D. Federal Preemption of State Law. PNH, Inc. v. Alfa Laval Flow, Inc.

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1 D. Federal Preemption of State Law PNH, Inc. v. Alfa Laval Flow, Inc. 130 OHIO ST. 3D 278, 2011-OHIO-4398, 958 N.E. 2D 120 DECIDED SEPTEMBER 7, 2011 I. INTRODUCTION PNH, Inc. v. Alfa Laval Flow, Inc. 1 ( PNH ) presented the Supreme Court of Ohio with the issue of whether the United States Bankruptcy Code has preempted state-law claims for abuse of process and tortious interference with contract when the alleged misconduct occurred during a bankruptcy court proceeding. 2 Being a question of first impression in Ohio, the majority relied on precedent from other jurisdictions. 3 Acknowledging a split in authority, the majority adopted the view of those jurisdictions favoring federal preemption of certain state law claims that result within a bankruptcy proceeding. 4 The court affirmed the appellate court s decision, holding that dismissal of the state-law claims due to lack of jurisdiction was appropriate. 5 This decision broadly swept many areas of state law causes of action that occur during bankruptcy proceedings under the rug of federal law this may prove to be overly aggressive. II. STATEMENT OF FACTS AND PROCEDURAL HISTORY The incidents giving rise to this suit date back to January 2001 when Ronald Creatore, William Sayavich, and David Barnitt established a holding company named U.S. Sanitary Corporation ( USSC ) in an effort to purchase the stock of Girton, Oakes & Burger, Inc. ( GO&B). 6 At that point in time, Alfa Laval Flow, Inc. ( Alfa Laval ), which manufacture[d] equipment for sanitary processing of food and beverages, sold its products to locales in Ohio, New York, and western Pennsylvania exclusively through GO&B Ohio St. 3d 278, 2011-Ohio-4398, 958 N.E.2d 120 (2011). 2. Id. at 281, 2011-Ohio , 958 N.E.2d at See id. at 281, 283, 2011-Ohio , 22, 958 N.E.2d at 123, Id. at 285, 2011-Ohio , 958 N.E.2d at See id., 2011-Ohio , 958 N.E.2d at PNH, Inc. v. Alfa Laval Flow, Inc., 130 Ohio St. 3d at 279, 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at

2 1182 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 When drafting the agreement to form USSC, Creatore, Sayavich, and Barnitt agreed to confidentiality and noncompetition provisions. 8 Furthermore, they borrowed a loan from Provident Bank as a means to finance the ensuing purchase of GO&B. 9 Once the purchase had gone through, all three took on executive level positions within the newly acquired GO&B Creatore notably as president. 10 Soon after the purchase, and unexpectedly to the new acquirers, Alfa Laval ended its exclusive distribution through GO&B. 11 In response, GO&B launched a private label line of similar products to compete with those it sold for Alfa Laval. 12 By 2003, GO&B was faced with two problems: (1) it owed Alfa Laval over $1 million, and (2) Provident Bank was seeking foreclosure on its loan. 13 In an effort to place itself in a better position if foreclosure occurred, Alfa Laval offered to purchase GO&B s intangible assets and transfer the distributorship of its products to a competitor. 14 Creatore refused the offer and chose instead to form another company, PNH, Inc. ( PNH ), in order to purchase the outstanding loan with Provident Bank. 15 By March 2003, Creatore had fired Sayavich and Barnitt due to accounting errors that were submitted to Provident Bank. 16 At that time, Creatore also informed Alfa Laval that both former executives were bound by the confidentiality and noncompetition provisions. 17 In spite of this, it is alleged that Sayavich and Barnitt notified Alfa Laval of GO&B s line of competing products and Creatore s intentions to purchase the outstanding loan with Provident Bank through PNH, Inc. 18 In late April 2003, PNH closed on purchasing the loan from Provident Bank. 19 On the same day, Alfa Laval and two other GO&B creditors filed an involuntary-bankruptcy provision against GO&B in the United States Bankruptcy Court for the Northern District of Ohio, and the court appointed an interim trustee to assume control over GO&B s management. 20 Creatore responded by 8. Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at PNH, 130 Ohio St. 3d at 279, 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at PNH, 130 Ohio St. 3d at 279, 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at 122.

