Court Opinion

ID: 4193013
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:03:47.033361+00
Date Added: 2024-06-11T14:40:25.620050
License: Public Domain

FILED
 1                         ORDERED PUBLISHED              AUG 06 2014
                                                      SUSAN M. SPRAUL, CLERK
 2                                                      U.S. BKCY. APP. PANEL
                                                        OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5
 6   In re:                        )      BAP No.     NV-13-1261-KiJuTa
                                   )
 7   MARK DINGLEY,                 )      Bk. No.     3:13-bk-50648-BTB
                                   )
 8                  Debtor.        )
     ______________________________)
 9                                 )
     YELLOW EXPRESS, LLC;          )
10   YELLOW LOGISTICS, LLC,        )
                                   )
11                  Appellants,    )
                                   )      O P I N I O N
12   v.                            )
                                   )
13   MARK DINGLEY,                 )
                                   )
14                  Appellee.      )
     ______________________________)
15
16                  Argued and Submitted on January 24, 2014
                              at Las Vegas, Nevada
17
                             Filed - August 6, 2014
18
               Appeal from the United States Bankruptcy Court
19                       for the District of Nevada
20       Honorable Bruce T. Beesley, Bankruptcy Judge, Presiding
21                         _________________________
22   Appearances:     Mark D. Wray, Esq., argued for appellants
                      Yellow Express, LLC and Yellow Logistics, LLC;
23                    Christopher P. Burke, Esq., argued for
                      appellee Mark Dingley.
24                         _________________________
25
     Before:   KIRSCHER, JURY and TAYLOR, Bankruptcy Judges.
26
27   Opinion by Judge Kirscher
     Concurrence by Judge Jury
28
 1   KIRSCHER, Bankruptcy Judge:
 2
 3        Yellow Express, LLC and Yellow Logistics, LLC
 4   (collectively, “appellants”) appeal from the bankruptcy court’s
 5   order sanctioning appellants $1,500 for violation of the
 6   automatic stay.   Following precedent of the Ninth Circuit Court
 7   of Appeals (“Ninth Circuit”), first decided under the Bankruptcy
 8   Act of 1898, establishing that a civil contempt proceeding is
 9   not subject to the automatic stay, we REVERSE.
10                                 I.   FACTS1
11   A.   Prepetition Facts
12        In 2009, appellants filed an action in the Second Judicial
13   District Court in Washoe County, Nevada, Case No. CV09-02392
14   against Mark Dingley (“debtor”) and two LLCs which he owned and
15   controlled, M&M Tow & Transport, LLC and Superior Tow and
16   Transport Service, LLC (collectively, “the LLCs”).   The
17   operative first amended complaint (“state court action”) alleged
18   claims for claim and delivery, unjust enrichment, negligence,
19   conversion and constructive fraud against debtor and the LLCs
20   (collectively, “defendants”), based on the tow, storage and
21   disposition of a semi-truck and trailer which belonged to Yellow
22   Express and was leased to Yellow Logistics.   The state court
23   action included no alter ego allegations.
24        Initially, defendants defaulted and, following a prove-up
25   hearing, judgment was entered against them in the total sum of
26
          1
27          The facts are largely undisputed and are drawn from
     debtor’s Motion to Enforce Automatic Stay and appellants’
28   Opposition to Motion to Enforce Automatic Stay.

                                        -2-
 1   $300,000.   Subsequently, defendants moved to set aside the
 2   default judgment, which was granted.     The state court then
 3   ordered that a hearing be held on sanctions for their willful
 4   failure to appear for depositions.     At the hearing on June 26,
 5   2012, the state court ordered defendants to pay sanctions to
 6   appellants in a sum not to exceed $6000 for attorneys’ fees and
 7   court reporter costs.     Appellants subsequently filed an
 8   affidavit, which fixed the sanctions at $4078.35.
 9        Defendants did not pay the sanctions.     On March 25, 2013,
10   appellants filed an application for an order to show cause
11   regarding contempt for defendants’ noncompliance with the
12   June 26, 2012 order.    On April 2, 2013, the state court judge
13   issued the order to show cause (“OSC”), ordering defendants to
14   appear on April 25, 2013, to show cause why they should not be
15   held in contempt for nonpayment.
16   B.   Postpetition Facts
17        On April 8, 2013, debtor filed a Chapter 72 proceeding in
18   the Nevada bankruptcy court.     Although his membership interest
19   in the LLCs was disclosed in debtor’s schedules, the LLCs did
20   not file independent cases.     Debtor scheduled appellants as
21   creditors, and the court mailed notice of the filing of the
22   bankruptcy case to appellants’ attorney Mark D. Wray (“Wray”) on
23   April 11, 2013.   On April 24, 2013, debtor’s state court counsel
24   advised Wray of the bankruptcy filing and the automatic stay
25
          2
26          Unless otherwise indicated, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532,
27   and “Rule” references are to the Federal Rules of Bankruptcy
     Procedure and “Civil Rule” refers to the Federal Rules of Civil
28   Procedure.

