Minor Children v. Roman Catholic Church of the Archdiocese of New Orleans (In re: Roman Catholic Church of the Archdiocese of New Orleans)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 5 months 3 weeks ago
- Case Type:
- Business
- Case Status:
- Reversed
- Citation:
- No. 23-30565 (5th Circuit, Jul 17,2024) Not Published
- Tag(s):
-
- Ruling:
- The U.S. Court of Appeals for the Fifth Circuit held (a) the Minor Children had Article III standing to appeal from a bankruptcy court's decision denying their motion for a "comfort order" to pursue state court litigation despite the automatic stay, (b) the district court properly and expressly treated the Minor Children's notice of appeal as a motion for leave to appeal, (c) the bankruptcy court had subject matter jurisdiction to rule on the stay motion, (d) the Minor Children sufficiently designated their issues on appeal, and (e) the bankruptcy court erred in denying the stay motion.
- Procedural context:
- Most of the opinion addresses "threshold procedural issues" that the Fifth Circuit labeled as "red herrings," specifically concerning standing and subject matter jurisdiction. Its decision on the merits turned on its conclusions "that Minor Children’s claims could not have been filed prepetition nor do they impermissibly interfere with the bankruptcy case." As to standing, notably, the Fifth Circuit concluded the Minor Children faced the risk of sanctions for violation of the automatic stay under 11 U.S.C.§ 362(k)(1) (stating "an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages") as Debtor accused the Minor Children of repeatedly violating the stay, though it had not yet moved for sanctions. It held "a party need not run afoul of the law in order to have Article III standing, and litigants can demonstrate standing before they face liability so long as they demonstrate a credible threat of enforcement." The opinion does not discuss whether Debtor - the Roman Catholic Church of the Archdiocese of New Orleans - can be "an individual injured by any willful violation of a stay" for purposes of 11 U.S.C.§ 362(k)(1).
- Facts:
- Appellant-Debtor Roman Catholic Church of the Archdiocese of New Orleans filed for bankruptcy in the U.S. Bankruptcy Court for the Eastern District of Louisiana in May 2020 after hundreds of child sex abuse claims came to light. The Appellees Minor Children were not pursuing sex abuse claims. Rather, they filed a class action state court lawsuit in August 2022 alleging Debtor was violating civil rights laws insofar as Catholic schools in the New Orleans area were asking improper pre-admission questions about their disabilities. Debtor removed the state court lawsuit to the U.S. District Court for the Eastern District of Louisiana under 28 U.S.C. § 1452(a) and “related to” bankruptcy jurisdiction under 28 U.S.C. § 1334(b). The Minor Children moved the district court to remand the case. They also moved the bankruptcy court for a “comfort order,” "seeking judicial confirmation that their action against [Debtor] was not subject to the automatic stay." The district court granted the motion to remand the class action case to the state court as "their suit was not 'related to' the Archdiocese’s bankruptcy because it could not conceivably affect the bankruptcy estate." But, shortly thereafter, the bankruptcy court denied the Minor Children's motion for a comfort order and held the automatic stay applied to bar continued pursuit of the state court class action case. The Minor Children appealed this decision to the district court without seeking leave to appeal. Debtor moved to dismiss the appeal for lack of standing and because the bankruptcy court's decision to deny the comfort order motion was interlocutory and unappealable. The district court quickly denied the motion to dismiss. A month later, it "reversed the bankruptcy court and held that the automatic stay does not apply to the Minor Children’s lawsuit." Debtor filed a subsequent appeal to the Fifth Circuit.
- Judge(s):
- King, Jones, and Oldham
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