3 2012] PNH, INC. V. ALFA LAVAL FLOW, INC forming another company, Diversified Process Components, to manufacture and distribute competing products. 21 In May 2003, Alfa Laval filed an adversary complaint in bankruptcy court against Creatore and his shell companies alleging that he had diverted corporate assets and opportunities from GO&B and wrongfully used [Alfa Laval s] confidential design specifications to start a competing enterprise manufacturing knock-off products. 22 Alfa Laval sought an injunction from all operations of Creatore by enforcing the confidentiality and noncompetition provisions of USSC s incorporating documents. 23 In May 2005, Creatore and PNH filed this suit in state court against Alfa Laval asserting claims for defamation, tortious interference with contract, and abuse of process. 24 In the complaint, Alfa Laval was alleged to have improperly used the adversary proceeding to eliminate Creatore and [his companies] as competitors, an objective not permitted by bankruptcy law. 25 Nearly two and half years later, on January 7, 2008, summary judgment was granted against Creatore and PNH on the defamation claim. 26 On February 2, 2009, the court dismissed the abuse of process and tortious interference with contract claims on the basis of lack of jurisdiction, holding that those causes of action had been preempted by federal bankruptcy law. 27 On appeal, the appellate court affirmed the trial court s dismissal concluding that allowing such state law remedies would undermine the uniformity of the bankruptcy process and deter parties from exercising federal rights created by the Bankruptcy Code. 28 The appeals court added that because the bankruptcy law already provided remedies for abuse of bankruptcy proceedings, it was evident that Congress intended to preempt state-law tort claims arising from the misuse of those proceedings. 29 On appeal to the Supreme Court of Ohio, Creatore and PNH emphasized the presumption that unless the intent of Congress is clear and manifest.... Congress has not preempted state-law causes of action and, therefore, federal law would not preempt state law. 30 They further argued 21. PNH, 130 Ohio St. 3d at 279, 2011-Ohio , 958 N.E.2d at Id. at , 2011-Ohio , 958 N.E.2d at Id. at 280, 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at PNH, 130 Ohio St. 3d at 280, 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at 123 (citing PNH v. Alfa Laval Flow, Inc., 189 Ohio App.3d 704, 719, 940 N.E.2d 577, (2010)). 29. Id., 2011-Ohio , 958 N.E.2d at 123 (citing PNH, 189 Ohio App.3d 704, 719, 721, 940 N.E.2d 577, , 591 (2010)). 30. Id., 2011-Ohio , 958 N.E.2d at 123.

