Lockyer v. Mirant Corp. ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BILL LOCKYER, Attorney General of 
the State of California; THE
STATE OF CALIFORNIA, ex rel,
Plaintiffs-Appellants,
and
DEPARTMENT OF WATER RESOURCES,
Plaintiff, No. 04-15024
v.  D.C. No.
CV-02-01787-VRW
MIRANT CORPORATION; MIRANT
AMERICAS, INC.; MIRANT OPINION
CALIFORNIA INVESTMENTS, INC.;
MIRANT CALIFORNIA, L.L.C.;
MIRANT AMERICAS ENERGY
MARKETING LP; MIRANT DELTA,
L.L.C.; MIRANT POTRERO, L.L.C.,
Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of California
Vaughn R. Walker, District Judge, Presiding
Argued and Submitted
September 14, 2004—San Francisco, California
Filed February 10, 2005
Before: William A. Fletcher, Raymond C. Fisher,
Circuit Judges, and B. Lynn Winmill,* District Judge.
*The Honorable B. Lynn Winmill, Chief United States District Judge,
District of Idaho, sitting by designation.
1645
1646 LOCKYER v. MIRANT CORP.
Opinion by Judge William A. Fletcher
LOCKYER v. MIRANT CORP. 1649
COUNSEL
Harvey I. Saferstein and Nada I. Shamonki, Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, Santa Monica, California;
Damon M. Connolly, Thomas Greene, Catherine A. Jackson,
and Tamar Pachter (argued), Office of the California Attorney
General, San Francisco, California, for the plaintiffs-
appellants.
Bryan A. Merryman, Robert P. Pongetti, and John A. Stur-
geon, White & Case, Los Angeles, California; Robert B.
Pringle (argued), Thelen Reid & Priest, San Francisco, Cali-
fornia, for the defendants-appellees.
OPINION
W. FLETCHER, Circuit Judge:
The Attorney General of California, Bill Lockyer, sues
under section 16 of the Clayton Act, 15 U.S.C. § 26, seeking
1650 LOCKYER v. MIRANT CORP.
divestiture by the Mirant defendants (collectively, “Mirant”)
of three electrical generating plants. The district court granted
a stay pursuant to Landis v. North American Co., 299 U.S.
248 (1936), pending the resolution of Mirant’s Chapter 11
petitions in a bankruptcy court in Texas. We hold that the dis-
trict court had jurisdiction to determine whether the automatic
stay of the Texas bankruptcy court applied to the Attorney
General’s suit, and that the Attorney General’s suit comes
within the “police or regulatory power” exception of 11
U.S.C. § 362(b)(4) to the automatic stay. We further hold, in
the circumstances of this case, that a Landis stay is not justi-
fied. Accordingly, we vacate the stay and remand to allow the
Attorney General’s suit to proceed on the merits.
I. Background
In 1996, California passed Assembly Bill 1890, which
required large investor-owned utilities to divest certain elec-
trical generating plants as part of the state’s deregulation of its
electrical generation industry. Pursuant to this mandatory
divestiture, Pacific Gas & Electric in 1999 sold its Pittsburg
and Contra Costa Power Plants in Contra Costa County, as
well as its Potrero Power Plant in San Francisco, to Mirant
Delta, LLC and Mirant Potrero, LLC. The Attorney General
alleges that the combined generating capacity of these three
plants amounts to approximately 44 percent of the northern
California wholesale spot electricity market.
On April 15, 2002, the Attorney General sued Mirant in
federal district court, alleging that Mirant’s ownership of the
plants gives it the incentive and ability to exercise market
power in violation of section 7 of the Clayton Act. See 15
U.S.C. § 18. The Attorney General sought equitable relief and
damages under both the Clayton Act and California Business
& Professions Code § 17204. The district court dismissed the
claims for violation of California Business & Professions
Code § 17204 and for damages under the Clayton Act, but
found that the allegations in the complaint were sufficient to
LOCKYER v. MIRANT CORP. 1651
state a claim for injunctive relief under section 16 of the Clay-
ton Act. See 15 U.S.C. § 26.
On July 14 and July 15, 2003, Mirant filed voluntary peti-
tions to reorganize under Chapter 11 in the United States
Bankruptcy Court for the Northern District of Texas. Subse-
quently, Mirant moved in the bankruptcy court for an order
modifying the automatic stay to allow three suits, including
two brought by the Attorney General (both separate from this
suit), to proceed in the Ninth Circuit, where they were then
pending on appeal.1 The bankruptcy court granted the motion,
but did not determine whether the appeals were, in fact, sub-
ject to the automatic stay. Instead, it granted the motion and
modified the stay only “to the extent necessary and applica-
ble.”
On the same day that Mirant moved in the bankruptcy court
to allow the Ninth Circuit appeals to proceed, it also filed a
“Suggestion of Stay” in district court in this case, advising the
court to “take . . . notice that . . . actions taken in violation of
the [automatic] stay are void” and may result in the “imposi-
tion of sanctions by the Bankruptcy Court.” The “Suggestion
of Stay” did not explicitly argue that the Attorney General’s
Clayton Act suit was subject to the automatic stay, nor did it
request that the district court determine the automatic stay’s
applicability.
1
None of these suits was related to the present suit, although all
involved issues of energy regulation. The Attorney General’s two suits
concerned, respectively, Mirant’s sale of “ancillary services” (a type of
wholesale energy capacity), and the question of whether Mirant had prop-
erly filed its wholesale electricity rates with the Federal Energy Regula-
tory Commission. These cases were consolidated, and the Ninth Circuit
affirmed their dismissal on preemption grounds. See California v. Trans-
canada Power, 110 Fed. Appx. 839 (9th Cir. 2004) (unpublished disposi-
tion). The third lawsuit concerned allegations by the Public Utility District
of Snohomish County that Mirant and other entities manipulated whole-
sale energy markets. It was also dismissed. See Pub. Util. Dist. No. 1 v.
