Mark Stoiber v. Craig S. Galpern, Adv. Proc. No. 08-6052-fra
In re Mark Jeffery Stoiber, Case No. 07-61157-fra7
UNPUBLISHED opinion by Judge Frank R. Alley, III
A debtor is not going to win an argument against a creditor for violation of the automatic stay if the debtor does not bother to include the creditor on the creditor schedule, even if the creditor is his ex-wife represented by an attorney who could have easily found out about his bankruptcy case, and even if that attorney had filed a state court action in the meantime against debtor pursuing a dischargeable debt and failed to dismiss it even after getting notice of the bankruptcy case.
Subject matter jurisdiction:
Before getting to the automatic stay issue, Judge Alley ruled against the effort by defendant, creditor’s attorney, to have the issue of the automatic stay violation decided in the pending state court case. Shortly before learning about the bankruptcy case, the attorney had filed an action against debtor in state court on behalf of the debtor’s ex-wife, which included a prayer for contempt for debtor’s failure to pay the attorney fees awarded in the earlier dissolution proceeding. In the adversary proceeding by debtor against him for violation of the automatic stay, the case at issue here, the attorney argued that jurisdiction on this matter is concurrent between state and federal courts, and so jurisdiction rested in the state court unless and until the pending case was removed to bankruptcy court. He relied on a 1995 Oregon bankruptcy court opinion, In re Jeffries, 191 B.R. 861 (1995), which spoke of such concurrent jurisdiction pursuant to 28 U.S.C. §1334(b). But Judge Alley effectively stated that the 9th Circuit Court of Appeals overruled that Jeffries opinion with its holding in In re Gruntz, 202 F.3d 1074, 1082 (9th Cir. 2000): “Because of the bankruptcy court’s plenary power over core proceedings, the . . . argument that states have concurrent jurisdiction over the automatic stay under 28 U.S.C. §1334(b) is unavailing.” Id. At 1082-83.
Although losing the jurisdictional argument, defendant prevailed in his motion for summary judgment in debtor’s adversary proceeding against him for violation of the stay because 1) Judge Alley found no evidence that defendant had actual knowledge of the bankruptcy case when he filed the state court action; 2) defendant had no “duty to search the bankruptcy records for a filing” even if he was an experienced litigator, “especially when the Plaintiff [debtor] had the duty under the Bankruptcy Code to list all creditors with his initial filing”; and 3) the evidence showed that neither defendant, nor anyone acting on behalf of the defendant, nor the state court “took any action in furtherance of the state court action pertaining to the debt.” Interestingly, Judge Alley cited no judicial authority whatsoever in support of these standards that he relied on in giving summary judgment to defendant, perhaps because he did not intend for his opinion here to be published.
BOTTOM LINES: 1) The Ninth Circuit has made it quite clear that state courts have no subject matter jurisdiction over disputes about the automatic stay and so must defer to bankruptcy courts.
2) If a debtor wants to be able to assert a violation of the automatic stay against a creditor, he ought to be sure to include the creditor in the creditor schedules, and, especially if there is any delay in doing so, also to be sure to have solid evidence that the creditor had actual knowledge of the bankruptcy case before the alleged stay violation.
Subject matter jurisdiction:
Before getting to the automatic stay issue, Judge Alley ruled against the effort by defendant, creditor’s attorney, to have the issue of the automatic stay violation decided in the pending state court case. Shortly before learning about the bankruptcy case, the attorney had filed an action against debtor in state court on behalf of the debtor’s ex-wife, which included a prayer for contempt for debtor’s failure to pay the attorney fees awarded in the earlier dissolution proceeding. In the adversary proceeding by debtor against him for violation of the automatic stay, the case at issue here, the attorney argued that jurisdiction on this matter is concurrent between state and federal courts, and so jurisdiction rested in the state court unless and until the pending case was removed to bankruptcy court. He relied on a 1995 Oregon bankruptcy court opinion, In re Jeffries, 191 B.R. 861 (1995), which spoke of such concurrent jurisdiction pursuant to 28 U.S.C. §1334(b). But Judge Alley effectively stated that the 9th Circuit Court of Appeals overruled that Jeffries opinion with its holding in In re Gruntz, 202 F.3d 1074, 1082 (9th Cir. 2000): “Because of the bankruptcy court’s plenary power over core proceedings, the . . . argument that states have concurrent jurisdiction over the automatic stay under 28 U.S.C. §1334(b) is unavailing.” Id. At 1082-83.
Although losing the jurisdictional argument, defendant prevailed in his motion for summary judgment in debtor’s adversary proceeding against him for violation of the stay because 1) Judge Alley found no evidence that defendant had actual knowledge of the bankruptcy case when he filed the state court action; 2) defendant had no “duty to search the bankruptcy records for a filing” even if he was an experienced litigator, “especially when the Plaintiff [debtor] had the duty under the Bankruptcy Code to list all creditors with his initial filing”; and 3) the evidence showed that neither defendant, nor anyone acting on behalf of the defendant, nor the state court “took any action in furtherance of the state court action pertaining to the debt.” Interestingly, Judge Alley cited no judicial authority whatsoever in support of these standards that he relied on in giving summary judgment to defendant, perhaps because he did not intend for his opinion here to be published.
BOTTOM LINES: 1) The Ninth Circuit has made it quite clear that state courts have no subject matter jurisdiction over disputes about the automatic stay and so must defer to bankruptcy courts.
2) If a debtor wants to be able to assert a violation of the automatic stay against a creditor, he ought to be sure to include the creditor in the creditor schedules, and, especially if there is any delay in doing so, also to be sure to have solid evidence that the creditor had actual knowledge of the bankruptcy case before the alleged stay violation.
by Andrew Toth-Fejel, Bankruptcy Litigation Services for Attorneys, Andy@BLSforAttorneys.com
© 2008 Bankruptcy Litigation Support for Attorneys
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