United States Abatement Corp. v. Mobil Exploration & Producing U.S. Inc.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 93-3582
_____________________
IN THE MATTER OF: UNITED STATES ABATEMENT CORPORATION,
a/k/a U.S.A. Corp.,
Debtor,
UNITED STATES ABATEMENT CORP.,
a/k/a U.S.A. Corp.,
Appellant,
v.
MOBIL EXPLORATION & PRODUCING U.S., INC.,
agent Mobil Oil Exploration & Producing Southeast, Inc., and
MOBIL EXPLORATION & PRODUCING NORTH AMERICA, INC.,
Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
_________________________________________________________________
(November 23, 1994)
Before KING, JOLLY, and STEWART, Circuit Judges.
KING, Circuit Judge:
This appeal involves essentially two questions: (1) whether
the bankruptcy court had subject matter jurisdiction to vacate an
order of contempt issued by that court against a creditor after
the creditor had filed a notice of appeal of that order; and (2)
whether the district court erred in holding that a corporate
debtor is not entitled to recover sanctions under 11 U.S.C. §
362(h) against a creditor who willfully violates the automatic
stay of 11 U.S.C. § 362(a). For the reasons elaborated below, we
conclude: (1) the bankruptcy court had subject matter
jurisdiction to vacate its non-final contempt order; and (2) we
need not answer the question of whether a corporate debtor may
recover sanctions under 11 U.S.C. § 362(h) because we find that
the creditor did not violate the automatic stay. Accordingly, we
AFFIRM.
I. FACTUAL AND PROCEDURAL HISTORY
On March 13, 1992, United States Abatement Corporation
("USA") filed for reorganization pursuant to Chapter 11 of the
Bankruptcy Code. Prior to filing for reorganization, a dispute
arose between USA and Mobil Exploration and Producing, U.S., Inc.
("Mobil") which resulted in the termination by Mobil of two
contracts with USA in which USA was supposed to sandblast and
paint certain structures belonging to Mobil located on the Outer
Continental Shelf.1
As a result of this contractual dispute, on November 28,
1990 (approximately fourteen months prior to USA's filing for
reorganization), Mobil filed a complaint in federal court seeking
a declaration of the amount (if any) it owed USA under the two
1
Our opinion in a related appeal, also decided today,
disposes of an assertion by USA that the claim of Mobil against
USA should be equitably subordinated. See United States
Abatement Corp. v. Mobil Exploration and Producing, U.S., Inc.
(In re United States Abatement Corp.), No. 93-3581, _____ F.3d
_____, slip op. at _____ (5th Cir. 1994).
2
contracts as well as damages for an alleged breach of those
contracts by USA. Mobil named as defendants USA, Delta Bank and
Trust Company (an assignee of USA's accounts receivable), and
various unpaid subcontractors and vendors ("lien claimants") who
provided services under the two contracts and who held potential
liens against Mobil's property. USA and the lien claimants filed
counterclaims against Mobil seeking to recover amounts due under
the contracts and subcontracts.
The filing of Chapter 11 bankruptcy by USA resulted in an
automatic stay of all actions against USA pursuant to 11 U.S.C. §
362(a); accordingly, the contractual suit by Mobil and the
counterclaims by USA and the lien claimants were administratively
closed by the district court. On March 17, 1992, Mobil filed a
motion in the bankruptcy court seeking to lift the automatic stay
so as to continue to litigate its contractual claim against USA.
On March 31, 1992, one of the lien claimants filed a motion in
the district court seeking reinstatement of its counterclaim
against Mobil. Upon the request of the district court, USA filed
a memorandum in support of reinstatement of the counterclaims
against Mobil, asserting, inter alia, that "offensive" claims by
the debtor are not subject to the automatic stay.
The bankruptcy court denied Mobil's request to lift the
automatic stay. Mobil next filed a motion in the district court
seeking to reinstate USA's counterclaim against Mobil and
requesting summary judgment on that counterclaim. The district
court denied Mobil's motion to reinstate, reasoning that the
3
counterclaim was within the ambit of the bankruptcy court's
automatic stay. USA then asked the bankruptcy court to impose
sanctions against Mobil pursuant to 11 U.S.C. § 362(h) or, in the
alternative, to find Mobil in civil contempt of the bankruptcy
court's stay, asserting that Mobil's attempt to reinstate USA's
counterclaim was a willful violation of the stay. On February 8,
1993, the bankruptcy court denied USA's motion for sanctions
pursuant to 11 U.S.C. § 362(h) on grounds that such sanctions are
not available to corporations. However, the bankruptcy court
agreed that Mobil had committed civil contempt by seeking to
reinstate USA's counterclaim, ordered USA to file an itemization
of the damages it had incurred, and ordered that a further
hearing on damages would be held on request of any party.
