Opinion ID: 554121
Heading Depth: 1
Heading Rank: 3

Heading: Exemption from Automatic Stay

Text: 38 DOL appeals the ruling of the bankruptcy court, affirmed by the district court, that its administrative action to enforce the provisions of the SCA is stayed by section 362(a) of the Bankruptcy Code. We review this question of law de novo, giving no special weight to the district court's determination. In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir.1988); Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458, 1464 (10th Cir.1988). 39 Under the automatic stay provision, a petition filed in bankruptcy operates as a stay, applicable to all entities of--(1) the commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the [bankruptcy] case.... 11 U.S.C. Sec. 362(a). However, [t]he filing of a petition ... does not operate as a stay--.... (4) ... of the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power.... 11 U.S.C. Sec. 362(b). 40 The bankruptcy court held that DOL's enforcement proceedings were not within the 362(b)(4) exception. The district court affirmed noting that section 362(b)(4) was intended to except only proceedings ... that are attempting to prevent or stop violations of fraud, environmental protection, consumer protection, safety or similar police or regulatory laws. Order, Sept. 13, 1988, at 7. The court reasoned that DOL was not attempting to prevent any of the foregoing or similar acts. Id. The court further reasoned that regulatory laws that conflict directly with control of the res or property by the Bankruptcy Court are not excepted by Sec. 362(b)(4). Id. 41 At the outset, we reject the district court's conclusion that the 362(b)(4) exception does not apply to government actions that conflict with the bankruptcy court's control over assets of the debtor. The language of section 362(b)(4) contains no such limitations. Under the plain language of the statute, governmental action must simply be taken for the purpose of exercising police or regulatory power in order to qualify for the exemption. Furthermore, the statute specifically allows the government to enforce any judgments obtained in the exercise of its police or regulatory powers, with the exception of money judgments. 11 U.S.C. Sec. 362(b)(5). 11 We must assume that Congress chose its language with the full recognition that the exception would allow governmental actions to encroach on the court's control of debtors' affairs. Accordingly, we conclude that the section 362(b)(4) exception can apply to agency actions, even though such actions may affect debtor assets. 42 We now consider whether the section 362(b)(4) exception applies to the DOL proceedings involved in this case. Most courts that have faced this issue have determined that the exception applies. 12 Of course, not every agency action against a debtor can be characterized as one that enforces police or regulatory power. Consequently, courts have developed two tests for determining whether agency actions fit within the exception. Under the pecuniary purpose test, the court asks whether the government's proceeding relates primarily to the protection of the government's pecuniary interest in the debtor's property and not to matters of public policy. See Edward Cooper Painting, 804 F.2d at 942; In re State of Missouri, 647 F.2d 768, 776 (8th Cir.1981), cert. denied, 454 U.S. 1162, 102 S.Ct. 1035, 71 L.Ed.2d 318 (1982). If it is evident that a governmental action is primarily for the purpose of protecting a pecuniary interest, then the action should not be excepted from the stay. In contrast, the public policy test distinguishes between government proceedings aimed at effectuating public policy and those aimed at adjudicating private rights. See Edward Cooper Painting, 804 F.2d at 942. Under this second test, actions taken for the purpose of advancing private rights are not excepted from the stay. See id. 43 In the case at bar, we conclude that DOL's enforcement proceedings are exempt from the stay under either test. The remedies sought by DOL are not designed to advance the government's pecuniary interest. DOL's pursuit of debarment and liquidation of back-pay claims was primarily to prevent unfair competition in the market by companies who pay substandard wages. Although we do not feel bound to apply it, we also conclude that the public policy test presents no barrier to DOL's actions. Despite the fact that DOL sought liquidation of back-pay claims for specific individuals, we do not characterize the use of that remedy as an assertion of private rights. We conclude instead that the request for liquidation of back-pay claims was but another method of enforcing the policies underlying the SCA. Our conclusion is bolstered by the fact that the back-pay claimants would not receive any extra priority by virtue of the DOL action. Actual collection of the back-pay claims must proceed according to normal bankruptcy procedures. Accordingly, we hold that DOL's enforcement proceedings in this case were exempt from the automatic stay under section 362(b)(4).