Opinion
Case No. 07-59138 Adv. Pro. No. 16-2029
09-22-2017
IN RE: Sandra Lee HANAWALT, Debtor. Sandra Lee Hanawalt, Plaintiff, v. Clyde Hardesty, Defendant.
Aaron M. Glasgow, IsaacWiles, Michael Thomas Gunner, Columbus, OH, for Plaintiff.
Aaron M. Glasgow, IsaacWiles, Michael Thomas Gunner, Columbus, OH, for Plaintiff.
OPINION AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
John E. Hoffman, Jr., United States Bankruptcy Judge
I. Introduction
This adversary proceeding is before the Court on cross-motions for summary judgment filed by Sandra Lee Hanawalt and David M. Whittaker, the former Chapter 7 trustee appointed in Hanawalt's bankruptcy case. Approximately seven years after her bankruptcy case was closed, Hanawalt filed a lawsuit against entities involved in the manufacture and distribution of a medical device known as transvaginal mesh ("TVM") and became entitled to receive funds as part of a settlement of the lawsuit (the "Settlement Proceeds"). Whittaker then obtained an order reopening Hanawalt's bankruptcy case in order to administer the Settlement Proceeds as property of her bankruptcy estate. But because the Settlement Proceeds are not sufficiently rooted in Hanawalt's prebankruptcy past, she is entitled to a declaratory judgment that they are not property of her estate.
After the briefing in this adversary proceeding was completed, Whittaker joined the same law firm in which the attorneys for Hanawalt are partners. In order to remove the resulting conflict of interest, Whittaker rejected his appointment as the Chapter 7 trustee, and Clyde Hardesty was appointed as the successor Chapter 7 trustee. Section 325 of the Bankruptcy Code provides that "[a] vacancy in the office of trustee during a case does not abate any pending action or proceeding, and the successor trustee shall be substituted as a party in such action or proceeding," and Rule 2012(b) of the Federal Rules of Bankruptcy Procedure states that "the successor is automatically substituted as a party in any pending action, proceeding, or matter ...." Hardesty therefore has been substituted as a party to this adversary proceeding. But because the arguments addressed in this opinion were made by Whittaker while he was still the Chapter 7 trustee, the remainder of this opinion will refer to Whittaker rather than Hardesty.
II. Jurisdiction and Constitutional Authority
The Court has subject matter jurisdiction to hear and determine this adversary proceeding under 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. This is a core proceeding. 28 U.S.C. § 157(b)(2).
The Court also has the constitutional authority to enter a final order determining whether the Settlement Proceeds are property of Hanawalt's estate under § 541 of the Bankruptcy Code. See, e.g ., Schlarman v. Nageleisen (In re Nageleisen) , 527 B.R. 258, 261 (Bankr. E.D. Ky. 2015) (holding that "disputes over the extent of debtors' estates [are] within bankruptcy courts' [constitutional] authority"); Murphy v. Felice (In re Felice) , 480 B.R. 401, 418 (Bankr. D. Mass. 2012) (holding that "an action under 11 U.S.C. § 541 to determine whether an interest of the debtor is property of the estate stems from the bankruptcy" and that "a bankruptcy judge may ... enter a final judgment" in such an action); Velo Holdings Inc. v. Paymentech, LLC (In re Velo Holdings Inc.) , 475 B.R. 367, 387 (Bankr. S.D.N.Y. 2012) (holding that determining whether an agreement is property of the estate "is an essential part of administration of the bankruptcy estate and stems from the bankruptcy itself").
III. Procedural and Factual Background
On November 11, 2007 (the "Petition Date"), Hanawalt filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code, and the United States Trustee appointed Whittaker as the Chapter 7 trustee. In 2008, Hanawalt received a discharge and her case was closed. Eight years later, in 2016, Whittaker filed a motion to reopen the case for the purpose of seeking to administer the Settlement Proceeds. Doc. 20. In the motion to reopen, Whittaker noted that Hanawalt had not included the TVM claims on her schedules of assets and liabilities, meaning that the claims were not abandoned when her case was closed. Whittaker also stated that he had no reason to believe that Hanawalt purposely concealed the claims. Id . at 2.
References to "Doc.—" are to docket entries in Hanawalt's bankruptcy case, Case No. 07-59138, and references to "Adv. Doc.—" are to docket entries in this adversary proceeding, Adv. Pro. No. 16-2029.
After the Court entered an order reopening the case (Doc. 21), Hanawalt filed a complaint seeking a declaratory judgment that the Settlement Proceeds are not property of her bankruptcy estate (Adv. Doc. 1). Before the discovery deadline of January 31, 2017 passed, Whittaker took Hanawalt's deposition (the "Deposition") (Adv. Doc. 22, Ex. A). Whittaker then filed a motion for summary judgment (the "Whittaker Motion") (Adv. Doc. 22), requesting an order that would require Hanawalt to turn over the Settlement Proceeds to him to administer on behalf of her bankruptcy estate. Hanawalt then filed a cross-motion for summary judgment (the "Hanawalt Motion") (Adv. Doc. 23), attaching an affidavit based on her personal knowledge (the "Hanawalt Affidavit").
