Opinion ID: 681613
Heading Depth: 2
Heading Rank: 1

Heading: Did the bankruptcy court have subject matter jurisdiction?

Text: 11 USA argues that Mobil's filing of a notice of appeal on February 12, 1993 divested the bankruptcy court of all further jurisdiction over the case. Thus, USA contends, the subsequent filing by Mobil of a motion to reconsider was of no effect because the bankruptcy court no longer had jurisdiction to entertain the motion. 12 More specifically, USA contends that Bankruptcy Rules 9020 3 and 9033 4 mandate that the only appropriate course of action in this case (and the one that Mobil, in effect, pursued) was for Mobil to seek review of the bankruptcy court's contempt decision by filing objections thereto with the district court. 5 The district court would then be obligated to provide a de novo review of the bankruptcy court's conclusions and determine whether an order of contempt was appropriate. USA argues that the review procedure defined in Bankruptcy Rule 9020 is akin to an appeal in that it divests the court that issued the order of jurisdiction over the matter for which review is sought in the district court. 13 As an initial matter, we note that the Bankruptcy Code requires finality for appeals from bankruptcy court decisions to the district court, unless the district court grants leave to pursue an interlocutory appeal. 28 U.S.C. Sec. 158(a); Smith v. Revie (In re Moody), 817 F.2d 365, 366 (5th Cir.1987). In this case, the bankruptcy court's contempt order was not a final order because no assessment of sanctions ever occurred. 6 The Order of Contempt stated that USA must file an itemization of the actual damages it has incurred as a result of Mobil's violation of the automatic stay on or before February 25, 1993. Mobil may file a response thereto on or before March 8, 1993. It is further ordered that a hearing on the dollar amount of damages to be imposed will be held upon the request of any of the parties. This language clearly contemplates an assessment of damages in the future, and without an assessment of damages, the contempt order is merely interlocutory. 14 It is well-settled that a civil contempt order is not final for purposes of appeal unless two actions occur: (1) a finding of contempt is issued, and (2) an appropriate sanction is imposed. Cf. Petroleos Mexicanos v. Crawford Enter., Inc., 826 F.2d 392, 398 (5th Cir.1987); Nasco, Inc. v. Calcasieu Television & Radio, Inc., 752 F.2d 157, 159 (5th Cir.1985); accord Blalock Eddy Ranch v. MCI Telecommunications Corp., 982 F.2d 371, 374 (9th Cir.1992); Dove v. Atlantic Capital Corp., 963 F.2d 15, 17 (2d Cir.1992); Bernard v. American Cyanamid Co. (In re Tetracycline Cases), 927 F.2d 411, 412 (8th Cir.1991); Combs v. Ryan's Coal Co., 785 F.2d 970, 977 (11th Cir.), cert. denied, 479 U.S. 853, 107 S.Ct. 187, 93 L.Ed.2d 120 (1986); Motorola, Inc. v. Computer Displays Int'l, 739 F.2d 1149, 1154 (7th Cir.1984); Weyerhaeuser Co. v. International Longshoremen's and Warehousemen's Union, Local 21, 733 F.2d 645, 645 (9th Cir.1984). The requirement of finality is no different when it is the bankruptcy court (rather than the district court) which has failed to assess damages. Calcasieu Marine Nat'l Bank v. Morrell (In re Morrell), 880 F.2d 855, 856-57 (5th Cir.1989); Shimer v. Fugazy (In re Fugazy Express, Inc.), 982 F.2d 769, 775 (2d Cir.1992). As we said in In re Morrell: 15 Determinations of liability without an assessment of damages are as likely to cause duplicative litigation in bankruptcy as they are in civil litigation and because bankruptcy litigants may appeal to district as well as to appellate courts, the waste of judicial resources is likely to be greater. The rule for appeals from bankruptcy decisions determining liability but not damages under 28 U.S.C. Sec. 158(d) must ... be the same as the rule under [28 U.S.C.] Sec. 1291. 16 In re Morrell, 880 F.2d at 856-57. Indeed, in the specific context of a bankruptcy contempt order, the Seventh Circuit has held that, absent an assessment of sanctions, a bankruptcy court's order holding a creditor in civil contempt of a discharge injunction is not a final judgment from which an appeal may be taken. In re Behrens, 900 F.2d 97, 100 (7th Cir.1990). 