567 B.R. 841
Bankr. W.D. Wash.2017Background
- Plaintiffs (Gray and Hart) filed Chapter 7 on March 25, 2016; ZBNA held the underlying vehicle debt and Bailey & Busey represented ZBNA in post-judgment supplemental proceedings.
- Bailey & Busey moved ex parte for bench warrants after Plaintiffs failed to appear at a supplemental hearing; the Cowlitz County Superior Court entered orders directing issuance of bench warrants on March 28, 2016.
- Plaintiffs were not served with the motion or the orders; the bench warrants ultimately used were issued by the clerk and signed under seal by the court.
- ZBNA learned of the bankruptcy by April 4, 2016 and informed Bailey & Busey; Bailey & Busey placed the file on hold but did not notify the state court or quash the orders/warrants.
- On May 24, 2016 the Cowlitz County Sheriff arrested Plaintiffs pursuant to the outstanding bench warrants. Plaintiffs moved for partial summary judgment that Defendants willfully violated the automatic stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bench-warrant actions fell within the § 362(b)(4) government/regulatory (police/punitive) exception to the automatic stay | The warrants were used to effectuate state-court contempt/authority and thus are outside the stay | The bench-warrant issuance and execution were civil contempt/regulatory actions exempt under § 362(b)(4) (relying on Dingley) | Not exempt: court finds actions were collection activity, not a government regulatory contempt enforcement, so § 362(b)(4) does not apply |
| Whether Defendants willfully violated the automatic stay | Arrests occurred post-petition and Defendants had notice of the bankruptcy; failure to quash the warrants is a stay violation | Defendants claim they put the file on hold, believed they held originals, and took no affirmative steps to enforce warrants after learning of the bankruptcy | Willful violation: Defendants had notice and an affirmative duty to act to quash/notify the state court; their inaction was willful |
| Whether counsel and creditor are jointly and severally liable for the willful stay violation | Both creditor and its counsel should be held jointly and severally liable for the willful stay violation | No opposing briefing to rebut joint liability or allocate responsibility between them | Joint and several liability imposed on ZBNA and Bailey & Busey |
| Remedy / next steps | Plaintiffs sought partial summary judgment on liability and reserved damages determination | Defendants sought denial or narrowing of liability/non-willfulness | Court granted partial summary judgment on liability; damages and final relief reserved for later proceedings |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard re: genuine issue of material fact)
- Scott v. Harris, 550 U.S. 372 (view facts in light most favorable to nonmoving party when dispute exists)
- Dingley v. Yellow Logistics, LLC, 852 F.3d 1143 (9th Cir.) (discussing § 362(b)(4) exemption for actions enforcing court’s regulatory interests)
- In re Berg, 230 F.3d 1165 (9th Cir.) (stay exception context for sanctions enforcement)
- Sternberg v. Johnston, 595 F.3d 937 (9th Cir.) (creditor’s duty to ensure compliance with automatic stay)
- Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210 (9th Cir.) (creditor’s affirmative duty to halt post-petition collection; failure can be willful)
- In re Bloom, 875 F.2d 224 (9th Cir.) (definition of willful stay violation)