UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

In re:

 MATHSON INDUSTRIES, INC.,

Debtor,

_____________________________/

WENDY TURNER LEWIS, Trustee of the

Chapter 7 Bankruptcy Estate of Mathson

Industries, Inc.,

Plaintiff/Appellee,

v.

NEGRI BOSSI USA, INC.,

Defendant/Appellant,

 /

Case Nos. 09-13148

 09-13149

Honorable Patrick J. Duggan

Chapter 7 Case No. 09-42894

Adversary No. 09-04639-tjt

Honorable Thomas J. Tucker

OPINION AND ORDER

 At a session of said Court, held in the U.S.

District Courthouse, Eastern District 

of Michigan, on January 26, 2010.

PRESENT: THE HONORABLE PATRICK J. DUGGAN

U.S. DISTRICT COURT JUDGE

Wendy Turner Lewis (“Plaintiff”), Trustee of the Chapter 7 bankruptcy estate of

Mathson Industries, Inc. (“Mathson”), filed an adversary proceeding against Negri Bossi

USA, Inc. (“Defendant”), in the United States Bankruptcy Court for the Eastern District

of Michigan on April 17, 2009. In that action, both parties filed motions for summary

judgment. On July 30, 2009, United States Bankruptcy Judge Thomas J. Tucker issued a

bench opinion granting, in part, Plaintiff’s motion and denying Defendant’s motion. 

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 1 of 21 Pg ID 168
2

Judge Tucker also entered an injunction against Defendant. On August 11, 2009,

Defendant filed an appeal as of right from the injunction and a motion for leave to appeal

the decisions on the motions for summary judgment. On September 30, 2009, this Court

granted the motion for leave to appeal and ordered that the appeals be consolidated. The

issues on appeal have now been fully briefed and the Court held oral argument on January

14, 2010. 

I. Facts and Procedural Background

As part of the underlying bankruptcy case, Mathson’s estate included a number

injection molding machines sold to Mathson by Defendant. Mathson never paid for those

machines but Defendant failed to perfect its security interest in eight machines being

maintained outside of the state of Michigan. Originally valued at over $3,000,000, the

eight machines were the most valuable part of Mathson’s estate and Plaintiff desired to

sell them at auction pursuant to 11 U.S.C. § 363. 

In the underlying adversary action, Plaintiff alleges that Defendant attempted to

control bidding on the machines by telling potential purchasers that it would not provide

necessary services and parts—referred to in this case as “servicing capabilities”—for

machines purchased from Plaintiff. By its actions, Defendant intended to suppress

bidding on the machines so that it could purchase the machines at a low price from the

estate and then resell them to the potential purchasers at or near full-price. (See Bankr.

Ct. Bench Op. at 21-40 (summarizing record evidence).) In this way, Defendant would

basically be able to recover all of its unsecured claim against Mathson. 

As a result of Defendant’s actions, one previously identified potential purchaser of

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 2 of 21 Pg ID 169
3

the two largest and most expensive machines, Draexlmaier Automotive Group of

America, LLC (“Draexlmaier”), informed Plaintiff that it would not be able to submit a

bid for the machines. (Pl.’s Mot. for Summ. J. Ex. 12.) This left Plaintiff with only

Defendant’s bid for the eight machines in the amount of $100,000 plus waiver of its

unsecured claim in the bankruptcy. Based on these events, Plaintiff sought relief in a

two-count complaint alleging (1) violation of 11 U.S.C. § 363(n), and (2) violation of 11

U.S.C. § 362(a)(3) and (a)(6). In both counts, Plaintiff requested that the bankruptcy

court exercise its power as set forth in 11 U.S.C. § 105(a) and grant injunctive relief as a

remedy to the alleged violations. Plaintiff specifically requested that the bankruptcy court

order Defendant to provide servicing capabilities to purchasers of the machines at a cost

equivalent to what Defendant charges other customers in its ordinary course of business. 

At some point during these events, Draexlmaier submitted a bid for the two larger

machines of $1,512,000 contingent upon assurances that Defendant would provide

servicing capabilities either voluntarily or upon court order. (See Bankr. Ct. Bench Op. at

54-55.)

In a July 30, 2009, bench opinion, the bankruptcy court agreed that Defendant’s

conduct violated 11 U.S.C. § 362(a)(6) and granted Plaintiff summary judgment as to that

claim only. Because Plaintiff sought the same relief in each of her claims, the bankruptcy

court did not address the alleged violations of 11 U.S.C. §§ 362(a)(3) and 363(n). (Id. at

41, 61.) Furthermore, to the extent the bankruptcy court granted summary judgment to

Plaintiff, the bankruptcy court also denied Defendant’s motion for summary judgment. 

