Dingley v. Yellow Logistics, LLC (In re Dingley)
No automatic stay to protect litigation misconduct in the Seventh and Ninth Circuits.
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- Case No. 14-60055; BA:P Case No. 13-1261 (9th Circuit, Apr 03,2017) Published
- Tag(s):
- Ruling:
- Affirmed BAP's holding that pursuing a civil contempt proceeding is exempt from the automatic stay where the contempt proceedings are in furtherance of the court's public policy interest in deterring litigation misconduct.
- Procedural context:
- In a pending state court action, and pursuant to court order, the creditor filed a brief in connection with a civil contempt proceeding arising from the debtor's failure to respond to discovery, the court's ensuing order imposing sanctions against the debtor, and the debtor's failure to pay the sanctions. In response, the debtor filed a motion for contempt under Section 362(k). The bankruptcy court granted the debtor's motion and imposed monetary sanctions against the creditor. On appeal, the Bankruptcy Appellate Panel (BAP) reversed. The debtor appealed the BAP's ruling to the Ninth Circuit, which affirmed, though on different grounds.
- Facts:
- Creditor sued the debtor alleging various state law claims. Debtor failed to show at his deposition. The state court imposed monetary sanctions against the debtor, which debtor failed to pay. The court scheduled an OSC re contempt against the debtor. Debtor filed his chapter 7 petition before the OSC hearing. At the OSC hearing, the court requested the parties to brief the effect of the automatic stay on the contempt proceedings. Creditor filed its brief. Rather than filing a brief with the state court, the debtor filed a motion in his bankruptcy case seeking sanctions under Section 362(k) based on the creditor filing the court-ordered brief after the petition date. The bankruptcy court granted debtor's motion and awarded monetary sanctions against creditor. Creditor appealed to the BAP, which reversed. The BAP's ruling was based on pre-Code precedent that civil contempt proceedings are exempted from the automatic stay unless the proceedings are in furtherance of collecting on a pre-petition claim or to harass the debtor. The debtor appealed to the Ninth Circuit, which affirmed the BAP's ruling. However, the Ninth Circuit relied on the Bankruptcy Code's "statutorily-enumerated exception for regulatory actions taken by a government entity." Section 362(b)(4). The Ninth Circuit applied two alternative tests to determine whether a government action falls under the government regulatory exception, the pecuniary purpose test (whether the government action is intended to protect the government's pecuniary interest in the debtor's property or to matters of public safety and welfare) and the public policy test (whether the government action is intended to effectuate public policy or adjudicate private rights). In a similar case (In re Berg) involving sanctions for litigation misconduct, the Ninth Circuit determined that under either test, a creditor's efforts to enforce a sanctions award against the debtor was exempted from the automatic stay. Similarly, the creditor's actions in the instant case to collect the state court sanctions award were also exempt from the stay.
- Judge(s):
- Ronald M. Gould, Richard R. Clifton, Paul J. Watford