Opinion ID: 2832004
Heading Depth: 2
Heading Rank: 1

Heading: The Automatic Stay and the Conduct Test

Text: The “automatic stay” is a statutory injunction against efforts outside of bankruptcy to collect debts from a debtor who is under the protection of the bankruptcy court. 11 U.S.C. § 362. It bars any “act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case.” Id. at § 362(a)(6). At issue in this appeal is whether the 2013 HAF constitutes a “claim” against St. Catherine that arose prior to the commencement of its bankruptcy, and is therefore subject to the automatic stay.2 We review the district court’s finding on this question de novo. In re Davis, 638 F.3d 549, 553 (7th Cir. 2011). There is no dispute that the 2013 HAF is a “claim.” The Bankruptcy Code (the “Code”) defines a “claim” as any “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” 11 U.S.C. § 101(5)(A). What we must 2 It is undisputed that the 2012 HAF (for the period July 1, 2011 through June 30, 2012) is a pre-petition claim. 6 Nos. 14-2420 & 14-2546 determine then is the date on which the 2013 HAF arose for purposes of classifying it as a pre- or post-petition claim. To make this determination, virtually all courts now apply some version of the “conduct test.” Under this approach, the date of a claim is determined by the date of the conduct giving rise to the claim. See Watson v. Parker (In re Parker), 313 F.3d 1267, 1269 (10th Cir. 2002) (ruling malpractice claim arose on date malpractice allegedly occurred); Grady v. A.H. Robins Co., 839 F.2d 198, 203 (4th Cir. 1988) (ruling tort claim arose on date tortious conduct allegedly occurred). By contrast, under the outmoded “accrual theory,” the date of a claim was determined pursuant to the state law under which liability for the claim arose. See In re Grossman's Inc., 607 F.3d 114, 119–121 (3d Cir. 2010) (overruling accrual test under which “the existence of a valid claim depends on: (1) whether the claimant possessed a right to payment; and (2) when that right arose as determined by reference to the relevant non-bankruptcy law”) (citations omitted). Because the conduct test includes both contingent and unmatured claims, it is thought to be in accordance with the broad definitions of “debt” and “claim” in the Code. See Parker, 313 F.3d at 1269 (adopting conduct test over accrual test as “the one more in tune with the plain language and the policy underlying the Bankruptcy Code”); Grady, 839 F.2d at 202 (“[T]he legislative history shows that Congress intended that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in bankruptcy.”); see also 11 U.S.C. § 101(12) (defining “debt” as “liability on a claim”); id. at § 101(5)(A). Some courts, however, expressing concern that the conduct test may be overly broad, require a “prepetition relationship” between the parties, “such as contact, exposure, impact, or privity, between the debtor’s prepNos. 14-2420 & 14-2546 7 etition conduct and the claimant.” In re Piper Aircraft Corp., 162 B.R. 619, 627 (Bankr. S.D. Fla. 1994) aff’d, 168 B.R. 434 (S.D. Fla. 1994), aff’d as modified sub nom. Epstein v. Official Comm. of Unsecured Creditors of Estate of Piper Aircraft Corp., 58 F.3d 1573 (11th Cir. 1995). This pre-petition relationship requirement “ameliorates the problem often attributed to the conduct test—that a bankruptcy proceeding cannot identify and afford due process to claimants” with unmatured or contingent claims. In re Grossman’s, 607 F.3d at 123 (citing Barbara J. Houser, Chapter 11 as a Mass Tort Solution, 31 LOY. L.A. L.REV. 451, 465 (1998). While we have never explicitly endorsed any approach, bankruptcy courts in this jurisdiction commonly apply the conduct test, see e.g., In re Papi, 427 B.R. 457, 465–66 (Bankr. N.D. Ill. 2010); In re Bonnett, 158 B.R. 125, 127 (Bankr. C.D. Ill. 1993), and we adopt it today. We decline to decide whether a pre-petition relationship is always required, but note that the parties here had one.