(Id. at 61.) To remedy the violation of 11 U.S.C. § 362(a)(6), the bankruptcy court

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 3 of 21 Pg ID 170
4

entered the following injunctive order:

From the entry of this Order through September 1, 2012, Negri Bossi,

and all agents and other persons acting in concert with Negri Bossi, are

permanently enjoined from:

(a) communicating to potential purchasers of the Machines that Negri

Bossi will not provide Servicing Capabilities to them if they purchase one

or more of the Machines from Trustee; and

(b) refusing to provide Servicing Capabilities to the purchaser(s) of one

or more of the Machines at the same cost that it charges its other customers

in the ordinary course of its business for such Servicing Capabilities. In

its discretion, Negri Bossi may require payment in advance in cash

equivalent prior to providing any such Servicing Capabilities.

(Bankr. Ct. Perm. Inj. Order ¶ 2.) The bankruptcy court left for another day the issue of

whether Defendant could be held liable for monetary damages relating to its violation. 

(Id.) After the issuance of the injunctive order, Draexlmaier completed its purchase of the

two larger machines for $1,512,000 and Plaintiff sold the remaining six machines at

public auction to Defendant for $499,730.

The primary issues on appeal include whether Defendant violated the automatic stay

in a manner prohibited by 11 U.S.C. § 362(a)(6) and, if so, whether the injunction entered

by the bankruptcy court is an appropriate remedy for such a violation. In the event

Defendant succeeds in obtaining reversal of the bankruptcy court on those issues,

Defendant also seeks an order from this Court denying Plaintiff’s motion for summary

judgment in its entirety, granting Defendant’s motion for summary judgment as to all

claims, and dismissing the case.

II. Standard of Review

The bankruptcy court’s findings of fact are reviewed under the clearly erroneous

standard. Booher Enter. v. Eastown Auto Co. (In re Eastown Auto Co.), 215 B.R. 960,

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 4 of 21 Pg ID 171
5

963 (B.A.P. 6th Cir. 1998). The bankruptcy court’s conclusions of law are reviewed de

novo. Id. at 964. This means that the reviewing court must decide legal issues as if the

issues had not been decided before. Id. Because “[t]he grant of summary judgment

presents a pure question of law,” the Court reviews the bankruptcy court’s ruling in this

case de novo. Superior Bank, FSB v. Lewis (In re Lewis), 398 F.3d 735, 746 (6th Cir.

2005). 

Summary judgment is appropriate only when there is no genuine issue as to any

material fact and the moving party is entitled to judgment as a matter of law. See Fed. R.

Civ. P. 56(c). The movant has an initial burden of showing “the absence of a genuine

issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548,

2553 (1986). Once the movant meets this burden, the non-movant must come forward

with specific facts showing that there is a genuine issue for trial. See Matsushita Electric

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356 (1986). The

court must accept as true the non-movant’s evidence and draw “all justifiable inferences”

in the non-movant’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.

Ct. 2505, 2513 (1986). The central inquiry is “whether the evidence presents a sufficient

disagreement to require submission to a jury or whether it is so one-sided that one party

must prevail as a matter of law.” Id., 477 U.S. at 251-52, 106 S. Ct. at 2512. 

III. The Automatic Stay and 11 U.S.C. § 362(a)(6)

The foundation of Plaintiff’s success in the bankruptcy court is Defendant’s alleged

violation of 11 U.S.C. § 362(a)(6). Specifically, the bankruptcy court concluded that

Defendant’s refusal to provide servicing capabilities to the trustee or potential purchasers

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 5 of 21 Pg ID 172
6

and attempt to obtain the machines for far less than their actual value amounted to an “act

to collect, assess, or recover a claim against the debtor that arose before the

commencement” of Mathson’s bankruptcy case in violation of the automatic stay. 11

U.S.C. § 362(a)(6). Defendant argues that the bankruptcy court erred, as a matter of law,

in concluding that such conduct violates the automatic stay.

Before jumping to the specifics of § 362(a)(6), the Court pauses to consider the

importance and purpose of the automatic stay to bankruptcy proceedings. The oft quoted

legislative history of § 362 explains the intended scope and purpose of the automatic stay:

It gives the debtor a breathing spell from his creditors. It stops all

collection efforts, all harassment, and all foreclosure actions. It permits

the debtor to attempt a repayment or reorganization plan, or simply to

be relieved of the financial pressures that drove him into bankruptcy.