                                      -3-
 1   provided by § 362(a).    On the following day, debtor’s bankruptcy
 2   attorney also advised Wray of the stay.     Wray, on April 24,
 3   2013, wrote debtor’s bankruptcy attorney acknowledging the
 4   notification of debtor’s bankruptcy filing and inquiring why the
 5   OSC could not proceed given the law established by several noted
 6   cases.    Despite the bankruptcy filing notices and given his
 7   response to opposing counsel, Wray declined to request the state
 8   court to vacate the OSC because:      (1) the LLCs had not filed and
 9   did not receive the benefit of the stay; and (2) his preliminary
10   research led him to believe that Ninth Circuit authority
11   excepted a state court contempt proceeding from the automatic
12   stay.    In making this second assertion, he relied on David v.
13   Hooker, Ltd., 560 F.2d 412 (9th Cir. 1977), and Dumas v. Atwood
14   (In re Dumas), 19 B.R. 676 (9th Cir. BAP 1982).
15        Debtor’s attorney responded that she did not have time to
16   review his cases, but she continued to assert that the contempt
17   hearing was a violation of the automatic stay and that the LLCs
18   should get the benefit of debtor’s stay because he listed his
19   interest in them in his schedules.     She then filed a Notice of
20   Bankruptcy Filing in the state court on the same day.     The state
21   court responded to that Notice by vacating the hearing.     On the
22   following day, it issued an order requiring briefing from the
23   parties on the applicability of the automatic stay to the
24   contempt hearing.    Appellants’ brief was due ten days after the
25   order and defendants’ brief was due in another ten days.
26        Appellants filed their state court brief timely on May 1,
27   2013, repeating the arguments they made to debtor’s counsel that
28   the automatic stay did not apply to nondebtor co-defendants and

                                     -4-
 1   that the contempt proceeding was excepted from the stay under
 2   Hooker and Dumas.    Debtor did not file a brief in state court.
 3   Instead, on May 3, 2013, he filed a Motion to Enforce Stay and
 4   For Award of Mandatory Sanctions Pursuant to 11 U.S.C. § 362(k)
 5   in the bankruptcy court.    Simultaneously, debtor filed an Ex
 6   Parte Application for Order Shortening Time, requesting an
 7   expedited hearing on the motion since his brief in state court
 8   was due.    On May 6, 2013, the bankruptcy court granted the
 9   application for shortened time and set the hearing for May 10,
10   2013, with opposition papers due no later than noon, May 9,
11   2013.
12        In his Motion to Enforce Stay, debtor asserted that the
13   prosecution of the contempt proceeding against him was a
14   violation of § 362(a) and that the bankruptcy court filing
15   divested the state court of jurisdiction to rule on the effect
16   of the automatic stay on its proceedings, relying on Gruntz v.
17   Cnty. of Los Angeles (In re Gruntz), 202 F.3d 1074, 1080 (9th
18   Cir. 2000) (en banc).    Debtor’s motion further sought an order
19   halting the state court action and an award of attorney’s fees
20   and punitive damages based on appellants’ willful violation of
21   the stay.    Appellants timely3 filed their Opposition to Motion
22   to Enforce Stay, asserting the same arguments which they had
23   previously made to debtor’s counsel.    Relying on pre-Gruntz non-
24   binding authority, they contended that the state court had
25   concurrent jurisdiction to determine whether the automatic stay
26
          3
27          Wray complained that he had asked debtor’s attorney for
     an extension of time to file but that his request fell on deaf
28   ears.

                                     -5-
 1   applied to its proceedings.   Next, pointing out that the LLCs
 2   were separate legal entities from debtor and that the contempt
 3   proceeding was against those entities, not his membership
 4   interest, appellants argued the automatic stay did not apply to
 5   the LLCs and the contempt proceeding should continue against
 6   them.   As authority, they cited Groner v. Miller (In re Miller),
 7   262 B.R. 499, 503 (9th Cir. BAP 2001), which in turn relied on
 8   Advanced Ribbons & Office Prods., Inc. v. U.S. Interstate
 9   Distrib., Inc. (In re Advanced Ribbons & Office Prods., Inc.),
10   125 B.R. 259, 263 (9th Cir. BAP 1991), and Marcus, Stowell &
11   Beye Gov’t Sec., Inc. v. Jefferson Inv. Corp., 797 F.2d 227, 230
12   n.4 (5th Cir. 1986) (“The well established rule is that an
13   automatic stay of judicial proceedings against one defendant
14   does not apply to proceedings against co-defendants.”).
15        Appellants also contended that state court contempt
16   proceedings were exempted from the automatic stay, citing again
17   Hooker and Dumas and emphasizing to the bankruptcy court that
18   debtor’s papers did not address the holding of these cases.
19   Finally, appellants noted that the only action they had taken
20   which allegedly violated the stay was filing the brief in the
21   state court pursuant to that court’s request.
22        At the hearing in the bankruptcy court, debtor’s counsel,
23   contrary to the position she had initially taken with
24   appellants’ counsel, conceded that the stay did not apply to the
25   LLCs.   However, she argued that it did apply to debtor and that
26   appellants had violated that stay by filing their brief in state
27   court, which urged that court to proceed against debtor.    She
28   attempted to distinguish the Ninth Circuit authority excepting

                                    -6-
 1   contempt proceedings from the stay by arguing they involved bad
 2   behavior and “criminal contempt.”       Despite arguments to the
 3   contrary from Wray, the bankruptcy court announced categorically
 4   that appellants could not proceed against debtor and that it was
 5   prepared to issue an order staying the state court action
 6   against him with no other relief granted.
 7         Debtor’s counsel then asserted that her client was broke
 8   and that she had incurred $1500 in attorney’s fees to stop the
 9   affirmative action against him.     After reading the brief which
10   appellants had filed in state court,4 the court announced:
11         “The automatic stay in bankruptcy court does not
           shield Mr. Dingley from his willful disobedience of
12         the Court’s lawful order.”5 I find that you’re in
           contempt of court for urging the district court to
13         extract from Mr. Dingley money for an order that was
           entered prebankruptcy which is certainly
14         dischargeable. He can certainly be hauled into court
           for postbankruptcy conduct, but you cannot use the
15         district court to try and recover money for contempt
           or otherwise that has occurred prior to the
16         bankruptcy. I am awarding $1500 in sanctions against
           you.
17
18   Hr’g Tr. (May 10, 2014) 16:11-22.       On May 17, 2013, the
19   bankruptcy court entered the Order on Debtor’s Motion to Enforce
20   Automatic Stay and For Award of Mandatory Sanctions Pursuant to
21   11 U.S.C. § 362(k).     Appellants paid the sanction and timely
22   appealed.
23   ///
24
25         4
            The bankruptcy judge said his court was very “green” and
26   he did not print out the papers. When he learned the state
     court brief was attached as an exhibit to the Motion, he read it
27   while on the bench.
28         5
               The court apparently read from the brief.