Dynegy Power Mktg., Inc., 384 F.3d 756 (9th Cir. 2004).
1652 LOCKYER v. MIRANT CORP.
The district court invited a noticed motion in which the par-
ties could present their positions on whether the automatic
stay was applicable. The Attorney General moved for a deter-
mination that the suit was exempt from the automatic stay
because it sought to enforce California’s “police or regulatory
power” within the meaning of 11 U.S.C. § 362(b)(4). Without
taking a position on the applicability of § 362(b)(4), Mirant
urged the district court to exercise its discretionary power to
stay the action. The district court declined to decide whether
the Attorney General’s suit came within § 362(b)(4). Citing
Mediterranean Enterprises, Inc. v. Ssangyong Corp., 708
F.2d 1458 (9th Cir. 1983), it granted the discretionary stay
requested by Mirant.
The court relied on three factors in granting the stay. First,
it found that its jurisdiction to determine the scope of the “po-
lice or regulatory power” exception under § 362(b)(4), and
hence the applicability of the automatic stay, was doubtful
under Celotex Corp. v. Edwards, 514 U.S. 300 (1995), and In
re Gruntz, 202 F.3d 1074 (9th Cir. 2000) (en banc). Second,
it found that the applicability of § 362(b)(4) raised unsettled
questions of law. Third, it found that the stay was “efficient
for [its] docket,” and that it was “the fair and practical course
for the parties.” The Attorney General timely appealed. We
now vacate and remand.
II. Our Jurisdiction to Review the Stay
Before considering the merits, we must first decide whether
we have jurisdiction under 28 U.S.C. § 1291 to review the
district court’s stay. We hold that we have jurisdiction over
the appeal because the order puts the Attorney General “effec-
tively out of court” within the meaning of Moses H. Cone
Memorial Hospital v. Mercury Construction Corp., 460 U.S.
1, 9 (1983), and Idlewild Bon Voyage Liquor Corp. v. Epstein,
370 U.S. 713, 715 n.2 (1962), and because the stay is an
appealable collateral order under Cohen v. Beneficial Indus-
trial Loan Corp., 337 U.S. 541 (1949).
LOCKYER v. MIRANT CORP. 1653
A. “Effectively Out of Court”
We first hold that the stay order in the district court is final
under what has come to be known as the Moses H. Cone doc-
trine. In Moses H. Cone, a hospital had sued in state court
seeking a declaration that a contract to which it was a party
did not confer a right to arbitration. The other party to the
contract then filed suit in federal district court seeking an
order compelling arbitration. The hospital successfully moved
for a stay in federal court pending resolution of the arbitration
question in state court. Relying on its earlier decision in
Idlewild, the Supreme Court held that the district court’s stay
order was appealable under § 1291. As a result of the stay,
there would be “no further litigation in the federal forum” and
the state’s judgment on the arbitration issue would be res judi-
cata, leaving the contractor “effectively out of court.” Moses
H. Cone, 460 U.S. at 9-10.
In Idlewild, plaintiff Idlewild Liquor had sought a declara-
tory judgment in federal district court that the New York
Alcoholic Beverage Law was unconstitutional. Rather than
convene a three-judge district court, the one-judge court
stayed the action under Railroad Commission v. Pullman Co.,
312 U.S. 496 (1941), to give the New York state courts the
opportunity to address the issue. The Supreme Court held that
the stay order was appealable, even though it was entirely
possible that Idlewild Liquor would be able to return to fed-
eral district court after the state court dealt with state-law
questions. Moses H. Cone, 460 U.S. at 10. Even in that cir-
cumstance, where the case might well come back to federal
district court, Idlewild Liquor was “effectively out of court”
for purposes of appealability of the stay order. Idlewild, 370
U.S. at 715 n.2.
The stay in this case is much like the stay in Idlewild. In
dealing with Mirant’s Chapter 11 petitions, the bankruptcy
court may well order divestiture of the three power plants as
part of a reorganization plan under Chapter 11. If Mirant’s
1654 LOCKYER v. MIRANT CORP.
Chapter 11 proceeding in the bankruptcy court results in
divestiture of the plants, the Attorney General’s Clayton Act
case in the district court will be mooted, just as Idlewild’s fed-
eral constitutional claims in the district court would have been
mooted if the New York state courts had granted relief on
state-law grounds. See Terra Nova Ins. Co. v. 900 Bar, Inc.,
887 F.2d 1213, 1219-21 (3d Cir. 1989) (concluding that the
danger that a stay would render a claim moot was equivalent
to res judicata for the purposes of applying the Moses H. Cone
test).
Because the bankruptcy court has not yet determined
whether Mirant’s plants will be divested as a result of the
reorganization, we cannot say with certainty that the Attorney
General’s district court suit will be moot. However, as
Idlewild establishes, absolute certainty is not required in order
to put a party “effectively out of court” within the meaning of
the Moses H. Cone doctrine. See United States v. General
Dynamics Corp., 828 F.2d 1356, 1361-62 (9th Cir. 1987)
(where a possibility existed that application of the collateral
estoppel doctrine might result in dismissal, the stay was
appealable under Moses H. Cone). Although the mooting of
Attorney General Lockyer’s Clayton Act claim is not inevita-
ble, both parties and the district court appear to view it as a
substantial possibility. Indeed, the district court explicitly
anticipated the possibility of mootness, citing the potential
waste of “significant judicial and party resources” if the bank-
ruptcy proceedings mooted the plaintiff’s claims before the
district court rendered judgment. This case is thus distinguish-
able from situations in which the district court clearly foresees
and intends that proceedings will resume after the stay has
expired. See Cofab, Inc. v. Philadelphia Joint Bd., 141 F.3d
105, 109 (3d Cir. 1998) (Moses H. Cone did not apply where
district court had no intention to “ ‘deep six’ the suit”).