4 1184 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 that because Congress granted state courts concurrent jurisdiction over matters that were not core to the bankruptcy proceeding but only related to a bankruptcy proceeding, the causes of action before this court were not to be preempted. 31 Alfa Laval responded to the complaint by arguing that other jurisdictions, such as the Sixth and Ninth Circuit Courts of Appeals and the Supreme Court of Pennsylvania, have held that state-law causes of action for misconduct and improper filings in bankruptcy proceedings are preempted by federal law. 32 III. DECISION AND RATIONALE A. Majority Opinion by Justice O Donnell Justice O Donnell, writing for the majority, began his analysis by looking at the Supremacy Clause of the United States Constitution. 33 Reviewing historic precedent, Justice O Donnell recognized that, unless there is clear intent by Congress to preempt state law within the federal statute s language, there remains a presumption that federal law shall not supersede state law. 34 He concluded that unless Congress has manifested its intent to preempt state-law claims alleging the abuse of a bankruptcy proceeding, the Bankruptcy Code will be construed to adopt, rather than to displace, pre-existing state law. 35 The majority next addressed the Bankruptcy Clause and the Bankruptcy Code. 36 Quoting the United States Constitution, Justice O Donnell acknowledged Congress power [t]o establish.... uniform Laws on the subject of the Bankruptcies throughout the United States. 37 Justice O Donnell recognized, however, that the Supreme Court of the United States has interpreted this Clause as having an inherent limitation on Congress power: requiring bankruptcy laws [to] be uniform throughout the United States. 38 As a means to sustain this uniformity, the majority referred to Congress enactment of the Bankruptcy Code, which vested federal district courts with original and exclusive jurisdiction over bankruptcy cases, including the 31. PNH, 130 Ohio St. 3d at , 2011-Ohio , 958 N.E.2d at Id. at 281, 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at See id. at , 2011-Ohio , 958 N.E.2d at Id. at 282, 2011-Ohio , 958 N.E.2d at 124 (quoting BFP v. Resolution Trust Corp., 511 U.S. 531, (1994)). 36. PNH, 130 Ohio St. 3d at 282, 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at 124 (quoting U.S. CONST. art. I, 8, cl. 8). 38. Id., 2011-Ohio , 958 N.E.2d at 124 (quoting Ry. Labor Executives Assn. v. Gibbons, 455 U.S. 457, 468 (1982)).

5 2012] PNH, INC. V. ALFA LAVAL FLOW, INC involuntary-bankruptcy and adversary proceedings at issue before the court. 39 However, the majority acknowledged that there still exists a split of authority regarding whether the Bankruptcy Code preempts state-law causes of action that allow the recovery of damages for a litigant s abuse of a bankruptcy court proceeding. 40 Justice O Donnell first addressed precedent in Texas, where federal preemption over these types of claims is not favored. 41 The Texas court, in recognizing that the Bankruptcy Code establishes various remedies and sanctions to deter the abuse of bankruptcy proceedings, distinguished between the bankruptcy provisions created by Congress that manifest the intent to preempt state law and those adopted from existing remedial scheme[s] in federal civil litigation... which do not. 42 In a case that dealt with a malicious-prosecution claim, the Texas court held that [b]ecause Congress had not provided any custom-built remedies for the wrongful use of bankruptcy proceedings but had merely imported the existing federal scheme, Congress, therefore, did not intend to preempt such claims. 43 In addressing the issue of uniformity of bankruptcy law, the Texas court held that the claim before it does not affect bankruptcy court proceedings because [the claim] arise[s] only after the underlying case reaches a final judgment, 44 and, therefore, would neither conflict[] with the federal laws that were expressed, nor... hinder the advancement of the policies embodied therein. 45 Justice O Donnell looked also to other jurisdictions that, as Texas, held that preemption of state-provided remedies for misconduct in bankruptcy proceedings was unnecessary. 