                                       -7-
 1                              II.   JURISDICTION
 2         The bankruptcy court had jurisdiction over this proceeding
 3   under 28 U.S.C. §§ 1334 and 157(b)(2)(A).       We have jurisdiction
 4   under 28 U.S.C. § 158.
 5                                III.    ISSUES
 6         A. Whether the bankruptcy court erred in ruling that
 7   appellants violated the automatic stay; and
 8         B. Whether the bankruptcy court erred in awarding sanctions
 9   of $1500.
10                        IV.    STANDARDS OF REVIEW
11         A bankruptcy court’s determination that the automatic stay
12   was violated is a question of law subject to de novo review.
13   Cal. Emp. Dev. Dep’t v. Taxel (In re Del Mission Ltd.), 98 F.3d
14   1147, 1150 (9th Cir. 1996).
15         An award of sanctions is reviewed for abuse of discretion.
16   Nash v. Clark Cnty. Dist. Attorney’s Office (In re Nash), 464
17   B.R. 874, 878 (9th Cir. BAP 2012).        The bankruptcy court abuses
18   its discretion when it fails to identify and apply “the correct
19   legal rule to the relief requested,” or if its application of
20   the correct legal standard was “(1) ‘illogical,’
21   (2) ‘implausible,’ or (3) without ‘support in inferences that
22   may be drawn from the facts in the record.’”       United States v.
23   Hinkson, 585 F.3d 1247, 1262-63 (9th Cir. 2009) (en banc).
24   ///
25   ///
26   ///
27   ///
28   ///

                                         -8-
 1                             V.   DISCUSSION6
 2   A.    The Automatic Stay and Sanctions for Willful Violation
 3          The automatic stay of § 362(a), as asserted to be
 4   applicable here, provides:
 5          (a) Except as provided in subsection (b) of this
            section, a petition filed under section 301, 302, or
 6          303 of this title . . . operates as a stay, applicable
            to all entities, of--
 7
                 (1) the commencement or continuation, including
 8               the issuance or employment of process, of a
                 judicial, administrative, or other action or
 9               proceeding against the debtor that was or could
                 have been commenced before the commencement of
10               the case under this title, or to recover a claim
                 against the debtor that arose before the
11               commencement of the case under this title;
12               (2) the enforcement, against the debtor or
                 against property of the estate, of a judgment
13               obtained before the commencement of the case
                 under this title; . . . .
14
                 . . . .
15
16          Section 362(k)(1) provides for an order for sanctions if a
17   party willfully violates the stay:
18          [A]n individual injured by any willful violation of a
            stay provided by this section shall recover actual
19          damages, including costs and attorneys’ fees, and, in
            appropriate circumstances, may recover punitive
20          damages.
21          Before imposing sanctions, the bankruptcy court must find
22   that a violation of the stay was willful.    The test for
23   determining whether a violation of the automatic stay is willful
24   is:    (1) whether the appellants knew of the stay; and
25
           6
26          We acknowledge debtor submitted a letter pursuant to Fed.
     R. App. P. 28(j). Appellants responded to debtor’s letter. We
27   reviewed the submissions and have concluded, given the record
     and issues before us, that the submitted case involves issues we
28   do not reach in this Opinion.

                                     -9-
 1   (2) whether the violation of the stay was intentional.     Goichman
 2   v. Bloom (In re Bloom), 875 F.2d 224, 227 (9th Cir. 1989).
 3   “Intentional” does not mean a specific subjective intent to
 4   violate the stay.   Pinkstaff v. United States (In re Pinkstaff),
 5   974 F.2d 113, 115 (9th Cir. 1992).      It is irrelevant whether the
 6   party believed in good faith that it had a right to the property
 7   at issue.   In re Bloom, 875 F.2d at 227.
 8        Willfulness is a question of fact reviewed for clear error.
 9   Safety Nat’l Cas. Corp. v. Kaiser Aluminum & Chem. Corp. (In re
10   Kaiser Aluminum Corp.), 303 B.R. 299, 303 (D. Del. 2003).
11        Appellants contend that the bankruptcy court erred:
12   (1) because the stay did not apply to the state court civil
13   contempt proceeding under applicable Ninth Circuit precedent;
14   and (2) even if it did apply, the act of filing a brief in state
15   court, which arguably had jurisdiction to determine whether the
16   stay applied to its proceeding, was not a willful violation of
17   the stay.   We address these arguments below, insofar as
18   necessary to decide this case.
19   B.   Exclusive Jurisdiction of the Bankruptcy Court
20        As a preliminary matter, appellants assert that the state
21   court had concurrent jurisdiction with the bankruptcy court to
22   decide whether the stay applied to its proceeding, citing Fid.
23   Nat’l Title Ins. Co. v. Franklin (In re Franklin), 179 B.R. 913,
24   925 (Bankr. E.D. Cal 1995).   Franklin is inapplicable to this
25   issue as it dealt with subject matter jurisdiction of a non-core
26   proceeding.   To the contrary, the Ninth Circuit has definitively
27   held that the applicability of the automatic stay is within the
28   exclusive jurisdiction of the bankruptcy court.     In Gruntz, 202

