WD Equipment, LLC v. Cowen
849 F.3d 943
10th Cir.2017Background
- Debtor Jared Cowen borrowed from WD Equipment (owned by Aaron Williams) secured by a lien on a 2000 Peterbilt; after repeated breakdowns he sought refinancing in early August 2013.
- While Cowen negotiated payoff, Williams allegedly gave conflicting payoff amounts and set an accelerated payoff deadline of August 6, 2013.
- Cowen separately defaulted on a loan for a 2006 Kenworth held by Bert Dring; Dring forcibly repossessed that truck on July 29, 2013 and later claimed a sale on August 4.
- Cowen filed Chapter 13 on August 6, 2013, notified Defendants, and requested return of both trucks; Defendants refused, asserting prepetition title transfers/sales (documents the bankruptcy court found manufactured).
- The bankruptcy court found Defendants willfully violated the automatic stay, ordered turnover, and awarded damages; the district court affirmed in part, and Defendants appealed to the Tenth Circuit.
- The bankruptcy court retained the adversary proceeding after dismissal of the main bankruptcy case; the Tenth Circuit reviewed jurisdictional and statutory issues and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction after dismissal of main bankruptcy case | § 362(k)(1) claim survives dismissal; bankruptcy court may enter final judgment | Dismissal divested bankruptcy court of jurisdiction over § 362 claim | Court held § 362(k)(1) proceedings remain viable after case dismissal (followed In re Johnson) |
| Constitutional authority under Stern | Automatic-stay claims "stem from the bankruptcy" and are core | Stern limits bankruptcy courts from entering final judgment on certain claims | Court held § 362(k)(1) is core and within bankruptcy court's constitutional authority (distinguishable from Stern) |
| Scope of § 362(a)(3) — whether passive retention violates stay | Retention of estate property post-petition violates § 362(a)(3); passive holding is actionable | § 362(a)(3) prohibits only affirmative acts to obtain possession or exercise control; passive retention is not an "act" | Court adopted minority rule: § 362(a)(3) reaches only affirmative acts to obtain possession or exercise control, not mere passive retention |
| Alternative remedies for refusing turnover | Automatic stay damages under § 362(k)(1) | If § 362(a)(3) doesn't cover passive retention, courts can rely on other powers | Court held bankruptcy courts may still sanction abusive postpetition conduct under § 105(a); remand to reassess damages under proper legal standards |
Key Cases Cited
- Celotex Corp. v. Edwards, 514 U.S. 300 (statutory limits on bankruptcy jurisdiction)
- Stern v. Marshall, 564 U.S. 462 (limits on bankruptcy courts adjudicating certain non‑bankruptcy claims)
- Johnson v. Smith (In re Johnson), 575 F.3d 1079 (§ 362(k)(1) claim is core and survives dismissal of underlying case)
- FB Acquisition Prop. I, LLC v. Gentry (In re Gentry), 807 F.3d 1222 (standard of review for bankruptcy appeals)
- Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (statutory interpretation begins and ends with plain text)
- United States v. Inslaw, 932 F.2d 1467 (interpreting limits of § 362(a)(3) — passive retention analysis)