46 Justice O Donnell next contrasted jurisdictions that have held in favor of federal preemption. 47 These jurisdictions, the majority noted, argue that because the uniformity of bankruptcy law is a constitutional requirement as well as a practical necessity, Congress has implicitly preempted state law tort claims that would allow for recovery for misconduct committed in 39. Id., 2011-Ohio , 958 N.E.2d at 124 (citing 11 U.S.C. 303 (2011); 28 U.S.C. 1334(a), (b), (e) (2011); Cohen v. Bucci, 905 F.2d 1111, 1112 (C.A ); Glannon v. Garrett & Assocs., Inc., 261 B.R. 259, 264 (D. Kan. 2001); 1 RESNICK & SOMMER, COLLIER ON BANKRUPTCY 3-5 (16th ed. 2010)). 40. Id. at 283, 2011-Ohio , 958 N.E.2d at PNH, 130 Ohio St. 3d at 283, 2011-Ohio , 958 N.E.2d at 125 (citing Graber v. Fuqua, 279 S.W.3d 608 (Tex. 2009). 42. Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at 125 (quoting Graber, 279 S.W.3d at 615). 44. Id., 2011-Ohio , 958 N.E.2d at 125 (quoting Graber, 279 S.W.3d at 617). 45. Id., 2011-Ohio , 958 N.E.2d at 125 (quoting Graber, 279 S.W.3d at 620). 46. See PNH, 130 Ohio St. 3d at , 2011-Ohio , 958 N.E.2d at 125 (referencing cases in California, New Jersey, and Florida). 47. Id. at 284, 2011-Ohio , 958 N.E.2d at

6 1186 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 bankruptcy cases. 48 Arguments in favor of preemption are based on the fear that if litigants were allowed to assert state law claims to redress wrongs under the Bankruptcy Code, state law would define the standard of conduct for litigants in federal bankruptcy court proceedings, establishing standards that vary from state to state and disrupt the uniformity of bankruptcy law that Congress had intended to promote. 49 The majority acknowledged the emphasis that these jurisdictions place on Congress enactment of a complex, detailed, and comprehensive statutory scheme that provides a number of remedies designed to preclude the misuse of the bankruptcy process. 50 These courts argue that the existence of federal remedies demonstrates that Congress recognized the need to deter the abuse of bankruptcy proceedings and... [that it did not] intend for states to supplement the federal remedies it provided. 51 Agreeing with this line of reasoning, the majority adopted the view that preemption is the best alternative in actions alleging misconduct in bankruptcy proceedings. 52 The court favored the preservation of uniformity argument and reasoned that [p]ermitting additional state-law claims for misconduct occurring during a bankruptcy proceeding would... impermissibly disrupt the uniformity of bankruptcy law by establishing separate remedies for Ohio litigants in a field of law that Congress intended to occupy exclusively. 53 Justice O Donnell concluded his opinion by affirming the lower courts holdings that abuse of process and tortious interference with contract are claims resulting from misconduct during a bankruptcy court proceeding and are preempted by federal law. 54 B. Dissenting Opinion by Justice Lanzinger In her dissenting opinion, Justice Lanzinger s principal argument was that Alfa Laval failed to show that the state-law claims for abuse of process 48. Id., 2011-Ohio , 958 N.E.2d at (citing Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 426 (C.A ); MSR Exploration, Ltd. v. Meridian Oil, Inc., 74 F.3d 910, 915 (9th Cir. 1996); Glannon v. Garrett & Assocs., Inc., 261 B.R. 259, 265 (D. Kan. 2001); Koffman v. Osteoimplant Technology, Inc., 182 B.R. 115, 125 (D. Md. 1995); Lewis v. Chelsea G.C.A. Realty Partnership, L.P., 86 Conn. App. 596, 605 (2004); Stone Crushed P ship v. Kassab, Archbold, Jackson & O Brien, 589 Pa. 296, 315 (2006)). 49. Id., 2011-Ohio , 958 N.E.2d at 126 (citing MSR Exploration, 74 F.3d at ; Glannon, 261 B.R. at 265; Stone Crushed P ship, 589 Pa. at 315). 50. Id., 2011-Ohio , 958 N.E.2d at 126 (quoting MSR Exploration, 74 F.3d at 914). 51. PNH, 130 Ohio St. 3d. at 285, 2011-Ohio , 958 N.E.2d at 126 (citing MSR Exploration, 74 F.3d at 915; Stone Crushed P Ship, 589 Pa. at 314). 52. Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at 127.