                                      -10-
 1   F.3d at 1083, the Ninth Circuit disregarded state court
 2   authorities and nonprecedential cases in ruling:
 3          In sum, by virtue of the power vested in them by
            Congress, the federal courts have the final authority
 4          to determine the scope and applicability of the
            automatic stay. “The States cannot, in the exercise
 5          of control over local laws and practice, vest State
            courts with power to violate the supreme law of the
 6          land.”
 7   Therefore, only the bankruptcy court had jurisdiction to
 8   determine whether the automatic stay applied to the state court
 9   contempt proceeding; the state court did not have concurrent
10   jurisdiction.    Id. at 1082-83.
11   C.     Automatic Stay and State Court Contempt Proceedings
12          The Ninth Circuit has created a bright-line rule on whether
13   the automatic stay applies to state court contempt proceedings,
14   whether they are based on nonpayment of a monetary sanction or
15   some other behavior which violates a state court order:      if the
16   sanction order “does not involve a determination [or collection]
17   of the ultimate obligation of the bankrupt nor does it represent
18   a ploy by a creditor to harass him” the automatic stay does not
19   prevent the proceeding from going forward.      Hooker, 560 F.2d at
20   418.
21          Hooker was decided under the Bankruptcy Act of 1898 and
22   interpreted the scope of the stay provided by Rule 401(a) of the
23   former Federal Rules of Bankruptcy Procedure which applied to
24   cases filed under the Act.    The question posed to the Ninth
25   Circuit was whether the district court where a contempt
26   proceeding was pending “had jurisdiction” to proceed after a
27   bankruptcy petition had been filed.       The order violated was not
28   dissimilar to the order in this case:      a discovery sanction

                                        -11-
 1   which directed the defendants to answer interrogatories and pay
 2   attorney’s fees.   The Ninth Circuit reasoned that the basic
 3   purpose of the stay was “to protect the bankrupt and to relieve
 4   the courts from pointless and needless litigation” over
 5   dischargeable debts.   Id. at 417.    Since the contempt proceeding
 6   at issue was ancillary to the underlying debt, the Ninth Circuit
 7   found the purpose of the stay was not implicated.      Relying on
 8   old district court decisions7 and 1A Collier ¶ 11.02 at 1147-48,
 9   the Ninth Circuit noted that the question was not a
10   jurisdictional one since the stay suspended, rather than
11   dismissed, the nonbankruptcy case.    Id. at 418.    Thus not every
12   aspect of the proceeding was to be suspended, and a proceeding
13   addressing disobedience of a state court order made prior to the
14   stay was not meant to be suspended.    Id.    Moreover, the Ninth
15   Circuit reasoned that the proceeding did not “‘attempt in any
16   way to interfere with the property which had passed to the
17   control of the bankruptcy court; it sought merely to vindicate
18   its dignity which had been affronted by the contumacious conduct
19   of a person who ignored its order.’”    Id.
20        The same issue was first addressed under the Bankruptcy Act
21   of 1978 (the Code) and its automatic stay provided by § 362(a)
22   by this panel in Dumas.   Prebankruptcy, the debtor stipulated
23   that he was in contempt of court for violation of a subpoena; a
24   hearing for sentencing for the contempt was scheduled.      Prior to
25   the hearing, Dumas filed his bankruptcy petition and asserted
26
27
          7
            In re Hall, 170 F. 721 (S.D.N.Y. 1909), and In re Spagat,
28   4 F. Supp. 926, 927 (S.D.N.Y. 1933).

                                    -12-
 1   that the automatic stay applied to the sentencing hearing.     The
 2   Panel determined that no meaningful difference existed between
 3   the stay of Rule 401(a) and the automatic stay of § 362(a).     It
 4   further found that, although the issue was raised as a
 5   jurisdictional one in Hooker, the court’s reasoning dealt with
 6   the propriety of the exercise of that jurisdiction when the stay
 7   might apply.   Finally, it also found no distinction where a
 8   private party, rather than the court itself, initiated the
 9   contempt proceeding.   Accordingly, it applied the holding of
10   Hooker and concluded that the state court’s post-bankruptcy
11   sentence for contempt was not stayed.
12        Appellants cited these authorities to debtor’s counsel and
13   eventually to the bankruptcy court.   Debtor’s counsel tried to
14   distinguish them by claiming the contempt proceedings at issue
15   in those cases were criminal and the holdings did not apply to
16   civil contempt.   As noted above, this argument was erroneous.
17   The bankruptcy court did not acknowledge them at all, turning
18   aside the arguments:
19        You can’t8 proceed against whatever distributions may
          come to Mr. Dingley from them [the LLCs], but you
20        cannot proceed against Mr. Dingley. And even if Judge
          Sattler orders you to proceed against Mr. Dingley, you
21        will get a sanction from me because you’ve violated –
          you will have violated the automatic stay, and the
22        fact – and Judge Sattler, if he proceeds against
          Dingley, he has violated the automatic stay . . . .
23
24   Hr’g Tr. (May 10, 2013) 13:1-8.
25
26        8
            The bankruptcy court may have meant “can,” given the
27   context of the discussion between counsel and the bankruptcy
     court and the ability to pursue postpetition chapter 7
28   distributions from the LLCs.

