Residential Capital, LLC

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
RESIDENTIAL CAPITAL, LLC, et al.,
Debtors.
FOR PUBLICATION
Case No. 12-12020 (MG)
(Jointly Administered)
AMENDED MEMORANDUM OPINION AND ORDER UPHOLDING BANKRUPTCY
COURT AUTHORITY TO TRY THE INTENTIONAL INFLICTION OF EMOTIONAL
DISTRESS CAUSE OF ACTION ASSERTED IN CLAIMS FILED BY
PAMELA D. LONGONI AND JEAN GAGNON
A P P E A R A N C E S:
MORRISON & FOERSTER LLP
Attorneys for ResCap Borrower Claims Trust
250 West 55th Street
New York, New York 10019
By: 	Norman S. Rosenbaum, Esq.
Jordan A. Wishnew, Esq.
Jessica J. Arett, Esq.
BRADLEY ARANT BOULT CUMMINGS LLP
Attorneys for ResCap Liquidating Trust
100 N. Tryon Street
Suite 2690
Charlotte, North Carolina 28202
By: 	Christian W. Hancock, Esq.
Avery A. Simmons, Esq.
ERICKSON, THORPE & SWAINSTON, LTD.
Attorneys for Pamela D. Longoni, Lacey
Longoni, and Jean M. Gagnon
99 W. Arroyo Street
P.O. Box 3559
Reno, Nevada 89505
By: 	Thomas P. Beko, Esq.
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
The Court must decide whether it can hear and determine (i.e., enter final judgment) the
emotional distress claim included among the remaining claims in this contested matter. If the
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emotional distress claim is a “personal injury tort” under section 157(b)(5) of title 28 of the
United States Code, absent consent (which has been withheld), only a district court may try the
claim and enter final judgment. There is no controlling law in this Circuit on what is a personal
injury tort. Lower courts have used different approaches to resolving the question. As explained
below, the Court concludes that the emotional distress claim in this matter is not a personal
injury tort; therefore, this Court can finally resolve the claim.
I. 	BACKGROUND
A. 	Prior Proceedings
An earlier memorandum opinion and order (the “Prior Opinion,” ECF Doc. # 8825)
sustained in part and overruled in part the ResCap Borrower Claims Trust’s (the “Trust”)
objection (the “Objection,” ECF Doc. # 8530) to Claim Numbers 2291, 2294, 2295, and 2357
(the “Claims”) filed by Pamela D. Longoni (“Longoni”), individually and as guardian ad litem
for Lacey Longoni, and Jean M. Gagnon (“Gagnon,” and together with Longoni and Lacey
Longoni, the “Claimants”).1 The Prior Opinion overruled the Trust’s Objection to causes of
action for fraud, negligence (to the extent the original cause of action asserted negligent
misrepresentation and negligent infliction of emotional distress),2 intentional infliction of
emotional distress (“IIED”), and promissory estoppel.
After issuing the Prior Opinion, the Court raised the issue whether section 157(b)(5) of
title 28 of the United States Code, which entitles a party to a personal injury tort or wrongful
1 	The Prior Opinion can be found at In re Residential Capital, LLC, Case No. 12-12020 (MG), 2015 WL
4066261 (Bankr. S.D.N.Y. July 1, 2015). Familiarity with the Prior Opinion is assumed.
2 	The negligence claim included allegations of negligent infliction of emotional distress. It is not clear
whether the Claimants intended to plead a separate claim for negligent infliction of emotional distress, or to seek
emotional distress damages on their negligence claim. The Prior Opinion overruled, in part, the objection to the
negligence claim. Nevada law appears to recognize a claim for negligent infliction of emotional distress, but with a
heavier burden for a plaintiff to recover on the claim. This Opinion will refer to a single intentional infliction of
emotional distress claim; the result here would be the same for a negligent infliction of emotional distress claim.
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death claim to demand a trial of such claim in a district court, applies to the Claimants’
emotional distress claim. If applicable, the emotional distress claim may not be tried in this
Court unless the parties consent. This Court directed the Claimants and the Trust to advise
whether they consent; if any party to the claim did not consent, the parties were directed to brief
whether section 157(b)(5) applies to the emotional distress claim. (See Case Management and
Scheduling Order (the “CMSO”), ECF Doc. # 8903 ¶ 4 (requiring the parties to brief the issue
whether this Court can finally adjudicate the Claimants’ surviving intentional infliction of
emotional distress claim (the “IIED Claim”)).) The parties did not mutually consent and
therefore they briefed the issue. (See “Trust’s Brief” or “Trust Br.,” ECF Doc. # 9014;
“Claimants’ Brief” or “Cl. Br.,” ECF Doc. # 9016.)