7 2012] PNH, INC. V. ALFA LAVAL FLOW, INC and tortious inference with contract have been preempted by federal law. 55 The dissent labeled the majority s decision to quickly discredit a state s right to handle such claims as almost cavalier-like. 56 Justice Lanzinger referenced a recent Supreme Court of the United States case in which it was held that there exists a restrictive view of the authority of bankruptcy courts... [and] there are times when they must abstain in state matters. 57 In Justice Lanzinger s opinion, because Ohio recognizes both tortious interference with contract and abuse of process as tort, [and this case is one] in which neither party is the bankruptcy debtor and [one] in which resolution of the litigation will not affect the bankruptcy estate, the state-court claims are not preempted by the federal bankruptcy law. 58 The dissent first addressed the preemption standard and how the two state law claims have traditionally been matters of state regulation. 59 Justice Lanzinger acknowledged that although the key to the preemption inquiry is the intent of Congress[,] 60 there is also a well-established presumption against imputing to Congress intention to preempt an area that traditionally has been left to state regulation. 61 Looking at the tortious interference with contract claim, Justice Lanzinger concluded that not only does Ohio recognize this cause of action, but also the elements of the [claim] arose before the filing and therefore encompass more than just a cause of action over improper bankruptcy. 62 The dissent looked next at the abuse of process claim and argued that not only is this type of claim a common cause of action in Ohio, but, in this case, it is also one that has been brought after the fact for allegedly improper actions taken by a nondebtor against another nondebtor litigants which are not your typical bankruptcy parties. 63 Justice Lanzinger next addressed Congress intention regarding the jurisdiction of the Bankruptcy Court. 64 She argued that although district courts have original and exclusive jurisdiction of all cases under title Id. at 286, 2011-Ohio , 958 N.E.2d at 127 (Lanzinger, J., dissenting). 56. PNH, 130 Ohio St. 3d at 286, 2011-Ohio , 958 N.E.2d at 127 (Lanzinger, J., dissenting). 57. Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at See id , 2011-Ohio , 958 N.E.2d at Id. at 286, 2011-Ohio , 958 N.E.2d at 128 (citing Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996)). 61. PNH, 130 Ohio St. 3d at , 2011-Ohio , 958 N.E.2d at 128 (Lanzinger, J., dissenting) (citing Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977)). 62. Id. at 287, 2011-Ohio , 958 N.E.2d at Id. at , 2011-Ohio , N.E.2d at Id. at 288, 2011-Ohio , 958 N.E.2d at 129.

8 1188 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title Moreover, the dissent argued that Congress instructed that bankruptcy courts should abstain from hearing certain state-law claims that are related to a case under Title 11 and can be timely adjudicated in state court. 66 Justice Lanzinger next addressed the differences between core and noncore proceedings, and the applicability of each in the case at bar. 67 She stated that core proceedings are those which aris[e] in a Title 11 case and noncore proceedings, contrarily, are those which are related to a Title 11 case. 68 The dissent honed in on these differences and argued that [a] claim arises in a case under the Bankruptcy Code only if the claim would have no existence outside of the bankruptcy 69 and, furthermore, it is a claim that by [its] nature, not [its] particular factual circumstance, could only arise in the context of a bankruptcy case. 70 Applying this rationale, Justice Lanzinger distinguished the state-law claims before the court and stated that they were not claims that by their nature could arise only in the context of a bankruptcy case.... [but are ones that] are often brought and adjudicated in state court. 