February 16, 2009
Texas Supreme Court Approves State Court Malicious Prosection Proceeding after Unsuccessful Bankruptcy Litigation
Graber v. Fuqua, --- S.W. 3d ---, 2009 WL 51570 (Tex. Jan 2009)
Issue: May a debtor file a malicious prosecution action in state court against a plaintiff who unsuccessfully prosecuted an action against the debtor in bankruptcy court or does the bankruptcy code preempt such an action?
Holding: Yes, the Texas Supreme Court ruled 5-4 that there is no preemption.
The debtor sued an attorney for malicious prosecution in state court. The attorney had filed a fraud complaint in bankruptcy court and reported the debtor to the Justice Department. The Justice Department indicted the debtor but at trial, the debtor was found not guilty on all counts. The bankruptcy court then dismissed the adversary proceeding. The malicious prosecution action followed. The attorney filed a motion to dismiss for lack of jurisdiction arguing that bankruptcy preempted the filed. The state court granted the motion and dismissed the case.
The Texas Supreme Court reversed 5-4. The majority simply thought (in a lengthy opinion) that Congress did not intend that state law malicious prosecution actions were preempted by the bankruptcy code and Rule 11.
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