Dean v. Trans World Airlines, Inc.
| Citation | 72 F.3d 754 |
| Decision Date | 19 December 1995 |
| Docket Number | Nos. 92-35470,92-35537,s. 92-35470 |
| Parties | 151 L.R.R.M. (BNA) 2134, 64 USLW 2419, 28 Bankr.Ct.Dec. 394, Bankr. L. Rep. P 76,733, 95 Cal. Daily Op. Serv. 9658, 95 Daily Journal D.A.R. 16,806 John L. DEAN, Plaintiff-Appellant, v. TRANS WORLD AIRLINES, INC.; Air Line Pilots Association, International, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
John L. Dean, in pro. per., Olympia, Washington, plaintiff-appellant.
Ronald T. Schaps, Bogle & Gates, Seattle, Washington; and Eugene B. Granof, Air Line Pilots Association, Herndon, Virginia, for defendants-appellees.
Appeals from the United States District Court for the Western District of Washington.
Before: REINHARDT and TROTT, Circuit Judges, and SCHWARZER, District Judge. *
John L. Dean argues that the district court violated the automatic stay provisions of 11 U.S.C. Sec. 362(a) when the court granted summary judgment to Trans World Airlines (TWA) and dismissed Dean's action against it four days after TWA filed for bankruptcy. Dean's argument requires us to revisit the issue of when a court may dismiss an action against a bankrupt defendant without violating the automatic stay. The trial court had jurisdiction under 28 U.S.C. Sec. 1331. Jurisdiction over this timely appeal is proper under We conclude that where a decision to dismiss requires the court to first consider other issues presented by or related to the underlying case, dismissal of an action after the defendant has filed for bankruptcy violates the automatic stay. Accordingly, we reverse the summary judgment in favor of TWA and remand for further proceedings.
28 U.S.C. Sec. 1291. This appeal raises an issue of law subject to de novo review.
In 1979, Dean sued TWA and the Air Line Pilots Association (ALPA) for contractual, statutory, and constitutional violations related to TWA's decision to fire Dean at ALPA's behest. The case travelled a tortuous path and has visited the Ninth Circuit twice--in Dean v. Trans World Airlines, Inc., 708 F.2d 486, 487 (9th Cir.), cert. denied, 464 U.S. 995, 104 S.Ct. 490, 78 L.Ed.2d 685 (1983) (Dean I ), and Dean v. Trans World Airlines, Inc., 924 F.2d 805 (9th Cir.1991) (Dean II )--before reaching us this third time.
In Dean II, we affirmed a jury's verdict that TWA was not contractually liable and reversed the partial summary judgment in favor of the defendants on the constitutional claim. On remand, TWA filed for summary judgment on the issues of constitutional and statutory liability. The parties seem to have finished all substantive briefing by early January 1992.
On January 31, 1992, TWA filed for bankruptcy in Delaware.
On February 4, 1992, the district court issued an order that, among other things, granted TWA's summary judgment motion and dismissed Dean's action against it because the law-of-the-case precluded finding TWA liable. 1 The parties tell us that the court was not aware of the bankruptcy filing when it issued its order.
On July 26, 1994, the bankruptcy court lifted TWA's automatic stay.
The automatic stay of 11 U.S.C. Sec. 362(a)(1) prevents the "commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement" of the bankruptcy case. The circuits do not agree on the circumstances under which post-filing dismissal of an action against a debtor is an impermissible continuation that violates the stay. 2 In the Ninth Circuit, such dismissal is permissible so long as it is "consistent with the purpose of the statute [11 U.S.C. Sec. 362(a) ]." Independent Union of Flight Attendants v. Pan American World Airways, Inc., 966 F.2d 457, 459 (9th Cir.1992) (IUFA ). Offering IUFA as authority, TWA asks us to affirm the district court's judgment.
Section 362(a) has two broad purposes. First, it provides debtors with protection against hungry creditors:
It gives the debtor a breathing spell from its creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.
H.R.Rep. No. 595, 95th Cong., 1st Sess., at 340 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6296-97. Second, the stay assures creditors that the debtor's other creditors are not racing to various courthouses to pursue The automatic stay also provides creditor protection. Without it, certain creditors would be able to pursue their own remedies against the debtor's property. Those who acted first would obtain payment of the claims in preference to and to the detriment of other creditors.
independent remedies to drain the debtor's assets:
In light of these purposes, we recognized in IUFA that, under very limited circumstances, post-filing dismissal by a court of an action against a debtor may not be an impermissible "continuation" of a proceeding. 966 F.2d at 458. In IUFA, after losing an appeal to this court, the Independent Union of Flight Attendants (IUFA) petitioned for rehearing with a suggestion for rehearing en banc. We could not act on this petition because appellees Pan American World Airways, Inc., and Pan Am Corporation (collectively, Pan Am) had filed for bankruptcy, triggering the automatic stay. Instead, we asked for a status report. In response to our request, IUFA moved to dismiss its appeal for mootness because it had withdrawn its grievance against Pan Am which had formed the basis for its appeal. IUFA's motion did not require us to resolve any issue related to the grievance. We reasoned that declining to dismiss would not serve the purposes behind the automatic stay. Judicial recognition that IUFA's claim was moot could neither intrude on Pan Am's "breathing space" nor give its other creditors any conceivable grounds for worry. Therefore, we dismissed IUFA's appeal notwithstanding the automatic stay. 966 F.2d at 458-59.
TWA reads IUFA broadly to mean that a post-filing dismissal of an action against a debtor does not violate the stay if the effect of the dismissal is consistent with the purposes of the stay--i.e., if one can say in hindsight that dismissal helped the debtor and did not threaten other creditors, then the ends excuse the means. A moment's reflection, however, shows that the IUFA exception must be a narrow one that cannot apply where a decision to dismiss requires a court to first decide...
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