71 With regard to claims that are related to a Title 11 case, Justice Lanzinger argued that a bankruptcy court s jurisdiction extended to such claims only when the proceeding might have any conceivable effect on the bankruptcy estate. 72 The dissent argued that this extension of jurisdiction was not necessary here because the debtor (GO&B) was not a party, and therefore, the claims being asserted are unrelated to the bankruptcy estate. 73 On the issue of uniformity, Justice Lanzinger stated that because neither of the parties was a debtor, the danger to the uniformity of the bankruptcy law is minimal. 74 Specifically, she reemphasized that because the claim 65. Id. at , 2011-Ohio , 958 N.E.2d at 129 (quoting 28 U.S.C. 1334(a)-(b) (2011)) (emphasis in original). 66. PNH, 130 Ohio St. 3d at 289, 2011-Ohio , 958 N.E.2d at 129 (Lanzinger, J., dissenting) (quoting 28 U.S.C. 1334(c)(2) (2011)). 67. Id., 2011-Ohio , 958 N.E.2d at Id., 2011-Ohio , 958 N.E.2d at 130 (emphasis added). 69. Id., 2011-Ohio , 958 N.E.2d at 130 (quoting In re Riverside Nursing Home, 144 B.R. 951, 955 (S.D.N.Y. 1992); In re Seven Fields Dev. Corp., 505 F.3d 237, 260 (C.A )). 70. Id., 2011-Ohio , 958 N.E.2d at 130 (quoting Stoe v. Flaherty, 436 F.3d 209, 218 (3rd Cir. 2006)). 71. PNH, 130 Ohio St. 3d at 289, 2011-Ohio , 958 N.E.2d at 130 (Lanzinger, J. dissenting). 72. Id., 2011-Ohio , 958 N.E.2d at 128 (quoting In re Cuyahoga Equip. Corp., 980 F.2d 110, 114 (2nd Cir. 1992)). 73. Id. at , 2011-Ohio , 52, 958 N.E.2d at Id. at 290, 2011-Ohio , 958 N.E.2d at

9 2012] PNH, INC. V. ALFA LAVAL FLOW, INC for tortious interference with contract arose prior to the filing of the involuntary bankruptcy petition, it is doubtful that the resolution of the claim will involve interpretation of bankruptcy law. 75 Referencing the Supreme Court of Texas, Justice Lanzinger acknowledged that [t]he uniformity argument for preemption is not triggered by the mere fact that a claim requires state courts to interpret federal bankruptcy law. 76 Furthermore, she argued that even the Supreme Court of the United States has held that the uniformity requirement should not be treated as a straitjacket. 77 Justice Lanzinger ended her dissent noting the majority s failure to give weight to the Bankruptcy Code s language regarding the concurrent jurisdiction of state courts and adamantly concluded that [b]ecause Congress has not chosen to enact laws that entirely eliminate the different state-law claims that could provide remedies for misconduct in bankruptcy proceedings between nondebtors, the state-law claims in this matter should be not be considered preempted. 78 IV. ANALYSIS The PNH decision signifies the initial precedent in Ohio on matters regarding state law tort causes of actions that occur during bankruptcy proceedings. The majority correctly held that the state law claim for abuse of process is one in which the Bankruptcy Code is not silent, and permitting the claim to run concurrently with a state court would disrupt the uniformity of federal bankruptcy law. However, the majority erred, and the dissent correctly concluded, that broadly sweeping state law claims like tortious interference with contract under the rug of federal preemption is not in sync with the Bankruptcy Code and its amendments. This analysis will address the areas of state law in which it is appropriate to preempt under federal bankruptcy law and those, as present in this case, where Congress intent was to permit concurrent jurisdiction with state courts. A. Abuse of Process At the heart of the majority s argument is whether a cause of action for abuse of process that is predicated on a bankruptcy proceeding is one in 75. Id., 2011-Ohio , 958 N.E.2d at PNH, 130 Ohio St. 3d at 290, 2011-Ohio , 958 N.E.2d at 131 (Lanzinger, J. dissenting) (quoting Graber, 279 S.W.3d at 619). 77. Id., 2011-Ohio , 958 N.E.2d at 131 (citing Gibbons, 455 U.S. at 469). 78. Id. at , 2011-Ohio , 958 N.E.2d at 131.

