O'BRIEN v. Fischel, Civ. No. 85-1426.
| Citation | 74 BR 546 |
| Decision Date | 09 June 1987 |
| Docket Number | Civ. No. 85-1426. |
| Parties | Brian M. O'BRIEN, D.C.; Brian M. O'Brien, D.C., dba Kapaa Chiropractic Clinic, Inc.; James H. Hattaway, D.C.; Michael Pierner, D.C.; Michael Pierner, D.C., dba Island Chiropractics, Ltd.; Michael Pierner, D.C., dba Lahaina Health Center; Michael Pierner, D.C., dba Central Pacific Chiropractics; Michael Pierner, D.C., dba Wailuku Chiropractics; Michael Pierner, D.C., dba Kahei Health Center; Rhody Edwards, D.C.; Rhody Edwards, D.C., Inc., dba Malama Chiropractic Clinic; and Kelvin M. Washington, D.C., Plaintiffs, v. Robert F. FISCHEL, D.C.; Thomas Grollman, M.D.; Mitchell Eli, D.C.; Rowlin Lichter, M.D.; Calvin Kam, M.D.; Accumed Analysis; Aetna Life and Casualty Company; Allstate Insurance Company; American Family Insurance Company; Amfac, Inc.; American International Adjusting Company; American Mutual Insurance Company; Argonaut Insurance Company; Atlast Insurance Company; BBA/GEICO; Bishop Insurance Company; Blue Cross; Blue Cross of Washington and Alaska; Blue Cross/Blue Shield; Blue Shield; Brown Brothers Adjustors; California Life Insurance Company; California Pacific Insurance Company; Combined Insurance Company of America; Commercial Union Insurance Company Hawaii; Commercial Union Life Insurance Company; Consolidated Insurance Adjustors; Consumers United Insurance Company; Crawford & Company; Dillingham Corporation; Don Beaudry Adjustors; Department of Social Services and Housing; Equitable Life Assurance; Farmers Insurance; Farmers Insurance Group of Companies; Financial Security; Firemans Fund Insurance Company; First Insurance Company of Hawaii, Ltd.; Friends America Insurance; GEICO Insurance; General Adjustment Bureau; Grand Pacific Life Insurance Company, Ltd.; Guarantee Trust; Hamakua Sugar Company; Hawaiian Dredging and Construction Company; Hawaii Medical Services Association; Hawaiian Insurance and Guarantee Company, Ltd.; Highgates Ranch; Heritage Insurance Company; Heritage Life Insurance Company; IBW/NECA; Industrial Indemnity Insurance Specialists of Hawaii; Industrial Insurance Company of Hawaii, Ltd.; Insurance of North America; Insurance Specialists of Hawaii; Island Insurance Company; J.D. Jenkins Company; John Hancock Insurance Company; John Mullens and Company; Kapalua Bay Hotel; Kapalua Land Company; Kauai Medical Group, Inc.; Leonard J. Russo, Inc.; Lihue Plantation; Mahelona Hospital; Marsh & McLennan; Maui County; Maui Land and Pine; Mauna Kea Beach Hotel; Medata Med-Review; Mission Insurance Company; Motion Picture Health/Welfare Fund; Mutual of Omaha; National Union Insurance Company; Pacific Insurance Company, Ltd.; Pensioned Operating Engineers; Royal Insurance; State Farm Insurance; Transamerica Insurance Company; Travelers Insurance Companies; Union Insurance Company; United Pacific/Reliance Insurance Company; USFG; United States Guaranty; Workers Trust, Inc.; Hawaii County; Kauai County; State of Hawaii; Department of Labor and Industrial Relations; Department of Health; Workers Compensation Board; Joshua Agsalud; Orlando Watanabe; Wallace Okuna; Larry Magnussen, D.C.; and Lindsay Yoshioka, Defendants. |
| Court | U.S. District Court — District of Hawaii |
William K. Maas, Jr., San Francisco, Cal., Ira Dennis Hawver, Honolulu, Hawaii, for plaintiffs.
Howard F. McPheeters, Burke, Sakai, McPheeters, Bordner & Gilardy, Honolulu, Hawaii, for defendants Thomas Grollman, M.D., Kauai Medical Group, Inc., and Larry Magnussen, D.C.
Martin Anderson, Warren Price, III, John R. Lacy, Lisa Woods Munger, Goodsill, Anderson, Quinn & Stifel, Honolulu, Hawaii, for Accumed Analysis, American Intern. Adjustment Co., Inc., Argonaut Ins. Company, Hawaiian Dredging & Const. Co., Ins. Co. of North America, John Hancock Mut. Life Ins. Co., John Mullen & Co., Kona Hosp., Mitchell Eli, D.C., Nat. Union Fire Ins. Co., Pacific Ins. Co., Samuel Mahelona Hosp., and the Travelers Ins.
John T. Komeiji, James D. Ing, Lex R. Smith, Kobayashi, Watanabe, Sugita & Kawashima, Honolulu, Hawaii, for Hawaiian Ins. & Guar. Co. Ltd., and Mauna Kea Beach Hotel.