In a footnote to his response to the Hanawalt Motion (Adv. Doc. 30) (the "Whittaker Response"), Whittaker describes the Hanawalt Affidavit as "self-serving." Whittaker Resp. at 2 n.1. But the self-serving nature of an affidavit in and of itself does not discredit it, because "affidavits are always self-serving." Beard v. Sentry Credit, Inc ., No. CIV S-10-2218-KJM-GGH, 2012 WL 3778880, at *3 (E.D. Cal. Aug. 31, 2012). To be sure, a "conclusory, self-serving affidavit, lacking detailed facts and any supporting evidence, is insufficient" to support a request for summary judgment. F.T.C. v. Publishing Clearing House, Inc ., 104 F.3d 1168, 1171 (9th Cir. 1997) ; see also Shaw v. Danley , No. 98-6579, 2000 WL 64945, at *7 (6th Cir. Jan. 10, 2000). But "[w]here the facts contained in an affidavit are ‘neither in the form of legal conclusions nor speculative, but are material facts based on [the affiant's] personal recollection of the events,’ the affidavit is not conclusory." United States v. $223,178.00 in Bank Account Funds , 333 F. App'x 337, 338 (9th Cir. 2009) (quoting Orsini v. O/S Seabrooke O.N ., 247 F.3d 953, 960 n.4 (9th Cir. 2001) ); see also United States v. Allen , 211 F.3d 970, 973–74 (6th Cir. 2000) (noting that "an affidavit setting out the reasons for a belief, as opposed to merely stating a belief, is not conclusory"). The facts contained in the Hanawalt Affidavit cited below are neither conclusory nor speculative, but instead are material facts based on her personal knowledge. As such, they provide support for the Hanawalt Motion.
The Court's policies and procedures (the "Procedures") provide that the statement of material facts in a motion for summary judgment "shall set forth, in numbered paragraphs, each material fact as to which the moving party contends there is no genuine issue." Procedures at 14, https://www.ohsb.uscourts.gov/OHSB/HearingSchedules/Columbus/Hoffman,JohnEJr/130942482948553750.pdf. Whittaker contends that the Hanawalt Motion should be denied because Hanawalt failed to comply with this requirement. Whittaker Resp. at 6.
The Court certainly could deny the Hanawalt Motion as a result of her noncompliance with the Procedures. And if Hanawalt's noncompliance had affected Whittaker's ability to adequately respond "by admitting and/or denying each of the movant's factual assertions in matching numbered paragraphs," Procedures at 14, then it would have done so. But the denial likely would have been without prejudice to Hanawalt's refiling a motion for summary judgment in accordance with the Procedures. And Whittaker does not contend that Hanawalt's noncompliance prevented him from responding in the required manner; in fact, he responded to Hanawalt's eight-paragraph statement of facts by using a numbering system that Hanawalt should have used. It therefore would be pointless to deny the Hanawalt Motion based on her failure to number the paragraphs in her statement of material facts.
In her reply in support of the Hanawalt Motion (the "Hanawalt Reply") (Adv. Doc. 37), Hanawalt attempted to correct her noncompliance with the numbering requirement, but then proceeded to misnumber her own motion's paragraphs. In particular, the passage that she identifies as paragraphs 3 and 4 of her factual statement together actually comprise the third paragraph of the factual statement, and that mistake, through a cascading effect, caused every subsequent paragraph to be misnumbered. Compare Hanawalt Reply at 5 with Hanawalt Mot. at 3–4.
Whittaker also argues that the Hanawalt Motion should be denied because Hanawalt failed to comply with the requirement that "[e]ach fact listed ... be supported by a specific citation to the record." Procedures at 14. In particular, he notes that Hanawalt's factual recitation fails to cite the Hanawalt Affidavit. Whittaker Resp. at 2 n.1. But while the Court "need consider only the cited materials," it "may consider other materials in the record." Fed. R. Civ. P. 56(c)(3). And it should come as a surprise to no one that the Hanawalt Affidavit, which was attached to the Hanawalt Motion, is part of the summary judgment record. Moreover, it is not difficult to match the statement of facts in the Hanawalt Motion with the representations made in the Hanawalt Affidavit. If Hanawalt's noncompliance with the Procedures had impaired Whittaker's ability to effectively respond to the Hanawalt Motion or had prevented the Court from determining which material facts are undisputed, then the Hanawalt Motion would have been denied. But Whittaker was able to make an effective response, and the Court was able to determine that the material facts set forth below are undisputed. Under the circumstances, the only effect of denying the Hanawalt Motion on procedural grounds would be needless delay.