[1] If the Attorney General’s Clayton Act claim comes
within the § 362(b)(4) exception to the automatic stay, no
legal barrier exists, apart from the district court’s stay order
LOCKYER v. MIRANT CORP. 1655
itself, to his pursuit of his suit in the district court in Califor-
nia. In such circumstances, the stay puts him “effectively out
of court,” and we have appellate jurisdiction to determine the
propriety of the stay.
B. Collateral Order
[2] Even if the stay did not constitute a final order under
Moses H. Cone, we would have jurisdiction under Cohen v.
Beneficial Industrial Loan Corp., 337 U.S. 541 (1949), under
which certain collateral orders of the district court may be
immediately appealed. To be included among “the small class
of decisions excepted from the final-judgment rule by
Cohen,” an order “must [1] conclusively determine the dis-
puted question, [2] resolve an important issue completely sep-
arate from the merits of the action, and [3] be effectively
unreviewable on appeal from a final judgment.” Coopers &
Lybrand v. Livesay, 437 U.S. 463, 468 (1978) (internal quota-
tion marks omitted; bracketed numbers added).
In Moses H. Cone, the Supreme Court held in the alterna-
tive that the district court’s stay was an appealable collateral
order under Cohen. 460 U.S. at 11-12. The Court concluded
that the first criterion was satisfied because, although the stay
was technically open to reconsideration, “there is no basis to
suppose that the District Judge contemplated any reconsidera-
tion of the decision to defer to the parallel state-court suit.” Id.
at 12-13. It also concluded that the second and third Cohen
criteria were met, since “[a]n order that amounts to a refusal
to adjudicate the merits plainly presents an important issue
separate from the merits” and, because of the possibility of res
judicata, “this order would be entirely unreviewable if not
appealed now.” Id. at 12. See also General Dynamics, 828
F.2d at 1360 n.4 (“Where a district court enters a stay that can
effectively end the litigation in that court, the court’s ability
to lift the stay if it chooses would seem to be irrelevant.”)
[3] We hold that the Cohen criteria are also satisfied here.
The first criterion is satisfied because, even though the stay
1656 LOCKYER v. MIRANT CORP.
order could theoretically be modified, the district court did not
impose a time limit on the stay or note circumstances that
might result in its modification. See Moses H. Cone, 460 U.S.
at 13 (stay order was conclusive where there was “no basis to
suppose that the District Judge contemplated any reconsidera-
tion of his decision to defer to the parallel . . . suit”); Burns
v. Watler, 931 F.2d 140, 144 (1st Cir. 1991) (even where stay
was nominally modifiable, there was “no indication in the
record” that the district court intended to take further action).
The second criterion is satisfied because the district court’s
central justification for issuing the stay was the desirability of
avoiding two analytically distinct determinations: the applica-
bility of the “police or regulatory power” exception to
§ 362(b)(4) and the legality of Mirant’s ownership of the three
power plants. Finally, the third criterion is satisfied. Either the
bankruptcy proceedings will moot the Clayton Act claim, in
which case the district court suit will be dismissed; or the
bankruptcy proceedings will not moot the Clayton Act claim,
in which case the district court will lift the stay on its own and
proceed with the suit. In either event, the propriety of the stay
will be unreviewable on appeal. See Marchetti v. Bitterolf,
968 F.2d 963, 966 (9th Cir. 1992) (unreviewability factor was
met where it was likely that case would be mooted). We
therefore conclude that the stay is reviewable under Cohen as
a collateral order.
C. Aggrieved by the Stay
Mirant argues that, even if the stay order is final under
Moses H. Cone or a reviewable collateral order under Cohen,
the Attorney General cannot appeal because he is not “ag-
grieved” by the stay. In Deposit Guaranty National Bank v.
Roper, 445 U.S. 326, 333 (1980), the Court held that “[a]
party who receives all that he has sought generally is not
aggrieved by the judgment affording the relief and cannot
appeal from it.” (Citations omitted.) Mirant contends that the
Attorney General is not aggrieved because either he will
receive the divestiture remedy he seeks from the bankruptcy
LOCKYER v. MIRANT CORP. 1657
court; or, if the bankruptcy court does not order divestiture
and the district court stay is lifted, he will be allowed to seek
divestiture in his Clayton Act litigation in the district court.
Mirant argues that the two outcomes — divestiture pursuant
to the bankruptcy proceedings and divestiture ordered by the
district court — are equivalent.
Mirant’s argument fails to recognize two things. First,
while it is possible that Mirant will eventually be ordered to
divest itself of the three power plants, the sequence of events
envisioned by Mirant may entail considerable delay. This is
particularly so if the bankruptcy court does not order divesti-
ture and the Attorney General must await the conclusion of
the bankruptcy proceedings before being allowed to resume
his Clayton Act suit in the district court. If Mirant’s owner-
ship of the three power plants in fact violates the Clayton Act,
northern California purchasers of electricity will have been
unnecessarily injured by the delay resulting from the stay.