The automatic stay also provides creditor protection. Without it,

certain creditors would be able to pursue their own remedies against the

debtor’s property. Those who acted first would obtain payment of their

claims in preference and to the detriment of other creditors. Bankruptcy

is designed to provide an orderly liquidation procedure in which all

creditors are treated equally.

H.R. Rep. No. 95-595, at 340 (1977), as reprinted in 1978 U.S.C.C.A.N. 5787, 6296-97;

S. Rep. No. 95-989, at 49, 54-55 (1978), as reprinted in 1978 U.S.C.C.A.N. 5787, 5835,

5840-41. Although cases involving stay violations typically evoke concerns for the

debtor, the unique circumstances of this case implicate the second purpose of the

automatic stay. Defendant’s refusal to provide services for and attempt to obtain

possession of the machines is of no particular concern to Mathson, a company that is

being liquidated; by its conduct, however, Defendant intends to increase significantly its

own recovery at the expense of other creditors. Keeping in mind the stay’s intended

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 6 of 21 Pg ID 173
7

protection of creditors, the Court now turns to the particulars of Plaintiff’s claim against

Defendant.

In analyzing a claimed violation of § 362(a)(6), the Sixth Circuit has provided the

following as a “useful guide:” “a course of conduct violates § 362(a)(6) if it ‘(1) could

reasonably be expected to have a significant impact on the debtor’s determination as to

whether to repay, and (2) is contrary to what a reasonable person would consider to be

fair under the circumstances.’” Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 423 (6th

Cir. 2000) (quoting In re Briggs, 143 B.R. 438, 453 (Bankr. E.D. Mich. 1992)). This test

arose in the context of cases where creditors sought to recover pre-petition debts from

bankruptcy debtors. See Pertuso, 233 F.3d 417; In re Briggs, 143 B.R. 438. As a result,

the first element of this “useful guide” limits its analysis to conduct directed against the

bankruptcy debtor. Such conduct is absent in this case. 

Nonetheless, the bankruptcy court concluded, and this Court agrees, that the

statutory language of § 362(a)(6) actually prohibits “any act to collect, assess, or recover”

a pre-petition debt, not just acts directed against the bankruptcy debtor. (See Bankr. Ct.

Bench Opinion at 12-18 (quoting 11 U.S.C. § 362(a)(6)).) In considering this claim,

then, the Court considers conduct violative of § 362(a)(6) if it (1) could reasonably be

expected to have a significant impact on the creditor’s ability to collect, assess, or recover

a pre-petition debt, and (2) is contrary to what a reasonable person would consider fair

under the circumstances. Defendant’s conduct in this case satisfies both elements of this

test.

1. Significant Impact

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 7 of 21 Pg ID 174
8

Contrary to Defendant’s self-serving arguments that its conduct would not have a

significant impact on its recovery, the record is replete with evidence that Defendant’s

conduct could reasonably be expected to have a significant impact on Defendant’s ability

to recover its pre-petition claim. Defendant’s own statements and admissions before and

during this adversary action reveal that the refusal to provide servicing capabilities could

reasonably be expected to diminish the value of the machines such that Plaintiff would

have no other option than to sell them to Defendant for a mere pittance at the expense of

other creditors. In a March 9, 2009, letter to Plaintiff’s counsel, Defendant’s counsel

explained that potential purchasers having to disassemble, transport, reassemble, and recalibrate the machines would face “a very high probability that the Machines will be

damaged” and that, once damaged, Defendant would refuse to assist with repairs. (Pl.’s

Mot. for Summ. J. Ex. 2.) The letter went on to warn that “[a]t some point prospective

purchasers will understand that they will need [Defendant’s] assistance now or in the

future and it will not be forthcoming,” and that, “because of the lack of service and

support, the purchaser may be buying nothing but expensive scrap.” (Id. (emphasis

added).)

These warnings were not mere hyperbole. A memorandum between two of

Defendant’s employees reveals that a purchasing agent for Draexlmaier understood the

value of Defendant’s service and support. (Pl.’s Mot. for Summ. J. Ex. 9.) The

purchasing agent indicated that, without Defendant’s servicing capabilities, she would

recommend that Draexlmaier refrain from purchasing the machines. (Id.) Indeed,

Draexlmaier later informed Plaintiff’s counsel that it would decline to make a bid for the

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 8 of 21 Pg ID 175
9

machines absent a guarantee that Defendant would provide servicing capabilities. (Pl.’s

Mot. for Summ. J. Ex. 12.)