As described in both the Hanawalt Motion and the Whittaker Motion, TVM was surgically implanted into Hanawalt's body in June 2005, approximately two and one-half years before the Petition Date. Whittaker Mot. ¶ 2; Hanawalt Mot. at 3. Afterward, Hanawalt "visited her gynecologist, Dr. Diana Zitter, for her annual physical examination" both before and after the Petition Date, and "[a]t each visit, Dr. Zitter physically checked the [TVM] and determined that there were no problems or issues with it." Hanawalt Mot. at 4; see also Hanawalt Aff. ¶ 3 ("After the surgery, I had annual gynecological examinations with ... Dr. Zitter .... During the examination from 2005–2010, she found no problems with the repairs performed in 2005. She did not express any concerns, and did not direct me to follow up with her or any other physician.").
Hanawalt states that she underwent the surgery to correct urinary incontinence and that her urologist advised her afterward that he also repaired her pelvic floor, but did not inform her that he had implanted TVM as part of the repair. Hanawalt Mot. at 3. To the contrary, Whittaker points to evidence suggesting that Hanawalt knew before the surgery took place that it would include the implantation of TVM. Whittaker Resp. at 3. The Court, of course, "does not weigh the evidence" on summary judgment in order to decide disputed facts, Rainer v. Westinghouse Elec. Corp ., No. 94-5642, 1995 WL 510050, at *1 (6th Cir. Aug. 28, 1995), and therefore is not deciding when Hanawalt learned that TVM had been implanted inside her body. But that does not preclude summary judgment here, because, as Whittaker concedes, it is immaterial for purposes of summary judgment whether Hanawalt knew that the surgery would include the implantation of TVM. Whittaker Resp. at 3.
Whittaker responded to Hanawalt's allegation that Dr. Zitter physically checked the TVM and determined that there were no problems or issues with it as follows: "She cites page 31 of her deposition transcript to support this allegation, but that was not [her] testimony. Rather, [Hanawalt] merely agreed with the statement that she ‘went on to have yearly [Pap] smears and [she] was evaluated each time as normal by [her] OB/GYN.’ " Whittaker Resp. at 4. It is true that, in response to a question by Whittaker's attorney during the Deposition, Hanawalt agreed that she had Pap smears as part of her annual examinations. Dep. at 31, 37. But Whittaker does not contest her representations in the Hanawalt Motion that the TVM was checked during the annual examinations and that Dr. Zitter determined that there were no problems or issues with it until 2011. In short, Whittaker's quibble with the page of the deposition cited by Hanawalt does not give rise to a genuine dispute as to any material fact.
In August 2011, Hanawalt "went for her annual examination," and during that examination Dr. Zitter "discovered that a portion of the TVM was eroding the tissue around it." Hanawalt Mot. at 4. "This was the first time ... Hanawalt was aware ... of a medical problem that she was experiencing related to [the TVM]." Id . She "had no symptoms of any problem related to the TVM to that point," and she "only became aware of the problem because Dr. Zitter informed her about the erosion" in August 2011. Id .; see also Hanawalt Aff. ¶ 4 ("August 3, 2011 ... was the first time there was any indication of any problems with the TVM.... Even then, I had no symptoms related to the TVM, and was only aware of a problem because Dr. Zitter found [the erosion] during an examination."). In October 2011, the urologist who had implanted the TVM, removed the 4–5 mm patch of the TVM that was causing the erosion. Hanawalt Mot. at 4; Whittaker Mot. ¶ 10. No one (including Hanawalt's doctors) has ever told her when the erosion occurred. Whittaker Mot. ¶ 11; Dep. at 37.
Hanawalt became aware of lawsuits related to TVM in 2011 and retained law firms to pursue claims on her behalf. Whittaker Mot. ¶ 12; Hanawalt Mot. at 4–5. In 2014, she filed a second amended complaint in a Minnesota state court asserting claims under Minnesota law (the "State Court Complaint"). Whittaker Mot. ¶ 13; Dep. Ex. 5. In the State Court Complaint, Hanawalt asserted, among other things, that the defendants were liable to her on a theory of strict liability and that they were estopped from asserting a statute of limitations defense because they hid the defect in the TVM, preventing Hanawalt from discovering it until Dr. Zitter did so. Whittaker Mot. ¶ 15(e)–(f).
A copy of the State Court Complaint is attached as Exhibit 5 to the Deposition.
According to Hanawalt, the amount of the Settlement Proceeds is $80,000. Hanawalt Mot. at 5. Whittaker states that this amount is unsupported by the record, but also concedes that the amount is not material for purposes of the Court's adjudication of the cross-motions for summary judgment. Whittaker Resp. at 5.
IV. Legal Analysis
A. Summary Judgment Standard
Under Rule 56 of the Federal Rules of Civil Procedure, made applicable in this adversary proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure, a court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "On a motion for summary judgment, facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts." Ricci v. DeStefano , 557 U.S. 557, 586, 129 S.Ct. 2658, 174 L.Ed.2d 490 (2009) (internal quotation marks omitted). A dispute is genuine only if it is "based on evidence upon which a reasonable [finder of fact] could return a [judgment] in favor of the non-moving party." Gallagher v. C.H. Robinson Worldwide, Inc ., 567 F.3d 263, 270 (6th Cir. 2009). And "[a] factual dispute concerns a ‘material’ fact only if its resolution might affect the outcome of the suit under the governing substantive law." Id.