                                    -13-
 1        I find that you’re in contempt of court for urging the
          district court to extract from Mr. Dingley money for
 2        an order that was entered prebankruptcy which is
          certainly dischargeable.
 3
 4   Id. at 16:14-17.
 5        Other courts have followed Hooker and Dumas in this
 6   circuit.   Most notably (and recently) the district court of
 7   Hawaii cited Hooker with approval in crafting a totality of the
 8   circumstances analysis of the “judicially created . . .
 9   exception to § 362(a) for civil contempt proceedings in limited
10   circumstances.”    Kukui Gardens Corp. v. Holco Capital Grp., 675
11   F. Supp. 2d 1016, 1026 (D. Haw. 2009).      The Kukui court
12   distinguished between contempt proceedings intended to
13   effectuate collection of a judgment and those intended to uphold
14   the dignity of the court.   Id.    If the purpose of the contempt
15   is to “punish a contemnor and uphold the dignity of the court,”
16   it found the automatic stay does not apply, id.; however, in
17   making this statement, it clarified that it was speaking of
18   civil, not criminal contempt.     Moreover, in addressing the test
19   as totality of circumstances, the court actually relied on
20   Lowery v. McIlroy & Millian (In re Lowery), 292 B.R. 645, 650
21   (Bankr. E.D. Mo. 2003), rather than any Ninth Circuit precedent.
22   The Hooker and Dumas precedent appears to be more a bright-line
23   test than a totality of circumstances test.
24        This judicially-crafted exception has been narrowly
25   construed even by the Ninth Circuit.      In Bloom, the federal
26   contempt proceeding arose out of a post-judgment deposition that
27   Goichman scheduled in advance of a hearing on an exemption claim
28   asserted by Bloom to a garnishment.      875 F.2d at 225.   Bloom

                                       -14-
 1   filed her bankruptcy petition after the date set for the
 2   deposition, but prior to the scheduled date for    the exemption
 3   claim hearing.   Goichman was notified of the bankruptcy
 4   petition; Bloom attended neither the deposition nor the
 5   exemption claim hearing.    The district court, after the hearing,
 6   denied the exemption claim.   Goichman moved for contempt against
 7   Bloom for, among other things, her nonattendance at the
 8   deposition.    The district court held another hearing and ordered
 9   Bloom to convey partnership assets to Goichman as security for
10   the judgment and fined Bloom $500 for contempt for her failure
11   to attend the deposition.   The district court made a minute
12   entry for the fine; however, the fine was not included in the
13   final order.
14        After various procedural maneuvers in district court, which
15   are not relevant here, Bloom filed an adversary proceeding in
16   the bankruptcy court asserting a stay violation.    The bankruptcy
17   court found Goichman violated the stay by proceeding in district
18   court after the bankruptcy filing.     The district court affirmed
19   and the Ninth Circuit also affirmed.     Since the district court
20   relief sought by Goichman was ordering the appointment of a
21   receiver, ordering compliance with the prepetition consent
22   decree, striking the exemption claim and ordering the transfer
23   of assets of the bankruptcy estate to himself, these proceedings
24   did violate the stay.   Id. at 226-27.
25        This limitation on the breadth of Hooker was followed in
26   the unpublished decision of the Federal Circuit, In re Long, 318
27   F. App’x 891, 894 (Fed. Cir. 2008), where the postbankruptcy
28   contempt proceedings related to enforcement of the judgment not

                                     -15-
 1   “improper conduct during litigation.”
 2        As noted in Debtor’s brief, the Hooker/Dumas decisions have
 3   drawn sharp criticism in other bankruptcy courts.    See Atkins v.
 4   Martinez (In re Atkins), 176 B.R. 998, 1005 (Bankr. D. Minn.
 5   1994) (“With all due respect to the courts that rendered these
 6   decisions [Hooker and Dumas], . . . they are not well-
 7   founded.”); Dock C-Food, Ltd. v. Cherry (In re Cherry), 78 B.R.
 8   65, 70 (Bankr. E.D. Pa. 1987) (“We would be inclined to
 9   recognize as exemptions from the power of the stay only those
10   specifically set forth in 11 U.S.C. § 362(b), not court-created
11   exemptions in cases decided under the Bankruptcy Act . . . .”).
12   A common theme of these contrary views is that when Congress
13   enacted the Bankruptcy Code in 1978, it provided specific
14   statutory exceptions to the automatic stay in § 362(b), making
15   the judicially created exemption under the Act improvident.
16   Since Hooker was decided before the Code was adopted, if
17   Congress had wished to include contempt proceedings under the
18   exceptions to the stay, it could have done so in § 362(b).
19        Other courts have attempted to distinguish Hooker and
20   Dumas.    These courts assert that if the contempt proceeding is
21   to deter wrongful conduct such as showing disrespect to the
22   court or filing a frivolous appeal, such contempt proceeding
23   should be allowed to proceed, whereas if a creditor is merely
24   attempting to collect money due under a court order it should be
25   stayed.    See In re Musaelian, 286 B.R. 781, 782 (Bankr. N.D.
26   Cal. 2002).    The Musaelian court said the state court “alone”
27   would not be stayed if the contempt proceeding was for public
28   policy purposes, but that if the creditor or his attorneys