That Defendant’s conduct would have a significant impact on the ultimate

disposition of the machines should come as no surprise to Defendant; Defendant

specifically engaged in the conduct at issue with the intention of re-acquiring the

machines from Plaintiff. In the same memorandum discussed above, Defendant’s

employee noted that Defendant felt that refusing servicing capabilities was Defendant’s

“only recourse to encourage [Plaintiff] to negotiate seriously with [Defendant].” (Pl.’s

Mot. for Summ. J. Ex. 9.) In deposition testimony, Defendant’s general manager

admitted that Defendant’s conduct was motivated by Mathson’s nonpayment for the

machines, conceded that there was a substantial likelihood that the machines would be

inoperable without Defendant’s assistance, and confirmed Defendant’s intentions

ultimately to obtain payment for the machines by refusing services. (See Bankr. Ct.

Bench Op. at 30-40 (summarizing deposition testimony of Liam Burns).) Under these

circumstances, there is no genuine issue of material fact that Defendant’s conduct could

reasonably be expected to have a significant impact on the Defendant’s ability to collect,

assess, or recover its pre-petition debt.

2. Fairness

Assuming the first element of the test is met, Defendant next argues that its conduct

is not contrary to what a reasonable person would consider fair under the circumstances. 

In making this claim, Defendant asserts that, under normal circumstances, it could refuse

to provide servicing capabilities to any potential customer and that its expressed intent to

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 9 of 21 Pg ID 176
1

Defendant cites numerous other cases for the proposition that mere requests for payment

from a bankruptcy debtor do not violate § 362(a)(6). (See Def.’s Appeal Brief at 15-16.) 

Defendant went beyond making a “mere request for payment,” however, when it refused to

provide servicing capabilities to potential purchasers of the machines.

10

recover on a pre-petition claim does not convert this otherwise lawful conduct into

unlawful conduct. The Court disagrees.

It is largely irrelevant whether Defendant’s conduct would be considered fair

outside of the bankruptcy proceedings; the § 362(a)(6) analysis requires consideration of

Defendant’s conduct “under the circumstances”—circumstances which include the

bankruptcy stay and the stay’s intended protection of creditors. Under the circumstances

of this case, Defendant’s conduct deprives the bankruptcy estate of the most valuable part

of the debtor’s property at the expense of all other creditors. In essence, Defendant’s

refusal of servicing capabilities allows Defendant to revive its unperfected security

interests. Defendant, however, is the only entity to blame for the unperfected security

interests and it would be unfair to allow Defendant to rectify its own error at the expense

of other creditors. Intervention of the Court is therefore necessary to ensure an orderly

liquidation procedure in which all creditors are treated equally.

In making its argument to the contrary, Defendant primarily relies on Brown v.

Pennsylvania State Employees Credit Union, 851 F.2d 81 (3d Cir. 1988). Defendant

asserts that this case stands for the proposition that conduct lawful outside of bankruptcy

proceedings is not made unlawful by the debtor’s bankruptcy filing.1

 In Brown, a credit

union sent a letter to a debtor stating that it would bar the debtor from membership unless

she reaffirmed, with court approval, her outstanding debt. Id. at 82. In concluding that

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 10 of 21 Pg ID 177
11

such conduct does not violate the automatic stay, the Third Circuit observed that the

denial of the credit union’s services, which were available at other institutions, was not

necessarily coercive and that the credit union’s conduct was designed to protect the credit

union from repeated defaults. Id. at 85-86. Under those circumstances, the Third Circuit

found nothing in the bankruptcy code to require the credit union to continue doing

business with the debtor and held that a ruling to the contrary “would impermissibly

extend the scope of the code’s anti-discrimination provisions.” Id. at 85 (referring to 11

U.S.C. §525's prohibition of discrimination against debtors by the government and

employers).

The present case is distinguishable from Brown in several material respects. First,

Defendant’s refusal of servicing capabilities is not analogous to the denial of services by a

credit union. Defendant’s conduct is not motivated by a desire or need to protect itself

from future default or loss. In fact, Defendant only furthers its losses by refusing to

provide servicing capabilities; Defendant typically generates a profit by providing

servicing capabilities to machine owners and that profit potential is protected by the terms

of the injunction. (See Dep. of Liam Burns, Pl.’s Mot. for Summ. J. Ex. 1 at 148-50.) 

