Bank Dismissed from Litigation in NJ Bankruptcy Court

. The defense prevailed on a motion to dismiss before the Bankruptcy Court for the District of New Jersey. The client was the loaner bank in an adversary proceeding wherein the plaintiff, as co-signer of pre-petition loans, asserted allegations of fraud in the inducement and equitable fraud against the debtor, the borrower, and the bank.  Pre-petition, the plaintiff had filed a civil action in New Jersey Superior Court against the soon-to-be debtor and borrower. The state court action was subject to an automatic stay in accordance with Section 362 of the Bankruptcy Code. Post-petition, the plaintiff filed an adversary proceeding, claiming that the debtor and borrower duped him into believing that a second loan was merely a re-application for the first loan. The plaintiff further claimed that the bank committed fraud by way of material omissions in not providing the plaintiff with notice that the first loan had been disbursed. The plaintiff sought compensatory damages, as well as equitable relief via reformation to be removed as co-signer. The defense filed a motion and supporting brief to dismiss the claims for lack of subject matter jurisdiction, setting forth the two-prong analysis of the Bankruptcy Court's jurisdictional limitations and emphasizing the plaintiff's failing to meet his burden to invoke the court's jurisdiction under the "well-pleaded complaint" rule. At oral argument, the Bankruptcy Court agreed that the adversary proceeding did not meet the first three "core proceeding" categories of 28 U.S.C. §1334 as it did not "arise under" or "arising in" a case under Title 11. The defense successfully argued that, as to relief sought against the bank, the claims were not "non-core" under 28 U.S.C. §157 because they failed to meet "related to" jurisdiction, which requires that the relief sought, if granted, could have any conceivable effect upon the debtor's administration or implementation of the Plan of Reorganization. The court agreed that grant of relief as against the bank could have a conceivable effort upon the debtor, thus warranting dismissal.