Clifford K. Higa, Milton S. Tani, Deputy Attys. Gen., State of Hawaii, Honolulu, Hawaii, for State of Hawaii, Dept. of Social Services & Housing, Dept. of Labor & Indus. Relations, Dept. of Health, Workers Compensation Board sic, Joshua Agsalud, Orlando Watanabe, Wallace Okuna, and Lindsay Yoshioka.
Clyde M. Matsui, Honolulu, Hawaii, for State Farm Ins. Co.
George L. Miller, Gary G. Grimmer, Carlsmith, Wichman, Case, Mukai & Ichiki, Honolulu, Hawaii, for Hamakua Sugar Company, Maui Land and Pine, Kapalua Land Co., and Kapalua Bay Hotel.
Michael M. Payne, Honolulu, Hawaii, for Indus. Ins. Co. of Hawaii, Ltd.
Jeffrey S. Portnoy, Cades, Schutte, Fleming & Wright, Honolulu, Hawaii, for First Ins. Co. of Hawaii, Ltd.
James F. Ventura, Libkuman, Ventura, Ayabe & Hughes, Honolulu, Hawaii, for Transamerica Ins. Co.
Stephen M. Sirota, Petaluma, Cal., for California Pacific Life Ins. Co. and California Pacific Ins. Services, Inc.
Michael F. McCarthy, McCarthy & Huang, Honolulu, Hawaii, for Consol. Adjusters and Don Beaudry Adjustors.
Guy Archer, Fred W. Rohlfing, Deputy Corp. Counsel, Dept. of Corp. Counsel, Wailuku, Maui, Hawaii, for Maui County.
Warren Perry, Deputy Co. Atty., Dept. of Co. Atty., Lihue, Kauai, Hawaii, for Kauai County.
Cuyler E. Shaw, Ashford & Wriston, Honolulu, Hawaii, for Hawaii Medical Services Ass'n.
Carleton B. Reid, Davis, Reid & Richards, Honolulu, Hawaii, for Calvin Kam, M.D.
Richard K. Quinn, Honolulu, Hawaii, for Rowlin Lichter, M.D.
Steven K. Hisaka, Craig K. Furusho, Hisaka & Furusho, Honolulu, Hawaii, for Bishop Ins. Co., Commercial Union Ins. Co. of Hawaii, Commercial Union Life Ins. Co., and Crawford & Co.
Joanne M. Lanham, Fireman's Fund Ins. Co., Archibald C.K. Kaolulo, Honolulu, Hawaii, for Fireman's Fund Ins. Co.
Pursuant to a Show Cause Order entered by this court on April 3, 1987, a hearing was held on May 13, 1987 as to why sanctions should not be imposed against plaintiffs and their attorney, William Keith Maas, Jr., under F.R.Civ.P. 11. At that hearing, this court found that Maas was responsible for the drafting, signing, and filing of a complaint, on behalf of five Hawaii chiropractors, naming 97 defendants allegedly engaged in a conspiracy to restrain trade in contravention of a variety of United States and State antitrust and other laws. At the May 13 hearing, this court found that Maas could not have made, and did not make, the "reasonable inquiry" required by Rule 11, and that the complaint was not well grounded in fact and warranted by law. This court imposed sanctions against Maas in the amount of the reasonable expenses incurred by the defendants because of the filing of the complaint, including reasonable attorneys' fees.
Prior thereto, on February 13, 1987, in the Northern District of California, attorney William Keith Maas, Jr. filed an individual petition for relief under Chapter 13 of the Bankruptcy Code. Although Maas related to this court that he would not be (and was not) present at this court's Order to Show Cause hearing, attorney Maas, in a brief submitted to the court, argued that any attempted action by this court to impose sanctions against him is stayed by the "automatic stay" provision of 11 U.S.C. section 362. Section 362 provides in relevant part:
Maas argued that since the defendants in their moving papers requested sanctions before the September 3, 1986 hearing on Defendants' Motion to Dismiss, i.e., more than five months before the filing of Maas's bankruptcy petition, the present Order to Show Cause is a continuation of a proceeding against the debtor that was commenced before the commencement of Maas's bankruptcy case, and is therefore stayed by the above section.
Subsection (b) to section 362, however, provides certain exceptions to the automatic stay. In particular, subsection (b)(4) provides:
The question is therefore presented whether the assessment of sanctions by a court under Rule 11 is an action by a governmental unit to enforce such governmental unit's police or regulatory power.
This court is unaware of any case ruling on the application of bankruptcy's automatic stay provisions to Rule 11 sanctions. This court's decision is therefore predicated upon an analysis of the policies of the Bankruptcy Code's automatic stay and those behind Rule 11, as well as cases ruling on the applicability of the automatic stay in analogous situations.1
The Ninth Circuit Bankruptcy Appellate Panel has adopted a "pecuniary purpose" test for applying the exception found in 11 U.S.C. Section 362(b)(4). That test provides that governmental actions which are aimed at obtaining a pecuniary advantage for the governmental unit involved or its citizens are stayed under Section 362(a)(1), while those which represent a direct application of the unit's police or regulatory powers are not. In re Thomassen, 15 B.R. 907 (Bankr. 9th Cir.1981). "It is now well-established that if the...
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