Secured creditor Agrifund filed a § 523 dischargeability complaint against Chapter 12 farm debtors. In response, the debtors brought various third-party cross-claims, which prompted Agrifund to assert its own cross-claims against those third parties for conversion, defalcation, larceny, embezzlement, and vicarious liability.

One third-party cross-claimant moved to dismiss Agrifund’s cross-claims, arguing that they lacked sufficient connection to the bankruptcy estate to support “related to” jurisdiction. The cross-claimant emphasized that Agrifund’s claim comprised only 11% of the secured debt and just 7% of total claims against the debtors, in effect urging the Court to impose a quantitative threshold on the Pacor “conceivable effect” test.

The Court rejected this argument, holding that if Agrifund recovers from the third-party claimant, its claim against the estate would decrease, thereby altering the distribution percentages for other creditors, which would have a “conceivable” effect on administration of the debtors’ estate. The Court distinguished this case from those involving more attenuated connections to the estate (such as equity interests in non-debtor affiliates or divested marital property), noting that Agrifund’s cross-claims (i) arose from the same auction transaction that was at issue in the dischargeability dispute and (ii) involved property subject to Agrifund’s security interest.

Practice Note: Here, Judge Somers (Bankr. D. Kan.) did not require a pro rata impact analysis before exercising “related to” jurisdiction over cross-claims against non-debtors. Rather, he held, because the cross-claims arose from the same transaction as the core dispute and would reduce an allowed proof of claim in the case, the Court had “related to” jurisdiction over claims among non-debtor third parties.

Agrifund, LLC v. Patmon (In re Patmon), No. 25-7018 (Bankr. D. Kan. June 2, 2026) 2026 WL 1596832