Court Opinion

ID: 3006000
Source: CourtListenerOpinion
Date Created: 2015-09-30 16:00:49.909943+00
Date Added: 2024-06-11T11:46:02.871408
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 15a0662n.06

                                       Case No. 15-5159

                         UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT

                                                                                  FILED
                                                                            Sep 30, 2015
JOHN F. WEARY, JR.,                                  )
                                                                        DEBORAH S. HUNT, Clerk
                                                     )
              Creditor-Appellant,                    )
                                                     )        ON APPEAL FROM THE
v.                                                   )        UNITED STATES DISTRICT
                                                     )        COURT FOR THE EASTERN
STEPHANIE RENEE POTEAT,                              )        DISTRICT OF TENNESSEE
                                                     )
              Debtor-Appellee.                       )
                                                     )             MEMORANDUM
                                                     )               OPINION

BEFORE: MERRITT, McKEAGUE and WHITE, Circuit Judges.

       McKEAGUE, Circuit Judge. This is an appeal from a district court judgment affirming

the bankruptcy court’s order finding creditor John F. Weary, Jr. in contempt for violating the

automatic bankruptcy stay and awarding debtor Stephanie Poteat actual and punitive damages.

On appeal, Weary contends the bankruptcy court erred by failing to recognize that his actions

came within the criminal prosecution exception to the automatic stay. Weary’s arguments are

unavailing. We affirm.

                                               I

       Appellant John F. Weary, Jr., was in a landlord-tenant relationship with Stephanie Poteat.

She defaulted in her rent payments and moved out of the rental property in Hendersonville,

Tennessee in May 2012. In January 2013, Weary sent a letter to Poteat’s parents’ address raising
Case No. 15-5159
Weary v. Poteat

the possibility of a criminal prosecution unless Poteat delivered to him a cashier’s check for

$13,000. Weary filed a civil action against Poteat in Tennessee state court in March 2013,

claiming $24,999.99 in damages. A month later, Poteat filed a Chapter 7 bankruptcy petition.

After Weary received notice of the bankruptcy filing and the accompanying automatic stay under

11 U.S.C. § 362(a) in May 2013, he sent letters to both Poteat’s bankruptcy attorney and Poteat’s

mother, who had served as a reference when her daughter entered into the lease agreement. The

letters, quoted at length in the district court’s opinion, acknowledged that Weary could no longer

pursue remedies in the civil action, but expressed his intention to pursue criminal charges against

Poteat which, the letters insisted, would turn out to be far more costly for her.

       In response, Poteat moved the bankruptcy court to hold Weary in contempt for violating

the automatic stay. The bankruptcy court conducted a hearing on the motion in December 2013,

receiving testimony from Weary, Poteat, and Poteat’s mother before issuing its ruling from the

bench. The court noted that the automatic stay prohibits creditors from engaging in “any act to

collect, assess, or recover a claim against the debtor that arose before the commencement of the

case.” R. 1-36, Bench Opinion Tr. at 8, Page ID 357 (quoting 11 U.S.C. § 362(a)(6)). The court

noted that the stay is designed to give debtors “a breathing spell from collection efforts,” id.

(quoting In re Printup, 264 B.R. 169, 173 (Bankr. E.D. Tenn. 2001)), and although it does not

prohibit all communications from a creditor to a debtor, a stay violation is made out by actions

that are coercive or harassing in nature. Id. at 11, Page ID 360. The bankruptcy court found

“that there was no purpose to be served by [Weary’s] sending the letters . . . other than to

threaten, harass and intimidate the Debtor in an effort to coerce her into paying him.” Id. at 12,

Page ID 361. The court further found that Weary acted “willfully,” i.e., with knowledge of the

bankruptcy stay. Id. at 10–11, Page ID 359–60.

                                                -2-
Case No. 15-5159
Weary v. Poteat

       In defense of his actions, Weary, through counsel, invoked 11 U.S.C. § 362(b)(1), which

excepts from the operation of the automatic stay “the commencement or continuation of a

criminal action or proceeding against the debtor.”         Weary thus argued that his letters,

communicating his intent to pursue criminal prosecution, came within the exception.            The

bankruptcy court acknowledged the criminal prosecution exception, but observed that Weary’s

letters were not in the nature of a criminal prosecution, but communicated a “threat” to pursue

prosecution. The court found that “the spirit and motivation behind those letters, irrespective of

Mr. Weary’s testimony to the contrary, clearly establish that those letters had only one purpose,

to harass and coerce the Debtor into paying Mr. Weary’s claim.” R. 1-36, Bench Opinion Tr. at

13, Page ID 362.

       Having found a willful violation of the stay, the bankruptcy court recognized that Poteat

was entitled to an award of her actual damages, including costs and attorneys’ fees, and that

assessment of punitive damages is allowable “in appropriate circumstances.”             11 U.S.C.

§ 362(k)(1). The bankruptcy court considered various factors, including Weary’s sophistication,

ability to pay, and demeanor, which the court characterized as reflecting open defiance of the

stay. Remarking that “[t]his, frankly, is the most egregious automatic stay case that I’ve heard

since I’ve been on the bench and I’ve been on the bench a long time,” the court imposed punitive

damages in the amount of $7500. R. 1-36, Bench Opinion at 15–16, Page ID 364–65.

