The Cracked Egg LLC
Case Information
IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA IN RE: )
) THE CRACKED EGG, LLC., ) Bankruptcy No. 20-22889-JAD
) Debtor. ) Chapter 11 __________________________________ X
) COUNTY OF ALLEGHENY, a ) Related to ECF No. 47 political subdivision of the )
Commonwealth of Pennsylvania, )
)
Movant, )
)
- v - )
)
THE CRACKED EGG, LLC, )
)
Respondent. )
__________________________________ X
MEMORANDUM OPINION
The matter before Motion for Relief From Automatic Stay filed by County heny, throu h Alle County Health Department ( collectively, “ Health Department ” ). for Relief From Automatic Stay core proceedin over uisite sub ect-matter j urisdiction enter final j ud ment pursuant 11 §§ b) ( 1), ( b) ( ( A), ( b) ( 2) ( G), ( b) ( 2) ( O), 33 4 ( b). ist motion filed this ency uests relief from stay pursue proceedin ainst The Cracked E gg LLC ( “ ” ) violation various miti measures ordered by Commonwealth of Pennsylvania protect ainst spread of Covid-19.
By way of back round, Covid-19 is hi hly infectious, communicable
disease caused by new ( or novel) coronavirus not previously seen humans. The Covid-19 virus transmitted predominantly by respiratory droplets enerated
when people cou h, snee z e, talk breathe. M.Rae, Inc. Wolf, Civil Action
No. 1:20-CV-2 366 ,
has caused lobal pandemic unprecedented scale. Id. at * 1. As December , World Health Or ani reported ,8 8, confirmed cases 1,711,498 deaths worldwide. Id. * 4. The Centers for Disease Prevention ( “ CDC ” ) reported 18,170,0 cases and
21,7 deaths States. Id. As late December
Commonwealth recorded 81,1 cases 14,442 deaths. Id. pandemic affected all counties within Commonwealth of Pennsylvania, includin where Cracked E gg LLC operates its restaurant business. Id. The number of cases and deaths have continued row locally, nationally, and lobally, and numbers even reater of writin of Memorandum Opinion. Indeed, most recent data on CDC website with respect reflects 20,7 2,404 cases 35 2,4 4 deaths nationwide. Pennsylvania reports its on [1]
website 6 ,91 total cases statewide , 6 recent deaths. most data [2] ardin Covid-19 cases Alle heny County, Pennsylvania reflects ,827 cases 1,011 deaths. [3] Faced unprecedented pandemic, Pennsylvania Governor Tom Wolf determined on March constituted threat imminent disaster health citi ens Commonwealth Pennsylvania, he issued statewide disaster declaration. Council ratified emer ency declaration thereby declarin county-wide emer ency on March 2020. July Secretary Health, Rachel Levine, M.D., issued certain orders uirin use face coverin indoor locations where public g enerally admitted and while en g g ed work, includin g at restaurants ( collectively, “ Universal Face Coverin Order ” ). Secretary of Health also issued order uired restaurants limit occupancy to 5% stated fire code ma imum occupancy for indoor dinin limit occupancy at discrete indoor events atherin 5 persons ( “ Miti g ation Order ” and collectively with Universal Face Coverin Order, “ Control Measures Orders ” ). Miti ation staff Order also counted towards [4]
occupancy limits, uired physical distancin maskin , other miti ation measures protect workers patrons.
It has been represented Miti ation Order contains various provisions, includin command that: “ All local officials currently involved or able involved Commonwealth enforcement efforts called upon enforce these critical miti measures. Motion Relief From Automatic Stay ( Motion ” ) at ¶ 17.
It been represented Health is statutorily char ed laws relatin public health, as well food environmental safety, within County. ¶ citin g Local Law Administration Law, P.S. §§ 12001-12029). Similarly, it has been averred the County Health Department is statutorily directed to, amon g other thin s, ecute the rules and ulations of the State Department Health and other departments, boards, commissions the State overnment. Motion at ¶ 5 ( citin g P.S. § a)). County Health Department additionally has the primary responsibility the prevention and control communicable and non-communicable diseases heny County. Motion at para 6 ( citin g 35 P.S. § 5 21. 3( a)).
