Opinion ID: 1655639
Heading Depth: 2
Heading Rank: 1

Heading: the circuit court erred by allowing sanctions against aussenberg.

Text: ¶ 62. On the morning of the status conference held by Judge Ready on January 30, 1997, attorney Aussenberg contacted the court administrator, informing him that a bankruptcy petition had been filed on behalf of QPI in the Western District of Tennessee. Due to the filing of that petition in bankruptcy, Aussenberg correctly assumed that it would be a violation of the automatic stay for him to attend the status conference, and therefore, he was absent from the conference. Aussenberg also contacted his co-counsel that morning, Omar Craig, who was local counsel for QPI, and informed him that he would not be attending the status conference. The lower court erred by sanctioning Aussenberg for his absence. ¶ 63. The conference was to discuss the contents of a letter Aussenberg had written to the lower court, concerning sanctions Wyssbrod was ordered to pay on behalf of QPI. With no notice or hearing, the trial judge transferred the sanction previously held against QPI and Wyssbrod, to their out-of-state attorney, Aussenberg. The trial judge abused his discretion by transferring the sanctions from Wyssbrod to Aussenberg without affording Aussenberg proper notice and an opportunity for a show cause hearing to answer these contempt charges. ¶ 64. From the record, it appears that Aussenberg acted in good faith by contacting his co-counsel and the court administrator about the filing of the bankruptcy petition and his intentions not to violate the automatic stay. The trial judge stated at the status conference that all other matters in this case would be postponed until a determination by the bankruptcy court. The status hearing should also have been put on hold pending the outcome of the bankruptcy case. See In re Cherry, 78 B.R. 65, 70 (Bkrtcy.E.D.Pa.1987) (holding the automatic stay applies to all civil contempt proceedings not included in the exemptions to the automatic stay listed in § 362(b); no exception exists for civil contempt proceedings); see also In re Wiese, 1 S.W.3d 246, 249 (Tex.Ct.App.1999) (holding All actions with respect to civil contempt orders are stayed until such time as the automatic stay has been lifted by the bankruptcy court.). In addition, if the lower court intended to sanction Aussenberg, the trial judge should have followed proper procedure and afforded Aussenberg a show cause hearing to determine these issues. ¶ 65. In Atkins v. Martinez, 176 B.R. 998, 1006 (Bkrtcy.D.Minn.1994), the defendants, who were attorneys, obtained a bench warrant to compel the debtor's attendance before a judge in a state court concerning a motion to compel discovery. The Atkins court stated that the automatic stay is a creature of statute, and as such, the scope of the stay is governed by its language, specifically in § 362. Since an exception for civil contempt proceedings is not included in the language of § 362(b), this court decided it should not create an exception that exists beyond the statutory language. Quoting the statutory language of § 362(a), the court noted that the automatic stay section clearly encompasses all forms of civil litigation, including any claims or causes of action that were founded on facts that arose pre-petition. Id. The court stated, Every proceeding of a judicial or quasi-judicial nature is affected. Id. (quoting In re Joe DeLisi Fruit Co., 11 B.R. 694, 695 (Bankr.D.Minn. 1981)). Therefore, the automatic stay prevents the initiation by all persons and entities against a debtor in bankruptcy. Id. The facts of Phoenix Exploration, Inc. v. Murexco Petroleum, Inc., 614 So.2d 72, 72 (La.1993), are similar to the present facts, where a realtor had filed bankruptcy proceedings at the time of a contempt hearing. His attorney informed him that it was not necessary for him to appear at the hearing because the automatic stay was in effect, and the trial judge found the realtor in contempt. The court set aside the trial judge's ruling, and remanded the case for further proceedings. ¶ 66. At the status conference, the trial judge stated that the automatic stay would not stay matters that are unrelated to the debt. In addition, the majority agrees that the automatic stay did not stay this status conference, as they state, Aussenberg wished the circuit court to acknowledge the automatic stay in regard to the status conference, but to disregard it in regard to the motion to dismiss filed on the same day by QPI. Section 362(a)(1) of the Bankruptcy Code states the automatic stay operates as to the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title. (emphasis added). Therefore, the stay protects all actions  against the debtor,  and not actions on behalf of the debtor. In addition, the motion to dismiss would have no bearing on the case against QPI due to the automatic stay, and therefore, the case itself and the status conference was and should have been stayed after the petition in bankruptcy was filed. ¶ 67. The majority is incorrect in attributing the sanction to Wyssbrod instead of to QPI. The original scheduling order concerning this discovery stated, Quality Pallets, Inc., through Bill Wyssbrod, will report all business transactions of the corporation to counsel for the Defendant, Jackson H. Wittjen, on fourteen (14) day intervals. [2] The status conference was to discuss sanctions against Wyssbrod for not producing discovery on behalf of QPI. Since QPI was the debtor in bankruptcy, this meeting was stayed pursuant to the automatic stay. Although the trial judge may have been frustrated with Aussenberg, he abused his discretion by allowing the conference to proceed in violation of the automatic stay. The trial judge also dismissed Aussenberg from the representation of QPI on the day of the status conference on January 30, 1997, and by order of the court on February 18, 1997. The trial judge cannot dismiss Aussenberg from representing QPI and sanction him for not attending a status conference on the same day without allowing him the opportunity for a show cause hearing to contest the sanction. ¶ 68. The circuit court erred in awarding sanctions against Aussenberg for not attending the proceedings.