B. 	The Claims
In April 2010, the Claimants filed a complaint in Nevada state court against Debtors
GMAC Mortgage, LLC (“GMACM”), Executive Trustee Services, LLC (“ETS”), Residential
Funding Corporation (“RFC”), and Residential Asset Mortgage Products, Inc. (“RAMP”), as
well as against other non-debtor individuals and entities (the “Nevada Action”). (Obj. ¶ 5.) The
defendants removed the case to the United States District Court for the District of Nevada (the
“Nevada District Court”). (Id.) The lawsuit alleged that GMACM wrongfully foreclosed on the
Claimants’ home after agreeing to approve a permanent loan modification and to halt the
foreclosure while the parties discussed the proposed modification. The foreclosure was
completed despite the alleged agreement. The original complaint included the following causes
of action: (1) violation of Nevada Revised Statutes sections 107.080, 107.085, 107.086,
107.087, and 107.090; (2) violation of Nevada Revised Statutes section 205.372; (3) fraud and
misrepresentation; (4) negligence and negligent misrepresentation; (5) breach of contract;
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(6) tortious breach of the implied covenant of good faith and fair dealing; (7) breach of the
covenant of quiet title; (8) IIED; (9) promissory estoppel; and (10) concert of actions. (Id.) The
Nevada District Court granted in part and denied in part the defendants’ motion to dismiss. See
Longoni v. GMAC Mortg., LLC, No. 3:10-CV-0297-LRH-VPC, 2010 WL 5186091, at *2 (D.
Nev. Dec. 14, 2010). The court dismissed the breach of the covenant of quiet title and tortious
breach of the implied covenant of good faith and fair dealing causes of action; the other eight
causes of action survived. See generally id. The Debtors’ bankruptcy stayed the Nevada Action;
the case was ultimately administratively closed. (Obj. ¶ 5.)
The Claims filed here incorporate the causes of action asserted in the Nevada Action.
(See Obj. Ex. 1.) The Prior Opinion disallowed and expunged some of these causes of action,
but the fraud, negligence (negligent misrepresentation and negligent infliction of emotional
distress), IIED, and promissory estoppel claims remain.
C. 	The IIED Claim
The IIED Claim stems from the allegedly wrongful foreclosure. The operative complaint
in the Nevada Action included the following allegations: “foreclosure and wrongful ousting of
the plaintiffs from the family home was an invasion of property owners’ rights which occurred
under circumstances of malice, willfulness, wantonness, and inhumanity”; the “defendants’ . . .
wrongful acts and foreclosure were a willful use of power with the expectation to humiliate and
distress the mortgagors and plaintiffs”; and “the defendants engaged in conduct that they knew,
or should have known and expected, would cause the plaintiffs to suffer and which did, in fact,
cause the plaintiffs to suffer severe and mental and emotional pain, grief, sorrow, anger, worry,
and anxiety.” (Obj. Ex. 4 ¶¶ 173–176.) The complaint requested at least $10,000 in general
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damages, at least $10,000 in exemplary and punitive damages, and costs and attorneys’ fees. (Id.
¶¶ 175–177.)
The Claimants supported their Opposition to the Objection to the IIED Claim with
Pamela Longoni’s affidavit that addresses the physical manifestations of the emotional distress to
herself and her daughter. (Opp. ¶ 68.) The affidavit states:
38. 	I expressed to all GMACM representatives that losing my
home was such an emotional and life changing event. My children
grew up in that home. I had improved that home greatly, and I was
comfortable in my neighborhood. 	My daughter, Lacey, who was
13 at the time this foreclosure took place, suffered tremendously.
She was forced out of her neighborhood and left the kids she grew
up with. 	She was forced to ride a new school bus from our new
rental house, and did not know any kids on the bus. 	She didn’t
have anyone to walk home with as there were no kids in our new
neighborhood.
39. 	We relied tremendously on the neighbors across the street
on Twin Creeks. 	She was a stay at home mom, and me, being a
single mom, relied greatly on her to assist with Lacey after school.
Our daughters were very close friends. 	Their friendship involved
sleepovers, holiday events, and extracurricular activities together.
