John Weary, Jr. v. Stephanie Poteat ( 2015 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 15a0662n.06
Case No. 15-5159
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Sep 30, 2015
JOHN F. WEARY, JR., )
DEBORAH S. HUNT, Clerk
)
Creditor-Appellant, )
) ON APPEAL FROM THE
v. ) UNITED STATES DISTRICT
) COURT FOR THE EASTERN
STEPHANIE RENEE POTEAT, ) DISTRICT OF TENNESSEE
)
Debtor-Appellee. )
) MEMORANDUM
) OPINION
BEFORE: MERRITT, McKEAGUE and WHITE, Circuit Judges.
McKEAGUE, Circuit Judge. This is an appeal from a district court judgment affirming
the bankruptcy court’s order finding creditor John F. Weary, Jr. in contempt for violating the
automatic bankruptcy stay and awarding debtor Stephanie Poteat actual and punitive damages.
On appeal, Weary contends the bankruptcy court erred by failing to recognize that his actions
came within the criminal prosecution exception to the automatic stay. Weary’s arguments are
unavailing. We affirm.
I
Appellant John F. Weary, Jr., was in a landlord-tenant relationship with Stephanie Poteat.
She defaulted in her rent payments and moved out of the rental property in Hendersonville,
Tennessee in May 2012. In January 2013, Weary sent a letter to Poteat’s parents’ address raising
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Weary v. Poteat
the possibility of a criminal prosecution unless Poteat delivered to him a cashier’s check for
$13,000. Weary filed a civil action against Poteat in Tennessee state court in March 2013,
claiming $24,999.99 in damages. A month later, Poteat filed a Chapter 7 bankruptcy petition.
After Weary received notice of the bankruptcy filing and the accompanying automatic stay under
11 U.S.C. § 362(a) in May 2013, he sent letters to both Poteat’s bankruptcy attorney and Poteat’s
mother, who had served as a reference when her daughter entered into the lease agreement. The
letters, quoted at length in the district court’s opinion, acknowledged that Weary could no longer
pursue remedies in the civil action, but expressed his intention to pursue criminal charges against
Poteat which, the letters insisted, would turn out to be far more costly for her.
In response, Poteat moved the bankruptcy court to hold Weary in contempt for violating
the automatic stay. The bankruptcy court conducted a hearing on the motion in December 2013,
receiving testimony from Weary, Poteat, and Poteat’s mother before issuing its ruling from the
bench. The court noted that the automatic stay prohibits creditors from engaging in “any act to
collect, assess, or recover a claim against the debtor that arose before the commencement of the
case.” R. 1-36, Bench Opinion Tr. at 8, Page ID 357 (quoting 11 U.S.C. § 362(a)(6)). The court
noted that the stay is designed to give debtors “a breathing spell from collection efforts,” id.(quoting In re Printup, 264 B.R. 169, 173 (Bankr. E.D. Tenn. 2001)), and although it does not
prohibit all communications from a creditor to a debtor, a stay violation is made out by actions
that are coercive or harassing in nature. Id. at 11, Page ID 360. The bankruptcy court found
“that there was no purpose to be served by [Weary’s] sending the letters . . . other than to
threaten, harass and intimidate the Debtor in an effort to coerce her into paying him.” Id. at 12,
Page ID 361. The court further found that Weary acted “willfully,” i.e., with knowledge of the
bankruptcy stay. Id. at 10–11, Page ID 359–60.
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In defense of his actions, Weary, through counsel, invoked 11 U.S.C. § 362(b)(1), which
excepts from the operation of the automatic stay “the commencement or continuation of a
criminal action or proceeding against the debtor.” Weary thus argued that his letters,
communicating his intent to pursue criminal prosecution, came within the exception. The
bankruptcy court acknowledged the criminal prosecution exception, but observed that Weary’s
letters were not in the nature of a criminal prosecution, but communicated a “threat” to pursue
prosecution. The court found that “the spirit and motivation behind those letters, irrespective of
Mr. Weary’s testimony to the contrary, clearly establish that those letters had only one purpose,
to harass and coerce the Debtor into paying Mr. Weary’s claim.” R. 1-36, Bench Opinion Tr. at
13, Page ID 362.
Having found a willful violation of the stay, the bankruptcy court recognized that Poteat
was entitled to an award of her actual damages, including costs and attorneys’ fees, and that
assessment of punitive damages is allowable “in appropriate circumstances.” 11 U.S.C.
§ 362(k)(1). The bankruptcy court considered various factors, including Weary’s sophistication,
ability to pay, and demeanor, which the court characterized as reflecting open defiance of the
stay. Remarking that “[t]his, frankly, is the most egregious automatic stay case that I’ve heard
since I’ve been on the bench and I’ve been on the bench a long time,” the court imposed punitive
damages in the amount of $7500. R. 1-36, Bench Opinion at 15–16, Page ID 364–65.
