Opinion ID: 777857
Heading Depth: 2
Heading Rank: 1

Heading: Justification for Relief

Text: 18 Pursuant to 11 U.S.C. § 362(a), the filing of a bankruptcy petition operates as an automatic stay to give a debtor a short respite from creditors' demands, during which a debtor will have the opportunity to develop and implement plans to right his financial affairs. In re 160 Bleecker St. Assocs., 156 B.R. 405, 411 (S.D.N.Y.1993). Relief from the stay may be granted after notice and a hearing, among other reasons, for cause. 11 U.S.C. § 362(d)(1). The burden is on the moving party, here the Spencers, to make an initial showing of cause. Absent such showing, relief from the effect of a stay will be denied. In re Mazzeo, 167 F.3d at 142. 19 Although the term for cause is not defined in the bankruptcy code, we have adopted 12 factors to consider when deciding whether or not to lift a stay in order that litigation may continue to completion in another tribunal. Sonnax Indus., Inc. v. Tri Component Prods. Corp. (In re Sonnax Indus.), 907 F.2d 1280, 1285-86 (2d Cir.1990). These factors are set forth in the margin. 1 Not every one of these factors will be relevant in every case. In re Mazzeo, 167 F.3d at 143. The ultimate determination whether to lift a stay depends upon the facts underlying a given motion. See In re Sonnax, 907 F.2d at 1286. Sonnax factors (1), (10) and (12) are relevant to the facts of this case. These factors are: (1) whether relief would result in a partial or complete resolution of the issues; ... (10) the interests of judicial economy and the expeditious and economical resolution of litigation; ... and (12)[the] impact of the stay on the parties and the balance of harms. Id. 20 As noted, the Spencers contend that if the stay were lifted to allow them to obtain a final judgment in California, that judgment would be dispositive of the issues raised in the adversary proceeding in the bankruptcy court. In examining the Spencers' proposition we begin by observing that a federal court decides whether to give preclusive effect to state judicial proceedings by looking to the law of preclusion in that state. Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 380-81, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985). Under California law, a judgment (much less a verdict, which is all the Spencers have here) is not final for collateral estoppel purposes until the appellate process has concluded or the time to take an appeal has passed. Conopco, Inc. v. Roll Int'l, 231 F.3d 82, 90 (2d Cir.2000); Wright v. Turner (In re Turner), 204 B.R. 988, 992 (B.A.P. 9th Cir.1997). Collateral estoppel would then apply only with respect to issues actually and necessarily decided by the jury. People v. Howie, 41 Cal.App.4th 729, 48 Cal.Rptr.2d 505, 508 (1995). The bankruptcy court in the Bogdanovich case made no determination regarding whether collateral estoppel would apply; instead it deferred decision on that issue until a final judgment had been entered in California. 21 The Spencers' adversary proceeding relies exclusively on the nondischargeability provisions in 11 U.S.C. § 523(a)(2)(A) and (a)(6) (2000). Section 523(a)(2)(A) provides that a debt for money will not be dischargeable in bankruptcy if obtained by false pretenses, a false representation, or actual fraud. Section 523(a)(6) further states that a debt for willful and malicious injury by the debtor is nondischargeable. The Spencers reason that these sections are applicable in light of the California jury's finding of fraud and conduct warranting punitive damages. 22 The Bogdanovichs counter that pursuit of a final judgment is futile. They argue that even were the verdict embodied in a judgment, the nondischargeability rule in § 523(a)(2)(A) would not apply because it contains an exception for a statement respecting the debtor's ... financial condition. According to § 523(a)(2)(B), such statements can form the basis for a nondischargeable debt only if in writing. Oral statements relating to a debtor's financial condition thereby remain dischargeable. See also In re Kiernan, 17 B.R. 362, 365 (Bankr.S.D.N.Y.1982) (noting that as between oral and written statements of financial condition, only the latter provide a basis for nondischargeable debt). The Bogdanovichs point out that Peiffer's representations were never reduced to writing, and they argue that his oral statements related solely to their financial condition. They then suggest that the absence of actionable statements under § 523(a)(2) means no cause of action can be sustained under § 523(a)(6). See McCrary v. Barrack (In re Barrack), 217 B.R. 598, 606 (B.A.P. 9th Cir.1998).