We 	often 	attended 	summertime 	BBQ’s 	and 	holiday 	events
together. 	We shared activities as families and helped each other
with transportation for our kids.
40. It was devastating to lose my house. It caused a great deal of
emotional distress. 	I had never planned on living anywhere else.
However, since this time, I have lived in 4 other places, which has
caused a lot of financial and continued emotional distress, as
nothing has felt quite like “home.”
41. 	After I learned of the foreclosure, I lost 13 pounds in a less
than two weeks. I was forced to take prescription medications just
to 	stop 	the 	emotional 	breakdowns. 	I 	was 	embarrassed 	and
humiliated 	that 	this 	had 	taken 	place. 	I 	had 	a 	hard 	time
concentrating at work. I cried all the time. I felt so guilty for my
daughter, Lacey, who had been displaced from her childhood
home. 	I remember, while attempting to pack all of 15 years of
belongings, and I was just exhausted, and I was wrapping up the
day of packing. I had left several belongings in my driveway and
after sheer exhaustion from the day, I covered those items with a
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tarp and believed they would be safe, as I knew my neighbors and
neighborhood.
42. 	The following morning, I went out to get my things and
continue packing. 	I realized that sometime during the night, my
belongings had been picked through, and several items were
missing. I ran to the side of the house, and vomited.
(Id. Ex. 9 ¶¶ 38–42.)
The Prior Opinion overruled the Trust’s Objection to the IIED Claim; the Nevada District
Court had previously denied the defendants’ motion to dismiss that claim. (Prior Opinion at 34–
35 & n.15 (citing Opp. ¶¶ 67–68 (citing id. Ex. 9 ¶¶ 38–42)).) The Court also overruled the
Trust’s argument about the requirement for physical manifestations of emotional distress—at this
stage of the pleadings, the Court concluded, Claimants provided sufficient allegations of physical
manifestations. (Id.) The Court overruled the Objection to the negligence claim insofar as it
asserted a negligent infliction of emotional distress claim because the Trust did not address the
cause of action in its Objection, thereby failing to meet its initial burden. (Id. at 31 & n.14.)
D. 	The Parties’ Arguments
The parties disagree whether the IIED Claim is a “personal injury tort” under section
157(b)(5). The Trust argues that the IIED Claim is not a personal injury tort because it alleges
no physical trauma or bodily injury—it is based on secondary emotional or mental anguish
purportedly caused by the failed mortgage contractual relationship. (Trust Br. ¶¶ 4–7.) Without
allegations that the Claimants suffered real psychiatric impairment beyond shame and
humiliation, the Trust argues, the IIED Claim is not a personal injury tort that cannot be finally
adjudicated by a bankruptcy court. (Id.) Alternatively, the Trust asserts that even if the IIED
Claim is construed as a personal injury tort, the IIED Claim should remain before this Court
because it is not the gravamen of the Claimants’ Claims. (Id. ¶¶ 8–11.)
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The Claimants contend that this Court cannot properly exercise jurisdiction over their
IIED Claim. (Cl. Br. at 2–5.) According to the Claimants, IIED claims based on wrongful
foreclosure are “non-core” claims under Stern v. Marshall, 131 S. Ct. 2594 (2011), and
bankruptcy courts do not have authority to render a final judgment on such claims absent the
parties’ consent. (Id. at 3–4.) The Claimants further request that this Court abstain from
deciding the IIED Claim and instead allow the United States District Court for the Southern
District of New York (the “SDNY District Court”) to determine where the IIED Claim should be
finally adjudicated—in the SDNY District Court or, their preferred venue, in the Nevada District
Court. (Id. at 4–5.)
II. 	DISCUSSION
Bankruptcy courts have jurisdiction over cases “arising under title 11, or arising in or
related to cases under title 11.” 28 U.S.C. § 1334. “The manner in which a bankruptcy judge
may act on a . . . matter[,] depends on the type of proceeding involved.” Stern , 131 S. Ct. at
2603. Bankruptcy courts “may hear and enter final judgments” in all “core” proceedings, which
are generally considered proceedings that either “aris[e] under title 11” or “aris[e] in a case under
title 11.” Id. (quoting 28 U.S.C. § 157(b)(1)). Section 157(b)(2) provides a non-exhaustive list
of “core” proceedings. These include the “allowance or disallowance of claims against the estate
. . . and estimation of claims or interests for the purposes of confirming a plan . . . but not the
liquidation or estimation of contingent or unliquidated personal injury tort or wrongful death
claims against the estate for purposes of distribution in a case under title 11.” 28 U.S.C.