On appeal to the district court, Weary asserted the same legal arguments that he raises
here. Weary did not challenge the bankruptcy court’s fact findings or its exercise of discretion in
imposing punitive damages. His appeal was limited to claimed legal error: that the bankruptcy
court erroneously applied an “expanded interpretation” of the § 362(b)(1) criminal prosecution
exception. Weary argued that the bankruptcy court erred by considering the purpose for which
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Weary intended to pursue criminal charges against Poteat. The district court acknowledged that
there is a split of authority on whether a party’s motivation for pursuing criminal prosecution is
relevant to determining the applicability of the exception. The court correctly concluded,
however, that the split of authority was immaterial to the bankruptcy court’s ruling. The court
explained that the bankruptcy court did not hold Weary outside the protection of the exception
because his intention to pursue criminal charges was motivated by desire to collect the debt owed
him, but rather because Weary’s letters, which were not in furtherance of any criminal
prosecution,1 were a thinly veiled attempt to coerce payment of the debt, violating Poteat’s
“breathing spell” from collection efforts.
The district court also rejected Weary’s argument that punishing him for communicating
his intent to pursue criminal charges had an impermissible chilling effect on his First
Amendment right to petition for redress of grievances. The court correctly explained that the
automatic stay does not restrain Weary’s freedom to pursue criminal charges with the local
governmental authorities, but it does restrain his freedom, as a creditor, to communicate a threat
to the debtor, based on the possibility of criminal prosecution, in order to induce payment:
In this case, appellant was never prohibited from filing a police report,
speaking with prosecutors, or otherwise petitioning the government to commence
a criminal action against appellee, and the bankruptcy court’s sanctions did not
punish him for such conduct. Rather, appellant was punished for engaging in
prohibited acts to collect on appellee’s debt. Accordingly, appellant’s First
Amendment right to petition the government for redress of grievances was not
violated in this case.
R. 11, Opinion at 12, Page ID 435.
1
In fact, no criminal prosecution was then or ever commenced or continued.
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II
Inasmuch as Weary’s claims on appeal present purely questions of law, we review de
novo. In re Global Technovations, Inc., 694 F.3d 705, 714–15 (6th Cir. 2012). On de novo
review of the bankruptcy court’s ruling, as affirmed by the district court, we find no error.
Weary has presented no argument on appeal that is not adequately and correctly resolved by the
district court rulings.
The rulings may be succinctly summarized as follows. First, the bankruptcy court found
that the purpose of Weary’s offending letters was to coerce payment of the debt. Weary has not
challenged this finding on appeal, only its materiality.
Second, the bankruptcy court found that Weary sent the letters with knowledge of the
automatic bankruptcy stay. Weary has not challenged this finding either.
Third, the bankruptcy court held the criminal prosecution exception inapplicable because
Weary’s letters to Poteat’s lawyer and mother were not a “commencement or continuation of a
criminal action or proceeding.” Weary does not argue otherwise; rather, he contends his letters
were expressions of intent to exercise his right to pursue charges that could result in
commencement of a criminal action. Yet, because the communications indisputably did not
advance criminal prosecution and, therefore, do not come within the plain language of the
exception; and because the communications were found to be a threat whose purpose was to
induce payment, a finding of fact Weary has not directly challenged, they clearly ran afoul of the
plain language of the automatic stay, prohibiting “any act to collect, assess, or recover a claim
against the debtor that arose before the commencement of the [bankruptcy] case.” 11 U.S.C.
§ 362(a)(6). Hence, the bankruptcy court did not need to reach Weary’s main argument, i.e., that
the criminal prosecution exception should be applied irrespective of the purpose for the
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prosecution. Here, there simply is no act in furtherance of “commencement or continuation of a
criminal action or proceeding” whose purpose could be considered. Weary’s argument that the
bankruptcy court improperly considered the purpose for his letters in holding the criminal
prosecution exception inapplicable is mere sophistry.
Fourth, the bankruptcy court found that the circumstances of this case—i.e., the
willfulness of the violation and Weary’s manifest defiance of the stay—justified award of
punitive damages in addition to actual damages. Again, Weary has not challenged these
findings.
Fifth, Weary’s argument that the bankruptcy court’s order impermissibly chills his First
Amendment rights was rejected by the district court.2 Weary cites no authority for the
proposition that enforcing the automatic stay by punishing him for “declaring his intention” (i.e.,
threatening) to pursue charges impermissibly chills his right to petition for redress. Nor has he
explained how his right to legitimately pursue charges with local prosecutorial authorities was or
is in any way hindered by the bankruptcy court’s order.
Accordingly, on de novo consideration of Weary’s appellate arguments, we find no error
in the district court’s affirmance of the bankruptcy court’s order. An additional opinion
reiterating the analysis contained in the lower court rulings would be duplicative and is
unnecessary. We therefore AFFIRM on the basis of the lower court opinions.
2
That the bankruptcy court did not allude to the argument in its ruling comes as no surprise. The argument
was not asserted in Weary’s brief and was mentioned by Weary’s counsel during the contempt hearing only in one
sentence . . . in response to a question from the court. The bankruptcy judge asked counsel why it was “necessary”
for Weary to broadcast his intention to pursue criminal charges to Poteat’s attorney and mother. Weary’s counsel
answered, “I can’t answer why it would be necessary, but . . . prohibiting such communication . . . would amount to
a chilling effect on freedom of speech.” R. 1-35, Hearing Tr. at 79, Page ID 343. Although the argument was only
perfunctorily asserted and could have been deemed forfeited, see White Oak Prop. Development, LLC v. Washington
Twp., Ohio, 606 F.3d 842, 850 (6th Cir. 2010), the district court addressed the claim and found it to be without
merit.
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