Morgan v. Group Health Plan Inc.

Background

Ashley N. Morgan alleged that Group Health Plan Inc., doing business as Park Nicollet Health Care Products, attempted to collect a debt from her after she filed for bankruptcy. Count One alleged a violation of the automatic-stay provision in 11 U.S.C. § 362. Count Two alleged the state-law tort of invasion of privacy.

Group Health moved to dismiss or, alternatively, to refer the bankruptcy-stay claim to the Bankruptcy Court under 11 U.S.C. § 157 and Local Rule of the Bankruptcy Court for the District of Minnesota 1070-1. It also asked the court to decline supplemental jurisdiction over the state-law claim and dismiss that claim without prejudice. Supplemental jurisdiction allows a federal court to hear certain state-law claims connected to a federal claim.

Parties’ Positions

Group Health argued that the automatic-stay claim should be referred because violations of the automatic-stay provisions are considered core proceedings under the Bankruptcy Code. Morgan acknowledged that the court could grant the requested relief but opposed referral. She argued that the case was already well underway, that Group Health had waited many months before seeking referral, and that the matter might later return to District Court for a jury trial or an appeal from a Bankruptcy Court ruling.

Court’s Analysis

The court adopted the reasoning of a recent District of Minnesota decision, which concluded that an automatic-stay claim should be referred to the Bankruptcy Court and that a related state-law privacy claim should be dismissed. The court also addressed the timing of Group Health’s request. It agreed that Group Health should have sought referral earlier, but concluded that Morgan had not shown that the delay caused prejudice, unnecessary duplication of effort, or a meaningful change in the parties’ settled expectations. The court noted that neither side argued that discovery already exchanged could not be used in the Bankruptcy Court.

Because the court referred the automatic-stay claim, no federal claim remained before it. The court therefore declined to exercise supplemental jurisdiction over the state-law invasion-of-privacy claim under 28 U.S.C. § 1367(c)(3).

Disposition

The court granted Group Health’s Motion to Dismiss or, Alternatively, to Refer Claim to Bankruptcy Court. It referred Count One to the Bankruptcy Court and directed the Clerk of Court to arrange the referral. It dismissed Count Two without prejudice.