616 B.R. 57
Bankr. M.D. Penn.2020Background:
- March 20, 2018: A $140,000 default judgment was entered in favor of Contractors, Surveyors, and Engineers, Inc. (CSE) against Popple Construction, Inc.
- July 24, 2018: Brannon and CSE assigned that default judgment to Plaintiff Edward Kaushas, who recorded the assignment.
- August 4, 2018: Kaushas filed a voluntary Chapter 13 bankruptcy petition.
- September 13–28, 2018: Popple (via Wendolowski) filed a post-petition State Court Petition to strike/open the default judgment, strike garnishment, enforce a settlement, and obtain sanctions; the state court struck the default judgment, lifted the garnishment, validated the settlement, and sanctioned Kaushas for attorneys’ fees.
- October 28, 2019: Kaushas filed an adversary complaint alleging Movants willfully violated the automatic stay under 11 U.S.C. § 362(a)(1) and (a)(3) and seeking damages under § 362(k); Movants moved to dismiss Count I for lack of jurisdiction and failure to state a claim.
- June 2, 2020: The Bankruptcy Court denied the motion to dismiss, holding Kaushas pled plausible stay-violation claims and that the court had subject-matter jurisdiction; Movants were ordered to answer within 21 days.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether filing the State Court Petition violated § 362(a)(1) (post-petition judicial action) | Kaushas: Movants filed and pursued the State Court Petition after Kaushas filed Chapter 13 and with knowledge of the petition, so it continued a judicial action against the debtor | Movants: No post-petition action taken against Kaushas beyond sanctions; issues could have been raised pre-petition; Kaushas waived stay protections | Court: Kaushas pled facts (knowledge, post-petition filing, sanctions) that make a § 362(a)(1) violation plausible; claim survives dismissal |
| Whether filing the State Court Petition violated § 362(a)(3) (act to obtain/control property of the estate) | Kaushas: The assigned default judgment became estate property on filing; movants’ effort to strike the judgment and obtain sanctions exercised control over estate property | Movants: Petition merely challenged facial defects and did not unlawfully seize or enforce estate property | Court: Complaint plausibly alleges the judgment was estate property and the petition was a post-petition act to obtain/control it; claim survives dismissal |
| Whether Kaushas pleaded willfulness and actual damages under § 362(k) | Kaushas: Movants acted with knowledge and his damages include the sanctions and loss of the $140,000 judgment as an estate asset | Movants: Kaushas waived rights by litigating and failing to notify; thus no willful violation or recoverable damages | Court: At pleading stage, Kaushas alleged knowledge, an act violating the stay, and actual damages; willfulness is plausibly pleaded |
| Whether the bankruptcy court has subject-matter jurisdiction (including Rooker–Feldman) | Kaushas: Federal bankruptcy courts have core jurisdiction over stay violations and related relief | Movants: Court lacks jurisdiction; Rooker–Feldman bars federal review of state court judgment | Court: Jurisdiction exists for the stay-violation claims; Rooker–Feldman does not apply because Kaushas alleges independent injury from stay violations rather than seeking appellate review of the state judgment |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard requires plausibility)
- Ashcroft v. Iqbal, 556 U.S. 662 (legal conclusions not entitled to pleading-stage deference)
- Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. guidance on applying plausibility standard)
- In re Linsenbach, 482 B.R. 522 (test for willful automatic-stay violation: violation occurred, knowledge, damages)
- In re Denby-Peterson, 941 F.3d 115 (3d Cir. decision distinguished by court on factual differences)
- Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159 (Rooker–Feldman elements)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (Rooker–Feldman doctrine articulation)
- Burns v. Pa. Dep't of Correction, 544 F.3d 279 (judgment qualifies as property)
- In re Healthcare Real Estate Partners, LLC, 941 F.3d 64 (bankruptcy court jurisdiction over core matters)