Court Opinion

ID: 9940326
Source: CourtListenerOpinion
Date Created: 2024-02-13 23:01:09.240636+00
Date Added: 2024-06-11T13:44:46.362835
License: Public Domain

FILED
                                                                                  FEB 13 2024
                          NOT FOR PUBLICATION
                                                                             SUSAN M. SPRAUL, CLERK
                                                                                U.S. BKCY. APP. PANEL
                                                                                OF THE NINTH CIRCUIT
          UNITED STATES BANKRUPTCY APPELLATE PANEL
                    OF THE NINTH CIRCUIT

In re:                                               BAP No. NV-23-1111-NFB
SILVER STATE BROADCASTING, LLC,
Debtor; GOLDEN STATE                                 Bk. No. 21-14978-ABL
BROADCASTING, LLC, Jointly
Administered Debtor; MAJOR MARKET
RADIO, LLC, Jointly Administered
Debtor.

SILVER STATE BROADCASTING, LLC;
GOLDEN STATE BROADCASTING, LLC;
MAJOR MARKET RADIO, LLC,
                 Appellants,
v.                               MEMORANDUM*
MICHAEL WARREN CARMEL, Chapter
11 Trustee; W. LAWRENCE PATRICK,
Receiver; U.S. TRUSTEE,
                 Appellees.

              Appeal from the United States Bankruptcy Court
                          for the District of Nevada
             August B. Landis, Chief Bankruptcy Judge, Presiding

Before: NIEMANN,** FARIS, and BRAND, Bankruptcy Judges.
      *
         This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
       **
          Hon. Jennifer E. Niemann, U.S. Bankruptcy Judge for the Eastern District of
California, sitting by designation.
                                 INTRODUCTION

      A federal court entered judgment against Silver State Broadcasting,

LLC (“Silver State”), Golden State Broadcasting, LLC (“Golden State”), and

Major Market Radio, LLC (together, “Chapter 111 Debtors”), and others,

jointly and severally. The Chapter 11 Debtors moved the bankruptcy court

to extend the automatic stay to protect other judgment debtors from

collection actions. The bankruptcy court denied the motion, and the

Chapter 11 Debtors appealed. We discern no error and AFFIRM.

                                       FACTS

A.    Background of the Chapter 11 Debtors

      The Chapter 11 Debtors own several radio stations. Royce

International Broadcasting Corporation (“Royce”) holds the equity interest

in the Chapter 11 Debtors, and Edward Stolz owns Royce. Ownership of

the equipment and personal property required to operate the Chapter 11

Debtors’ various radio stations is in dispute. Mr. Stolz contends that such

equipment and personal property belong to him, while the chapter 11

trustee contends that the equipment and personal property belong to the

Chapter 11 Debtors.

B.    Prepetition Lawsuit

      In August 2018, a judgment was entered by the United States District

Court for the Central District of California (“District Court”) against Silver

      Unless specified otherwise, all chapter and section references are to the
      1

Bankruptcy Code, 11 U.S.C. §§ 101-1532.
                                           2
State, Golden State, Royce, Mr. Stolz, and Playa Del Sol Broadcasters

(“Playa”) (together, “Judgment Debtors”), jointly and severally in the

amount of $1,249,563.46 for violation of the Federal Copyright Act. WB

Music Corp. v. Royce Int’l Broad. Corp., 47 F.4th 944, 946 (9th Cir. 2022). The

Judgment Debtors did not pay the judgment.

      In July 2020, the District Court appointed W. Lawrence Patrick

(“Receiver”) as a receiver to facilitate collection of the outstanding

judgment from the Judgment Debtors. Id. at 947-48. The Judgment Debtors

subsequently deposited enough funds with the District Court to satisfy the

original judgment plus interest but not enough to ensure that all expenses

of the receivership would be paid. Id. at 948-49. The receivership was still

in place when the Chapter 11 Debtors filed their voluntary petitions on

October 19, 2021.

C.    Postpetition Collection Efforts in Prepetition Lawsuit

      After the Ninth Circuit affirmed the District Court’s decision not to

terminate the receivership until all receivership expenses had been paid,

the District Court signed an order in February 2023 approving a total of

$2,078,076.95 in additional fees and costs to Receiver and his professionals

as to all the Judgment Debtors except Silver State and Golden State (“Fee

Order”).