10 1190 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 which Congress intended to preempt. 79 The majority took a unique approach in determining preemption. The general rule provides for the assumption that the historic police powers of the States [are] not to be superseded by [federal law] unless that [is] the clear and manifest purpose of Congress. 80 Thus, the common approach would be to look for this clear and manifest purpose in the language of the federal statute. 81 Being a case of first impression, the majority relied on precedent from surrounding jurisdictions and took the position that, because the Supreme Court of the United States has interpreted the Constitution as placing emphasis on the uniformity of bankruptcy law, 82 any misconduct committed during bankruptcy proceedings is implicitly preempted to ensure this uniformity. 83 However, assuming that many critics of federal preemption demand the existence of a clear and manifest purpose, arguing that Congress has implicitly preempted state law is a position that will most likely receive criticism. The majority, however, was not wrong in its judgment [i]f intent to preempt is not explicitly stated in the statute s language, it could be ascertained by examining the structure and purpose of the statute. 84 It was argued by the majority that Congress has established a comprehensive legislative scheme intended to promote the uniformity of bankruptcy law, which provides for federal remedies to deter the abuse of bankruptcy proceedings. 85 Setting aside the concept of uniformity and focusing more on whether the Bankruptcy Code speaks to the issue at hand, it can be concluded that [r]emedies and sanctions for improper behavior and filings in bankruptcy court... are matters on which the Bankruptcy Code is far from silent. 86 Specifically, section 303(i)(2) of the Bankruptcy Code 79. See id. at 281, 2011-Ohio , 958 N.E.2d at 123 (majority opinion). 80. PNH, 130 Ohio St. 3d. at 282, 2011-Ohio , 958 N.E.2d at 124 (alterations in original) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)). 81. Rice, 331 U.S. at 230; see Betsy J. Grey, Make Congress Speak Clearly: Federal Preemption of State Tort Remedies, 77 B.U. L. REV. 559, 607 (1997) (concluding that preemption clauses should be construed to cover state tort remedies only when Congress has explicitly referred to state tort actions in clear and unmistakable language. ). 82. PNH, 130 Ohio St. 3d. at 282, 2011-Ohio , 958 N.E.2d at 124 (citing Gibbons, 455 U.S. at 468). 83. Id. at 284, 2011-Ohio , 958 N.E.2d at (citing Pertuso, 233 F.3d at 426; MSR Exploration, 74 F.3d at 915; Glannon, 261 B.R. at 265; Koffman, 182 B.R. at 125; Lewis, 86 Conn.App. at 605; Stone Crushed P ship, 589 Pa. at 315). 84. Oleksandra Johnson, The Bankruptcy Code As Complete Preemption: The Ultimate Trump?, 81 AM. BANKR. L.J. 31, 56 (2007) (quoting Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992)). 85. PNH, 130 Ohio St. 3d. at 285, 2011-Ohio , 958 N.E.2d at Koffman v. Osteoimplant Tech., Inc., 182 B.R. 115, 124 (D. Md. 1995).

11 2012] PNH, INC. V. ALFA LAVAL FLOW, INC addresses sanctions against creditors who file involuntary petitions in bad faith. 87 In Justice Lanzinger s dissent, she places much emphasis on the fact that neither party is a debtor. 88 However, section 303(i)(2) addresses sanctions against petitioners, irrespective of whether the other party is a debtor or nondebtor. 89 Just as the majority would agree that neither party is a debtor, Justice Lanzinger would have to agree that Alfa Laval who filed the involuntary bankruptcy petition was the petitioner that section 303(i)(2) addresses. Therefore, because Congress, through the enactment of the Bankruptcy Code, has provided specific remedies for acts of bad faith on the part of the petitioner filing the involuntary bankruptcy petition and because the Supreme Court of the United States has recognized the Constitution as requiring uniformity of bankruptcy law, the majority properly held that Appellant s state law cause of action for abuse of process was preempted by federal law. B. Tortious Interference with Contract The dissent, however, was on point in criticizing the majority s haste to sweep the tortious interference with contract claim under the preemption rug with the claim for abuse of process. Courts agree that in the absence of compelling congressional direction, [a court cannot] infer that Congress [has] deprived the States of the power to act. 90 As discussed above, the compelling congressional direction was evident in the Bankruptcy Code s provision dealing specifically with petitioners abusing the process of involuntary bankruptcy proceedings through bad faith filings and other misconduct. 