On summary judgment, the Court is required to draw all inferences in favor of the nonmoving party "to the extent supportable by the record." Scott v. Harris , 550 U.S. 372, 381 n.8, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). But the Court may "disregard[ ] unsupported allegations, unreasonable inferences, and conclusory speculation." Hann v. Micron Separations, Inc ., No. 96-1948, 1997 WL 56859, at *1 (1st Cir. Feb. 12, 1997) ; see also Grubb v. YSK Corp ., 401 F. App'x 104, 111 (6th Cir. 2010) ("[W]e are not obliged to draw unreasonable inferences in [the non-movant's] favor."). Further, "[c]onclusory allegations, speculation, and unsubstantiated assertions are not evidence, and are not enough to defeat a well-supported motion for summary judgment." Gooden v. City of Memphis Police Dep't , 67 F. App'x 893, 895 (6th Cir. 2003). Moreover, a court is required to enter summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
B. The Law Governing the Determination of Whether the Settlement Proceeds Are Property of the Estate
Although "[t]he trustee must bring the action to claim property for the bankruptcy estate," In re Wagner , 530 B.R. 695, 701 n.1 (Bankr. E.D. Wis. 2015), Whittaker did not do so. Instead, Hanawalt commenced this adversary proceeding, seeking a declaratory judgment that the Settlement Proceeds are not property of the estate. But no matter who commences the adversary proceeding, the party seeking turnover has the burden of proving that the asset at issue is property of the estate. See MacKenzie v. Neidorf (In re Neidorf) , 534 B.R. 369, 372 (B.A.P. 9th Cir. 2015) (holding that "[t]he party seeking to include property in the estate bears the burden of showing that the item is property of the estate"); Seaver v. Klein-Swanson (In re Klein Swanson) , 488 B.R. 628, 633 (B.A.P. 8th Cir. 2013) ; Porrett v. Hillen (In re Porrett) , 564 B.R. 57, 66 (D. Idaho 2016) ; Wagner , 530 B.R. at 701 n.1. Thus, as the party seeking turnover, the Chapter 7 trustee has the burden of proof.
Property of the estate includes "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). The claims set forth in the State Court Complaint would be property of Hanawalt's bankruptcy estate only if they were prepetition claims. See Underhill v. Huntington Nat'l Bank (In re Underhill) , 579 F. App'x 480, 482 (6th Cir. 2014). Thus, the question here is whether Hanawalt had an interest in the claims asserted in the State Court Complaint as of the Petition Date. If so, then the Settlement Proceeds are property of her estate under § 541(a)(6) as "proceeds" of the claims. See, e.g. , Porrett , 564 B.R. at 68.
"The nature and extent of property rights in bankruptcy are determined by the ‘underlying substantive law.’ " Tyler v. DH Capital Mgmt., Inc ., 736 F.3d 455, 461 (6th Cir. 2013) (quoting Raleigh v. Ill. Dep't of Rev ., 530 U.S. 15, 20, 120 S.Ct. 1951, 147 L.Ed.2d 13 (2000) ). Here, the underlying substantive law is the Minnesota law on which Hanawalt grounded the claims she asserted in the State Court Complaint. In order to answer the question of whether Hanawalt had an interest in the claims under Minnesota law on the Petition Date, the Sixth Circuit would—and therefore this Court must—analyze whether the claims were "sufficiently rooted in [Hanawalt's] prebankruptcy past." Tyler , 736 F.3d at 461.
The "sufficiently rooted" test has its genesis in a case decided under the Bankruptcy Act, Segal v. Rochelle , 382 U.S. 375, 428, 86 S.Ct. 511, 15 L.Ed.2d 428 (1966). There, the Supreme Court held that a loss-carryback tax refund claim was "sufficiently rooted in the pre-bankruptcy past and so little entangled with the bankrupts' ability to make an unencumbered fresh start that it should be regarded as [prepetition property]." Segal , 382 U.S. at 380, 86 S.Ct. 511. As a decision the Sixth Circuit cited with approval in Tyler stated, "[t]he 1978 Bankruptcy Code follows Segal to the extent that it includes after acquired property ‘sufficiently rooted in the pre-bankruptcy past’ but eliminates the requirement that it not be entangled in the debtor's ability to make a fresh start." In re Richards , 249 B.R. 859, 861 (Bankr. E.D. Mich. 2000). Thus, the only question is whether the claims asserted in the State Court Complaint are sufficiently rooted in Hanawalt's pre-bankruptcy past to make them property of her bankruptcy estate.