      On March 10, 2023, Michael Carmel (“Trustee”) was appointed as the

chapter 11 trustee for the Chapter 11 Debtors’ jointly administered

bankruptcy cases.

                                        3
      On May 5, 2023, Receiver applied to the District Court for the

issuance of a writ of execution to enforce the Fee Order as to Royce,

Mr. Stoltz, and Playa, but not as to Silver State and Golden State. The

District Court granted Receiver’s ex parte application on May 9, 2023.

D.    Emergency Motion in Bankruptcy Court

      On May 15, 2023, the Chapter 11 Debtors filed an emergency motion

in the bankruptcy court for an order determining that Receiver violated the

automatic stay imposed by § 362(a)(1) and (6) by his attempts to have the

District Court determine the amount of fees as set forth in the Fee Order

and permit Receiver to collect on the Fee Order by levying on assets owned

by non-debtors Royce and Mr. Stolz.

      Receiver and Trustee both opposed the Chapter 11 Debtors’

emergency motion. Trustee asserted that, based on Trustee’s preliminary

investigations, the bankruptcy estates owned (or at least had an interest in)

the equipment and personal property used to operate the Chapter 11

Debtors’ radio stations. Trustee argued that the automatic stay protected

the radio station equipment or personal property, and the bankruptcy

court should not lift the stay as to those items. Trustee also stated that the

automatic stay did not prevent Receiver from collecting from Mr. Stolz’s

property, citing Aerodynamics Inc. v. Caesars Entertainment Operating Co.,

Case No. 2:15-cv-01344-JAD-BNW, 2020 WL 5995488, at *2 (D. Nev. Oct. 9,

2020).

                                       4
      To avert needless litigation, Receiver agreed not to execute on

equipment or personal property used by the Chapter 11 Debtors in the

operation of their radio stations. Receiver argued that the Fee Order was an

award of fees against only the non-debtor Judgment Debtors, as was the

right to execute on the Fee Order. Therefore, the Fee Order and related

right to execute were not actions with respect to a claim against the

Chapter 11 Debtors. Receiver also argued that while the motion sought to

enjoin Receiver from seeking to execute against assets of the Judgment

Debtors other than the Chapter 11 Debtors, such a request should have

been brought as an adversary proceeding. Moreover, even if such a request

had been made properly, the Chapter 11 Debtors would be unable to

satisfy their burden to justify such an injunction.

      The bankruptcy court heard oral argument on the Chapter 11

Debtors’ motion on June 7, 2023. The Chapter 11 Debtors argued that the

automatic stay should apply to the non-debtor Judgment Debtors for two

reasons. First, Receiver should not be permitted to execute on the

equipment used by the Chapter 11 Debtors to operate their radio stations

and prevent Trustee from selling the Chapter 11 Debtors’ assets as a “going

concern.” Second, Receiver filed a proof of claim in the Chapter 11 Debtors’

cases in January or February 2022 for the same fees that were the subject of

the Fee Order and, because Receiver filed a proof of claim in the

bankruptcy court, jurisdiction over Receiver’s fee claims was transferred to

the bankruptcy court. The Chapter 11 Debtors asserted that the bankruptcy

                                       5
court needed to be able to decide the amount of Receiver’s filed fee claims

without interference by another court, citing Celotex Corp. v. Edwards, 514

U.S. 300 (1995). According to the Chapter 11 Debtors, the Aerodynamics case

did not preclude the bankruptcy court from dealing with the non-debtor

Judgment Debtors if such interference is important to the success of the

bankruptcy estate.

      Trustee and Receiver confirmed that they had agreed between

themselves that any order entered on the Chapter 11 Debtors’ motion

should provide specifically that the automatic stay extends to any

equipment or personal property necessary to operate the stations whether

the property belongs to the Chapter 11 Debtors or to Mr. Stolz.

      The bankruptcy court determined that § 362(a) applies to the

equipment and personal property used by the Chapter 11 Debtors in the

operation of their radio stations. However, the bankruptcy court

determined that § 362(a) does not protect assets of Royce and Mr. Stolz

under the plain language of the Bankruptcy Code and black-letter law,

citing Aerodynamics, notwithstanding the fact that they are jointly and

severally liable with two of the Chapter 11 Debtors (Silver State and

Golden State) on the judgment. The court granted the Chapter 11 Debtors’

motion as to all equipment, personal property, and other assets used in the

operation of the Chapter 11 Debtors’ radio stations and denied it in all

other respects.

