Court Opinion

ID: 213780
Source: CourtListenerOpinion
Date Created: 2011-04-01 16:29:14+00
Date Added: 2024-06-11T17:28:17.169365
License: Public Domain

FILED
                                              United States Court of Appeals
                                                      Tenth Circuit

                                                     April 1, 2011
              UNITED STATES COURT OF APPEALS
                                                 Elisabeth A. Shumaker
                      FOR THE TENTH CIRCUIT          Clerk of Court

In re: JIM’S MAINTENANCE &
SONS INC.,

         Debtor.

JIM’S MAINTENANCE & SONS                    No. 10-6052
INC.,                               (D.C. No. 5:09-CV-00438-M)
                                           (W.D. Okla.)
         Appellant,

v.

TARGET CORPORATION,

         Appellee.

In re: JIM’S COMMERCIAL
CLEANING LTD.,

         Debtor.

JIM’S COMMERCIAL CLEANING                   No. 10-6053
LTD.,                               (D.C. No. 5:09-CV-00439-M)
                                           (W.D. Okla.)
         Appellant,

v.

TARGET CORPORATION,

         Appellee.
                           ORDER AND JUDGMENT *

Before LUCERO, EBEL, and O’BRIEN, Circuit Judges.

      Jim’s Maintenance & Sons Inc. and Jim’s Commercial Cleaning Ltd. appeal

from identical orders by the bankruptcy court granting Target Corporation’s

motions to lift the automatic stay provided in 11 U.S.C. § 362 in order for Target

to pursue claims against the debtors in litigation pending in federal district court.

Appeal numbers 10-6052 and 10-6053 were consolidated for the purposes of

briefing, record, and submission. Because the bankruptcy court provided the

same reasoning for lifting the automatic stay in both of these bankruptcy

proceedings, we decide these appeals together. Exercising jurisdiction under

28 U.S.C. § 158(d)(1), we affirm.

                                    Background

      In 2000, Target Corporation entered into contracts with Jim’s Maintenance

& Son’s Inc. and Jim’s Commercial Cleaning Ltd. (collectively “Jim’s

*
       After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.

                                         -2-
Maintenance” or “the debtors”) in which Jim’s Maintenance agreed to provide

cleaning services for Target at certain stores. Target terminated its relationship

with Jim’s Maintenance in May 2006. That same year, former employees of Jim’s

Maintenance brought two separate lawsuits against the company and Target in the

Southern District of Texas (“the Fuentes case”) and the Western District of Texas

(“the Iztep case”). The former employees asserted that Jim’s Maintenance and

Target were liable for failure to pay overtime and minimum wage in accordance

with the Fair Labor Standards Act. Target subsequently brought crossclaims

against Jim’s Maintenance for breach of contract and other claims in both Texas

cases. In December 2007, Target moved for summary judgment against Jim’s

Maintenance in the Iztep case. Jim’s Maintenance filed its response to the

summary judgment motion in January 2008.

      In May 2008, Jim’s Maintenance filed for bankruptcy protection and an

automatic stay of all litigation against the debtors went into effect under

11 U.S.C. § 362(a). After filing for bankruptcy, Jim’s Maintenance filed a civil

action against Target in state court in Oklahoma, which was later removed to

federal court in the Western District of Oklahoma (“the Oklahoma litigation”).

Target subsequently moved the bankruptcy court for relief from the automatic

stay to allow it to continue litigating its crossclaims in the Texas cases and to

allow it to file comparable counterclaims in the Oklahoma litigation. In February

2009, the bankruptcy court lifted the automatic stay. The debtors appealed the

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bankruptcy court’s decision to the district court. In January 2010, the district

court affirmed the bankruptcy court’s decision to lift the automatic stay. Jim’s

Maintenance then filed its appeal in this court.

                                      Discussion

      We review for abuse of discretion the bankruptcy court’s decision to lift the

automatic stay. Pursifull v. Eakin, 814 F.2d 1501, 1504 (10th Cir. 1987). “Under

the abuse of discretion standard[,] a trial court’s decision will not be disturbed

unless the appellate court has a definite and firm conviction that the lower court

made a clear error of judgment or exceeded the bounds of permissible choice in

the circumstances.” In re Busch, 294 B.R. 137, 140 (B.A.P. 10th Cir. 2003)

(quotations omitted).

      “The automatic stay generally prohibits . . . litigation, enforcement of liens,

and other actions, be they judicial or otherwise, which would affect or interfere

with property of the estate, of the debtor, or which is in the custody of the estate.”

Pursifull, 814 F.2d at 1504 (citing 11 U.S.C. § 362(a)). The stay procedure

allows the bankruptcy court “to retain control over the resolution of all claims

pertaining to the debtor and the bankruptcy estate.” Id. Relief from the

automatic stay may be granted for cause, see 11 U.S.C. § 362(d)(1), which

involves a discretionary determination by the bankruptcy court made on a case by

case basis. See Busch, 294 B.R. at 140. “The moving party has the burden to

                                          -4-
show that ‘cause’ exists to lift the stay, after which the burden shifts to a debtor

to demonstrate why the stay should remain in place.” Id. at 140-41.

      In its motion seeking to lift the automatic stay, Target noted bankruptcy

courts have held cause existed to grant relief from the stay

      to allow a creditor to establish its claims against a debtor in other
      forums, particularly in forums where the bankruptcy debtor is already
      a named party defendant or where the bankrupt debtor has instituted
      an action against the creditor, and to protect the creditor’s right of
      offset against debts the bankrupt debtor claims the creditor owes the
      bankrupt debtor.