Under the "sufficiently rooted" test, a claim held by a debtor against a nondebtor is undeniably property of the estate if the claim has accrued as of the bankruptcy filing date. See Tyler , 736 F.3d at 462–64. In fact, some courts have concluded that a claim held by a Chapter 7 debtor is property of the estate only if the claim has accrued as of that date. See, e.g. , Holstein v. Knopfler (In re Holstein) , 321 B.R. 229 (Bankr. N.D. Ill. 2005). According to the Holstein court, "[r]eading Segal to include in the bankruptcy estate ... causes of action accruing post-petition if they are ‘sufficiently rooted in the pre-bankruptcy past,’ gives courts two alternatives," both of which the court found to be unacceptable: "disregard the clear temporal line drawn in section 541(a)(1), or ignore state law establishing the causes of action in question." Id . at 238. But other courts have held that something less than claim accrual can be sufficient to make a claim property of the estate. Indeed, "[s]ome courts have applied the [sufficiently rooted] test expansively, including contingent and unripe claims as property of the estate." Tyler , 736 F.3d at 462.
It is important to keep in mind the distinction between claims held by debtors against third parties and claims that third parties hold against debtors. Although some courts, as explained above, would hold that claims held by debtors must have accrued as of the petition date in order for the claims to be property of the estate under § 541(a), it is generally accepted that a claim against a debtor need not have accrued as of the petition date in order for it to be a claim against the debtor within the meaning of § 101(5) of the Bankruptcy Code. See Jeld-Wen, Inc. v. Van Brunt (In re Grossman's Inc.) , 607 F.3d 114, 117 (3d Cir. 2010) (overruling the widely criticized decision in Avellino & Bienes v. M. Frenville Co. (In re M. Frenville Co.) , 744 F.2d 332 (3d Cir. 1984), which had held that a "claim" as that term is defined in § 101(5) arises when the underlying state law cause of action accrues); see also In re Huffy Corp ., 424 B.R. 295, 303 (Bankr. S.D. Ohio 2010) ("Frenville [was] widely criticized for its failure to address critical bankruptcy laws and policies. Most notably, by focusing on state law to determine when a claim arises, the theory does not fully account for the broad definition of a claim in the Bankruptcy Code that explicitly encompasses a right to payment that is unmatured or contingent.") (citations omitted); Sikirica v. Harber (In re Harber) , 553 B.R. 522, 530 (Bankr. W.D. Pa. 2016) (explaining that the distinction between the treatment of claims within the meaning of § 101(5) and property of the estate as defined in § 541(a) "is rooted in Congressional intent"). For a discussion of the various tests courts have used to determine whether a third party has a claim against a debtor under § 101(5), see Jeffries v. Buckley (In re Buckley) , 404 B.R. 877, 887–89 (Bankr. S.D. Ohio 2009).
In the cases the Sixth Circuit has decided to date in this area, the determination of whether the claim at issue was property of the estate would have been the same under either test. Thus, the Sixth Circuit has not had occasion to adopt a definitive standard for determining whether a claim held by a debtor against a third party is sufficiently rooted in the debtor's prebankruptcy past. But the Sixth Circuit has made clear that, regardless of the test used, a debtor's claim may be sufficiently rooted in her prebankruptcy past and therefore "qualif[y] as bankruptcy estate property only if the [debtor] suffered a pre-petition injury." Underhill , 579 F. App'x at 482.
In Underhill , the bankruptcy court and the Bankruptcy Appellate Panel issued decisions holding that the debtor's tortious-interference-with-contract claim was sufficiently rooted in her prebankruptcy past and therefore was property of the estate even though the harm that befell the debtor occurred postpetition. See id . at 481. The Sixth Circuit reversed those decisions, determining that the tortious-interference claim was insufficiently rooted in the prepetition past of the debtor because the record lacked evidence that the debtor was injured before she filed her bankruptcy case. See id . at 482–83. In support of this holding, the Underhill court cited with approval the decision of Witko v. Menotte (In re Witko) , 374 F.3d 1040, 1044 (11th Cir. 2004), in which the Eleventh Circuit held that a legal malpractice claim was not property of the estate given that the debtor suffered no injury from his attorney's malpractice before he filed his bankruptcy petition.
C. Application of Governing Law
Whittaker and Hanawalt agree that if Hanawalt suffered no injury from the TVM before the Petition Date, then her TVM-based claims are not property of the estate. Whittaker Mot. at 9–10; Hanawalt Mot. at 2. They part ways, however, over whether Hanawalt was injured by the TVM before the Petition Date.
