bankruptcy court.
That does not seem terribly burdensome.
Guthrie does have an important limitation. PHH expressly waived field preemption, and the majority specifically declined to decide whether state-law claims based upon violations of the automatic stay or conduct occurring during the bankruptcy case would be preempted. (Midpage)
So Guthrie is not a Fourth Circuit rejection of Cogan. But its skepticism toward implied exclusivity is decidedly unfriendly to the Ninth Circuit's reasoning.
North Carolina Bankruptcy Courts: A More Complicated Picture
North Carolina cases make the issue more nuanced.
In Tate v. NationsBanc Mortgage Corp. (In re Tate), 253 B.R. 653 (Bankr. W.D.N.C. 2000), the bankruptcy court held that an N.C. Debt Collection Act claim premised entirely upon alleged violations of federal bankruptcy proof-of-claim procedures was conflict-preempted. The concern was that layering fifty different state remedial schemes onto uniquely federal bankruptcy procedures could interfere with uniform bankruptcy administration.
That distinction—between an independent state-law wrong and merely relabeling a Bankruptcy Code violation as a state-law claim—remains important.
Indeed, the Western District of North Carolina recently applied Tate even after Guthrie.
In Jones v. State Employees' Credit Union (In re Jones), Adv. No. 25-3049 (Bankr. W.D.N.C. Dec. 2, 2025), Judge Laura Beyer considered an NCDCA claim alleging that SECU improperly applied mortgage payments during the debtor's Chapter 13 case. She held that the claim was preempted to the extent it rested upon violations of federal bankruptcy law, but distinguished any claim independently supported by nonbankruptcy law.
Judge Beyer specifically explained why Guthrie did not dictate a different result: Guthrie concerned post-discharge conduct and expressly declined to decide claims involving conduct during the bankruptcy case.
But Jones also rejected a much broader proposition. The court emphasized that it was not holding that a debtor can never pursue state-law remedies for misconduct occurring during bankruptcy. The answer depends on the facts, the nature of the state cause of action, and how thoroughly the claim is intertwined with bankruptcy law. (GovInfo)
That distinction may be critical in a future North Carolina version of Cogan.
A State Tort Does Not Become Federal Just Because Bankruptcy Is Nearby
North Carolina decisions also recognize the difference between having bankruptcy jurisdiction over a state-law claim and transforming that claim into an exclusively federal cause of action.
In Kozec v. Murphy (In re Murphy), 569 B.R. 402 (Bankr. E.D.N.C. 2017), Judge David Warren considered an actual North Carolina malicious-prosecution claim in connection with a § 523(a)(6) nondischargeability proceeding. The court recognized that malicious prosecution was a state-law tort, rather than a right created by the Bankruptcy Code, even though bankruptcy jurisdiction existed over the dispute.
Similarly, litigation in Rodgers v. Preferred Carolinas Realty, Inc. (In re Rodgers) in the Eastern District of North Carolina involved state-law abuse-of-process and related tort claims arising in the context of a bankruptcy adversary proceeding. The courts treated those claims as state causes of action rather than pretending that bankruptcy jurisdiction magically converted them into federal bankruptcy claims. (GovInfo)
That distinction exposes one of the conceptual problems with Cogan: “related to” bankruptcy jurisdiction is not ordinarily synonymous with exclusive federal jurisdiction.
Commentary
The better rule is somewhere between two extremes.
A debtor should not be able to turn every violation of a Bankruptcy Rule, every unsuccessful proof of claim, or every disputed motion into a treble-damage state consumer-protection action. Tate and Jones provide legitimate warnings against simply dressing a bankruptcy procedural violation in state-law clothing.
But that is quite different from saying that anything bad enough to constitute an independent state tort becomes immune from state law merely because it happened inside a bankruptcy case.
That is where Cogan goes badly wrong.
If an attorney maliciously prosecutes someone in state court, state tort law may provide a remedy. If the same attorney does exactly the same thing in bankruptcy court, Cogan says federal law preempts that remedy—even when federal law provides no comparable cause of action.
That does not protect the integrity of the bankruptcy system. It potentially protects those who abuse it.
And perversely, the person losing the protection in Cogan was the debtor.
Bankruptcy preemption should protect the uniform administration of bankruptcy cases. It should not become a judicially manufactured immunity provision for creditors, servicers, debt collectors, or their attorneys.
The Fourth Circuit's reasoning in Guthrie provides a better starting point: courts should not go looking for conflicts between federal and state law where none actually exists. A creditor can obey the discharge injunction and state debt-collection law at the same time. An attorney can comply with Rule 9011 and state malicious-prosecution law at the same time.
And where Congress has provided no federal cause of action remotely equivalent to the state remedy being destroyed, the argument for complete preemption becomes weaker still.
Complete preemption should mean replacement, not erasure.
Otherwise bankruptcy produces a remarkably backwards result: the more intimately the misconduct is connected to the bankruptcy system, the less protection the bankruptcy debtor receives from it.
That is a strange version of the Bankruptcy Code's fresh start.
One useful addition from the further research is Jones v. SECU from December 2025. It prevents the post from overstating Guthrie and, I think, actually strengthens the argument by acknowledging the legitimate distinction between a state claim that merely repackages a Bankruptcy Rule violation and a genuinely independent tort such as malicious prosecution. (casemine.com)
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