§ 157(b)(2)(B).
For matters involving personal injury tort or wrongful death claims, a bankruptcy court’s
authority is different. Section 157(b)(5) requires the district court to “order that personal injury
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tort or wrongful death claims shall be tried in the district in which the bankruptcy case is
pending, or in the district court in the district in which the claim arose, as determined by the
district court in which the bankruptcy case is pending.” Id. § 157(b)(5). The Supreme Court has
held—though most overlook this particular holding—that section 157(b)(5) is not jurisdictional
and the parties may consent to the trial of personal injury and wrongful death claims in the
bankruptcy court. Stern, 131 S. Ct. at 2606 (“We need not determine what constitutes a
‘personal injury tort’ in this case because we agree with Vickie that § 157(b)(5) is not
jurisdictional, and that Pierce consented to the Bankruptcy Court’s resolution of his defamation
claim.”). Here, consent was not provided, so the Court must decide whether the Claimants’ IIED
Claim is a personal injury tort for purposes of section 157(b)(5).
The Bankruptcy Code does not define the term “personal injury tort.” The Second
Circuit has not addressed the issue. Lower courts in this Circuit and elsewhere have adopted
different approaches to determine whether a particular claim is a personal injury tort for purposes
of section 157(b)(5). See Stranz v. Ice Cream Liquidation, Inc. (In re Ice Cream Liquidation,
Inc.), 281 B.R. 154, 160 (Bankr. D. Conn. 2002) (citing cases). Three approaches have been
used.
Some courts adopt the “narrow view,” characterizing a personal injury tort claim as “a
tort [claim] with[] trauma or bodily injury.” Id. at 160 (citing In re Atron Inc. of Mich., 172 B.R.
541, 544–45 (Bankr. W.D. Mich. 1994); Perino v. Cohen (In re Cohen), 107 B.R. 453, 455
(S.D.N.Y. 1989)); Vinci v. Town of Carmel (In re Vinci), 108 B.R. 439, 442 (Bankr. S.D.N.Y.
1989); In re Sheehan Mem’l Hosp., 377 B.R. 63, 68 (Bankr. W.D.N.Y. 2007). A court following
this “narrow view” considers whether the claim is a personal injury tort “in the traditional, plain
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meaning sense of those words, such as a slip and fall, or a psychiatric impairment beyond mere
shame and humiliation.” In re Cohen, 107 B.R. at 455.
Other courts adopt a “broader view,” holding that the term “personal injury tort”
“embraces a broad category of private or civil wrongs or injuries for which a court provides a
remedy in the form of an action for damages, and includes damage to an individual’s person and
any invasion of personal rights, such as libel, slander and mental suffering.” Boyer v. Balanoff
(In re Boyer), 93 B.R. 313, 317–18 (Bankr. N.D.N.Y. 1988); Leathem v. Von Volkmar (In re Von
Volkmar), 217 B.R. 561, 565 (Bankr. N.D. Ill. 1998); see also Thomas v. Adams (In re Gary
Brew Enters. Ltd.), 198 B.R. 616, 619–20 (Bankr. S.D. Cal. 1996) (holding that claim under
section 1983 of the Civil Rights Act constituted a personal injury tort claim because section 1983
confers “a general remedy for injuries to personal rights”).
Still other courts adopt a middle or hybrid view. Where a claim appears to be a
“‘personal injury tort claim’ under the ‘broader’ view but has earmarks of a financial, business or
property tort claim, or a contract claim, the court reserves the right to resolve the ‘personal injury
tort claim’ issue by (among other things) a more searching analysis of the complaint.” In re Ice
Cream Liquidation, Inc., 281 B.R. at 161 (concluding that a sexual harassment claim brought
against a debtor’s successor entity was a personal injury tort under section 157(b)(5), and finding
that the availability of equitable relief and damages sufficiently distinguished the claim “from
other workplace claims which might constitute financial, business or property tort claims (or
even contract claims)”); Adelson v. Smith (In re Smith), 389 B.R. 902, 908–13 (Bankr. D. Nev.
2008) (applying hybrid view and concluding that libel claim under Nevada law is a personal
injury tort, but plaintiff consented to bankruptcy court adjudication of claim); see also In re
Sheehan Mem’l Hosp., 377 B.R. at 68 (recognizing the “middle view that weighs the personal
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nature of the injury against characteristics involving financial, business, property or contract
rights”).