Apparently conceding that TVM-induced tissue erosion constitutes injury, Hanawalt relies on the following undisputed facts in support of her position that she experienced no prepetition injury: (1) her gynecological examinations from 2005 through 2010 revealed no erosion; (2) it was not until her annual examination in August 2011—nearly four years after the Petition Date—that Dr. Zitter observed erosion; and (3) other than the erosion, she never experienced any ill effects tied to the TVM. Under similar circumstances, another bankruptcy court held that settlement proceeds from a TVM lawsuit were not property of the Chapter 7 debtor's bankruptcy estate. See In re Segura , No. 07-31907, 2016 WL 829830 (Bankr. N.D. Ohio Mar. 2, 2016). The debtor in that case, Angela Segura, underwent surgery for the implantation of TVM in April 2006, filed a Chapter 7 petition in May 2007, and began experiencing pain several years after she filed her petition. Approximately five years after she commenced her bankruptcy case, Segura learned that the TVM was eroding. She commenced a lawsuit asserting all of the claims that Hanawalt brought and more—including strict product liability claims—and became entitled to settlement proceeds as a result of the lawsuit. Id . at *1. The Chapter 7 trustee filed a motion to reopen the debtor's bankruptcy case in order to administer the settlement proceeds. Segura testified during the hearing on the motion to reopen that "the pelvic mesh eroded and that the erosion is the cause of her injuries," but the court found that there was "no evidence that the erosion began at the time the pelvic mesh was implanted and no evidence of the cause of the erosion or that it was inevitable at the time it was implanted." Id . at *3. Thus, the bankruptcy court found that "a critical predicate for [her] causes of action, namely, injury proximately caused by the pelvic mesh, did not exist prepetition," meaning that it would be futile to reopen the case because the settlement proceeds were not property of the bankruptcy estate. Id . Likewise, there is no evidence here that the erosion in Hanawalt's tissue began before the Petition Date.
In another case involving a Chapter 7 trustee's attempt to administer settlement proceeds derived from TVM implanted prepetition, the bankruptcy court held that the proceeds were not property of the debtor's estate, because the TVM did not cause prepetition harm and because applicable New York law provided that "a tort claim does not accrue until the debtor sustains an injury as a result of the complained of act or omission." In re Ross , 548 B.R. 632, 640 (Bankr. E.D.N.Y. 2016), aff'd sub nom. Mendelsohn v. Ross , 251 F.Supp.3d 518 (E.D.N.Y. 2017). Whittaker attempts to distinguish Ross by noting that it "applied New York substantive law, not Ohio law," as if there were something distinctive about New York law that drove the result in Ross . Whittaker Reply at 4. But New York law is no different from Ohio law, under which "a cause of action does not arise until the plaintiff has suffered injury." Biro v. Hartman Funeral Home , 107 Ohio App.3d 508, 669 N.E.2d 65, 68 (1995) ; Ohio Rev. Code Ann. § 2305.10(A) (providing that, in general, a cause of action based on a product liability claims accrues "when the injury or loss to person or property occurs"). And under the Minnesota law relevant here as the law on which Hanawalt based her claims in the State Court Complaint, a tort action does not accrue until "the act causes the injury upon which one could base a claim." Johnson v. Steele-Waseca Coop. Elec ., 469 N.W.2d 517, 520 (Minn. Ct. App. 1991).
In fact, it might accrue later. See Huggins v. Stryker Corp ., 932 F. Supp. 2d 972 (D. Minn. 2013). In Huggins , the patient had a cognizable physical manifestation of injury, but the causal connection between the injury and the product was not known. The court held that the products liability claim did not accrue under Minnesota law until evidence was produced connecting the injury and the product in the form of a scientific article and subsequent FDA notice. Id . at 986. Here, an FDA notice was issued with respect to the TVM in July 2011—more than four years after the Petition Date. State Court Compl. ¶ 9. Hanawalt and the Trustee, however, do not mention this FDA notice in their motions, and the Court is not grounding its decision on the timing of the FDA notice. Nor is the Court deciding a case that is not before it—one in which the Chapter 7 debtor experienced no prepetition injury, but nonetheless had other reasons before filing bankruptcy to expect that a medical device implanted prepetition would give rise to a right to receive settlement proceeds after the petition date.
Another bankruptcy court decision also supports Hanawalt's position. See Sikirica v. Harber (In re Harber) , 553 B.R. 522 (Bankr. W.D. Pa. 2016). In Harber , the Chapter 7 trustee filed a motion requesting the turnover of proceeds that the debtor might become entitled to receive from a claim against the manufacturer of a hip-replacement device that had been implanted in the debtor several years before she commenced her bankruptcy case. The debtor had received a notice informing her of the possibility that the hip implant could fail even before she filed her bankruptcy case. Id. at 525–26. But the bankruptcy court nonetheless found that her claim against the manufacturer of the implant was insufficiently rooted in her prepetition past because she had not sustained an injury and did not exhibit any symptoms prepetition that would have signaled a problem with the hip implant. The court accordingly ruled that the debtor's claim against the manufacturer was not property of the bankruptcy estate. Id. at 533.
Given the relevant case law and the lack of any genuine dispute as to any material fact, Hanawalt is entitled to judgment as a matter of law. It is undisputed that Hanawalt experienced no side effects from the TVM other than erosion. It also is undisputed that her annual gynecological examinations after the TVM was implanted in 2005 revealed no erosion through 2010 and that it was not until an annual examination conducted nearly four years after the Petition Date that erosion was detected by her doctor in 2011.