On February 10, 1993, USA requested the bankruptcy court to
reconsider its ruling that sanctions under 11 U.S.C. § 362(h)
were not available to corporations. On February 12, 1993, Mobil
filed its first notice of appeal regarding the contempt order.
Four days later, on February 16, 1993, Mobil filed a second
notice of appeal and also filed a motion asking the bankruptcy
court to reconsider its finding of contempt. On February 19,
1993, Mobil filed a third notice of appeal.
On March 26, 1993, the bankruptcy court granted Mobil's
motion for reconsideration and vacated its order of contempt. In
re U.S. Abatement Corp., 152 B.R. 78 (Bankr. E.D. La. 1993). USA
timely appealed this decision to the district court, which
affirmed on grounds that reinstatement of a debtor's (i.e.,
4
USA's) original counterclaim was not an action "against the
debtor" within the meaning of 11 U.S.C. § 362; thus, Mobil's
motion to reinstate USA's counterclaim was not in contempt of the
automatic stay. In re U.S. Abatement Corp., 157 B.R. 278 (E.D.
La. 1993). Because its decision favored Mobil, the district
court dismissed Mobil's three appeals.2
USA appeals the district court's decision on three grounds.
First, USA contends that the bankruptcy court lacked subject
matter jurisdiction to reconsider its contempt order because
Mobil's notice of appeal operated as the filing of an objection
pursuant to Bankruptcy Rules 9020(c) and 9033(b) which divested
the bankruptcy court of jurisdiction to reconsider. Because the
bankruptcy court was without jurisdiction, USA contends that the
district court's affirmance of the bankruptcy court's decision
should be reversed. Second, USA argues that Mobil's motion to
reinstate USA's counterclaim was a willful violation of the
automatic stay. Third, USA contends that corporate debtors such
as USA are entitled to recover sanctions under 11 U.S.C. § 362(h)
against those who willfully violate the automatic stay. We now
proceed to address each of these claims.
II. STANDARD OF REVIEW
2
Mobil has appealed the district court's dismissal of its
three appeals in order to preserve those claims should this court
reverse the district court. Those appeals, docketed as Nos. 93-
3622, 93-3623 and 93-3624, are being dismissed today in a
separate order.
5
This appeal involves pure questions of law. First, we must
determine whether the bankruptcy court had subject matter
jurisdiction to reconsider its earlier contempt order given that
Mobil had filed a notice of appeal to the district court. This
court conducts a de novo review to determine whether a lower
court had subject matter jurisdiction to entertain a case.
Carney v. Resolution Trust Corp., 19 F.3d 950. 954 (5th Cir.
1994) (per curiam); Ceres Gulf v. Cooper, 957 F.2d 1199, 1204
(5th Cir. 1992). Second, we are asked to determine whether §
362(h) of the Bankruptcy Code permits a corporate debtor to
obtain damages for a willful violation of the automatic stay.
Third, we are asked to determine whether the bankruptcy court
erred in vacating its earlier order of contempt on grounds that
the Bankruptcy Code's automatic stay does not prohibit the
reinstatement of a debtor's counterclaim. As these last two
issues also involve pure questions of law, we likewise conduct
plenary review.
III. ANALYSIS
A. Did the bankruptcy court have subject matter jurisdiction?
USA argues that Mobil's filing of a notice of appeal on
February 12, 1993 divested the bankruptcy court of all further
jurisdiction over the case. Thus, USA contends, the subsequent
filing by Mobil of a motion to reconsider was of no effect
because the bankruptcy court no longer had jurisdiction to
entertain the motion.
6
More specifically, USA contends that Bankruptcy Rules 90203
and 90334 mandate that the only appropriate course of action in
this case (and the one that Mobil, in effect, pursued) was for
Mobil to seek review of the bankruptcy court's contempt decision
by filing objections thereto with the district court.5 The
district court would then be obligated to provide a de novo
review of the bankruptcy court's conclusions and determine
3
Rule 9020 is labelled "Contempt Proceedings" and provides
in relevant part:
(c) Service and Effective Date of Order; Review. The clerk
shall serve forthwith a copy of the order of contempt on the
entity named therein. The order shall be effective 10 days after
service of the order and shall have the same force and effect as
an order of contempt entered by the district court unless, within
the 10 day period, the entity named therein serves and files
objections prepared in the manner provided in Rule 9033(b). If
timely objections are filed, the order shall be reviewed as
provided in Rule 9033. . . .