Sub judice uncontested innin g sometime prior commencement instant case and continuin g throu h date Memorandum Opinion, Debtor has violated and continues violate) Covid-19 Control Orders. For ample, public facin employees of Debtor have been observed not wearin face masks and patrons have been observed bein admitted into Debtor ’ s restaurant and bar area wearin g masks. ¶¶ Debtor ’ s Response, ECF No. at ¶¶ 20. It has been alle ed Debtor honorin g physical distancin other uirements set forth Measure Orders.
Given alle ed violations, County Health Department suspended Debtor operatin permit Au ust ordered Debtor ’ s facility to close, continued i nore. Given failure adhere directives, Health Department commenced a civil enforcement action a g ainst the in the Court Common Pleas g County, GD-20-9809. No. This [5] action was filed on September 2020, was pendin when filed the instant bankruptcy case on October 2020.
Given pendin bankruptcy, Department re q uests that automatic stay be lifted so that it may prosecute its action a ainst Debtor. Upon review lan g ua g pertinent statute, the circumstances case, this concludes that Health motion has merit should be ranted. mere fact that a debtor filed bankruptcy protection does not obviate uirement a debtor abide applicable law. Con ress has reco ni ed as much when passed § b), which states that:
. . . debtor in possession, shall mana operate the property in his possession such trustee, receiver or mana er accordin uirements valid laws State in such property situated, in same manner owner possessor thereof would bound do if possession thereof. observes automatic stay bankruptcy shield sword desi ned afford party liti advanta e. While automatic stay desi ned afford honest but unfortunate debtor with respite from creditor collection activities, e x tent or reach automatic stay not absolute. When Con g ress enacted Bankruptcy Code it was well aware that: stay provision [ § 36 ( a) ] was particularly
vulnerable abuse by debtors improperly seekin g refu g e under stay an effort frustrate necessary g overnmental functions. To combat risk bankruptcy court would become sanctuary for [ wron g doers ] Con g ress enacted police re g ulatory power e x ception automatic stay.
U.S. v. Nicolet, F.2d (3 d Cir. 1988) ( citin g Commodity Futures th Tradin Comm ’ n Co Petro Mkt g . Group, Inc., F.2d 3 ( Cir. ). Accordin g ly, Con g ress wrote limitation provisions into Bankruptcy Code. These limitin provisions reflect Con ress ’ s intention automatic stay does provide debtor carte blanche cuse avoid health safety re ulations. Section b) ( Bankruptcy Code provides as much, statute pressly provides automatic stay does apply to: commencement or continuation action or
proceedin by overnmental unit . . . enforce such overnmental unit or or ani z ation ’ s police and ulatory power, includin a ud ment other than money j ud ment, obtained an action or proceedin overnmental unit enforce such g overnmental unit or ani police or ulatory power. See § 36 2 ( b) ( 4). As the Third Circuit of Appeals wrote: This e x ception discoura es debtors from submittin g bankruptcy petitions either primarily or solely for purpose of evadin g impendin g g overnmental efforts to invoke the g overnmental police powers to en oin or deter on oin g debtor conduct would seriously threaten public safety welfare . . . rd In re Nortel Networks, Inc., 66 F. d (3 Cir. (q uotin In re
st McMullen Sevi ny ( In re McMullen), F. d 3 3 24-2 5 ( 1 Cir. 2004)).
Application this law to facts of this case reveals much of dispute about law. reaches this conclusion because Debtor has contested ( a) Alle heny County is overnmental unit havin standin g under section 36 b) ( 4), ( b) e tent Covid-19 Control Measure Orders valid, enforcement them proper e ercise police ulatory power Department, c) purpose County Health action protect public health safety citi ens as opposed bein an action primarily seekin protect overnmental pecuniary interest such collectin debt. Nortel Networks, F. d 7-42.