Second, Mirant’s argument fails to recognize that a divesti-
ture order to cure a Clayton Act violation is different from a
divestiture order entered pursuant to a bankruptcy reorganiza-
tion. The Clayton Act could possibly be raised as an issue in
the Texas bankruptcy proceeding, for any confirmable reorga-
nization plan must have been “proposed in good faith and not
by any means forbidden by law.” 11 U.S.C. § 1129(a)(3). See
also Pacific Gas & Electric Co. v. California, 350 F.3d 932(9th Cir. 2003) (addressing preemption of non-bankruptcy
laws under 11 U.S.C. §§ 1123(a)(5) and 1142(a)); In re Texas
Extrusion Corp., 844 F.2d 1142, 1157-58 (5th Cir. 1988)
(opponents to reorganization plan contended that the plan vio-
lated the federal antitrust laws; court declined to reach the
issue on the ground that the objection had been raised too
late). But there is no guarantee (or even likelihood) that the
bankruptcy court will consider the effect of the Clayton Act;
nor is there a guarantee, even if it does, that it will entertain
briefing or hold hearings, or that it will justify or explain the
reorganization plan in terms of the Clayton Act. If divestiture
1658 LOCKYER v. MIRANT CORP.
of the three power plants is ordered by the bankruptcy court
on some basis other than the Clayton Act, the Attorney Gen-
eral will not have received, in the relevant legal sense of the
term, “all that he has sought.” Roper, 445 U.S. at 333. That
the alleged Clayton Act violation by Mirant might inciden-
tally be cured in the course of the bankruptcy proceedings is
not equivalent to a binding legal determination by the district
court that Mirant violated the Clayton Act and a divestiture
order by that court. The difference is more than theoretical.
For example, without a binding decision on the merits of the
Attorney General’s Clayton Act claim, a single entity could
acquire the three plants from Mirant. The Attorney General
would then be required to bring another Clayton Act suit, now
against the new entity instead of Mirant.
[4] Regardless of how events ultimately transpire, the stay
order has deprived the Attorney General — at least temporar-
ily and perhaps permanently — of the legal remedy he seeks
against Mirant. He has thus been aggrieved within the mean-
ing of Roper, and we have jurisdiction over this appeal.
III. The District Court’s Landis Stay
We review a district court’s stay order for abuse of discre-
tion, but this standard is “somewhat less deferential” than the
abuse of discretion standard used in other contexts. Yong v.
INS, 208 F.3d 1116, 1119 (9th Cir. 2000); Intel Corp. v.
Advanced Micro Devices, Inc., 12 F.3d 908, 912 (9th Cir.
1993). A district court abuses its discretion if it “base[s] its
ruling on an erroneous view of the law or on a clearly errone-
ous assessment of the evidence.” Cooter & Gell v. Hartmarx
Corp., 496 U.S. 384, 405 (1990).
The district court gave three reasons for granting a Landis
stay. First, it believed that its jurisdiction to determine
whether the automatic stay applied to the suit before it was
questionable. Second, it believed that the “police or regulatory
power” exception to the automatic stay under 11 U.S.C.
LOCKYER v. MIRANT CORP. 1659
§ 362(b)(4) was also questionable. Third, in light of the fore-
going, it held that granting the stay was “efficient for [its]
docket and is the fair and practical course for the parties.” We
consider these reasons in turn.
A. Jurisdiction to Determine the Applicability
of the Automatic Stay
Relying on Celotex Corp. v. Edwards, 514 U.S. 300 (1995),
and In re Gruntz, 202 F.3d 1074 (9th Cir. 2000) (en banc), the
district court expressed concern that it did not have jurisdic-
tion to determine the applicability of the automatic stay. The
district court’s concern was unfounded.
In Celotex, the bankruptcy court issued a § 105 injunction
preventing plaintiffs who had won a district court suit against
the debtor from executing on a supersedeas bond that would
have satisfied their judgment. See 11 U.S.C. § 105(a). The
district court allowed plaintiffs to execute on the bond despite
the bankruptcy court’s § 105 injunction, on the ground that
the judgment had been affirmed on appeal and the bond had
become due before the bankruptcy filing. The decision of the
district court was appealed to the Fifth Circuit, which
affirmed. The Supreme Court reversed. Without deciding
whether the § 105 injunction was properly issued, the Court
held that the district court acted improperly in disregarding it.
If plaintiffs wanted relief from the injunction, wrote the
Court, they should have sought modification in the bank-
ruptcy court that issued the injunction. 514 U.S. at 313.
In Gruntz, Gruntz had twice been convicted in state court
of failure to pay child support. He filed for bankruptcy prior
to sentencing in the first criminal proceeding, and prior to the
institution of the second criminal proceeding. He brought an
adversary proceeding in bankruptcy court seeking a declara-
tion that the state criminal proceedings violated the automatic
stay. The bankruptcy court denied relief, holding that it was
collaterally estopped by the state court’s decision that the
1660 LOCKYER v. MIRANT CORP.
automatic stay did not apply. On appeal, we held that the state
court has the power to decide whether the automatic stay
applies to its proceedings. 202 F.3d at 1087 (“Thus, unless a
specific § 105 injunction applies, state trial courts need not
seek bankruptcy court approval before commencing criminal
proceedings.”). But a state court makes such a decision at its
peril, for the bankruptcy court is not precluded by the state
court’s decision. If the bankruptcy court later decides that the
state court was incorrect, the state court proceedings in viola-
tion of the stay are void. See, e.g., In re Schwartz, 954 F.2d
569 (9th Cir. 1992); In re Shamblin, 890 F.2d 123 (9th Cir.
1989). On the other hand, if the state court is correct in decid-
ing that the stay does not apply, the state court proceedings
are not void. Gruntz, 202 F.3d at 1087. We ultimately
affirmed the result reached by the bankruptcy court based on
our determination, independent of the state court’s decision,
that the state criminal proceedings were not within the scope
of the stay.
[5] Celotex and Gruntz both stand for familiar propositions
in bankruptcy law. Neither case casts doubt on a district
court’s ability to decide for itself whether proceedings pend-
ing before it are subject to an automatic stay. Celotex tells us
that a district court has no authority to modify or to disregard
a § 105 injunction. Only the bankruptcy court that issued the
injunction has the authority to modify the injunction, and until
the injunction is modified the district court is bound by it.
Gruntz tells us that a state court has the authority to decide
whether its proceeding is within the scope of the automatic
stay, but the state court’s holding is not entitled to preclusive
effect in the bankruptcy court.
