Delaware Business Bankruptcy Report : Delaware Business Bankruptcy Report : Morris James LLP Lawyers & Attorneys

Creditors of the debtor, Seven Fields Development Corporation, brought an action against an accounting firm employed by the debtor for alleged misconduct occurring during the debtor’s Chapter 11 case, but prior to plan confirmation. The United States Court of Appeals for the Third Circuit found the claims arose in bankruptcy, and the action therefore was a core proceeding. Because the Bankruptcy Court possessed “arising in” jurisdiction, there was no need for the Bankruptcy Court to determine whether the action had a “close nexus” to the bankruptcy case. In dicta, the Third Circuit also decided that when a federal court exercises “related to” jurisdiction, the Court is required to determine whether there is a “close nexus” between the claims asserted and the bankruptcy cases, such determination to be made as of the time that the claims are brought.