Furthermore, Defendant can protect itself from losses similar to those sustained in the

underlying bankruptcy case by properly perfecting its security interests in machines sold

to future customers. Defendant’s refusal in this case is also distinguishable from the

refusal in Brown by the fact that the servicing capabilities here are not readily available

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 11 of 21 Pg ID 178
2

On appeal, Defendant argues that the servicing capabilities are, in fact, available from

other providers. (See Def.’s Brief on Appeal at 6, 24-25.) In support, Defendant cites a web

posting of a competitor that states the competitor “can take any manufacturer’s machine and

make it good as new, including everything you need to get it up and running fast.” (See id. at

25.) The Court, however, considers this unauthenticated posting insufficient to create a genuine

issue of material fact as to the reasonable availability of servicing capabilities especially in the

face of admissions by Defendant and its agents that purchasers will need Defendant’s assistance;

that there is a “substantial likelihood” that the machines will be inoperable without Defendant’s

support; that Defendant’s servicing capabilities would be the quickest, most cost-effective

solution for problems with the machines; and that Defendant remains unaware of any other

company in the United States that has successfully provided start-up services for the two larger

machines. (See Pl.’s Mot. for Summ. J. Ex. 2; Dep. of Liam Burns, Pl.’s Mot. for Summ. J. Ex. 1

at 124-34.)

3

Defendant spends some time in its brief arguing that its conduct was neither harassing

nor coercive because its statements were made in the course of “settlement negotiations” and

were not repetitively made. (See Def.’s Brief on Appeal at 17.) The Court agrees that

Defendant’s conduct was not “harassing.” Statements need not be unsolicited or repetitive,

however, to qualify as “coercive.” See In re Levine, 132 B.R. 475, 477 (Bankr. M.D. Fla. 1991)

(finding a single letter to be coercive under the circumstances of the case). It is the

circumstances under which Defendant made its refusal of servicing capabilities that renders that

conduct coercive, not any singular statement of refusal in the abstract.

12

from other providers.2 Because purchasers of the machines could not reasonably go to

another service provider for assistance, Defendant’s refusal to provide servicing

capabilities took on a coercive character that the credit union’s refusal lacked in Brown.

3

Second, the Third Circuit’s concern regarding impermissible extensions of the

bankruptcy code’s anti-discrimination provision is not implicated by the present case. 

While the bankruptcy code does not explicitly require Defendant to provide servicing

capabilities to purchasers of the machines, it does prohibit Defendant from engaging in

“any act to collect, assess, or recover” a pre-petition debt. 11 U.S.C. § 362(a)(6). Having

concluded that Defendant’s conduct violates that statutory language, the Court need not

extend the code’s anti-discrimination provision to justify intervention. Furthermore, the

anti-discrimination provision has no relevance to this case considering that Defendant’s

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 12 of 21 Pg ID 179
13

conduct is directed against the bankruptcy estate and third parties rather than the

bankruptcy debtor.

Finally, Defendant’s reliance on Brown ignores the fact that bankruptcy courts

regularly issue orders regarding creditor conduct that could not otherwise issue except

that they are necessary to effectuate the bankruptcy code. In Sechuan City, Inc. v. North

American Motor Inns, Inc. (In re Sechuan City, Inc.), 96 B.R. 37 (Bankr. E.D. Pa. 1989),

for example, the bankruptcy court considered a creditor’s attempts to discourage potential

customers from patronizing a debtor-restaurant by posting signs regarding the debtorrestaurant’s financial condition. After considering the guidance of the Brown decision,

the bankruptcy court concluded that the creditor violated § 362(a) when it “undertook a

studied effort to coerce payment of the lessor’s prepetition claim.” Id. at 41. What is

more, the bankruptcy court rejected the creditor’s attempt to shield the wrongful conduct

by invoking the First Amendment’s freedom of speech. Id. at 44. So, while the creditor

would have been able to engage in such conduct outside of a bankruptcy proceeding, the

protections of the bankruptcy code justified the bankruptcy court’s intervention.

 Furthermore, a bankruptcy court’s ability to intervene is not limited to requiring

that creditors refrain from certain conduct; in Sportfame of Ohio, Inc. v. Wilson Sporting

Goods Co. (In re Sportfame of Ohio, Inc.), 40 B.R. 47 (Bankr. N.D. Ohio 1984), a

bankruptcy court ordered that a sporting goods manufacturer engage in business that it

otherwise would have declined. Like Defendant in this case, the sporting goods

manufacturer in Sportfame attempted to force the Chaptor 11 bankruptcy debtor to pay its

pre-petition debts by refusing to fulfill future orders of otherwise irreplaceable goods. Id.

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 13 of 21 Pg ID 180
14

at 48-49. The bankruptcy court concluded that such conduct violated § 362(a)(6) and

ordered that the sporting goods manufacturer continue supplying goods to the debtor in

exchange for up-front cash payments. Id. at 51, 53. The fact that this case arose in the

context of a Chapter 11 case, rather than Chapter 7, does nothing to diminish the general

proposition that a bankruptcy court may intervene when necessary to enforce provisions

of the bankruptcy code. 

