## Facts

- Earl and Margaret Blasingame filed a Chapter 7 petition in the Western District of Tennessee in August 2008, with attorney Tommy Fullen as counsel of record and attorney Martin Grusin involved in prepetition advice and preparation.
- The filed schedules reported minimal assets, but later proceedings indicated the debtors controlled substantial assets through multiple entities, trusts, and accounts and held a life estate in a high-value residence.
- The Chapter 7 trustee and a major unsecured creditor, Church Joint Venture, L.P. (CJV), pursued an adversary proceeding under 11 U.S.C. § 727(a) based on alleged nondisclosure; after trial, the bankruptcy court denied the debtors a discharge, and that denial was affirmed on appeal.
- CJV obtained derivative standing to pursue, on behalf of the trustee/estate, a legal-malpractice claim against the filing attorneys alleging negligent bankruptcy filing work caused damages tied to the denial of discharge.
- The debtors filed their own malpractice action in Tennessee state court, asserting the claim belonged to them personally rather than to the bankruptcy estate.
- The bankruptcy court resolved ownership through a declaratory-judgment action on cross-motions for summary judgment addressing whether the malpractice claim was estate property under 11 U.S.C. § 541.

## Issues

1. Whether a legal-malpractice claim based on prepetition legal services, but alleging injury from a post-petition denial of discharge, is “property of the estate” under 11 U.S.C. § 541(a).
2. Whether, under Tennessee law, the malpractice cause of action existed as of the petition date when the alleged negligence occurred prepetition but the asserted legally cognizable damages occurred post-petition.
3. Whether the “sufficiently rooted in the pre-bankruptcy past” concept can bring into the estate a claim that state law treats as unaccrued on the petition date.

## Decision

- The Sixth Circuit affirmed the Bankruptcy Appellate Panel, which had affirmed the bankruptcy court’s summary judgment.
- The court held the malpractice claim belonged to the debtors, not the Chapter 7 estate.
- Applying Tennessee accrual rules, the court concluded the claim did not exist at filing because the element of legally cognizable damages first occurred after the petition date (the denial of discharge).
- The court rejected using “sufficiently rooted in the pre-bankruptcy past” to create estate property where state law recognized no accrued cause of action at commencement.
- As a result, CJV’s derivative standing to sue on behalf of the estate did not extend to prosecuting the debtors’ malpractice claim as an estate asset.

## Legal Principles

- Under 11 U.S.C. § 541(a), estate property includes the debtor’s legal or equitable interests “as of the commencement” of the bankruptcy case.
- Federal law determines whether an interest becomes estate property, but state law determines the nature and existence of a cause of action, including when it accrues.
- Under Tennessee legal-malpractice law, a cause of action requires legally cognizable damages; until damages occur, there is no complete claim that constitutes a transferable property interest.
- The “sufficiently rooted in the pre-bankruptcy past” concept does not override state-law nonexistence of a cause of action at filing; it addresses contingent or unmatured interests, not claims lacking an accrued injury element under state law.

## Conclusion

Because Tennessee law required post-petition legally cognizable damages for the malpractice claim to accrue, the claim did not exist on the petition date and therefore never became property of the Chapter 7 estate under § 541(a); it belonged to the debtors.


Church Joint Venture, L.P. v. Blasingame (In re Blasingame), 986 F.3d 633 (6th Cir. 2021)