Although the undisputed facts and the case law favor Hanawalt, Whittaker argues that he, not Hanawalt, is the one entitled to summary judgment. But Whittaker, despite having completed discovery, offers no evidence that would raise a genuine dispute as to whether the erosion occurred before the Petition Date. Whittaker instead contends that Hanawalt should be estopped from arguing that she was injured after the Petition Date by what he says was her own previous allegation that she was injured before the Petition Date. According to Whittaker, Hanawalt took "the position in her [State Court] Complaint that her injury and/or cause of action ... arose in 2005 at the latest when the [TVM] was implanted ...." Whittaker Mot. at 10–11; see also Whittaker Resp. at 7; Whittaker Reply at 2–3. But Whittaker's position relies on a misreading of the State Court Complaint. Hanawalt never alleged in the State Court Complaint that she was injured at the moment the TVM was implanted in 2005. To the contrary, after stating that the TVM was implanted in 2005, she alleged that she "subsequently developed significant injuries, including but not limited to ... erosion" and then alleged that "the injuries and damages [she] suffered subsequent to her surgeries were caused by the negligent design and manufacture of [the TVM]." State Court Compl. ¶¶ 32–33 (emphasis added). The State Court Complaint includes allegations of erosion, and every count of the State Court Complaint either references erosion specifically or alleges injury other than the mere implantation of the defective TVM. Id. ¶¶ 14, 20, 23, 32–33, 41, 47, 53, 56(b), 60, 65, 68–69, 74(g), 75, 86, 98, 105, 110–11. While Hanawalt asserted that the TVM was defective at the time it was implanted in her body and that those defects led to the erosion, id . ¶¶ 4–7, 31–111, she never stated in the State Court Complaint when the erosion or any other injury occurred. Indeed, she would have had no reason to do so. In order to recover on her claims, Hanawalt needed to allege only that she had been injured; she did not need to establish when the injury occurred. Quite simply, Whittaker's argument that Hanawalt alleged in the State Court Complaint that she was injured before the Petition Date is incorrect.
Whittaker attempts to put a finer point on his argument in his reply. There, he contends that Hanawalt must have been taking the position in the State Court Complaint that she experienced a prepetition injury because, according to Whittaker, she alleged that the TVM was " ‘biologically incompatible with human tissue’ and initiated a chain ‘immune response’ in her body when it was implanted pre-petition in 2005, ultimately resulting in tissue erosion that was not discovered until 2011." Whittaker Reply at 1. In other words, according to Whittaker, "[t]he discovery of the injury occurred after [Hanawalt] filed for bankruptcy, but according to [her] own allegations, the injury began in 2005 when the [TVM] was implanted," because the TVM was "fundamentally antagonistic to human tissue." Id . at 2–3.
By relying on the State Court Complaint's reference to a "chain immune response," Whittaker suggests that such a response itself would constitute injury. The Court need not decide that issue for two reasons: (1) the State Court Complaint does not in fact state that it was an immunological response that caused the erosion in Hanawalt's tissue; (2) even though the discovery deadline has passed, Whittaker can point to no evidence of the cause of the erosion. It bears noting, however, that it is highly questionable whether a "chain immune response" is injury in and of itself. After all, many courts have held that exposure to products that initiate biological processes leading to illness do not constitute injury until the illness develops. See, e.g. , Urie v. Thompson , 337 U.S. 163, 170, 69 S.Ct. 1018, 93 L.Ed. 1282 (1949) (holding that a party exposed to silica dust was injured "only when the accumulated effects of the deleterious substance manifest themselves" as silicosis); Brush Beryllium Co. v. Meckley , 284 F.2d 797, 800 (6th Cir. 1960) (holding that a party exposed to noxious gases was "injured only when the accumulated effects of the deleterious substance manifest themselves" as berylliosis ); Ackison v. Anchor Packing Co. , 120 Ohio St.3d 228, 897 N.E.2d 1118, 1126 (2008) ("This court has never held that asymptomatic pleural thickening is, by itself, sufficient to establish a compensable injury for [a claim for] asbestos exposure.").
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Once again, Whittaker misreads the State Court Complaint. Hanawalt never alleged in the State Court Complaint that any immune response that occurred in her body began immediately upon implantation of the TVM or any time before the Petition Date. In fact, she does not allege definitively that an immune response ever began in her body at all. The State Court Complaint states that "the scientific evidence shows that [TVM] is biologically incompatible with human tissue and promotes an immune response in a large subset of the population ," not in every individual into whose body the TVM is implanted. State Court Compl. ¶ 4 (emphasis added). Further, Hanawalt does not definitively identify the cause of her tissue erosion. The cause could have been any number of aspects of the TVM mentioned in the State Court Complaint, such as the "biomechanical issues with the design of the [TVM] that create strong amounts of friction between the mesh and the underlying tissue that subsequently cause that tissue to degrade resulting in injury," id . ¶ 6(c), or the "degradation of the mesh itself over time," leading to erosion of the underlying tissue, id . ¶ 6(e), (f). And just as she failed to do with respect to any potential immune response leading to erosion, Hanawalt never alleged in the State Court Complaint that frictional forces or mesh erosion began immediately upon implantation or that her tissue began to erode as soon as the TVM was implanted (or at any time before the Petition Date). In sum, Whittaker's inaccurate characterization of the State Court Complaint "does not create a genuine issue of material fact." Coal. for the Advancement of Reg'l Transp. v. Fed. Highway Admin ., 576 F. App'x 477, 494 (6th Cir. 2014).