[6] There is no reason why a federal court should have less
power than a state court to decide whether its proceeding
comes within the scope of the automatic stay. Indeed, there
are a number of cases, in this circuit and elsewhere, in which
a federal court has decided whether the automatic stay applies
to a proceeding pending before it. See, e.g., NLRB v. Conti-
LOCKYER v. MIRANT CORP. 1661
nental Hagen Corp., 932 F.2d 828 (9th Cir. 1991) (NLRB
enforcement proceeding in the court of appeals comes within
the § 362(b)(4) exception to the automatic stay); NLRB v.
Twin Cities Elec., 907 F.2d 108 (9th Cir. 1990) (same); Com-
modity Futures Trading Comm’n v. Co Petro Marketing
Group, Inc., 700 F.2d 1279 (9th Cir. 1983) (Commodities
Exchange Act proceeding in the district court comes within
the § 362(b)(5) exception to the automatic stay); Chao v. Hos-
pital Staffing Servs., Inc., 270 F.3d 374, 384-85 (6th Cir.
2001) (suit under the federal Fair Labor Standards Act in the
district court does not come within the § 362(b)(4) exception
to the automatic stay, but the district court has authority to
decide the applicability of the exception); NLRB v. Edward
Cooper Painting, Inc., 804 F.2d 934 (6th Cir. 1986) (NLRB
enforcement proceeding in the court of appeals comes within
the § 362(b)(4) exception to the automatic stay); Hunt v.
Bankers Trust Co., 799 F.2d 1060, 1069 (5th Cir. 1986)
(“ ‘Whether the stay applies to litigation otherwise within the
jurisdiction of a district court or court of appeals is an issue
of law within the competence of both the court within which
the litigation is pending . . . and the bankruptcy court.’ ” (cita-
tion omitted)); In re Baldwin-United Corp., 765 F.2d 343, 347
(2d Cir. 1985) (“The court in which the litigation claimed to
be stayed is pending has jurisdiction to determine not only its
own jurisdiction but also the more precise question whether
the proceeding pending before it is subject to the automatic
stay.”); SEC v. First Fin. Group of Texas, 645 F.2d 429 (5th
Cir. 1981) (civil enforcement action under the federal securi-
ties laws in the district court comes within the § 362(b)(4)
exception to the automatic stay). We are aware of no case
holding to the contrary.
[7] We therefore hold, in accordance with established law,
that a district court has jurisdiction to decide whether the
automatic stay applies to a proceeding pending before it, over
which it would otherwise have jurisdiction. Specifically, as
applied to this case, we hold that the district court has juris-
diction to decide whether the Attorney General’s section 16
1662 LOCKYER v. MIRANT CORP.
Clayton Act suit comes within the exception to the automatic
stay for “police or regulatory power” under § 362(b)(4).
B. Exception from the Automatic Stay under § 362(b)(4)
The applicability of the automatic stay, and the extent of
the “police or regulatory power” exception under § 362(b)(4),
are questions of law that we consider de novo. In re Hines,
198 B.R. 769 (9th Cir. BAP 1996), rev’d on other grounds by
147 F.3d 1185 (9th Cir. 1998) (whether an act falls within
statutory exception to the stay is reviewed de novo). The
record is sufficiently complete that we may decide the ques-
tion even though the district court did not. Chang v. United
States, 327 F.3d 911, 928 (9th Cir. 2003).
[8] Section 362(b)(4) provides that the filing of a bank-
ruptcy petition does not operate as an automatic stay “of the
commencement or continuation of an action or proceeding by
a governmental unit . . . to enforce such governmental unit’s
. . . police or regulatory power.” 11 U.S.C. § 362(b)(4). A
government unit need not affirmatively seek relief from the
automatic stay to initiate or continue an action subject to the
exemption. Edward Cooper Painting, 804 F.2d at 939. The
theory of the exception is that bankruptcy should not be “ ‘a
haven for wrongdoers.’ ” Universal Life Church, Inc. v.
United States (In re Universal Life Church), 128 F.3d 1294,
1297 (9th Cir. 1997) (citations omitted).
The “police or regulatory power” exception allows the
enforcement of laws affecting health, welfare, morals, and
safety despite the pendency of the bankruptcy proceeding.
The exception applies, for example, to suits to determine a
federal income tax exemption, see id.; to enforce federal labor
laws, see Twin Cities Electric, 907 F.2d at 109; to enforce
state bar disciplinary rules, see Wade v. State Bar of Arizona,
948 F.2d 1122 (9th Cir. 1991); to enforce federal employment
discrimination laws, see EEOC v. Hall’s Motor Transit Co.,
789 F.2d 1011 (3rd Cir. 1986); and to enforce state consumer
LOCKYER v. MIRANT CORP. 1663
protection laws, see In re First Alliance Mortgage, 263 B.R.
99 (B.A.P. 9th Cir. 2001).
Mirant did not argue in the district court that the Attorney
General’s Clayton Act suit fell outside the § 362(b)(4) excep-
tion. In its initial briefing before us, Mirant similarly did not
argue that the suit fell outside the exception, even though the
Attorney General had briefed the question. After oral argu-
ment, we asked the parties to submit supplemental briefing in
order to be sure that Mirant had been given a full opportunity
to address the question.
Mirant now makes two arguments to us. First, it argues that
the § 362(b)(4) exception does not apply because the statutory
reference to “such government unit’s police or regulatory
power” means that the government in question must be suing
in furtherance of its own police and regulatory power. Mirant
contends that the state Attorney General is not doing so in this
case because his only remaining claim is for injunctive relief
under section 16 of the federal Clayton Act, which authorizes
“[a]ny person, firm, corporation, or association” to seek
injunctive relief “against threatened loss or damage by a vio-
lation of the antitrust laws.” 15 U.S.C. § 26.