In a related argument, Defendant objects that the analysis set forth above

impermissibly deems otherwise lawful conduct unlawful merely because of Defendant’s

expressed intention to recover the value of the pre-petition claim. In other words,

Defendant believes that the Court would allow it to deny servicing capabilities to

purchasers had Defendant simply refused to express its reasons for doing so. Defendant’s

argument echoes a statement by the Third Circuit in Brown. As previously explained,

Brown addressed the refusal of a credit union to provide future services to a bankruptcy

debtor who declined to reaffirm her pre-petition debt. Therein the Third Circuit wrote:

Having concluded that [the credit union’s] bylaw provision [denying

services] is valid, we do not see how merely sending the letter

[informing the debtor of the bylaw] offends the bankruptcy laws. To

hold otherwise allows the credit union to deny services to a debtor but

forbids it to say why. The result is unreasonable, and finds no support

in the statute or its history.

Brown, 851 F.2d at 86. Defendant’s reliance on this passage is fundamentally flawed,

however, because neither this Court nor the bankruptcy court has concluded that

Defendant’s conduct in this case was valid in the first instance.

Contrary to Defendant’s interpretation of the ruling, this Court considers

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 14 of 21 Pg ID 181
4

To the extent that Sportfame relies on the creditor’s expression of intent to justify its

ruling, this Court disagrees with that opinion. See Sportfame, 40 B.R. at 50 (“Wilson could have

simply refused, for any reason, to sell goods to debtor or offered no explanation for its refusal to

do business. Instead, its sole reason for refusing to sell goods to debtor was its desire to collect

its prepetition debt.”) Rather, the Court considers dispositive the fact that the creditor’s conduct

in Sportfame “had the effect of interfering with the reorganization effort, a result at odds with the

purpose of the bankruptcy laws.” Id. 

15

Defendant’s conduct violative of the stay because the conduct allows Defendant to

recover its pre-petition debt at the expense of other creditors, not because Defendant

expressed an intention to obtain such a result. Had Defendant expressed an intention to

recover a pre-petition claim without engaging in any conduct to effectuate that intent,

there would be no violation of the stay. Conversely, by engaging in an act to recover a

pre-petition claim, Defendant violated the stay regardless of its expressed intentions. 

Admittedly, a defendant’s express intentions will normally be relevant to determining

whether an act is taken “to collect, assess, or recover” a pre-petition debt. See Cousins v.

CitiFinancial Mortgage Co. (In re Cousins), 404 B.R. 281, 287 (Bankr. S.D. Ohio 2009). 

Ultimately, though, the Court agrees with the Third Circuit’s observation that it is not the

mere expression of intent that makes a creditor’s conduct unlawful; the proper analysis

focuses on whether the conduct in question actually violates a provision of the bankruptcy

code.4

In this case, Defendant did more than simply express an intent to collect a prepetition debt; Defendant engaged in conduct in furtherance of that intent. Specifically,

Defendant (1) informed a prospective purchaser that it would not provide support or

maintenance for machines purchased from the bankruptcy estate, (Pl.’s Mot. for Summ. J.

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 15 of 21 Pg ID 182
5

As previously discussed, exhibit 9 is a memorandum between two of Defendant’s

employees indicating that Draexlmaier had been informed about Defendant’s refusal to provide

services. Exhibit 11 is a letter from Defendant to Draexlmaier confirming the same.

6

Exhibit 14 reflects Defendant’s offer for the machines. Therein, Defendant explains that

its offer is made in the context of the facts that “Negri Bossi will not service, support or provide

replacement parts for any of the Machines[;] Negri Bossi will advise prospective purchasers of

this fact if asked by them[;]” and “[t]he two large Machines require special handling for removal

and set up. Negri Bossi will not provide this assistance to purchasers. There is a substantial

likelihood that these Machines will not be operable without this assistance. Moreover, all of the

Machines will require support, parts or service in the future and Negri Bossi will not provide

this.”

Defendant’s attempt to obtain possession of the machines is vital to this case. Had

Defendant simply accepted its loss and entirely walked away from the machines, its refusal to

provide servicing capabilities could not be seen as an attempt to recover a pre-petition debt. 