       On appeal to the district court, Weary asserted the same legal arguments that he raises

here. Weary did not challenge the bankruptcy court’s fact findings or its exercise of discretion in

imposing punitive damages. His appeal was limited to claimed legal error: that the bankruptcy

court erroneously applied an “expanded interpretation” of the § 362(b)(1) criminal prosecution

exception. Weary argued that the bankruptcy court erred by considering the purpose for which

                                               -3-
Case No. 15-5159
Weary v. Poteat

Weary intended to pursue criminal charges against Poteat. The district court acknowledged that

there is a split of authority on whether a party’s motivation for pursuing criminal prosecution is

relevant to determining the applicability of the exception.                 The court correctly concluded,

however, that the split of authority was immaterial to the bankruptcy court’s ruling. The court

explained that the bankruptcy court did not hold Weary outside the protection of the exception

because his intention to pursue criminal charges was motivated by desire to collect the debt owed

him, but rather because Weary’s letters, which were not in furtherance of any criminal

prosecution,1 were a thinly veiled attempt to coerce payment of the debt, violating Poteat’s

“breathing spell” from collection efforts.

       The district court also rejected Weary’s argument that punishing him for communicating

his intent to pursue criminal charges had an impermissible chilling effect on his First

Amendment right to petition for redress of grievances. The court correctly explained that the

automatic stay does not restrain Weary’s freedom to pursue criminal charges with the local

governmental authorities, but it does restrain his freedom, as a creditor, to communicate a threat

to the debtor, based on the possibility of criminal prosecution, in order to induce payment:

               In this case, appellant was never prohibited from filing a police report,
       speaking with prosecutors, or otherwise petitioning the government to commence
       a criminal action against appellee, and the bankruptcy court’s sanctions did not
       punish him for such conduct. Rather, appellant was punished for engaging in
       prohibited acts to collect on appellee’s debt. Accordingly, appellant’s First
       Amendment right to petition the government for redress of grievances was not
       violated in this case.

R. 11, Opinion at 12, Page ID 435.

       1
           In fact, no criminal prosecution was then or ever commenced or continued.

                                                       -4-
Case No. 15-5159
Weary v. Poteat

                                                 II

        Inasmuch as Weary’s claims on appeal present purely questions of law, we review de

novo. In re Global Technovations, Inc., 694 F.3d 705, 714–15 (6th Cir. 2012). On de novo

review of the bankruptcy court’s ruling, as affirmed by the district court, we find no error.

Weary has presented no argument on appeal that is not adequately and correctly resolved by the

district court rulings.

        The rulings may be succinctly summarized as follows. First, the bankruptcy court found

that the purpose of Weary’s offending letters was to coerce payment of the debt. Weary has not

challenged this finding on appeal, only its materiality.

        Second, the bankruptcy court found that Weary sent the letters with knowledge of the

automatic bankruptcy stay. Weary has not challenged this finding either.

        Third, the bankruptcy court held the criminal prosecution exception inapplicable because

Weary’s letters to Poteat’s lawyer and mother were not a “commencement or continuation of a

criminal action or proceeding.” Weary does not argue otherwise; rather, he contends his letters

were expressions of intent to exercise his right to pursue charges that could result in

commencement of a criminal action. Yet, because the communications indisputably did not

advance criminal prosecution and, therefore, do not come within the plain language of the

exception; and because the communications were found to be a threat whose purpose was to

induce payment, a finding of fact Weary has not directly challenged, they clearly ran afoul of the

plain language of the automatic stay, prohibiting “any act to collect, assess, or recover a claim

against the debtor that arose before the commencement of the [bankruptcy] case.” 11 U.S.C.

§ 362(a)(6). Hence, the bankruptcy court did not need to reach Weary’s main argument, i.e., that

the criminal prosecution exception should be applied irrespective of the purpose for the

                                                -5-
Case No. 15-5159
Weary v. Poteat

prosecution. Here, there simply is no act in furtherance of “commencement or continuation of a

criminal action or proceeding” whose purpose could be considered. Weary’s argument that the

bankruptcy court improperly considered the purpose for his letters in holding the criminal

prosecution exception inapplicable is mere sophistry.

        Fourth, the bankruptcy court found that the circumstances of this case—i.e., the

willfulness of the violation and Weary’s manifest defiance of the stay—justified award of

punitive damages in addition to actual damages.                  Again, Weary has not challenged these

findings.

        Fifth, Weary’s argument that the bankruptcy court’s order impermissibly chills his First

Amendment rights was rejected by the district court.2                    Weary cites no authority for the

proposition that enforcing the automatic stay by punishing him for “declaring his intention” (i.e.,

threatening) to pursue charges impermissibly chills his right to petition for redress. Nor has he

explained how his right to legitimately pursue charges with local prosecutorial authorities was or

is in any way hindered by the bankruptcy court’s order.

        Accordingly, on de novo consideration of Weary’s appellate arguments, we find no error

in the district court’s affirmance of the bankruptcy court’s order.                     An additional opinion

reiterating the analysis contained in the lower court rulings would be duplicative and is

unnecessary. We therefore AFFIRM on the basis of the lower court opinions.

        2
           That the bankruptcy court did not allude to the argument in its ruling comes as no surprise. The argument
was not asserted in Weary’s brief and was mentioned by Weary’s counsel during the contempt hearing only in one
sentence . . . in response to a question from the court. The bankruptcy judge asked counsel why it was “necessary”
for Weary to broadcast his intention to pursue criminal charges to Poteat’s attorney and mother. Weary’s counsel
answered, “I can’t answer why it would be necessary, but . . . prohibiting such communication . . . would amount to
a chilling effect on freedom of speech.” R. 1-35, Hearing Tr. at 79, Page ID 343. Although the argument was only
perfunctorily asserted and could have been deemed forfeited, see White Oak Prop. Development, LLC v. Washington
Twp., Ohio, 606 F.3d 842, 850 (6th Cir. 2010), the district court addressed the claim and found it to be without
merit.

                                                       -6-