## Facts

- Dr. James P. Wood and Dr. Arthur E. Wood, III formed Wayne Clinic, P.A. in 1981 and each initially held 1,000 shares.
- In March 1984, James Wood and his wife, Carol, filed for Chapter 11 bankruptcy.
- Arthur alleged that in November 1984 James, Carol, and another director wrongfully issued additional clinic stock to James and caused disproportionate profit distributions, contrary to an alleged agreement for equal ownership and profits.
- Arthur filed an adversary proceeding in the bankruptcy court seeking declaratory relief regarding corporate ownership/rights and damages based on state-law corporate and contract theories.
- Defendants moved to dismiss, arguing the bankruptcy court lacked subject-matter jurisdiction over an intra-corporate dispute governed by state law.

## Issues

1. Whether the district court had “related to” bankruptcy jurisdiction under 28 U.S.C. § 1334(b) over state-law claims concerning stock issuance and profit distributions involving Chapter 11 debtors.
2. If jurisdiction existed, whether the proceeding was “core” under 28 U.S.C. § 157(b) or non-core but “otherwise related” under § 157(c).

## Decision

- The Fifth Circuit held the dispute fell within “related to” jurisdiction because its outcome could conceivably affect the debtors’ estate.
- The court held the proceeding was non-core because it did not invoke Bankruptcy Code rights and could exist outside bankruptcy as a state-law corporate/contract dispute.
- The court reversed the district court’s dismissal for lack of jurisdiction and remanded for further proceedings consistent with § 157(c).

## Legal Principles

- A civil proceeding is “related to” a bankruptcy case if its outcome could conceivably have any effect on the estate, including altering the debtor’s rights, liabilities, options, or the administration of the estate.
- “Core” proceedings are those that invoke substantive rights created by title 11 or that, by their nature, could arise only in bankruptcy.
- State-law disputes that could be brought outside bankruptcy may still be within “related to” jurisdiction, but they are generally non-core and subject to the bankruptcy judge’s limited authority under 28 U.S.C. § 157(c) (hearing the matter and submitting proposed findings and conclusions for district court entry of final judgment).
- The existence of “related to” jurisdiction is distinct from the core/non-core classification, which governs adjudicatory authority rather than subject-matter jurisdiction.

## Conclusion

The Fifth Circuit ruled that an intra-corporate shareholder dispute involving Chapter 11 debtors satisfied “related to” jurisdiction because it could affect the bankruptcy estate, but it was non-core because it arose solely under state law; accordingly, it could proceed only under the non-core procedures of § 157(c) rather than being finally adjudicated by the bankruptcy court.


Wood v. Wood (In re Wood), 825 F.2d 90 (5th Cir. 1987)