                                     -16-
 1   participated “in any way other than pursuant to [a] direct and
 2   unsolicited order of the state court, they risk liability for
 3   violation of the automatic stay.”     Id.   The Musaelian court
 4   further denied relief from stay so the creditor could not pursue
 5   collection of any monetary amount associated with any private
 6   interest furthered by pursuing any discovery sanction order.
 7   However, Hooker and Dumas made no such distinction between a
 8   public policy and a private interest analysis, since both cases
 9   involved monetary sanction orders arising from contempt
10   proceedings and both authorized recovery of the monetary
11   sanctions associated with the discovery violations.
12        Still other courts have excepted nonbankruptcy contempt
13   proceedings arising from sanction orders by applying one of the
14   statutory exceptions provided in § 362(b).      The Seventh Circuit
15   in Alpern v. Lieb, 11 F.3d 689, 690 (7th Cir. 1993), relied on
16   the police power exception of § 362(b)(4) when determining that
17   enforcement of a Civil Rule 11 sanction was not stayed, even
18   when the Civil Rule 11 motion was brought by a private party.
19   Similarly, the Ninth Circuit in Berg v. Good Samaritan Hosp.
20   (In re Berg), 230 F.3d 1165 (9th Cir. 2000), used the police
21   power exception when determining that an action to collect an
22   attorney sanction for filing a frivolous appeal was not subject
23   to the automatic stay.   In both Alpern and Berg the payment at
24   issue was to a private party for attorney’s fees, not the court.
25        Although we recognize these different approaches to the
26   issue before us, the precedent of this circuit is set by Hooker
27   as followed post-Code by Dumas:   a contempt action for
28   nonpayment of court-ordered sanctions is exempted from the

                                    -17-
 1   automatic stay unless the proceeding turns on the determination
 2   or collection of the underlying judgment.   We acknowledge the
 3   strength of the points made in the concurrence.    We ultimately
 4   determine, however, that it is for the Ninth Circuit to make the
 5   determination as to the continued validity of the Hooker bright-
 6   line test.
 7        Applying this rule here, the contempt proceeding in the
 8   Nevada state court was not subject to the stay.    Debtor had been
 9   ordered to pay attorney’s fees and costs to Appellants due to
10   his noncooperation with discovery.   The relevant civil contempt
11   proceeding arose from his nonpayment under that order.   These
12   facts parallel those in Hooker and Dumas which provide the rule
13   of law.
14        Consequently, the bankruptcy judge erred when he found
15   appellants willfully violated the automatic stay; in this
16   context, no stay existed to violate.9   The sanction award also
17   was error.
18                           VI.   CONCLUSION
19        For the reasons set forth above, we REVERSE the finding of
20   a violation of the automatic stay and the order to pay
21   sanctions.
22
23                   Concurrence begins on next page.
24
25
26
          9
27          The bankruptcy court’s oral findings on the willful
     nature of the violation are sparse. However, since no violation
28   occurred, we do not address the sufficiency of these findings.

                                   -18-
 1   JURY, Bankruptcy Judge, Concurring:
 2
 3        With reluctance, I concur with the Panel’s decision
 4   reversing the bankruptcy court’s decision finding appellants in
 5   contempt for violating the automatic stay of § 362.   We are
 6   compelled to follow the holding in Hooker, which in turn, was
 7   followed in Dumas.    See Salomon N. Am. v. Knupfer (In re Wind N’
 8   Wave), 328 B.R. 176, 181 (9th Cir. BAP 2005) (bankruptcy panel
 9   is bound by its previous precedent).   Nonetheless, I write
10   separately because I believe that Hooker’s judicially-created
11   rule excepting a contempt action for nonpayment of court-ordered
12   sanctions from the automatic stay is not consistent with the
13   modern breadth of the automatic stay espoused in Ninth Circuit
14   case law and at odds with the plain language of § 362(b).
15        The issues decided by the Hooker court highlight just how
16   undeveloped the concept of the stay in bankruptcy was at the
17   time the decision was rendered.   Rather than questioning whether
18   a bankruptcy stay precluded a district court from conducting a
19   contempt proceeding arising from noncompliance with discovery,
20   the issue was initially posed as whether the district court had
21   jurisdiction to issue the order of contempt after the bankruptcy
22   petition was filed.   The Ninth Circuit recognized the question
23   was not jurisdictional because the stay merely “suspends the
24   proceedings.”   That the Circuit was even asked to consider a
25   jurisdictional impact, however, illustrates how novel the stay
26   concept was at the time.
27         Moreover, Hooker interpreted the impact of a stay provided
28   by then Rule 401(a), a stay limited in scope when compared to

                                     -1-
 1   the today’s version of § 362(a).      Rule 401(a) became effective
 2   in 1973 and provided:
 3        The filing of a petition shall operate as a stay of
          the commencement or continuation of any action against
 4        the bankrupt, or the enforcement of any judgment
          against him, if the action or judgment is founded on
 5        an unsecured provable debt other than one not
          dischargeable under clause (1), (5), (6), or (7) of
 6        section 35(a) of this title.
 7   At the time of its ruling, the court noted that no cases had
 8   discussed the precise scope of the Rule 401(a) stay.     Hooker,
 9   560 F.2d at 417 n.8.    The court, however, was persuaded by the
10   concept that the purpose of the Rule 401 stay was only to
11   prevent adjudication or collection of the underlying unsecured
12   debt, such that collateral proceedings like enforcement of
13   discovery orders did not fall within that province.     Thus, the
14   court decided that continuing with the district court contempt
15   proceeding did not violate the Rule 401 stay.     This holding
16   established the rule of law applied by the Panel in Dumas.
17        In the meantime, the Bankruptcy Act of 1978 was enacted and
18   along with it came the automatic stay of § 362(a) and, perhaps
19   of equal importance, a list of statutory exceptions to the stay
20   provided by § 362(b).   “[I]n enacting § 362 in 1978, Congress
21   significantly broadened the scope of the automatic stay, an
22   expansion that had begun only five years earlier with the
23   adoption of the Bankruptcy Rules in 1973 . . . .     In the face of
24   the greatly increased scope of § 362, it was necessary for
25   Congress to limit this new power expressly.”     Midlantic Nat’l
26   Bank v. N.J. Dep’t of Envtl. Prot., 474 U.S. 494, 504 (1986)
27   (citations omitted) (noting that the express exceptions to the
28   stay were meant to overrule certain judicial expansions of the