Bankr. Rule 9020(c), 11 U.S.C.A. (West Supp. 1994).
4
Rule 9033 is labelled "Review of Proposed Findings of Fact
and Conclusions of Law in Non-Core Proceedings" and provides in
relevant part:
(d) Standard of Review. The district judge shall make a de
novo review upon the record or, after additional evidence, of any
portion of the bankruptcy judge's findings of fact or conclusions
of law to which specific written objection has been made in
accordance with this rule. The district judge may accept,
reject, or modify the proposed findings of fact or conclusions of
law, receive further evidence, or recommit the matter to the
bankruptcy judge with instructions.
Bankr. Rule 9033(d), 11 U.S.C.A. (West Supp. 1994).
5
We note that it is USA that has chosen to characterize the
notices of appeal filed by Mobil in the bankruptcy court as an
invocation of the review process contemplated by Bankruptcy Rule
9020. We address USA's arguments based on that characterization
without expressing any opinion on whether that is a correct
characterization.
7
whether an order of contempt was appropriate. USA argues that
the review procedure defined in Bankruptcy Rule 9020 is akin to
an appeal in that it divests the court that issued the order of
jurisdiction over the matter for which review is sought in the
district court.
As an initial matter, we note that the Bankruptcy Code
requires finality for appeals from bankruptcy court decisions to
the district court, unless the district court grants leave to
pursue an interlocutory appeal. 28 U.S.C. § 158(a); Smith v.
Revie (In re Moody), 817 F.2d 365, 366 (5th Cir. 1987). In this
case, the bankruptcy court's contempt order was not a final order
because no assessment of sanctions ever occurred.6 The Order of
Contempt stated that USA must "file an itemization of the actual
damages it has incurred as a result of Mobil's violation of the
automatic stay on or before February 25, 1993. Mobil may file a
response thereto on or before March 8, 1993. It is further
ordered that a hearing on the dollar amount of damages to be
imposed will be held upon the request of any of the parties."
This language clearly contemplates an assessment of damages in
the future, and without an assessment of damages, the contempt
order is merely interlocutory.
6
Because the bankruptcy court in this case never issued a
"final" order of contempt, we need not decide the question of
whether the constitutional doctrine of separation of powers
permits a bankruptcy court to issue an order of contempt. See
Bankr. Rule 9020, 11 U.S.C.A. advisory committee's note to 1987
amendments (West Supp. 1994) ("This rule, as amended, recognizes
that bankruptcy judges may not have the power to punish for
contempt.").
8
It is well-settled that a civil contempt order is not
"final" for purposes of appeal unless two actions occur: (1) a
finding of contempt is issued, and (2) an appropriate sanction is
imposed. Cf. Petroleos Mexicanos v. Crawford Enter., Inc., 826
F.2d 392, 398 (5th Cir. 1987); Nasco, Inc. v. Calcasieu
Television & Radio, Inc., 752 F.2d 157, 159 (5th Cir. 1985);
accord Blalock Eddy Ranch v. MCI Telecommunications Corp., 982
F.2d 371, 374 (9th Cir. 1992); Dove v. Atlantic Capital Corp.,
963 F.2d 15, 17 (2d Cir. 1992); Bernard v. American Cyanamid Co.
(In re Tetracycline Cases), 927 F.2d 411, 412 (8th Cir. 1991);
Combs v. Ryan's Coal Co., 785 F.2d 970, 977 (11th Cir.), cert.
denied, 479 U.S. 853 (1986); Motorola, Inc. v. Computer Displays
Int'l, 739 F.2d 1149, 1154 (7th Cir. 1984); Weyerhaeuser Co. v.
International Longshoremen's and Warehousemen's Union Local 21,
733 F.2d 645, 645 (9th Cir. 1984). The requirement of finality
is no different when it is the bankruptcy court (rather than the
district court) which has failed to assess damages. Calcasieu
Marine Nat'l Bank v. Morrell (In re Morrell), 880 F.2d 855, 856-
57 (5th Cir. 1987); Shimer v. Fugazy (In re Fugazy Express,
Inc.), 982 F.2d 769, 775 (2d Cir. 1992). As we said in In re
Morrell:
Determinations of liability without an assessment of damages
are as likely to cause duplicative litigation in bankruptcy
as they are in civil litigation and because bankruptcy
litigants may appeal to district as well as to appellate
courts, the waste of judicial resources is likely to be
greater. The rule for appeals from bankruptcy decisions
determining liability but not damages under 28 U.S.C. §
158(d) must . . . be the same as the rule under [28 U.S.C.]
§ 1291.
