Opinion ID: 495301
Heading Depth: 2
Heading Rank: 1

Heading: The Abuse of Process Judgment

Text: 5 The Parkses contend that, because the abuse of process claim did not accrue until the Gonzaleses' petition was filed, no provision of section 362(a) barred her from commencing the state court proceeding. 3 Section 362(a) provides that the filing of a bankruptcy petition automatically stays the commencement of judicial actions against the debtor that were or could have been initiated before the commencement of the case under this title. Parks contends that she could not have initiated her abuse of process suit before the commencement of the bankruptcy case because the act of filing the bankruptcy petition constituted the actionable tort. Thus, she concludes, the automatic stay provision did not apply. 6 We agree with Parks in at least a limited respect. We agree that the filing of the abuse of process claim was not contrary to any of the specific provisions of section 362(a). We also note that Congress' intent in enacting Sec. 362(a) is clear--it wanted to stop collection efforts for all antecedent debts. Congress intended that the debtor obtain a fresh start, free from the immediate financial pressures that caused the debtor to go into bankruptcy. Matter of M. Frenville Co., Inc., 744 F.2d 332, 334 (3rd Cir.1984). Both the language of Sec. 362(a) and its legislative history indicate that the section was primarily intended to apply to claims based on prior debts and obligations. See 2 D. Cowans, Bankruptcy Law and Practice Sec. 11.3 (1986). It is also clear that the stay is not applicable to debts or obligations that accrue after the filing of the bankruptcy petition. Id.; see, e.g., In re Shenberg, 433 F.Supp. 677, 680 (N.D.Ill.1977). However, the effect the section would have on a theoretical third category of debts and obligations, those that might accrue at the moment of filing or by virtue of that filing, is far from clear--and that is the category involved in the case before us. While the question may be an interesting one, there is no reason for us to decide it here. We affirm the bankruptcy court's decision on other, related grounds. 4 7 Implicit in the Parkses' appeal is the notion that state courts have subject matter jurisdiction to hear a claim that the filing of a bankruptcy petition constitutes an abuse of process. We disagree with that assumption. 5 Filings of bankruptcy petitions are a matter of exclusive federal jurisdiction. 6 State courts are not authorized to determine whether a person's claim for relief under a federal law, in a federal court, and within that court's exclusive jurisdiction, is an appropriate one. Such an exercise of authority would be inconsistent with and subvert the exclusive jurisdiction of the federal courts by allowing state courts to create their own standards as to when persons may properly seek relief in cases Congress has specifically precluded those courts from adjudicating. Cf. Siravo v. Siravo, 424 A.2d 1047, 1049-50 (R.I.1981) (because the bankruptcy courts have exclusive jurisdiction over bankruptcy, a bankruptcy court's determination that a section of the Bankruptcy Act is unconstitutional may not be challenged in a state court). The ability collaterally to attack bankruptcy petitions in the state courts would also threaten the uniformity of federal bankruptcy law, a uniformity required by the Constitution. U.S. Const. art. I, Sec. 8, cl. 4. 8 That Congress' grant to the federal courts of exclusive jurisdiction over bankruptcy petitions precludes collateral attacks on such petitions in state courts is supported by the fact that remedies have been made available in the federal courts to creditors who believe that a filing is frivolous. Debtors filing bankruptcy petitions are subject to a requirement of good faith, In re Thirtieth Place, Inc., 30 B.R. 503, 505 (Bankr.App. 9th Cir.1983), and violations of that requirement can result in the imposition of sanctions, In re 2218 Bluebird Ltd. Partnership, 41 B.R. 540, 542-43 (Bankr.S.D.Calif.1984); see In re Villareal, 46 B.R. 284 (Bankr.C.D.Calif.1984) (sanctions awarded because debtor's filing was an abuse of the bankruptcy process); Bankr.R. 9011. 7 Cf. 11 U.S.C.A. Sec. 303(i)(2) (Supp.1987) (authorizing the imposition of sanctions on petitions for involuntary bankruptcy petitions filed in bad faith). Congress' authorization of certain sanctions for the filing of frivolous bankruptcy petitions should be read as an implicit rejection of other penalties, including the kind of substantial damage awards that might be available in state court tort suits. Even the mere possibility of being sued in tort in state court could in some instances deter persons from exercising their rights in bankruptcy. In any event, it is for Congress and the federal courts, not the state courts, to decide what incentives and penalties are appropriate for use in connection with the bankruptcy process and when those incentives or penalties shall be utilized. 