                                     -2-
 1   stay).
 2        Section 362 has continually expanded over decades, with the
 3   petition now staying all entities from
 4        (1) the commencement or continuation, including the
          issuance or employment of process, of a judicial
 5        administrative, or other action or proceeding against
          the debtor that was or could have been commenced
 6        before the commencement of the case under this title,
          or to recover a claim against the debtor that arose
 7        before the commencement of the case under this title;
 8        (2) the enforcement, against the debtor or against
          property of the estate, of a judgment obtained before
 9        the commencement of the case under this title;
          . . .
10
          [and] (6) any act to collect, assess, or recover a
11        claim against the debtor that arose before the
          commencement of the case under this title[.]
12
13        Clearly, the plain language of the statute today shows that
14   the reach of the stay is much broader than that previously
15   provided by Rule 401(a).   Incredibly, at least to me, the Dumas
16   Panel found the “present statute and the former rule are
17   essentially similar.”   In re Dumas, 19 B.R. at 677.    Because of
18   that perceived similarity, the Panel, without any discussion of
19   the statutory exceptions then listed in § 362(b), held that the
20   rule in Hooker controlled the outcome of the case — a contempt
21   proceeding arising from a discovery dispute like Hooker.
22        Since Hooker, Ninth Circuit case law has continually
23   recognized and preserved the broad scope of the stay outlined in
24   § 362(a).   In Schwartz v. United States (In re Schwartz), 954
25   F.2d 569 (9th Cir. 1992), the Ninth Circuit ruled that an act
26   taken in violation of the stay was void ab initio.     In so
27   ruling, the court explained the importance of the stay:
28        [T]he automatic stay plays a vital role in bankruptcy.

                                    -3-
 1        It is designed to protect debtors from all collection
          efforts while they attempt to regain their financial
 2        footing. As Congress stated: “The automatic stay is
          one of the fundamental debtor protections provided by
 3        the bankruptcy laws. It gives the debtor a breathing
          spell from his [or her] creditors. It stops all
 4        collection efforts, all harassment, and all
          foreclosure actions. It permits the debtor to attempt
 5        a repayment or reorganization plan, or simply to be
          relieved of the financial pressures that drove him
 6        into bankruptcy.”
 7   Id. at 571 (emphasis in original).
 8        In the context of determining that the power to interpret
 9   the scope of the automatic stay was exclusively held by the
10   bankruptcy courts, the Circuit again emphasized the broad sweep
11   of the stay in In re Gruntz, 202 F.3d at 1081-82:
12        The automatic stay is self-executing, effective upon
          the filing of the bankruptcy petition. . . . The
13        automatic stay sweeps broadly, enjoining the
          commencement or continuation of any judicial,
14        administrative, or other proceedings against the
          debtor, enforcement of prior judgments, perfection of
15        liens, and “any act to collect, assess or recover a
          claim against the debtor that arose before the
16        commencement of the case.”
17        The cases which have echoed this interpretation of the
18   breadth of the stay since Schwartz and Gruntz are legion and
19   need not be cited here.   However, more recent decisions
20   emphasize the absolute power of the stay.   See Sternberg v.
21   Johnston, 595 F.3d 937, 943 (9th Cir. 2010) (“We have held on
22   several occasions that the automatic stay imposes on non-debtor
23   parties an affirmative duty of compliance” to remedy automatic
24   stay violations.); Eskanos & Adler, P.C. v. Leetien, 309 F.3d
25   1210, 1215 (9th Cir. 2002) (“Consistent with the plain and
26   unambiguous meaning of the statute, and consonant with
27   Congressional intent, we hold that § 362(a)(1) imposes an
28   affirmative duty to discontinue post-petition collection

                                    -4-
 1   actions.”).   I cannot help but wonder if the Dumas Panel had
 2   been informed by these cases, would it still opine that the Rule
 3   401(a) stay and the § 362 stay were “essentially similar”?
 4        More than just the scope of the stay is in play here,
 5   however.   Whatever may have been the perceived scope of the stay
 6   before the enactment of the Code, Congress has since regulated
 7   the exceptions to the stay by statute.   When the Bankruptcy Code
 8   took effect in 1978, § 362(b) only contained seven types of
 9   actions not stayed under § 362(a).   See Bankruptcy Reform Act of
10   1978, Pub. L. No. 95–598 (1978) (superseded by 11 U.S.C § 362(b)
11   (2005)).   Between 1990 and 1994, § 362(b) had expanded to
12   eighteen exceptions, then when the Code was modified by the
13   Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,
14   Congress added another ten exceptions so that § 362(b) presently
15   specifies twenty-eight categories of actions not barred by the
16   stay.
17        The legislative history of § 362 illuminates the thinking
18   of Congress when the Code was enacted:
19        Subsection (b) lists seven exceptions to the automatic
          stay. The effect of an exception is not to make the
20        action immune from injunction. The court has ample
          other powers to stay actions not covered by the
21        automatic stay. Section 105 . . . grants the power to
          issue orders necessary or appropriate to carry out the
22        provisions of title 11. The district court and the
          bankruptcy court as its adjunct have all the
23        traditional injunctive powers of a court of equity . .
          . . Stays or injunctions issued under these other
24        sections will not be automatic upon the commencement
          of the case, but will be granted or issued under the
25        usual rules for the issuance of injunctions. By
          excepting an act or action from the automatic stay,
26        the bill simply requires that the trustee move the
          court into action, rather than requiring the stayed
27        party to request relief from the stay. There are some
          actions, enumerated in the exceptions, that generally
28        should not be stayed automatically upon the