Courts have reached different results under section 157(b)(5) for emotional distress
claims (whether negligent or intentional). Some courts have held, without analysis or
explanation, that the bankruptcy court does not have subject matter jurisdiction to adjudicate the
emotional distress claim under section 157(b)(5).3 DiMare v. Ameriquest Mortg. Co. (In re
DiMare), 462 B.R. 283, 309 (Bankr. D. Mass. 2011) (“While I agree with [the defendant’s]
contention that the Debtor has failed to satisfy the applicable standard for either [negligent or
intentional infliction of emotional distress], the infliction of emotional distress pled as an
independent cause of action is a personal injury tort claim over which the bankruptcy court has
no jurisdiction. Accordingly, Count VII must be dismissed.”); Laudani v. Tribeca Lending Corp.
(In re Laudani), 401 B.R. 9, 42 (Bankr. D. Mass. 2009) (“[T]his Court is without jurisdiction to
hear a tort claim for intentional infliction of emotional distress. Accordingly, the Court shall
enter an order granting summary judgment with respect to Count XII.”); Lentz v. Bureau of Med.
Econ. (In re Lentz), 405 B.R. 893, 899–900 (Bankr. N.D. Ohio 2009) (“Additionally under Count
III, the Plaintiff seeks damages for her alleged mental anguish and emotional distress which are
personal injury matters. Personal injury matters are not subject to the bankruptcy court’s
jurisdiction. . . . Consequently, for lack of subject matter jurisdiction, Count II is hereby
dismissed.”); Texas Capital Bank, N.A. v. Dallas Roadster, Ltd. (In re Dallas Roadster, Ltd.),
Nos. 11-43725, 11-43726, Adv. Proc. No. 13-4033, 2013 WL 5758632, at *3 & n.1 (Bankr. E.D.
Tex. Sept. 27, 2013) (“In addition, certain of [the] counterclaims may be personal injury torts
3 	Many of the cases discussed in the text are off-the-mark to the extent they hold that the bankruptcy court
does not have subject matter jurisdiction over claims against the estate for personal injury tort or wrongful death
claims—Stern v. Marshall makes that point clearly. Even though the court has jurisdiction, section 157(b)(5) may
require trial in the district court.
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which are expressly excluded from the automatic referral to the Bankruptcy Court—and thus are
already in the District Court.” (indicating that the counterclaims consist of IIED and
“defamation/business disparagement” causes of action)); see also Paulson v. Arbaugh (In re
Paulson), No. 09-32439-RLD7, Adv. Proc. No. 11-03309-RLD, 2012 WL 5177950, at *4
(Bankr. D. Or. Apr. 26, 2012) (“Because the conspiracy and IIED claims neither arise under title
11 nor arise in a case under title 11, at best they can be considered to be related to a case under
title 11, and therefore non-core. It is undisputed that without the consent of the parties I have no
authority to enter a final judgment in a non-core matter.”).
Some courts have found it unnecessary to settle on one single approach for determining
whether an emotional distress claim involves a personal injury tort, focusing instead on the
“gravamen” 4 of the claim. The bankruptcy court in In re Thomas, 211 B.R. 838, 841–42 (Bankr.
D.S.C. 1997) declined to adopt either the broad or narrow view of a personal injury tort, finding
that the emotional distress claim in that case was a personal injury tort under either view. The
court acknowledged that, for both the “narrow” and the “broader” views, “the question is
whether the emotional trauma is the gravamen of the complaint or merely an element of
damages.” Id. at 841. Because the emotional distress claim in that case was the gravamen of the
claim, and because the reference had not been withdrawn to the district court, the bankruptcy
court granted the claimant’s motion to lift the automatic stay, permitting the claim to proceed in
state court. Id. at 842.
The court’s analysis in Thomas and in other cases points strongly towards analyzing the
context and central focus of the claims—if an IIED claim is the tail wagging the dog, section
4 	As will be seen, a number of courts have focused on the gravamen of the claim. Black’s Law Dictionary
defines “gravamen” as “[t]he substantial point or essence of a claim, grievance or complaint.” BLACK’ S LAW
D ICTIONARY (10th ed. 2014).