Rather, challen Relief From Automatic Stay, overt challen le ality constitutionality Covid-19 Control Measure Orders. essence, defense motion essentially uest declare Orders un- constitutional therefore deny for Relief From Automatic Stay because it is ultra vires . The Court, however, declines accept s invitation insert itself into fray re g ardin g ultimate merits of Covid-19 Orders. The Court renders this decision a couple of reasons.
First, nothin section 36 ( b) ( 4) police or re g ulatory power e x ception automatic stay conditions its application upon this Court makin atekeeper determination whether e x ercise of police or re g ulatory power proper in first instance. plain lan g ua g e of U.S.C. § 36 ( b) ( 4) even su gg ests otherwise when e x cepts from automatic stay any “ commencement ” or “ continuation ” le al action overnmental entity. use words “ commencement continuation ” demonstrates that e ception includes liti far from final ad j udication. It reflects fact that parties are left their relative non-bankruptcy law claims defenses each which decided appropriate court competent j urisdiction).
Second, viewpoint consistent Supreme precedent. Almost three decades o Supreme re ected ar ument courts applyin § 36 b) ( must first decide whether proposed ercise police or ulatory power " le itimate, " findin such " broad readin ... would uire courts scrutini validity of every administrative action brou ht ainst bankrupt entity. " Bd. Governors Fed. Reserve Sys. MCorp Fin., Inc., U.S. S.Ct. 9, 6 L.Ed.2d 35 ( 1991). Court held that "[ s ] uch a readin is problematic, both because it conflicts broad discretion Con ress has e x pressly g ranted many administrative entities and because it is inconsistent with limited authority Con ress has vested in bankruptcy courts. " Id. Third, section ( b) ( 4) ’ terms are plain unambi uous this Court powerless re-write them add atekeeper function that Debtor is q uestin . United Supreme Court instructed that: interpretin statute a court should always turn first one, cardinal canon before all others. We have stated time ain courts must presume a le islature says statute what it means means in statute what says there. When words a statute unambi uous, then, this first canon also last: j udicial q uiry complete. Conn. Nat l Bank v. Germain, U.S. - ( internal citations and q uotation marks omitted).
Fourth, e tent this Court has eneral e q uitable power under 11 § 5( a) entertain q uest, outer boundaries this e q uitable power Bankruptcy Code itself. Here States Supreme instructed whatever e uitable powers remain courts must can only ercised within confines Bankruptcy Code. ” Norwest Bank Worthin ton Ahlers, 5 U.S. 1988). Fifth, even if possesses uitable powers su gg ests, substantial q uestion uncertainty remains respect to constitutional challen Covid-19 Measure Orders. It true that in of Butler v. Wolf, Civil Action No. 2:20-cv- 6 77, 2020 WL 55 10 6 90 ( W.D. Pa. Sept. 14, 2020) District held that certain Covid-19 lockdown restrictions in violated federal constitutional principles. decision, however, did address all elements of Covid-19 Control Orders, such uirement face coverin s. decision Butler v. Wolf presently on appeal, Third Circuit Appeals stayed trial court j ud ment. Butler v. Governor of rd Pennsylvania, No. 20-29 WL 5 3 9 3 (3 Cir. October 1, 2020).
Subse uent Butler v. Wolf, other federal courts cases involvin g restaurants bars have called decision District into q uestion. These cases include AJE Enter. LLC v. Justice, Civil Action No. 1:20-CV-229, WL N.D. W.Va. Oct. M. Rae, Inc. v. Wolf, supra. These courts hold that constitutional challen es posed plaintiff in those cases do have likelihood success. reachin such conclusion, these courts appear conclude state miti ation efforts curtail spread Covid-19 are sub ect “ rational basis review. Utili le al framework, courts presume state miti efforts constitutional, makin incumbent upon plaintiffs ne ate every conceivable basis which mi ht support it. ’” AJE Enter. LLC Justice, WL * (q uotin g Armour v. City Indianapolis, 566 U.S. 6 7 3 , 6 81 ( 2012)).