[9] Mirant suggests in its argument that a suit by a Califor-
nia official to enforce the federal Clayton Act would not be
a suit within its own authority, and that only a suit by the
United States Attorney to enforce the Clayton Act would
come within § 362(b)(4). This suggestion is without founda-
tion in the case law. A number of cases make clear that the
§ 362(b)(4) exception extends to a government’s enforcement
of laws enacted by other governments. See, e.g., City of New
York v. Exxon Corp., 932 F.2d 1020, 1024-25 (2d Cir. 1991)
(municipality enforcing federal environmental law); In re
Commonwealth Oil Refining Co., 805 F.2d 1175, 1186, 1188
& n. 5 (5th Cir. 1986) (United States enforcing Puerto Rico
law); New York v. Mirant New York, Inc., 300 B.R. 174, 178-
79 (S.D.N.Y. 2003) (state enforcing federal environmental
1664 LOCKYER v. MIRANT CORP.
law); Herman v. Brown, 160 B.R. 780, 781 (E.D. La. 1993)
(state enforcing federal racketeering law); People of the State
of Illinois v. Electrical Utilities, 41 B.R. 874, 876-77 (N.D.
Ill. 1984) (state enforcing federal environmental law); In re
Canarico Quarries, Inc., 466 F. Supp. 1333, 1334 (D. Puerto
Rico 1979) (commonwealth enforcing federal Clean Air Act);
In re Pincombe, 256 B.R. 774, 781-83 & n.3 (Bankr. N.D. Ill.
2000) (state enforcing federal employment discrimination
law); In re New York Trap Rock Corp., 153 B.R. 642, 643
(Bankr. S.D.N.Y. 1993) (county enforcing federal environ-
mental law).
Mirant argues explicitly that because section 16 of the
Clayton Act authorizes suits by private parties, a government
unit suing to enforce that section cannot be acting as a gov-
ernment within the meaning of § 362(b)(4). This argument is
also without foundation. While section 16 does authorize suits
by private entities, it also authorizes suits by state govern-
ments. See California v. Am. Stores Co., 495 U.S. 271, 275-
76 (1990) (upholding injunctive relief awarded to state in suit
brought under section 16 of the Clayton Act). When the
Attorney General seeks to enforce this law on behalf of the
citizens of California, he is acting within the police power of
the California government. His suit is authorized by the state,
is in furtherance of the state’s authority, and uses state
resources. We are aware of no authority, and Mirant cites
none, holding that a government suit that would otherwise be
within the “police or regulatory power” exception of
§ 362(b)(4) ceases to come within that exception whenever
the provision of law under which the government sues also
authorizes suits by private entities.
[10] Second, Mirant argues that the Attorney General’s suit
does not satisfy either of the two established tests for the “po-
lice or regulatory powers” exception of § 362(b)(4). The two
tests are the related, and somewhat overlapping, “pecuniary
purpose” and “public purpose” tests. A suit comes within the
exception of § 362(b)(4) if it satisfies either test. See Univer-
LOCKYER v. MIRANT CORP. 1665
sal Life Church, 128 F.3d at 1297 (“The question in this case
is whether [the government action] meets either test.”)
(emphasis added). We hold that the Attorney General’s Clay-
ton Act suit satisfies both tests.
[11] Under the “pecuniary purpose” test, “the court deter-
mines whether the [government] action relates primarily to
the protection of the government’s pecuniary interest in the
debtors’ property or to matters of public safety and health.”
Continental Hagen, 932 F.2d at 828 (internal quotation marks
and modifications omitted). See also Edward Cooper Paint-
ing, 804 F.2d at 942; In re State of Missouri, 647 F.2d 768,
776 (8th Cir. 1981). If the suit seeks to protect the govern-
ment’s pecuniary interest, the § 362(b)(4) exception does not
apply. On the other hand, if the suit seeks to protect public
safety and welfare, the exception does apply. The purpose of
the “pecuniary purpose” test is to prevent suits that would
allow a governmental unit to obtain an advantage over credi-
tors or potential creditors in the bankruptcy proceeding.
[12] The Attorney General’s section 16 Clayton Act suit
clearly satisfies the “pecuniary purpose” test. After having
been trimmed down by the district court, the suit now seeks
only divestiture. The Attorney General does not seek a mone-
tary recovery, and asserts no interest of the state in the three
power plants that are the subject of his suit. Rather, the Attor-
ney General seeks only an injunction that would require
Mirant to divest itself of the plants. There is nothing in this
relief that would allow the Attorney General to gain an advan-
tage over creditors in the bankruptcy proceeding. If granted,
the only effect of the remedy would be to require that the
plants be sold, with the entire proceeds going to the bank-
ruptcy estate. Further, it is clear that the suit seeks to protect
the welfare of electricity consumers in northern California by
protecting them from the excessive charges that might result
from an undue concentration of market power.
[13] Under the “public purpose” test, the court determines
whether the government seeks to “effectuate public policy” or
1666 LOCKYER v. MIRANT CORP.
to adjudicate “private rights.” NLRB v. Continental Hagen,
932 F.2d at 833. If the government seeks the former, the
exception applies; if the government seeks the latter, it does
not. Id.; see also In re State of Missouri, 647 F.2d at 776. A
suit does not satisfy the “public purpose” test if it is brought
primarily to advantage discrete and identifiable individuals or
entities rather than some broader segment of the public. See,
e.g., Chao, 270 F.3d 378 (suit to recover unpaid wages under
the Fair Labor Standard Act does not come within
§ 362(b)(4)). The Attorney General’s suit clearly satisfies the
“public interest” test, for it is brought to protect the interest
of all electricity consumers in northern California.
[14] We therefore hold that the Attorney General’s section
16 Clayton Act suit comes within the “police or regulatory
power” exception under § 362(b)(4), and that the automatic
stay does not apply.