      The Chapter 11 Debtors timely appealed.

                                      6
                               JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A) and (G). We have jurisdiction under 28 U.S.C. § 158.

                                     ISSUE

      Did the bankruptcy court err by holding that the automatic stay did

not protect the non-debtor Judgment Debtors Royce and Mr. Stolz and by

not enjoining Receiver, who had filed a proof of claim in the Chapter 11

Debtors’ bankruptcy cases, from liquidating or enforcing a joint and several

claim against the non-debtor Judgment Debtors Royce and Mr. Stolz in the

District Court?

                           STANDARD OF REVIEW

      We review de novo the bankruptcy court’s conclusions of law. Parks

v. Drummond (In re Parks), 475 B.R. 703, 706 (9th Cir. BAP 2012). The

bankruptcy court’s determination regarding the scope or applicability of

the automatic stay is also reviewed de novo. Lehman Com. Paper, Inc. v.

Palmdale Hills Prop., LLC (In re Palmdale Hills Prop., LLC), 423 B.R. 655, 663

(9th Cir. BAP 2009), aff’d, 654 F.3d 868 (9th Cir. 2011).

      Under de novo review, we “consider a matter anew, as if no decision

had been made previously.” Francis v. Wallace (In re Francis), 505 B.R. 914,

917 (9th Cir. BAP 2014).

                                DISCUSSION

      The Chapter 11 Debtors’ appeal stems from their contention that once

Receiver filed a proof of claim in the Chapter 11 Debtors’ bankruptcy cases,

                                        7
Receiver subjected himself to the bankruptcy court’s jurisdiction to

adjudicate those claims and could no longer adjudicate those claims in the

District Court. Citing Katchen v. Landy, 382 U.S. 323 (1966), the Chapter 11

Debtors assert that a creditor who invokes the aid of the bankruptcy court

by filing a proof of claim and demanding its allowance must abide the

consequences of that procedure. “By filing a claim against a bankruptcy

estate, the creditor triggers the process of allowance and disallowance of

claims, thereby subjecting himself to the bankruptcy court’s equitable

power.” Langenkamp v. Culp, 498 U.S. 42, 44 (1990) (cleaned up).

      While the bankruptcy court has jurisdiction to allow or disallow

Receiver’s claim against the Chapter 11 Debtors, that was not the question

before the bankruptcy court. Rather, the question was whether filing a

proof of claim under which a debtor has joint and several liability with a

non-debtor should “extend the automatic stay” to the non-debtor judgment

debtor. As correctly analyzed by the bankruptcy court, the answer is no.

      Nothing in the express language of § 362(a) extends the automatic

stay to non-debtors. The automatic stay protects only the debtor, the

debtor’s property, and the property of the debtor’s bankruptcy estate.

§ 362(a). It does not protect the debtor’s owners, affiliates, or co-obligees.

Chugach Timber Corp. v. N. Stevedoring & Handling Corp. (In re Chugach Forest

Prods., Inc.), 23 F.3d 241, 246 (9th Cir. 1994) (stating that the automatic stay

“protects only the debtor, property of the debtor or property of the estate

. . . [and] does not stay actions against guarantors, sureties, corporate

                                        8
affiliates, or other non-debtor parties liable on the debts of the debtor”).

The filing of a proof of claim by a party does not alter this analysis.

      Moreover, “extensions” of the automatic stay to non-debtors,

“although referred to as extensions of the automatic stay, are in fact

injunctions issued by the bankruptcy court after hearing and the

establishment of unusual need to take this action to protect the

administration of the bankruptcy estate.” Aerodynamics, 2020 WL 5995488,

at *2. Injunctions against non-debtors may only be obtained through

§ 105(a) after application of the “usual preliminary injunction standard,”

which “helps to ensure that stays would not be granted lightly.” Solidus

Networks, Inc. v. Excel Innovations, Inc. (In re Excel Innovations, Inc.), 502 F.3d

1086, 1094-95 (9th Cir. 2007). Here, the Chapter 11 Debtors sought to extend

the automatic stay to the non-debtor Judgment Debtors Royce and Mr.

Stolz only through a motion, rather than an adversary proceeding seeking

to enjoin Receiver, and without satisfying the exacting standard for

preliminary injunctive relief.

                                 CONCLUSION

      The bankruptcy court correctly held that the automatic stay does not

protect Royce and Mr. Stolz. Accordingly, we AFFIRM.

                                         9