In re Daya Medicals, Inc., 560 B.R. 855

Background

Daya Medicals, Inc. (Debtor) filed Chapter 11 on Aug. 18, 2015; a Broward County state court had entered a receivership order (effective Aug. 24, 2015) at the request of Eric Stanco and his clients Dana Klein and DKMC, Inc. covering the Debtor and the Debtor’s principals.
The Debtor asserted that a 2004 corporate assignment (the 2004 Assignment) transferred the principals’ rights in the relevant intellectual property (IP) to the Debtor, making that IP property of the bankruptcy estate.
After the petition, receiver Scott D. Smiley (and Stanco) sought assignments of the IP from the principals and sent draft/cover letters and a motion in state court to compel assignments; Debtor’s counsel and the U.S. Trustee warned these efforts implicated the automatic stay.
The Debtor moved for sanctions for willful violation of the automatic stay and sought injunctive and monetary relief; hearings were held over three days in 2016.
The bankruptcy court found the evidence credible that the IP was estate property, that Smiley knew of the bankruptcy and nonetheless repeatedly sought assignments from the principals (which would cloud estate title), and that Stanco did not willfully violate the stay.
The court granted injunctive relief forbidding attempts to obtain control of the subject IP absent relief from the stay, and awarded the Debtor’s counsel fees and costs against Smiley as sanctions.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the subject IP is property of the bankruptcy estate	Debtor: 2004 Assignment and testimony show the IP was assigned to and developed for the Debtor, so it is estate property	Receiver/creditors: principals retain ownership; receiver needed to take custody under the receivership order	Court: IP is estate property; 2004 Assignment effective before petition date; no credible contrary evidence
Whether attempts to obtain assignments from principals after petition violated §362(a)(3)	Debtor: Smiley’s repeated solicitations and motion to compel sought to obtain/control estate property and thus violated automatic stay	Smiley: he sought only the principals’ personal interests under the receivership and did not intend to act against the Debtor after learning of bankruptcy; inclusion of Debtor in paperwork was inadvertent	Court: Smiley knew of the bankruptcy and persisted in seeking assignments from principals, which would cloud the estate’s interest; his actions were willful violations of the automatic stay
Whether Stanco willfully violated the automatic stay	Debtor: Stanco’s emails attempted to transfer IP and thus violated the stay	Stanco: first email predated knowledge of bankruptcy; later email was legal discussion about the stay	Court: No willful violation by Stanco—no evidence he knew of bankruptcy at first email; later communication was legal discussion
Appropriate sanctions/remedies for willful stay violation	Debtor: requests damages, attorneys’ fees, injunction	Smiley: sought fees/costs; argued no direct harm to Debtor	Court: Injunction barring attempts to obtain IP without relief from stay; denied punitive/actual damages claim but awarded reasonable attorneys’ fees and costs incurred by Debtor to rebuff Smiley; denied Smiley’s fee request

Key Cases Cited

Jove Eng’g v. IRS, 92 F.3d 1539 (11th Cir. 1996) (willful stay violations permit sanctions including fees and damages)
Fleet Mortg. Group v. Kaneb, 196 F.3d 265 (1st Cir. 1999) (willfulness does not require specific intent to violate the stay)
In re Lickman, 297 B.R. 162 (Bankr. M.D. Fla. 2003) (automatic stay reaches attempts to control intangible property and parties on notice must seek clarification from bankruptcy court)
In re Pratt, 462 F.3d 14 (1st Cir. 2006) (good-faith belief in right to property does not negate willful stay violation)
In re Nat’l Century Fin. Enters., 423 F.3d 567 (6th Cir. 2005) (actions not directly against debtor may nonetheless be barred if they adversely impact estate property)
In re Prudential Lines, Inc., 928 F.2d 565 (2d Cir. 1991) (automatic stay applies when creditor’s actions adversely impact debtor’s estate)
In re Klarchek, 508 B.R. 386 (Bankr. N.D. Ill. 2014) (section 362(a)(3) reaches efforts to exercise control over estate property)