C. Landis Stay
[15] A district court has discretionary power to stay pro-
ceedings in its own court under Landis v. North American
Co., 299 U.S. 248, 254 (1936). In Landis, two holding compa-
nies sued the Securities and Exchange Commission (“SEC”)
in the District Court for the District of Columbia to enjoin
enforcement of the Public Utility Holding Company Act of
1935 on the ground that it was unconstitutional. Numerous
similar suits were filed, in the District of Columbia and else-
where, against the SEC. The SEC filed a complaint in the dis-
trict court for the Southern District of New York to compel
other holding companies to comply with the terms of the Act.
The District of Columbia district court stayed its suit, indicat-
ing that the stay would last until the New York district court
suit was decided on appeal by the Supreme Court or was oth-
erwise finally resolved.
[16] The Supreme Court reversed:
LOCKYER v. MIRANT CORP. 1667
[A party seeking] a stay must make out a clear case
of hardship or inequity in being required to go for-
ward, if there is even a fair possibility that the stay
for which he prays will work damage to some one
else. Only in rare circumstances will a litigant in one
cause be compelled to stand aside while a litigant in
another settles the rule of law that will define the
rights of both.
Id. at 255. The Court noted that resolution of the New York
district court suit could help narrow the issues considerably:
True, a decision in the cause then pending in New
York may not settle every question of fact and law
in suits by other companies, but in all likelihood it
will settle many and simplify them all.
Id. at 256. Nonetheless, the Court held that a stay lasting until
the New York district court suit was finally resolved exceeded
“the limits of a fair discretion.” Id. It then held that, in the cir-
cumstances now confronting it, where the New York district
court had already had its case for a year, a stay lasting only
until the New York district court decided the case might be
appropriate. Id. at 256-57. It therefore remanded to the Dis-
trict of Columbia district court to consider whether to grant a
stay of what was now likely to be fairly short duration. Id. at
259.
We have sustained, or authorized in principle, Landis stays
on several occasions. In CMAX, Inc. v. Hall, 300 F.2d 265(9th Cir. 1962), CMAX, a common carrier by air, sued Dre-
wry, a shipper, in federal district court to recover $12,696.00,
contending that Drewry had not paid the full amount of the
government-approved tariff. At least a dozen other suits were
later filed in the same district court, in which CMAX sued
shippers on the same ground. The Civil Aeronautics Board
(“CAB”) then instituted an administrative enforcement pro-
ceeding against CMAX, contending that CMAX had charged
1668 LOCKYER v. MIRANT CORP.
numerous shippers, including Drewry, more than the
approved tariff. The district court stayed CMAX’s suit against
Drewry. CMAX sought mandamus.
Citing Landis, we set out the following framework:
Where it is proposed that a pending proceeding be
stayed, the competing interests which will be
affected by the granting or refusal to grant a stay
must be weighed. Among those competing interests
are the possible damage which may result from the
granting of a stay, the hardship or inequity which a
party may suffer in being required to go forward, and
the orderly course of justice measured in terms of the
simplifying or complicating of issues, proof, and
questions of law which could be expected to result
from a stay.
Id. at 268. We denied mandamus. Applying the framework,
we noted that CMAX sought only damages. It alleged no con-
tinuing harm and sought no injunctive or declaratory relief.
Delay of CMAX’s suit would result, at worst, in a delay in its
monetary recovery, with possible (though by no means cer-
tain) loss of prejudgment interest. Further, we noted that the
CAB proceeding would provide considerable assistance in
resolving CMAX’s suit against Drewry, as well as CMAX’s
other suits in the district court:
[A]t the very least, the [CAB] proceeding will pro-
vide a means of developing comprehensive evidence
bearing upon the highly technical tariff questions
which are likely to arise in the district court case.
Moreover, if that proceeding should result in a revo-
cation of CMAX’s operating authority, the district
court will be enabled to explore the effect thereof on
that carrier’s standing to collect past undercharges.
...
LOCKYER v. MIRANT CORP. 1669
To these considerations must be added the fact
that several other similar cases are now pending in
the same district court, and more are likely to be
filed in the near future. In the interests of uniform
treatment of like suits there is much to be said for
delaying the frontrunner.
Id. at 269.
In Leyva v. Certified Grocers of California, Ltd., 593 F.2d
857 (9th Cir. 1979), truck drivers sued their employer for
unpaid wages under the federal Fair Labor Standards Act
(“FLSA”) (count I), and under their collective bargaining
agreement (count II). The district court stayed both counts
under the Federal Arbitration Act. On appeal, we held that the
collective bargaining count was subject to arbitration, but that
the FLSA count was not. We nonetheless held that a stay of
the FLSA count might be justified under Landis and related
cases:
[S]ound reasons may exist . . . to support the dis-
trict court’s determination to stay the action under
the powers to control its own docket and to provide
for the prompt and efficient determination of the
cases pending before it.
***
A trial court may, with propriety, find it is effi-
cient for its own docket and the fairest course for the
parties to enter a stay of an action before it, pending
resolution of independent proceedings which bear
upon the case. This rule applies whether the separate
proceedings are judicial, administrative, or arbitral in
character, and does not require that the issues in such
proceedings are necessarily controlling of the action
before the court.
1670 LOCKYER v. MIRANT CORP.
Id. at 863-64.
We noted that the resolution of the collective bargaining
count in arbitration had the potential to advance significantly
the resolution of the FLSA count:
[T]he arbitrator would no doubt make findings as to
what contract documents are controlling, the hours
and work pattern of the claimants, and the amount of
wages paid to them. . . . These findings, as well as
the documents and testimony produced during the
arbitration hearing, may be of valuable assistance to
the court in resolving the Fair Labor Standards Act
claims presented in count I of the complaint, even
under the assumption that the court is not bound and
controlled by the arbitrator’s conclusions, a point we
decline to address.