                                    -5-
 1        commencement of the case, for reasons of either policy
          or practicality. Thus, the court will have to
 2        determine on a case-by-case basis whether a particular
          action which may be harming the estate should be
 3        stayed.
 4   S. Rep. 95-989 (1978), p. 51; H.R. Rep. 95-595 (1977) p. 321
 5   (reprinted in 1978 U.S.C.C.A.N. 5787, 5837).
 6        Congress thus flagged circumstances which it believed, for
 7   policy or practical reasons, should not be subject to the stay
 8   automatically, shifting the burden to the trustee or debtor to
 9   seek a stay if necessary to preserve the estate.      Significantly,
10   nowhere in § 362(b) does Congress choose to except contempt
11   proceedings.   If Congress had intended to except contempt
12   proceedings in a non-bankruptcy forum from the automatic stay
13   for reasons of policy or practicality, it would have done so
14   expressly and not by silence.   The Supreme Court has held that
15   “[w]here Congress explicitly enumerates certain exceptions to a
16   general prohibition, additional exceptions are not to be
17   implied, in the absence of evidence of a contrary legislative
18   intent.”   Andrus v. Glover Constr. Co., 446 U.S. 608, 616–17
19   (1980).    This recognition presents another source of conflict —
20   by applying the rule in Hooker, we effectively incorporate
21   another exception into § 362(b).      That would mean creditors
22   could pursue twenty-nine different types of actions without
23   concern for violating the automatic stay.      As this cannot be
24   what Congress intended, it would seem that the statutory
25   exceptions are exclusive.
26        The oft-quoted maxim of statutory interpretation expressio
27   unius est exclusio alterius also tells us that when a
28   legislature “includes particular language in one section of a

                                     -6-
 1   statute . . . it is generally presumed that [the legislature]
 2   acts intentionally and purposely in the disparate inclusion or
 3   exclusion.”   Russello v. United States, 464 U.S. 16, 23 (1983).
 4   It is true that this principle does not apply “unless it is fair
 5   to suppose that Congress considered the unnamed possibility and
 6   meant to say no to it.”    Marx v. Gen. Revenue Corp., __ U.S. __,
 7   133 S. Ct. 1166, 1175 (2013).    Moreover, this rule is a “rule of
 8   interpretation, not a rule of law.    The maxim is ‘a product of
 9   logic and common sense,’ properly applied only when it makes
10   sense as a matter of legislative purpose.”    Longview Fibre Co.
11   v. Rasmussen, 980 F.2d 1307, 1313 (9th Cir. 1992).    Thus, it can
12   be overcome by a strong indication of contrary legislative
13   intent or policy.
14        While it is impossible to know if Congress in 1978
15   considered excepting contempt proceedings from the automatic
16   stay and rejected that concept, it is logical and makes common
17   sense to apply the maxim expressio unius est exclusio alterius
18   here.   Not including all contempt proceedings within the
19   exclusions to the automatic stay is fully consistent with the
20   legislative purpose behind the automatic stay, which is to stop
21   collection actions against the debtor to give him or her
22   breathing space.    I do recognize that exceptions to the
23   automatic stay are based on specific policies and that by
24   allowing a contempt action to proceed the dignity of the court
25   issuing the contempt could be upheld.    After all, as opined by
26   more than one court, a debtor should not be allowed to
27   disrespect a court order without consequence by retreating
28   behind the automatic stay of a bankruptcy that he or she

                                     -7-
 1   voluntarily files.   But I do not find this policy overcomes the
 2   plain language of the statutory exceptions listed in § 362(b).
 3        Further, a bankruptcy court can always grant relief from
 4   stay for “cause” to allow the delinquent debtor to face his or
 5   her due before the court whose order he or she has disobeyed.
 6   The bright-line Hooker exception to the automatic stay for
 7   contempt proceedings fails to recognize that not all violations
 8   of court orders are of equal magnitude and show disrespect for
 9   the court issuing the disobeyed order.   Where, as here, the
10   court order was to pay a sum of money to a party litigant for a
11   discovery violation, I view this as an action more to collect
12   money from the debtor than to compel compliance with a court
13   order.   Collection of money from the debtor arising from a
14   prepetition debt is just the type of action intended to be
15   stayed by § 362.
16        As noted above, Hooker and Dumas have drawn criticism from
17   at least one bankruptcy court in the Ninth Circuit and courts in
18   other jurisdictions for the same reasons I assert here.   One
19   bankruptcy court analyzed the different types of contempt
20   actions I have highlighted above:
21        Every court faces two types of contempt proceedings:
          those resulting from a private squabble among
22        litigants, where the role of the court is merely to
          enforce the law and move the litigation to conclusion,
23        and those resulting from acts truly offensive to the
          court and tending to interfere with the administration
24        of justice. An example of the former would be a
          discovery sanction; examples of the latter might
25        include disrespectful conduct in court or the bringing
          of a frivolous appeal. In order for contempt
26        proceedings to go forward after bankruptcy, there must
          be a direct, unattenuated need for them in order to
27        deter wrongful conduct and not just collect money.
28   In re Musaelian, 286 B.R. at 782; see also In re Atkins, 176

                                    -8-
 1   B.R. at 1005; In re Cherry, 78 B.R. at 70.   I agree with these
 2   bankruptcy courts that court-created exceptions to the automatic
 3   stay should not have survived the Bankruptcy Act of 1978.
 4   Accordingly, a party to a state court contempt proceeding, like
 5   all others subject to the § 362 stay, should be required to seek
 6   relief from the stay for cause, leaving the determination of
 7   whether the action should go forward to the discretion of the
 8   bankruptcy court.   For all these reasons, I conclude that the
 9   stay imposed under § 362(a) should “automatically” apply to
10   contempt proceedings in non-bankruptcy forums.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

                                    -9-