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157(b)(5) should not require dislodging the claim from bankruptcy court resolution of a portion
of a claim asserted against a debtor. If the IIED claim is the gravamen of the claim, as the South
Carolina bankruptcy court found in Thomas, section 157(b)(5) does not permit the bankruptcy
court to try the claim absent consent. But when the context and central focus of the claim is not
about physical injury or emotional distress, the claim should remain in the bankruptcy court.
Other courts have also focused on the context and central focus of the claims. Like the
court in Thomas, the district court in Lang v. Lang (In re Lang), 166 B.R. 964, 966–67 (D. Utah
1994) looked at the context and central focus of the claims and concluded that the claims should
remain in the bankruptcy court. The court denied a motion to withdraw the reference,
concluding that the bankruptcy court retained jurisdiction over the IIED claim. See id. at 966–
67. The plaintiff’s claims were “fundamentally allegations of fraud”; his emotional distress
claim was “intimately connected to his claims of fraud”; and as such, the emotional distress
claim was “too tangential” to warrant “withdrawal of the entire matter solely on the basis of the
emotional distress claim” and withdrawing the emotional distress claim on its own was
“impractical and inefficient.” Id. at 967. Any other result would make it too easy for a claimant
to get out of bankruptcy court.
Concern about permitting a claimant too easily to escape bankruptcy court adjudication
of claims against a debtor by pleading an emotional distress claim (along with other claims) has
led other courts to be cautious about concluding that section 157(b)(5) applies. In Bertholet v.
Harman, 126 B.R. 413, 415–16 (Bankr. D. N.H. 1991), the court adopted the “narrow view” of a
personal injury tort, finding that the emotional distress claim did “not rise to the level of
‘psychiatric impairment’ caused by willful conduct.” The court further found that the emotional
distress claim was “minor” and “incidental” to the complaint, and even if the court adopted the
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“broader view,” section 157(b)(5) would not be implicated. Id. “[T]he better rule is that if a
mental distress claim does not involve physical injury, then only if the claim is the gravamen of
the complaint would § 157(b)(5) be invoked. Otherwise, . . . jurisdiction would too easily be lost
from this court . . . .” Id. (“As a practical matter, it makes sense that claims for minor emotional
distress not the focus of a complaint not be transferred to the district court.”).
The courts’ concerns in Lang and Bertholet highlight the problem where IIED claims are
tacked onto bankruptcy claims when the gravamen of the claim—as is true here—focuses on a
contractual relationship, alleged economic injury, or conduct arising from mortgage foreclosure.
The Claimants here are not the first borrowers in the ResCap bankruptcy cases to assert an IIED
claim along with a plethora of other common law and statutory claims arising from what are
fundamentally residential mortgage foreclosure disputes. See, e.g., In re Residential Capital,
LLC, 531 B.R. 1, 20–21 (Bankr. S.D.N.Y. 2015) (dismissing emotional distress claim under
Washington law for conduct relating to foreclosure); In re Residential Capital, LLC, 529 B.R.
806, 818 (Bankr. S.D.N.Y. 2015) (dismissing emotional distress claim under Massachusetts law
because claimant failed to allege physical harm manifested by objective symptomology); In re
Residential Capital, LLC, No. 12-12020 (MG), 2015 WL 4747860, at *14–15 (Bankr. S.D.N.Y.
Aug. 4, 2015) (dismissing negligence claim under California law seeking damages, among other
things, for severe emotional distress); In re Residential Capital, LLC, No. 12-12020 (MG), 2015
WL 3952688, at *4 (Bankr. S.D.N.Y. June 26, 2015) (applying res judicata and dismissing IIED
claim under Hawaii law for conduct relating to foreclosure); In re Residential Capital, LLC, No.
12-12020 (MG), 2015 WL 2229234, at *9 (Bankr. S.D.N.Y. May 8, 2015) (dismissing emotional
distress claim under Texas law for conduct relating to foreclosure); In re Residential Capital,
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LLC, No. 12-12020 (MG), 2015 WL 1087746, at *3 (Bankr. S.D.N.Y. Mar. 9, 2015) (dismissing
emotional distress claim under Connecticut law for conduct relating to foreclosure).
Each ResCap borrower asserting an emotional distress claim should have his or her claim
evaluated separately to determine whether it states a claim under applicable state law. But the
issue whether the state law claim is a personal injury tort under federal bankruptcy law, such that
a bankruptcy court may not enter a final judgment absent consent, is a separate question
controlled by federal law. The Claimants’ IIED Claim here survived the Trust’s Objection to the
Claims, but that ruling does not control whether this Court may hear and finally determine the
IIED Claim along with the Claimants’ other surviving causes of action.