Id. at 863. We remanded to allow the district court to deter-
mine whether the stay of the FLSA count was proper. In so
doing, however, we instructed the district court to take into
account “the urgent nature of the statutory right to minimum
compensation” under the FLSA, and suggested that a stay
might be appropriately conditioned on assurance that the arbi-
tration proceedings was going forward “with diligence and
efficiency.” Id. at 864. We wrote, “A stay should not be
granted unless it appears likely the other proceedings will be
concluded within a reasonable time in relation to the urgency
of the claims presented to the court.” Id.Finally, in Mediterranean Enterprises, Inc. v. Ssangyong
Corp., 708 F.2d 1458 (9th Cir. 1983), Mediterranean sued to
enforce a contract forming a joint venture with Ssangyong.
The contract contained an arbitration clause. The district court
held that the clause applied to some but not all of the counts
in Mediterranean’s complaint. It stayed the entire suit pending
arbitration, not limited to the counts subject to arbitration. The
arbitrable and non-arbitrable counts in the complaint over-
LOCKYER v. MIRANT CORP. 1671
lapped a great deal both factually and legally. Citing Landis
and Leyva, we sustained the stay of the entire proceeding as
within the discretion of the district court. Id. at 1465.
In the case now before us, the district court stayed proceed-
ings based in substantial part on its belief that its jurisdiction
to decide the scope of the automatic stay was in doubt, and
that the applicability of the § 362(b)(4) exception to the stay
was also in doubt. We have now resolved both of these ques-
tions, holding that the district court does have jurisdiction to
decide the scope of the stay and that the § 362(b)(4) exception
applies. If we believed, after resolving these questions, that a
Landis stay might still be appropriate, we would remand to
allow the district court to exercise its discretion. However, we
conclude that a Landis stay cannot be justified and therefore
vacate the stay.
[17] On the facts of this case, neither the balance of hard-
ships between the parties, nor the prospect of narrowing the
factual and legal issues in the other proceeding, justifies a
stay. Unlike the plaintiffs in CMAX and Leyva, who sought
only damages for past harm, the Attorney General seeks
injunctive relief against ongoing and future harm. Landis cau-
tions that “if there is even a fair possibility that the stay . . .
will work damage to some one else,” the party seeking the
stay “must make out a clear case of hardship or inequity.” 299
U.S. at 255. There is more than just a “fair possibility” of
harm to the Attorney General, and to the interests of the elec-
tricity consumers of northern California whose interest he
seeks to protect. If the Attorney General’s Clayton Act claim
has merit, Mirant’s ownership of the three power plants is an
ongoing illegal concentration of market power that threatens
economic harm to electricity consumers. For its part, Mirant
has not made out a “clear case of hardship or inequity.” To
be sure, if the stay is vacated Mirant must proceed toward trial
in the suit in the district court, but being required to defend
a suit, without more, does not constitute a “clear case of hard-
ship or inequity” within the meaning of Landis.
1672 LOCKYER v. MIRANT CORP.
Further, it is highly doubtful that the bankruptcy court in
Texas will provide a legal resolution to the Attorney Gener-
al’s Clayton Act claim. First, we note that neither the Attor-
ney General nor Mirant has instituted an adversary action in
the bankruptcy court seeking a determination whether the
ownership of the plants by a single entity, such as Mirant,
constitutes a Clayton Act violation. Second, the bankruptcy
court is unlikely to consider, as part of its approval or disap-
proval of a Chapter 11 reorganization plan, whether owner-
ship of the plants by a single entity is legal under the Clayton
Act. Indeed, it may well approve a reorganization plan per-
mitting Mirant to sell off the three power plants to a single
entity, on the rationale that the plants are worth more when
owned by a single entity.
We are aware of no case, other than this one, in which a
district court has entered a Landis stay of a suit falling within
the “police or regulatory power” exception to the automatic
stay, and counsel has cited none. The very terms of the excep-
tion provide that the suit be brought by a governmental unit
in furtherance of its “police or regulatory power,” thereby
indicating that a suit qualifying under the exception will be
brought to protect an important governmental interest. Fur-
ther, the “pecuniary interest” and “public interest” tests under
which the exception is allowed are designed to ensure that a
suit qualifying under § 362(b)(4) does not interfere with the
ongoing bankruptcy proceeding. Because a suit permitted
under § 362(b)(4) is thus distinct from the bankruptcy pro-
ceeding, it is relatively unlikely that resolution of the bank-
ruptcy proceeding will significantly assist the district court in
the decision of the factual and legal issues before it.
[18] We recognize the importance of the district court hav-
ing the ability to control its own docket, particularly in this
time of scarce judicial resources and crowded dockets. We do
not intend that this opinion be read to restrict unduly the abil-
ity of the district court, in appropriate cases, to issue Landis
stays, or to issue stays under other doctrines, such as Colo-
LOCKYER v. MIRANT CORP. 1673
rado River Water Conservation District v. United States, 424
U.S. 800 (1976). We hold only that a Landis stay is improper
in the circumstances of this case — where the power of the
district court to decide whether the automatic stay applies is
clear, where the inapplicability of the automatic stay is also
clear, and where the proceeding in the bankruptcy court is
unlikely to decide, or to contribute to the decision of, the fac-
tual and legal issues before the district court.
Conclusion
We hold that the district court has jurisdiction to decide
whether the suit before it is stayed by the automatic stay of
the bankruptcy court. We hold, further, that the suit qualifies
under the exception to the automatic stay for “police or regu-
latory power” under 11 U.S.C. § 362(b)(4). Finally, we hold
that a Landis stay is not justified under the circumstances of
this case. We therefore VACATE the stay and REMAND to
allow the Attorney General’s suit to go forward on the merits
of his Clayton Act claim.
VACATED and REMANDED.