519 B.R. 723
Bankr. S.D. Ohio2014Background
- Freddie L. Fulson (later deceased) sued Columbia Gas and affiliates in Ohio state court under the Ohio Corrupt Practices Act (OCPA), asserting RICO-like claims in part "in his capacity" as 100% owner of companies including Nicole Gas Production, Ltd. (NGP), which was a Chapter 7 debtor.
- NGP was in bankruptcy and Ransier was the Chapter 7 trustee who had filed a Rule 9019 settlement motion to compromise NGP’s claims against Columbia Gas for $250,000.
- Fulson’s lawyers, Robert Sanders and James Lowe, drafted, signed and filed the state-court complaint and an amended complaint without giving notice to the trustee or seeking relief from the automatic stay.
- The trustee moved in bankruptcy court, seeking a show‑cause order that the Fulson parties be held in civil contempt for violating the automatic stay by asserting claims that the trustee contended were property of NGP’s estate.
- The bankruptcy court found that the claims alleged in the complaint (derivative claims based on injury to NGP) arose before NGP’s petition date and therefore were property of the estate under 11 U.S.C. § 541(a)(1); filing and pursuing them violated § 362(a)(3).
- The court held Fulson, Sanders and Lowe in contempt and established procedures for the trustee to submit a fee/expense statement to quantify damages; sanctions amount to be determined after briefing/hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the OCPA/RICO-style claims asserted by Fulson are property of NGP’s bankruptcy estate | Fulson: his OCPA claim is a personal claim as a person “directly or indirectly injured,” so he may sue individually (not derivative). | Trustee (Ransier): claims allege injury to NGP and are derivative; under §541(a)(1) causes of action existing at petition belong to the estate. | Held: Claims are derivative (injury to NGP) and thus estate property; only trustee may assert or settle them. |
| Whether filing and pursuing the state-court lawsuit violated the automatic stay | Fulson: filing did not violate the stay because the OCPA permits indirect/injured persons to sue and the Amended Complaint seeks damages only for NES (or is not an estate claim). | Trustee: parties knew of the bankruptcy/stay, did not seek stay relief or notify trustee, and pursued estate claims despite pending settlement, violating §362(a)(3). | Held: Fulson, Sanders and Lowe willfully violated the automatic stay by exercising control over estate property. |
| Whether the OCPA’s “any person” / “indirectly injured” language overrides Ohio common‑law derivative‑action rule | Fulson: statutory language allows indirect (shareholder) claims directly, displacing common law limitation. | Trustee: statutes are read with common‑law milieu; OCPA does not clearly abrogate derivative‑action principles; case law supports limiting indirect‑injury suits when claims are duplicative/derivative. | Held: OCPA does not overturn the rule that shareholders cannot bring direct suits for injuries to the corporation; cases (and logic) reject Fulson’s expansive reading. |
| Whether good faith, reliance on counsel, or the trustee’s settlement justify or excuse contempt liability | Fulson/Sanders/Lowe: they acted in good faith, relied on legal advice, amended complaint to avoid estate claims, and trustee’s settlement changes accrual. | Trustee: good faith/advice of counsel are not defenses to civil contempt; settlement does not revive trustee’s exclusive right and does not authorize third‑party suits. | Held: Good‑faith belief/advice does not excuse contempt; trustee’s pending settlement confirms trustee’s exclusive rights; contempt liability affirmed. |
Key Cases Cited
- Stern v. Marshall, 131 S. Ct. 2594 (U.S. 2011) (addressing bankruptcy court constitutional authority for certain matters)
- Chambers v. NASCO, Inc., 501 U.S. 32 (U.S. 1991) (courts’ inherent contempt powers)
- Bauer v. Commerce Union Bank, 859 F.2d 438 (6th Cir. 1988) (causes of action are property of the debtor’s estate)
- Van Dresser Corp. v. Honigman (In re Van Dresser Corp.), 128 F.3d 945 (6th Cir. 1997) (shareholder’s derivative claims belong to debtor’s estate; shareholder barred from suing)
- Parker v. Goodman (In re Parker), 499 F.3d 616 (6th Cir. 2007) (bankruptcy estate acquires derivative rights; trustee has exclusive standing)
- Adair v. Wozniak, 23 Ohio St.3d 174, 492 N.E.2d 426 (Ohio 1986) (only the corporation — not shareholders — can sue for injury to the corporation)
- Liberte Capital Group, LLC v. Capwill, 462 F.3d 543 (6th Cir. 2006) (elements required to prove civil contempt)