9 A Congressional grant of exclusive jurisdiction to the federal courts includes the implied power to protect that grant. For example, in Yakus v. United States, 321 U.S. 414, 64 S.Ct. 660, 88 L.Ed. 834 (1944), the Supreme Court considered the exclusive grant of jurisdiction to the Emergency Court of Appeals to hear challenges to price control regulations. The Court held that this grant precluded litigants from challenging the validity of price control regulations in state courts even as a defense in a criminal action. Cf. Donovan v. City of Dallas, 377 U.S. 408, 84 S.Ct. 1579, 12 L.Ed.2d 409 (1964) (state courts do not have the power to enjoin proceedings in the federal courts); Terral v. Burke Construction Co., 257 U.S. 529, 42 S.Ct. 188, 66 L.Ed. 352 (1922) (despite plenary state power to condition the licensing of foreign corporations to do business within the state, states cannot revoke a corporation's license on the basis that the corporation resorted to the federal court sitting in the state). 10 A state court judgment entered in a case that falls within the federal courts' exclusive jurisdiction is subject to collateral attack in the federal courts. See Kalb v. Feuerstein, 308 U.S. 433, 60 S.Ct. 343, 84 L.Ed. 370 (1940) (bankruptcy case); C. Wright, Law of Federal Courts 84-86 (4th ed. 1983); see also Consolidated Rail Corp. v. Illinois, 423 F.Supp. 941 (Regional Rail Reorg. Ct.1976), cert. denied, 429 U.S. 1095, 97 S.Ct. 1111, 51 L.Ed.2d 542 (1977) (exclusive jurisdiction in a special federal court allows collateral attack in that court on an action brought in a federal district court). Thus the bankruptcy court was correct in vacating the state court judgment against the Gonzaleses. It was also correct in holding that the Parkses' claim against the Gonzaleses and Dodge was void from the outset. Permitting state courts to award damages against bankrupts' attorneys based on the filing of a bankruptcy petition would subvert exclusive federal jurisdiction in much the same manner as allowing similar awards against the bankrupt parties. B. Recusal of the Bankruptcy Judge 11 The Parkses contend that the bankruptcy judge abused his discretion by refusing to recuse himself pursuant to 28 U.S.C. Secs. 144, 455(b)(1) (1982). A judge is required to disqualify himself if his impartiality might reasonably be questioned, or if he has a personal bias or prejudice concerning a party. 28 U.S.C. Secs. 455(a), (b)(1). The Parkses allege that the bankruptcy judge advised the Gonzaleses to file a motion for summary judgment. They offer no support for this allegation. Moreover, they did not mention it when they moved for recusal and it is apparently raised for the first time on this appeal. Accordingly, we do not consider the issue here. See Michael-Regan Co., Inc. v. Lindell, 527 F.2d 653, 656 (9th Cir.1975). We note however, that the Parkses' allegation, even if supported, would not lead a reasonable person to question the judge's impartiality. There is nothing inherently improper about a suggestion by a judge that a party should file a particular motion. In fact the suggestion allegedly made here could well be viewed as a salutary docket control measure. C. Attorney's Fees 12 The bankruptcy court awarded attorney's fees to the Gonzaleses and Dodge after concluding that the Parkses had violated the automatic stay provisions of the Bankruptcy Act. The Act authorizes the recovery of costs and attorney's fees in cases where there has been a willful violation of the automatic stay provisions. 11 U.S.C.A. Sec. 362(h) (Supp.1987). The district court affirmed the award of attorney's fees. Although we uphold the bankruptcy court's decision holding the state court judgment void, we do not base our affirmance on the automatic stay provisions. At the least, the applicability of the automatic stay provisions to the Parkses' state court claim is not so clear that the bankruptcy court was justified in concluding that the Parkses had willfully violated those provisions. We therefore reverse the award of attorney's fees. D. Sanctions 13 As to the sanctions imposed by the district court, we think it clear that the appeal was not frivolous. The parties agreed at oral argument that the case was one of first impression. The appeal presented legitimate legal questions for resolution. Under these circumstances, an appellant may not be penalized for utilizing the judicial system. 8 14 For the reasons set forth above, the district court's decision is affirmed in part and reversed in part.