Plaintiff’s counsel reluctantly admitted as much during oral argument. By using the refusal of

servicing capabilities as leverage to obtain possession of the machines, however, Defendant

clearly sought to recover on its pre-petition claim. That said, it does not matter that Defendant

admitted to using the refusal of services as leverage; it is the combination of conduct, not

Defendant’s mere words, that resulted in a violation of the stay.

16

Exs. 9, 11),5 and (2) offered to purchase the machines from Plaintiff for far less than their

value, knowing other purchasers would require the assistance Defendant refused to

provide, (Pl.’s Mot. for Summ. J. Ex. 14).6

 In this way, Defendant sought to pursue its

own remedy against the debtor’s property to the detriment of other creditors. The

conduct more specifically violates § 362(a)(6) in that it (1) could reasonably be expected

to have a significant impact on the creditor’s ability to collect, assess, or recover a prepetition debt, and (2) is contrary to what a reasonable person would consider fair under

the circumstances. Having identified a violation of the bankruptcy code, the Court now

turns to consider the appropriateness of injunctive relief.

IV. Injunctive Relief

After concluding that Defendant’s conduct violated § 362(a)(6), the bankruptcy

court determined that the only viable remedy for the violation was to issue an injunction

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 16 of 21 Pg ID 183
7

The bankruptcy court drew on the provisions of 11 U.S.C. § 105(a) for its authority to

grant injunctive relief. That section states, “The court may issue any order, process, or judgment

that is necessary or appropriate to carry out the provisions of this title.” Id. Another provision

of the bankruptcy code creates a private right of action for violations of the automatic stay. See

11 U.S.C. § 362(k).

17

requiring Defendant to provide servicing capabilities to purchasers of the machines.7 “At

the permanent injunction stage, the requirements for injunctive relief are success on the

merits, irreparable harm, a balance of harms weighing in favor of the prevailing party, and

public interest weighing in favor of the injunction.” McCuiston v. Hoffa, 351 F. Supp. 2d

682, 689 n.5 (E.D. Mich. 2005); see also Audi AG v. D’Amato, 469 F.3d 534, 550 (6th

Cir. 2006). In addition to the arguments analyzed above regarding Plaintiff’s success on

the merits, Defendant asserts that the bankruptcy court erroneously analyzed the

remaining factors for injunctive relief.

As an initial matter, Defendant disputes that its refusal to provide servicing

capabilities gives rise to irreparable injury. Defendant contends that any damages caused

by its refusal of servicing capabilities could be measured and remedied by a monetary

award equivalent to the cost of replacement servicing capabilities. If the resolution were

so simple, however, Defendant’s denial of servicing capabilities would not have been

coercive or violative of § 362(a)(6) in the first place. As detailed in footnote 2, supra,

there remains a substantial likelihood that the machines will be inoperable without

Defendant’s assistance and, in exploring alternative options, purchasers would face

increased costs in time and money. Furthermore, because it is only speculative to assume

that another company could successfully provide servicing capabilities, this measure of

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 17 of 21 Pg ID 184
8

When the nature of the loss makes damages difficult to quantify, the damages are not

fully compensable by a monetary award and, therefore, may be irreparable. See Basicomputer

Corp. v. Scott, 973 F.2d 507, 511 (6th Cir. 1992).

9

It is difficult to attach a precise monetary value to any waiver of Defendant’s unsecured

claim and neither party has attempted to do so on appeal. Nonetheless it is safe to say that the

value of the waiver is far less than the amount of the claim. (See Bankr. Ct. Bench Op. at 53). 

As a general rule, waiver of a bankruptcy claim would, on a dollar-for-dollar basis, increase the

recovery of other creditors. The waiver of Defendant’s claim, however, comes at a cost of $1.9

million to the pot of money to be distributed. The “value” of Defendant’s waiver would

arguably be the amount that Defendant recovers as a creditor to the larger pot of money. That

calculation, however, requires additional considerations regarding creditor priorities and

administrative expenses that the Court is not prepared to discuss.

10Defendant makes no argument that the value of the waiver of its unsecured claim, as

discussed in footnote 7, supra, would exceed $900,000.

18

damages is presently impossible to calculate.8

In contrast, the Court can quantify, to a certain extent, the impact of Defendant’s

conduct on bidding for the machines. Without a guarantee of the availability of servicing

capabilities, Plaintiff received only Defendant’s bid for the machines of $100,000 plus

waiver of Defendant’s unsecured claim. Meanwhile, with assurances of servicing

capabilities, Draexlmaier paid $1,512,000 for two of the eight machines and Defendant

purchased the remaining six machines for $499,730. Setting aside the value of the waiver

of Defendant’s unsecured claim,9

 there is a $1.9 million difference between the proceeds

from the machines with and without servicing capabilities. The bankruptcy court

concluded, and Defendant does not dispute, that Defendant would be rendered insolvent

and uncollectable by any damage award at or above $1 million. (See Bankr. Ct. Bench

Op. at 57-58.) Therefore, to the extent that Defendant would be rendered insolvent by a

damage award,10 the bankruptcy court correctly concluded that Defendant’s conduct gives

rise to irreparable injury. See Roland Machinery Co. v. Dresser Indus., Inc., 749 F.2d

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 18 of 21 Pg ID 185
19

380, 386 (7th Cir. 1984).

