513 B.R. 888
Bankr. N.D. Tex.2014Background
- Debtor Robert L. Adkins, Sr. (chapter 7) moved for damages under 11 U.S.C. § 362(k) for an alleged willful violation of the automatic stay after creditor McLoba Partners filed a third-party complaint naming Adkins in an adversary pending in a related corporate bankruptcy (Morton Adversary).
- The Morton Adversary (brought by the liquidating trustee of R.L. Adkins Corp.) asserted usury, fraudulent transfer, and equitable subordination claims against McLoba; McLoba’s answer included a third‑party complaint alleging veil‑piercing/alter‑ego and single‑enterprise theories implicating Adkins personally.
- McLoba filed the third‑party complaint while aware of Adkins’s individual chapter 7 case and declined to dismiss Adkins after demand from Adkins’s counsel.
- McLoba argued the third‑party pleading was a permissible in‑court defensive action (relying on Campbell and Sammon) and pointed to its proof of claim in Adkins’s case; it also noted it did not effect service on Adkins.
- The bankruptcy court found the third‑party suit targeted prepetition conduct, concluded the filing was a stay violation, found McLoba’s conduct willful, and ordered Adkins to submit attorney’s fees and costs for award; McLoba later dismissed claims against Adkins in the Morton Adversary.
Issues
| Issue | Plaintiff's Argument (Adkins) | Defendant's Argument (McLoba) | Held |
|---|---|---|---|
| Did filing a third‑party complaint against an individual chapter 7 debtor violate § 362(a)? | Third‑party suit was based on prepetition acts and was filed during Adkins’s chapter 7, so it violated the automatic stay. | The third‑party pleading was filed in a pending adversary in bankruptcy court and thus did not implicate the stay. | Court: Filing the third‑party complaint against Adkins was a stay violation. |
| Does filing or litigating claims "within" the bankruptcy court (in a related adversary) fall outside the stay under Campbell/Sammon? | N/A | McLoba relied on Campbell/Sammon to argue in‑court actions in bankruptcy forum are not barred by the stay. | Court: Campbell/Sammon do not excuse filing a third‑party complaint against an individual debtor in his own chapter 7 when it targets prepetition claims; the alleged forum exception does not swallow the stay’s purpose. |
| Was the stay violation willful and what damages are recoverable? | The violation was willful because McLoba knowingly filed and refused to dismiss after demand; Adkins seeks fees, costs, and punitive damages. | McLoba contended no damages to Adkins because it sought no recovery from him and did not serve him; alternatively sought retroactive relief. | Court: Conduct was willful; Adkins may recover actual damages (attorneys’ fees and costs); court directed submission of fee affidavit for award. |
Key Cases Cited
- Campbell v. Countrywide Home Loans, 545 F.3d 348 (5th Cir. 2008) (proof‑of‑claim filings asserting prepetition claims do not necessarily violate the stay)
- United States v. Inslaw, Inc., 932 F.2d 1467 (D.C. Cir. 1991) (automatic stay has no effect on actions expressly allowed under the Bankruptcy Code)
- In re S.I. Acquisition, Inc., 817 F.2d 1142 (5th Cir. 1987) (alter‑ego and related claims can be property of the bankruptcy estate and belong to the trustee)
- GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711 (5th Cir. 1985) (automatic stay’s purpose includes providing the debtor a breathing spell)
- In re Halo Wireless, Inc., 684 F.3d 581 (5th Cir. 2012) (reiterating the stay’s purpose to give debtors temporary relief from creditors)