Aplt. App. at 15 (citing In re Countryside Manor, Inc., 188 B.R. 489 (Bankr.

D. Conn. 1995)). Under this standard, Target argued cause existed to lift the stay

in order for Target to protect its right of offset by pursuing its crossclaims in the

Texas cases, which had been filed prior to the institution of the bankruptcy

proceedings, and to file its counterclaims in the Oklahoma litigation. Target

further asserted the federal district courts in Texas and Oklahoma were the more

appropriate forums to litigate its claims and allowing Target to litigate its claims

in those courts would result in judicial economy and an expeditious resolution of

the litigation. Finally, Target contended nine of the relevant factors from the

Curtis test 1 supported lifting the stay.

1
       In In re Curtis, 40 B.R. 795, 799-800 (Bankr. D. Utah 1984), the court
identified factors to consider in deciding “whether or not to modify the stay to
permit litigation against the debtor to proceed in another forum.” These factors
“have been widely adopted by bankruptcy courts.” Busch, 294 B.R. at 141.

                                            -5-
      In response, the debtors did not object to the lifting of the stay in the

Oklahoma litigation, but they did object to the lifting of the stay in the two Texas

cases. The debtors asserted there were no funds to employ counsel to represent

them in the Texas cases and they would be prejudiced by their inability to

represent themselves. The debtors took the position Target would not be harmed

by continuing the stay in the Texas cases because the stay could be lifted in the

Oklahoma litigation and Target could bring its counterclaims in that case.

      In its order, the bankruptcy court stated it had considered the legal

arguments advanced by Target and the trustee and ultimately concluded the

prejudice advanced by the debtors did not override the other factors that

compelled the court to grant Target’s motion for relief from the stay.

Specifically, the bankruptcy court noted counsel for the estate had previously

appeared in the Texas cases, and Target’s motion for summary judgment in the

Iztep case had already been briefed by both sides when the court’s ruling on the

motion had been stayed by the institution of the bankruptcy proceedings. The

bankruptcy court also noted the debtors could file a motion in the Texas district

courts requesting Target’s claims be transferred to the Oklahoma district court in

order for the claims to be consolidated in one jurisdiction. The bankruptcy court

agreed with Target “that the decision as to which federal district court should

handle the claims should rest with and should be decided by the federal district

courts.” Aplt. App. at 39.

                                          -6-
      On appeal, the debtors argue the bankruptcy court abused its discretion in

lifting the automatic stay in the Texas litigation 2 because “[the court] failed to

consider all of the relevant factors and erred in balancing the factors that it

properly considered.” Aplt. Br. at 6. We disagree. The debtors’ objection in

response to the motion to lift the stay was very limited and was essentially an

objection to the geographical location for Target’s litigation of its claims (federal

district court in Texas versus federal district court in Oklahoma), as opposed to an

objection to Target being able to litigate its claims against the debtors in any

non-bankruptcy forum. The debtors did not object to Target being allowed to file

counterclaims in the Oklahoma litigation, which is a concession the estate would

not be harmed by allowing litigation to proceed against it in a non-bankruptcy

forum. Instead, the debtors attempted to convince the bankruptcy court to allow

them to defend against Target’s claims in their preferred non-bankruptcy forum,

arguing the estate would be prejudiced if the Texas cases were allowed to proceed

because their Oklahoma counsel was not willing to travel to Texas.

2
       Although the debtors continue to refer to the “Texas litigation,” which
encompasses both the Iztep and the Fuentes cases, we note only the litigation in
the Iztep case is proceeding. When Target sought to reopen its crossclaims in the
Fuentes case after the bankruptcy court lifted the stay, the Fuentes court denied
its request, noting all of the plaintiffs’ claims had been resolved and therefore it
would be more appropriate for Target to litigate its claims in the Iztep case or the
Oklahoma litigation. See Aplee. App. at 16. Because the Fuentes case has been
closed, any request for relief related to the bankruptcy court’s decision to lift the
stay in that case is moot, see BioDiversity Conservation Alliance v. Bureau of
Land Mgmt., 608 F.3d 709, 713 (10th Cir. 2010) (noting “a case is moot if a court
cannot provide effectual relief” (quotation omitted)).

                                          -7-
      Given these circumstances, the bankruptcy court’s analysis was

appropriately tailored to the debtors’ limited argument regarding prejudice.

Moreover, it was reasonable for the bankruptcy court to conclude that the

decision as to which federal district court should handle the claims should be

decided by the federal district courts. The debtors have failed to show that the

bankruptcy court’s consideration of their prejudice argument and the court’s

ultimate decision to lift the automatic stay constituted a “clear error of judgment”

or “exceeded the bounds of permissible choice in the circumstances.” Busch,
294 B.R. at 140. Accordingly, we conclude the bankruptcy court did not abuse its

discretion in granting Target’s motion to lift the automatic stay. 3

      We AFFIRM the bankruptcy court’s orders granting Target’s motions to lift

the automatic stay in the underlying bankruptcy proceedings.

                                                      Entered for the Court

                                                      Terrence L. O’Brien
                                                      Circuit Judge

3
       We note the debtors did not provide a complete record for our review. The
bankruptcy court held a hearing on Target’s motion to lift the stay, but the debtors
failed to provide us with any portion of the transcript from the hearing. See
10th Cir. R. 10.1(A)(1) (“The appellant must provide all portions of the transcript
necessary to give the court a complete and accurate record of the proceedings
related to the issues on appeal.”).

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