91 However, the Bankruptcy Code is much more silent on issues that arise from claims for tortious interference with contract, triggering the presumption that state law is not to be preempted. In Glass v. Prcin, 92 the Texas Court of Appeals held that a suit to recover property under state law was not preempted by federal law. 93 In Glass, the plaintiff sought recovery of property that was at issue in the U.S.C. 303(i)(2) (2011). 88. PNH, 130 Ohio St. 3d. at , 2011-Ohio , 958 N.E.2d at (Lanzinger, J., dissenting). 89. See 11 U.S.C. 303(i)(2). 90. Feikema v. Texaco, 16 F.3d 1408, 1413 (4th Cir. 1994) (second alteration added) (quoting San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236, 244 (1959)). 91. See 11 U.S.C. 303(i)(2) S.W.3d 135 (Tex. 1999). 93. Glass v. Prcin, 3 S.W.3d at

12 1192 OHIO NORTHERN UNIVERSITY LAW REVIEW [Vol. 38 bankruptcy proceeding. 94 The defendant argued for lack of jurisdiction due to preemption by federal law, as the recovery claim was now part of the bankruptcy proceeding. 95 However, the underlying lawsuit for recovery was one that was already initiated in state court. 96 The Texas court held that the claim was not founded upon any provision of title 11 of the United States Code or any other federal law. 97 Rather, the court concluded, the cause[] of action asserted arose solely from the common and equitable law of Texas. 98 Similarly, here, the claim for tortious interference with contract was filed in state court 99 and, as the dissent thoroughly proves, has long been regarded as a state cause of action. 100 Amendment to the Bankruptcy Code, 28 U.S.C. 1334(c)(2), states that a bankruptcy court shall abstain from hearing proceedings based upon a State law claim or State cause of action which proceeding could not have been commenced in a court of the United States absent jurisdiction under this section. 101 Here, unlike the claim for abuse of process, which arose from a bad faith filing of the involuntary bankruptcy petition and would have viability in federal court under section 303(i)(2), the claim for tortious interference with contract is one that could not stand on its own in federal court had there been no bankruptcy proceeding. Although uniformity of bankruptcy law has an important goal to ensure litigants that they will not face varying standards state to state the Supreme Court of the United States has acknowledged that the uniformity requirement should not be treated as a straitjacket. 102 Further, it has been held that [a] bankruptcy law may be uniform and yet may recognize the laws of the State in certain particulars, although such recognition may lead to different results in different States. 103 Therefore, because there exists a lack of compelling congressional direction regarding preemption of state law claims for tortious interference with contract, an implication emerges that uniformity on such claims is not as imperative as with those dealing with abuse of process, making such claims a perfect example of those in 94. Id. at Id. 96. Id. at Id. 98. Glass, 3 S.W.3d at PNH, 130 Ohio St. 3d at 280, 2011-Ohio , 958 N.E.2d at 122 (majority opinion) Id. at 287, 2011-Ohio , 958 N.E.2d at 128 (Lanzinger, J., dissenting) U.S.C. 1334(c)(2) (2011) PNH, 130 Ohio St. 3d at 290, 2011-Ohio , 958 N.E.2d at 131 (Lanzinger, J., dissenting) (citing Gibbons, 455 U.S. at 469) Gibbons, 455 U.S. at 469 (quoting Stellawagen v. Clum, 245 U.S. 605, 613 (1918)).

13 2012] PNH, INC. V. ALFA LAVAL FLOW, INC which Congress intended for state courts to retain concurrent jurisdiction over. V. CONCLUSION Although the majority correctly held that the abuse of process claim was one in which required preemption, the court placed too much weight on the overarching theme of uniformity throughout bankruptcy law and turned a blind eye to amendments to the Bankruptcy Code that provide for concurrent jurisdiction with state courts. However, until Congress more clearly defines the determinants of preemption regarding bankruptcy law, Ohio will not be last state to be caught making decisions based on judicial preference of varying authority and the back-load of their dockets. JUSTIN A. TRAINO