Next, Defendant contends that the bankruptcy court failed to consider the harm of

entering an injunction. Specifically, Defendant complains that the issuance of an

injunction interferes with its right to freedom of contract. See, e.g., Pac. Bell Tel. Co. v.

Linkline Commc’ns, Inc., 129 S. Ct. 1109, 1118 (2009) (“As a general rule, businesses are

free to choose the parties with whom they will deal, as well as the prices, terms, and

conditions of that dealing.”). While it is true that the injunction interferes with

Defendant’s freedom to choose the parties with which it will deal, that harm is mitigated

to a certain extent by the fact that the injunction protects Defendant’s ability to obtain a

profit and allows Defendant to provide the servicing capabilities as it does to other

customers in the ordinary course of business. (See Bankr. Ct. Perm. Inj. Order ¶ 2.) This

mitigated harm to Defendant is outweighed by the irreparable harms, as discussed above,

that would result if no injunction were entered. In other words, Defendant’s interest in

the freedom of contract does not outweigh Plaintiff’s interest in the enforcement of the

bankruptcy code.

Finally, Defendant asserts that the public interest favors denial of injunctive relief. 

In making this argument, Defendant basically repeats the argument regarding the right to

freedom of contract and alleges that the public has a derivative interest in ensuring that

the freedom of contract is respected by the courts. Assuming that such a public interest

exists, the public has at least an equivalent interest in enforcement of the provisions of the

bankruptcy code, especially insofar as those provisions seeks to ensure the fair treatment

of bankruptcy creditors. Therefore, the Court concludes that the public interest factor

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 19 of 21 Pg ID 186
20

also weighs in favor of the issuance of an injunction in this case.

Having independently reviewed the injunctive relief factors, the bankruptcy court’s

reasoning, and Defendant’s objections thereto, the Court concludes that injunctive relief

is an appropriate remedy in this case and affirms the bankruptcy court’s order to that

effect.

V. Plaintiff’s Remaining Claims and Defendant’s Motion for Summary Judgment

As previously discussed, the bankruptcy court’s disposition of Plaintiff’s remaining

claims and Defendant’s motion for summary judgment depended on the conclusion that

Plaintiff is entitled to relief on her § 362(a)(6) claim. Specifically, the bankruptcy court

declined to address Plaintiff’s remaining claims because those claims sought the same

relief that the court had already granted as to the § 362(a)(6) claim. Similarly, the

bankruptcy court denied Defendant’s motion for summary judgment based on the

conclusion that Defendant violated § 362(a)(6) and did not address Defendant’s potential

liability on the remaining claims. Because this Court is affirming the bankruptcy court’s

opinion as to the § 362(a)(6) claim, this Court also declines to address the merits of the

remaining claims and Defendant’s motion for summary judgment. As indicated in this

Court’s prior opinion and order granting Defendant’s motion for leave to appeal, this

Court has no intention to address the merits of claims that were not addressed by the

bankruptcy court in the first instance. (See September 30, 2009, Opinion and Order,

Docket Entry No. 7, at 5.)

VI. Conclusion

Defendant’s conduct in this case gave rise to a violation of 11 U.S.C. § 362(a)(6). 

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 20 of 21 Pg ID 187
21

Because the damage resulting from that violation was otherwise irreparable, the

bankruptcy court appropriately granted Plaintiff’s request for injunctive relief.

Accordingly,

IT IS ORDERED that the bankruptcy court’s July 30, 2009, bench opinion and

subsequent entry of a permanent injunction against Defendant is AFFIRMED.

A judgment consistent with this opinion shall issue.

s/PATRICK J. DUGGAN

UNITED STATES DISTRICT JUDGE

Copies to:

Howard S. Sher, Esq.

Michele L. Walton, Esq.

Anissa C. Hudy, Esq.

John J. Bursch, Esq.

Hon. Thomas J. Tucker

2:09-cv-13148-PJD-MKM Doc # 15 Filed 01/26/10 Pg 21 of 21 Pg ID 188