Not to be lost in the myriad case-law emer in g durin g the Covid-19 pandemic are the words Chief Justice John Roberts, who wrote the followin g in his concurrin g opinion South Bay United Pentecostal Church v. Newsom, 140 S.Ct. 1 6 1 3 ( 2020): precise q uestion when restrictions on particular
social activities should be lifted durin the pandemic is dynamic and fact-intensive matter sub j ect reasonable disa reement. Our Constitution principally entrusts “[ t ] he safety health people ” to politically accountable officials “ to uard protect. ” Jacobson v. Massachusetts,197 U.S. 11 , 3 8, 2 5 S.Ct. 35 8, 49 L.Ed. 6 4 3 ( 190 5 ). When those officials “ undertake [ ] act areas frau ht with medical scientific uncertainties, ” their latitude “ must be especially broad. Marshall v. States,414 U.S. 427 ,94 S.Ct. 700 , 3 8 L.Ed.2d 6 18 1974).
Where those broad limits not e x ceeded, they should
not sub ect second- uessin by “ unelected
federal j udiciary, ” lacks back round,
competence, e pertise assess public health is
accountable people. See Garcia San Antonio
Metropolitan Transit Authority,
recitin case-law set forth above, this undertakin an haustive analysis constitutional issues presented Debtor s challen Orders. merely pointin g out fact case hardly proverbial slam-dunk. ” Indeed, renderin decision, sympathetic fact s business ( like lots businesses throu hout the United States) suffered because the pandemic. Court reco ni es that the police power Commonwealth is not absolute. As one court wrote: While the law may take periodic naps durin pandemic, we will not let it sleep throu h one. Maryville th Baptist Church, Inc. Beshear, F. d 5 (6 Cir. 2020).
essence, iven the fact that the Debtor ob j ection the Control Orders does lend itself obvious rulin in Debtor favor, discretion it better leave determination these issues to court competent j urisdiction will ultimately preside over dispute. This conclusion does pre j udice Debtor, because Debtor free defend itself raise its constitutional defenses in those proceedin s. In addition, Debtor currently plaintiff in civil ri hts case ainst County States District for Western District filed No. 2:20-cv-014 4-RJC. Nothin prevents from askin United District Jud case for leave court amend complaint pursue unctive relief tent believes can state prove claim same.
For reasons set forth above, order shall entered rants Relief From Automatic Stay filed Department. ___________________________________ ______________________ ______________________________________ Date: January (cid:20)
The Honorable Jeffery A. Deller Honorable Jeffery A. Deller Bankruptcy Jud e cc: James R. Cooney, Es ., counsel Debtor
Viyalakshmi Patel, Es ., counsel heny FILED
1/7/21 9:57 am CLERK U.S. BANKRUPTCY (cid:3) COURT - (cid:58)(cid:39)(cid:51)(cid:36)
Notes
[1] See CDC COVID Data Tracker, Centers for Disease Control and Prevention, http://covid.cdc.gov/covid-data-tracker/#cases_casesper100klast7days (last visited Jan. 6, 2021).
[2] See COVID-19 Data for Pennsylvania: COVID-19 Dashboard, Pennsylvania Department of Health, https://www.health.pa.gov/topics/disease/coronavirus/Pages/Cases.aspx (last visited Jan. 6. 2021).
[3] COVID-19, Allegheny County, https://www.alleghenycounty.us/Health- Department/Resources/COVID-19/COVID-19.aspx (last visited Jan. 6. 2021).
[00031192]
[4] The maximum capacity component of the Mitigation Order has been adjusted from time to time by the Commonwealth of Pennsylvania depending upon the surge or anticipated surge of Covid-19 cases. Because this Memorandum Opinion only addresses whether the County Health Department is excepted from the automatic stay pursuant to 11 U.S.C. § 362(b)(4), the modifications to the Mitigation Order and related items are not germane to the outcome of the Motion for Relief From Automatic Stay.
[00031192]
[5] The civil enforcement action was removed to this Court, and the County Health Department has filed a motion asking that the matter be remanded. Since the action properly belongs before the Court of Common Pleas of Allegheny County, an order shall be entered remanding the matter to the state court for adjudication.
[00031192]