Opinion ID: 789340
Heading Depth: 2
Heading Rank: 1

Heading: Jurisdiction to Determine the Applicability of the Automatic Stay

Text: 25 Relying on Celotex Corp. v. Edwards, 514 U.S. 300, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995), and In re Gruntz, 202 F.3d 1074 (9th Cir.2000) (en banc), the district court expressed concern that it did not have jurisdiction to determine the applicability of the automatic stay. The district court's concern was unfounded. 26 In Celotex, the bankruptcy court issued a § 105 injunction preventing plaintiffs who had won a district court suit against the debtor from executing on a supersedeas bond that would have satisfied their judgment. See 11 U.S.C. § 105(a). The district court allowed plaintiffs to execute on the bond despite the bankruptcy court's § 105 injunction, on the ground that the judgment had been affirmed on appeal and the bond had become due before the bankruptcy filing. The decision of the district court was appealed to the Fifth Circuit, which affirmed. The Supreme Court reversed. Without deciding whether the § 105 injunction was properly issued, the Court held that the district court acted improperly in disregarding it. If plaintiffs wanted relief from the injunction, wrote the Court, they should have sought modification in the bankruptcy court that issued the injunction. 514 U.S. at 313, 115 S.Ct. 1493. 27 In Gruntz, Gruntz had twice been convicted in state court of failure to pay child support. He filed for bankruptcy prior to sentencing in the first criminal proceeding, and prior to the institution of the second criminal proceeding. He brought an adversary proceeding in bankruptcy court seeking a declaration that the state criminal proceedings violated the automatic stay. The bankruptcy court denied relief, holding that it was collaterally estopped by the state court's decision that the automatic stay did not apply. On appeal, we held that the state court has the power to decide whether the automatic stay applies to its proceedings. 202 F.3d at 1087 (Thus, unless a specific § 105 injunction applies, state trial courts need not seek bankruptcy court approval before commencing criminal proceedings.). But a state court makes such a decision at its peril, for the bankruptcy court is not precluded by the state court's decision. If the bankruptcy court later decides that the state court was incorrect, the state court proceedings in violation of the stay are void. See, e.g., In re Schwartz, 954 F.2d 569 (9th Cir.1992); In re Shamblin, 890 F.2d 123 (9th Cir.1989). On the other hand, if the state court is correct in deciding that the stay does not apply, the state court proceedings are not void. Gruntz, 202 F.3d at 1087. We ultimately affirmed the result reached by the bankruptcy court based on our determination, independent of the state court's decision, that the state criminal proceedings were not within the scope of the stay. 28 Celotex and Gruntz both stand for familiar propositions in bankruptcy law. Neither case casts doubt on a district court's ability to decide for itself whether proceedings pending before it are subject to an automatic stay. Celotex tells us that a district court has no authority to modify or to disregard a § 105 injunction. Only the bankruptcy court that issued the injunction has the authority to modify the injunction, and until the injunction is modified the district court is bound by it. Gruntz tells us that a state court has the authority to decide whether its proceeding is within the scope of the automatic stay, but the state court's holding is not entitled to preclusive effect in the bankruptcy court. 29 There is no reason why a federal court should have less power than a state court to decide whether its proceeding comes within the scope of the automatic stay. Indeed, there are a number of cases, in this circuit and elsewhere, in which a federal court has decided whether the automatic stay applies to a proceeding pending before it. See, e.g., NLRB v. Continental Hagen Corp., 932 F.2d 828 (9th Cir.1991) (NLRB enforcement proceeding in the court of appeals comes within the § 362(b)(4) exception to the automatic stay); NLRB v. Twin Cities Elec., 907 F.2d 108 (9th Cir.1990) (same); Commodity Futures Trading Comm'n v. Co Petro Marketing Group, Inc., 700 F.2d 1279 (9th Cir.1983) (Commodities Exchange Act proceeding in the district court comes within the § 362(b)(5) exception to the automatic stay); Chao v. Hospital Staffing Servs., Inc., 270 F.3d 374, 384-85 (6th Cir.2001) (suit under the federal Fair Labor Standards Act in the district court does not come within the § 362(b)(4) exception to the automatic stay, but the district court has authority to decide the applicability of the exception); NLRB v. Edward Cooper Painting, Inc., 804 F.2d 934 (6th Cir.1986) (NLRB enforcement proceeding in the court of appeals comes within the § 362(b)(4) exception to the automatic stay); Hunt v. Bankers Trust Co., 799 F.2d 1060, 1069 (5th Cir.1986) (`Whether the stay applies to litigation otherwise within the jurisdiction of a district court or court of appeals is an issue of law within the competence of both the court within which the litigation is pending ... and the bankruptcy court.' (citation omitted)); In re Baldwin-United Corp., 765 F.2d 343, 347 (2d Cir.1985) (The court in which the litigation claimed to be stayed is pending has jurisdiction to determine not only its own jurisdiction but also the more precise question whether the proceeding pending before it is subject to the automatic stay.); SEC v. First Fin. Group of Texas, 645 F.2d 429 (5th Cir.1981) (civil enforcement action under the federal securities laws in the district court comes within the § 362(b)(4) exception to the automatic stay). We are aware of no case holding to the contrary. 30 We therefore hold, in accordance with established law, that a district court has jurisdiction to decide whether the automatic stay applies to a proceeding pending before it, over which it would otherwise have jurisdiction. Specifically, as applied to this case, we hold that the district court has jurisdiction to decide whether the Attorney General's section 16 Clayton Act suit comes within the exception to the automatic stay for police or regulatory power under § 362(b)(4). 31