In litigation, the first question is where should the claim be adjudicated. In bankruptcy matters, additional complexity is involved given that bankruptcy court jurisdiction is governed by a separate federal statute. In addition to needing to examine what matters can be heard by the bankruptcy court during the pendency of the bankruptcy case, courts also are asked to review what claims related to a Chapter 11 bankruptcy case can be heard by the bankruptcy court after the plan of reorganization is confirmed and becomes effective. In these situations, courts have held that the bankruptcy court’s jurisdiction narrows after the Chapter 11 plan becomes effective.

The issue was recently considered by the U.S. District Court for the District of Colorado in Centrix Financial Liquidating Trust v. Sutton, (In re Centrix), Case No. 18-cv-02769-RBJ. The court ruled that, unlike a Chapter 11 reorganization case where the debtor emerges from Chapter 11 as an operating business, a bankruptcy court’s jurisdiction does not narrow if the matter involves a liquidating trust whose only purpose is the administration of the bankruptcy estate.

The Claims at Issue