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PLAINTIFFS SOUGHT TO FORECLOSE ON LOANS TO THE BORROWERS WHO THEN STARTED BANKRUPTCY PROCEEDINGS; PLAINTIFFS THEN SUED DEFENDANTS, WHO ARE NOT PARTIES TO THE FORECLOSURE/BANKRUPTCY ACTIONS, FOR TORTIOUS INTERFERENCE WITH THE LOAN AGREEMENTS; THE TORTIOUS INTERFERENCE WITH CONTRACT ACTIONS ARE NOT PREEMPTED BY FEDERAL BANKRUPTCY LAW (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Stein, over a three-judge dissent, determined the tortious interference with contract claims, against defendants who are not parties in the foreclosure/bankruptcy proceedings, were not preempted by federal law. Plaintiff sought to foreclose on a loan and the borrowers commenced bankruptcy proceedings. Plaintiff then sued defendants, who are not parties to the foreclosure, alleging tortious interference with the loan agreements. The opinion focuses on the law of preemption:

It is not disputed that valid contracts existed between plaintiff and the borrowers. Plaintiff’s claims arising out of the borrowers’ breach of those contracts as asserted against the borrowers were resolved by the bankruptcy proceeding. Here, plaintiff alleges that defendants knew of the relevant contractual terms and deliberately induced the borrowers’ violations of those terms prior to the bankruptcy proceedings. In other words, plaintiff’s allegations state a claim for tortious interference with contract, and the remedy for that tort will not affect the debtor’s estate. As such, these claims will not encroach upon the province of the bankruptcy court. Stated simply, plaintiff’s claims “do[] not require the adjudication of rights and duties of creditors and debtors under the Bankruptcy Code” … . Sutton 58 Assoc. LLC v Pilevsky, 2020 NY Slip Op 06939, Ct App 11-24-20

 

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