Edgewater Construction Group, Inc., 653 B.R. 221

Background

Edgewater Construction Group, Inc. filed a Subchapter V Chapter 11 petition on March 22, 2023; it had two stucco subcontracts with Balfour Beatty for 2000 Biscayne and RD East Las Olas.
Edgewater had removed its workforce just before the petition date; scaffolding and stucco materials delivered prepetition remained on the job sites.
On March 23, 2023 Edgewater and senior Balfour Beatty personnel met and discussed a joint-check arrangement to keep Edgewater working; Edgewater representatives informed Balfour Beatty of the bankruptcy at that meeting.
Despite the meeting and later court authorization to use a joint-check procedure, Balfour Beatty sent Default Letters on March 28 declaring Edgewater in default and threatening cross-default remedies.
Edgewater’s counsel sent a Stay Violation Letter (March 30) demanding turnover of materials; Balfour Beatty’s counsel acknowledged the automatic stay on March 31, but Balfour Beatty did not rescind the Default Letters and allowed a replacement subcontractor to use Edgewater’s materials and scaffolding.
The Bankruptcy Court found Balfour Beatty willfully violated 11 U.S.C. §362, entitling Edgewater to compensatory attorneys’ fees/costs and punitive damages; damages and setoff/recoupment issues reserved for further evidentiary proceedings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether serving Default Letters and declaring the debtor in default violated the automatic stay	Default Letters were postpetition acts to exercise control and enforce rights, violating §362	Contracts were terminated/abandoned prepetition so letters were valid and not stayed; any void act need not be rescinded	Court: Default Letters violated §362; willful violation found
Whether retaining and allowing use of Edgewater’s scaffolding/materials postpetition violated the stay and required turnover	Balfour Beatty exercised control, used materials, and refused turnover after notice — violating §362(a)(3) and (4)	Reliance on Fulton: mere retention of property is not a stay violation; asserted not a creditor or had lawful possession	Court: Fulton inapplicable—BB took possession/use postpetition; turnover/refusal violated §362; willful violation found
Whether Balfour Beatty had notice of the bankruptcy and thus acted willfully	Edgewater informed BB at March 23 meeting; knowledge suffices for willfulness	BB witnesses equivocated; argued they lacked clear notice and were not served with certain filings	Court: BB had actual knowledge from the March 23 meeting; failure to inquire was insufficient — willfulness established
Remedies and offsets: what damages and whether BB may assert setoff/recoupment	Edgewater seeks actual damages (loss of profits, inability to monetize scaffolding), attorneys’ fees, punitive damages, and turnover	BB argues stay-violative acts were void ab initio and claims potential setoff/recoupment against any award	Court: Edgewater entitled to damages; amounts and punitive award to be determined at further hearing; ordered briefing on BB’s asserted setoff/recoupment rights

Key Cases Cited

In re Daya Medicals, Inc., 560 B.R. 855 (Bankr. S.D. Fla. 2016) (willful stay violations permit damages, fees, and injunctive relief)
Jove Eng'g v. IRS, 92 F.3d 1539 (11th Cir. 1996) (definition of willful stay violation and available remedies)
In re Lyubarsky, 615 B.R. 924 (Bankr. S.D. Fla. 2020) (debtor entitled to actual and potentially punitive damages for willful stay violations)
In re WVF Acquisition, LLC, 420 B.R. 902 (Bankr. S.D. Fla. 2009) (notice standard: actual knowledge or facts prompting inquiry suffices for stay purposes)
City of Chicago v. Fulton, 141 S. Ct. 585 (U.S. 2021) ("mere retention" of prepetition property distinguished from postpetition taking/use)