Efficient, prompt, consistent resolution of objections to bankruptcy claims is important—
no ResCap borrower claimant with an allowed claim has received a distribution yet from the
Trust, as the claims allowance process continues to resolve numerous contested claims.
Requiring each ResCap borrower’s emotional distress claim to be resolved in a district court can
only further slow the claims allowance process and the making of distributions to claimants with
allowed claims. These concerns, of course, cannot control the correct determination of what is a
personal injury tort under section 157(b)(5), but courts should not be blind to the consequences
of a ruling on the application of the statutory term “personal injury tort”—context matters.
With that, the Court turns to the primary issue before it: whether the Claimants’ IIED
Claim is a personal injury tort for purposes of section 157(b)(5). The Court concludes that the
hybrid approach is most appropriately applied in determining whether the Claimants’ IIED
Claim is a personal injury tort under section 157(b)(5). In this contested matter, however,
whether the hybrid or narrow approach is followed, the result would be the same—the
Claimants’ IIED Claim is not a personal injury tort.
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The Claimants’ assert their IIED Claim pursuant to Nevada law. Under Nevada law,
courts identify the following elements of an IIED claim: “(1) extreme or outrageous conduct on
the part of the defendants; (2) intent to cause emotional distress or reckless disregard for causing
emotional distress; (3) that the plaintiff actually suffered extreme or severe emotional distress;
and (4) causation.” Franchise Tax Bd. of State of Cal. v. Hyatt, 335 P.3d 125, 147 (Nev. 2014)
(citation omitted). Nevada courts apply a sliding scale approach such that “[t]he less extreme the
outrage, the more appropriate it is to require evidence of physical injury or illness from the
emotional distress.” Id. at 148 (citation omitted). A plaintiff asserting an IIED claim “need not
suffer physical harm to recover . . . , especially when the outrageousness of defendants’ conduct
affords sufficient assurance that the mental damages are genuine. Carl Tobias, Intentional
Infliction of Mental Distress in Nevada, 2 NEV. L.J. 59, 67–68 (2002). Some Nevada Supreme
Court cases appear to suggest “that plaintiffs, who did not experience physical impacts, must
prove severe emotional distress by showing physical injury or physical illness.” Id. (citations
omitted). However, such holdings appear to be primarily for claims of negligent infliction of
emotional distress, and the only high court decision involving IIED appears to have “imposed an
exceptionally high standard, which few other jurisdictions presently apply and which lacks
scientific substantiation.” Id. (citations omitted).
This Court refused to dismiss the Claimants’ IIED Claim under Nevada law, finding that
their allegations of physical manifestations of the emotional distress were sufficient to overcome
the Trust’s Objection based on the pleadings. But the allegations, including of the physical
manifestations, do not rise to the level of “trauma or bodily harm,” In re Ice Cream Liquidation,
Inc., 281 B.R. at 160 (citation omitted), nor do they rise to the level of the “traditional, plain-
meaning sense” of a “personal injury tort,” In re Cohen, 107 B.R. at 455. The allegations in the
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Claimants’ complaint and in the Longoni affidavit rise to the level of “shame and humiliation,”
but not more. Id. The Court does not wish to understate the seriousness of the IIED Claim in
this matter; the Claimants may prevail on the claim, but they will have to do so in this Court.
Under the hybrid view, the Claimants’ IIED Claim does not fall within section 157(b)(5).
Like many other ResCap borrower claimants, the Claimants’ IIED Claim unquestionably stems
from allegedly flawed mortgage foreclosure and loss mitigation processes. The IIED Claim
therefore arises primarily out of financial, contract, or property tort claims triggering this Courts
“more searching analysis” of the Claimants’ allegations. See In re Ice Cream Liquidation, Inc.,
281 B.R. at 160. In this case, the analysis leads to the determination that the IIED Claim—based
on allegations of wrongful foreclosure, denial of loan modifications, and false representations—
is not, by its “nature,” a “personal injury tort.” Id.
III. 	CONCLUSION
For the foregoing reasons, the Court concludes that the Claimants’ IIED Claim is not a
personal injury tort for purposes of section 157(b)(5). As a result, the IIED Claim will remain in
this Court for final adjudication.
IT IS SO ORDERED.
Dated: September 4, 2015
New York, New York
_____Martin Glenn____________
MARTIN GLENN
United States Bankruptcy Judge
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