Whittaker points out in his reply that the erosion began before it was discovered. Whittaker Reply at 3. This is true, of course, for erosion, whether of human tissue or some other material, occurs over time. But this does not establish that the erosion had begun as of the Petition Date—a date that was four years before the erosion was discovered. As in Segura , there is simply "no evidence that the erosion began at the time the pelvic mesh was implanted and no evidence of the cause of the erosion or that it was inevitable at the time it was implanted." Segura , 2016 WL 829830, at *3.
Whittaker also relies on Hanawalt's assertion of a strict liability claim as a basis for his contention that she alleged in the State Court Complaint that her injury occurred at the time the TVM was implanted inside her body. But a strict liability claim based on a defective product does not accrue until there is a "cognizable physical manifestation" of injury caused by the defect. See Huggins , 932 F. Supp. 2d at 984. That is, injury and product defect are separate elements of the claim. See Hudson v. Snyder Body, Inc ., 326 N.W.2d 149, 155 (Minn. 1982) (holding that, in order to recover on a theory of strict liability, the plaintiff must establish each of the following: "(1) that plaintiff was injured, (2) that the injury was caused by defendant's product, (3) that the injury occurred because defendant's product was defective, and (4) that the defect was present in the product when it was sold by defendant"). Yet Whittaker repeatedly references Hanawalt's strict liability claim as though it might through some talismanic effect establish that she suffered a prepetition injury. See Whittaker Mot. at 3, 6, 11; Whittaker Resp. at 1; Whittaker Reply at 4. The flaw in this logic is clear: Because defectiveness does not equal injury, Hanawalt's allegation that the TVM was defective at the time it was implanted is not tantamount to an assertion that she suffered an injury at that time. Thus, it does not follow from Hanawalt's allegation that the TVM was defective at the time of implantation that she must have been asserting that she suffered an injury at that time or at any other time before the Petition Date—and thus holds a prepetition claim against the manufacturer.
Whittaker likewise attempts to make something of Hanawalt's "apparent attempt [in the State Court Complaint] to preempt an anticipated statute of limitations defense" by "alleg[ing] that [the defendants] hid the defects in the mesh from her and that she had no way of discovering the defects until recently." Whittaker Mot. at 11; Whittaker Resp. at 7–8. But again, defectiveness is not the same as injury. Thus, even if Hanawalt made these allegations in anticipation of the defendants' arguing that any injured she sustained occurred the moment the device was implanted and that her claims therefore were time-barred, this does not mean that Hanawalt herself was taking the position that she was injured when the device was implanted. Hanawalt's allegations in the State Court Complaint are in no way inconsistent with her position that she was not injured until after the Petition Date, and Whittaker's estoppel argument therefore must fail.
In sum, Whittaker does not allege that Hanawalt was injured in 2005 or at any time before she commenced her bankruptcy case. He merely contends that Hanawalt alleged in the State Court Complaint that she was injured before the Petition Date, when Hanawalt in fact said no such thing. And there is no evidence in the record that erosion or any other injury had occurred as of the Petition Date. Whittaker instead "simply claims that it should be inferred (without evidence) that because the TVM was defective, it began to cause an injury to Ms. Hanawalt immediately upon being implanted, [b]ut there is no evidence for this in the record." Hanawalt Reply at 2. Whittaker offers speculation rather than evidence that the erosion began four years before its discovery even though it was not uncovered during several intervening examinations. What's more, the speculation is based on a faulty reading of the State Court Complaint. And neither speculation nor unsubstantiated assertions are "enough to defeat a well-supported motion for summary judgment." Gooden v. City of Memphis Police Dep't , 67 F. App'x 893, 895 (6th Cir. 2003).
V. Conclusion
"A judge must not grant summary judgment based on his determination that one set of facts is more believable than another." Nelson v. City of Davis , 571 F.3d 924, 929 (9th Cir. 2009). And so, if Whittaker had set forth facts from which a reasonable inference could be drawn that Hanawalt experienced injury before the Petition Date, the Court would not grant summary judgment in her favor. Whittaker, however, has not set forth any such facts, and instead relies entirely on an inaccurate reading of the State Court Complaint.
For the foregoing reasons, the Whittaker Motion is DENIED and the Hanawalt Motion is GRANTED . The Court will enter a separate judgment entry in accordance with this opinion declaring that the Settlement Proceeds are not property of Hanawalt's bankruptcy estate.