17 We think that the same considerations militating in favor of finality in the appeal context should operate in the context of Bankruptcy Rule 9020, and we therefore hold that because the bankruptcy court in this case had not yet assessed sanctions against Mobil, the order of contempt entered by the bankruptcy court was not yet sufficiently final so as to trigger the review process of Bankruptcy Rules 9020 and 9033. 7 Cf. Liberty Mutual Ins. Co. v. Wetzel, 424 U.S. 737, 96 S.Ct. 1202, 47 L.Ed.2d 435 (1976) (where assessment of damages or awarding of other relief remains to be resolved [judgments] have never been considered to be 'final' within the meaning of 28 U.S.C. Sec. 1291.). Absent finality, the contempt order was merely an interlocutory order which the bankruptcy court was free to reconsider and vacate. 18 USA argues that Mobil's filing of a notice of appeal automatically divested the bankruptcy court of jurisdiction to entertain Mobil's subsequent motion to reconsider. While it is generally true that a timely filing of a notice of appeal will divest a court of jurisdiction, this rule presupposes that there is a final judgment from which to appeal. In this case, however, we have determined that there was no final contempt judgment; hence, there can be no appeal absent express permission of the bankruptcy court to take an interlocutory appeal. 28 U.S.C. Sec. 158(a); Smith v. Revie (In re Moody), 817 F.2d 365, 366 (5th Cir.1987). As there is no right to appeal an interlocutory order, the notice of appeal filed by Mobil was simply premature and of no effect. Cf. Brinkmann v. Dallas County Deputy Sheriff Abner, 813 F.2d 744, 748 (5th Cir.1987) (noting that a notice of appeal [is] ordinarily ... ineffective [if] the judgment [is] not final when appealed....); see generally James William Moore, et al., 6 Moore's Federal Practice Sec. 54.41 (2d ed. 1994). 19 B. Does the automatic stay prohibit reinstatement of a debtor's offensive counterclaim? Are Sec. 362(h) sanctions available to a corporate debtor? 20 Section 362(h) of the Bankruptcy Code states that an individual is entitled to recover damages which flow from a willful violation of the automatic stay. 11 U.S.C. Sec. 362(h). Both the bankruptcy court and the district court in this case determined that the term individual as used in Sec. 362(h) does not include corporations; thus, both courts agreed that USA, a corporation, is not entitled to recover sanctions under this section. USA argues that this parsimonious interpretation of the term individual is erroneous and asks this court to pronounce that corporate debtors injured by willful violations of the automatic stay are entitled to sanctions under Sec. 362(h). 21 In this case, however, we find that there has been no violation of the automatic stay; thus, we need not reach the question of whether Sec. 362(h) sanctions are available to a corporate debtor. The automatic stay of the Bankruptcy Code extends only to actions against the debtor. 11 U.S.C. Sec. 362(a). We have previously held that counterclaims asserted by a debtor are not actions against the debtor which are subject to the automatic stay. First Wis. Nat'l Bank of Milwaukee v. Grandlich Dev. Corp., 565 F.2d 879, 880 (5th Cir.1978); accord Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194, 1205 (3d Cir.1991); Martin-Trigona v. Champion Fed. Sav. & Loan, 892 F.2d 575, 577 (7th Cir.1989). If a debtor's offensive claims are not subject to the automatic stay, a fortiori a creditor's motion to reinstate and seek summary judgment of such non-stayed claims is not subject to the automatic stay. Thus, in this case, Mobil's motion to reinstate and obtain summary judgment on USA's offensive contractual claims was not a willful violation of the automatic stay. Because we find no violation of the automatic stay by Mobil, the question of whether corporate debtors such as USA are individuals entitled to recover sanctions under Sec. 362(h) for injury suffered as a result of a willful violation of the automatic stay need not be answered.