9
In re Morrell, 880 F.2d at 856-57. Indeed, in the specific
context of a bankruptcy contempt order, the Seventh Circuit has
held that, absent an assessment of sanctions, a bankruptcy
court's order holding a creditor in civil contempt of a discharge
injunction is not a "final judgment" from which an appeal may be
taken. In re Behrens, 900 F.2d 97, 100 (7th Cir. 1990).
We think that the same considerations militating in favor of
finality in the appeal context should operate in the context of
Bankruptcy Rule 9020, and we therefore hold that because the
bankruptcy court in this case had not yet assessed sanctions
against Mobil, the order of contempt entered by the bankruptcy
court was not yet sufficiently final so as to trigger the review
process of Bankruptcy Rules 9020 and 9033.7 Cf. Liberty Mutual
Ins. Co. v. Wetzel, 424 U.S. 737 (1976) ("where assessment of
damages or awarding of other relief remains to be resolved
[judgments] have never been considered to be ``final' within the
meaning of 28 U.S.C. § 1291."). Absent finality, the contempt
order was merely an interlocutory order which the bankruptcy
court was free to reconsider and vacate.
USA argues that Mobil's filing of a notice of appeal
automatically divested the bankruptcy court of jurisdiction to
7
USA argues that Bankruptcy Rules 9020 and 9033 do not
contain a provision similar to that contained in Bankruptcy Rule
8002(b) or Rule 4(a) of the Federal Rules of Appellate Procedure
which state that a timely filed motion for reconsideration
vitiates antecedent notices of appeal. Because we find that the
order of contempt "appealed" from was interlocutory, the special
provisions of Bankruptcy Rules 9020 and 9033 are inapplicable and
we need not address this issue at this time.
10
entertain Mobil's subsequent motion to reconsider. While it is
generally true that a timely filing of a notice of appeal will
divest a court of jurisdiction, this rule presupposes that there
is a final judgment from which to appeal. In this case, however,
we have determined that there was no final contempt judgment;
hence, there can be no appeal absent express permission of the
bankruptcy court to take an interlocutory appeal. 28 U.S.C. §
158(a); Smith v. Revie (In re Moody), 817 F.2d 365, 366 (5th Cir.
1987). As there is no right to appeal an interlocutory order,
the notice of appeal filed by Mobil was simply premature and of
no effect. Cf. Brinkmann v. Dallas County Deputy Sheriff Abner,
813 F.2d 744, 748 (5th Cir. 1987) (noting that a "notice of
appeal [is] ordinarily . . . ineffective [if] the judgment [is]
not final when appealed . . . ."); see generally James William
Moore, et al., 6 Moore's Federal Practice § 54.41[4] (2d ed.
1994).
B. Does the automatic stay prohibit reinstatement of a debtor's
offensive counterclaim? Are § 362(h) sanctions available to a
corporate debtor?
Section 362(h) of the Bankruptcy Code states that an
"individual" is entitled to recover damages which flow from a
willful violation of the automatic stay. 11 U.S.C. § 362(h).
Both the bankruptcy court and the district court in this case
determined that the term "individual" as used in § 362(h) does
not include corporations; thus, both courts agreed that USA, a
corporation, is not entitled to recover sanctions under this
11
section. USA argues that this parsimonious interpretation of the
term "individual" is erroneous and asks this court to pronounce
that corporate debtors injured by willful violations of the
automatic stay are entitled to sanctions under § 362(h).
In this case, however, we find that there has been no
violation of the automatic stay; thus, we need not reach the
question of whether § 362(h) sanctions are available to a
corporate debtor. The automatic stay of the Bankruptcy Code
extends only to actions "against the debtor." 11 U.S.C. §
362(a). We have previously held that counterclaims asserted by a
debtor are not actions "against the debtor" which are subject to
the automatic stay. First Wis. Nat'l Bank of Milwaukee v.
Grandlich Dev. Corp., 565 F.2d 879, 880 (5th Cir. 1978); accord
Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194, 1205 (3d
Cir. 1991); Martin-Trigona v. Champion Fed. Sav. & Loan, 892 F.2d
575, 577 (7th Cir. 1989). If a debtor's offensive claims are not
subject to the automatic stay, a fortiori a creditor's motion to
reinstate and seek summary judgment of such non-stayed claims is
not subject to the automatic stay. Thus, in this case, Mobil's
motion to reinstate and obtain summary judgment on USA's
offensive contractual claims was not a willful violation of the
automatic stay. Because we find no violation of the automatic
stay by Mobil, the question of whether corporate debtors such as
USA are "individuals" entitled to recover sanctions under §
362(h) for injury suffered as a result of a willful violation of
the automatic stay need not be answered.
12
IV. CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the
district court.
13