In re Johnson

• Decision Date: 28 April 2016
• Docket Number: Case No. 14–57104
• Citation: 548 B.R. 770
• Parties: In re: John Joseph Louis Johnson, III, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

548 B.R. 770

In re: John Joseph Louis Johnson, III, Debtor.

Case No. 14–57104

United States Bankruptcy Court, S.D. Ohio, Eastern Division, At Columbus .

Signed April 28, 2016

Daniel A. DeMarco, Rocco I. Debitetto, Cleveland, OH, Marc J. Kessler, Hahn Loeser & Parks LLP, Columbus, OH, for Debtor.

OPINION AND ORDER GRANTING MOTION OF DEBTOR AND DEBTOR IN POSSESSION FOR AN ORDER ENFORCING THE AUTOMATIC STAY AGAINST RFF FAMILY PARTNERSHIP, LP (DOC. 382)

John E. Hoffman, Jr.

, United States Bankruptcy Judge

I. Introduction

In this contested matter, John Joseph Louis "Jack" Johnson, III (the "Debtor") seeks to enforce the automatic stay against RFF Family Partnership, LP ("RFF") and recover damages for its willful violation of the stay. The Debtor is a professional hockey player with the Columbus Blue Jackets of the National Hockey League who filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code more than a year ago. Since then, the Debtor has sought to convert his case to Chapter 7, resulting in a spate of litigation in this Court between the Debtor and a group of his largest creditors, who seek to share in the Debtor's significant future earnings.

One such creditor is RFF. Alleging that the Debtor defrauded it, RFF instituted a prepetition arbitration proceeding against the Debtor and several related parties who had issued it a note allegedly secured by the Debtor's player contract. The Debtor asserted counterclaims against RFF in the arbitration, asserting that it was RFF that defrauded him and his co-borrowers. The Debtor also denied that RFF has a perfected security interest in his player contract. Before the arbitration could proceed further, the Debtor filed his bankruptcy petition. Since then, RFF has continued to demonstrate its desire for one thing: the Debtor's multi-million dollar salary. But the automatic stay, which was triggered upon the Debtor's bankruptcy filing, prevented RFF from asserting any rights in the Debtor's income outside of this Court and from obtaining findings that might impair the Debtor's claims against RFF. This is because the automatic stay prohibits any attempt by a creditor to take an action to exercise control over property of the Debtor's bankruptcy estate, which includes the Debtor's employment contract and his claims against RFF.

But without seeking relief from the automatic stay or even informing the Debtor of its actions, RFF continued the arbitration proceeding under the pretense of asserting claims against parties related to the Debtor. RFF ultimately obtained an arbitration award containing a finding that it has a perfected security interest in the Debtor's player contract and other findings that would defeat the Debtor's claims against RFF. By obtaining these findings and a state court order confirming the arbitration award, RFF attempted to exercise control over the Debtor's bankruptcy estate—both his salary and his counterclaims—to the detriment of the Debtor and his other creditors. And RFF sought these findings intentionally and with full knowledge of the Debtor's bankruptcy, in willful violation of the automatic stay.

The Court accordingly grants the Debtor's motion to enforce the automatic stay and sets a hearing on the issues of (1) the amount of the Debtor's attorneys' fees that RFF must pay and (2) whether punitive damages should be imposed against RFF and if so, in what amount.¹

II. Jurisdiction and Constitutional Authority

The Court has jurisdiction to hear and determine this contested matter pursuant to 28 U.S.C. §§ 157

and 1334 and the general order of reference entered in this district. This is a core proceeding. See 28 U.S.C. § 157(b)(2)(A) and (O) ; Amedisys, Inc. v. Nat'l Century Fin. Enters., Inc. (In re Nat'l Century Fin. Enters., Inc.), 423 F.3d 567, 573 (6th Cir.2005) (A "motion to enforce [the automatic stay] constitutes a ‘core proceeding’....").

There is disagreement about the circumstances under which an order holding an entity liable for violating the automatic stay while deferring an award of damages under § 362(k)

is a final order. In a case where the debtor sought only attorneys' fees and expenses for "contempt" by creditors in violating the automatic stay, the Bankruptcy Appellate Panel for the Sixth Circuit held that a bankruptcy court order granting a motion to enforce the automatic stay, but deferring its decision on the amount of attorneys' fees and expenses that should be awarded under § 362(k), was not a final order. See In re Webb, No. BAP 11–8016, 2012 WL 2329051, at *5 (6th Cir. BAP Apr. 9, 2012). Because the Court is deferring an award of attorneys' fees and expenses, this opinion and order would not be considered final under Webb. Other courts have held that a bankruptcy court's stay-enforcement order is not final if it defers consideration of damages other than attorneys' fees, including punitive damages. See Guy v. Dzikowski (In re Atlas), 210 F.3d 1305, 1308 (11th Cir.2000) (holding that an order awarding attorneys' fees and costs under 11 U.S.C. § 362(h) (now § 362(k) ) for violation of the automatic stay while "consider[ing] the possibility of future ... damages, but deferr[ing] assessment of those damages" was not a final order); Shimer v. Fugazy (In re Fugazy Express, Inc.), 982 F.2d 769, 776 (2d Cir.1992) (same); Calcasieu Marine Nat'l Bank v. Morrell (In reMorrell), 880 F.2d 855, 856–57 (5th Cir.1989) (same); see also Eden Place, LLC v. Perl (In re Perl), 811 F.3d 1120, 1132 (9th Cir.2016) ("Our sister circuits have uniformly held that an order finding a stay violation but postponing assessment of damages under § 362(k) is not final.") (Watford, J., dissenting). Under these authorities, because this order is deferring not only an award of attorneys' fees and expenses, but also the consideration of punitive damages, this order would not be considered final. But see Perl, 811 F.3d at 1126–27 (concluding that an order holding that a party had violated the automatic stay was final and appealable because it was a "substantive ruling with real effects" even though it deferred assessment of all damages), petition for cert. docketed, No. 15–1224 (U.S. Mar. 31, 2016).

Even if this order were final, the Court has the constitutional authority to enter it after Stern v. Marshall, 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011)

. The Debtor seeks a judgment finding that RFF violated the automatic stay. After Stern,"[t]here is no question that [a] bankruptcy court continues to have the authority to enter judgment on [a] claim for violation of the automatic stay .... [because] the automatic stay is fundamental to the bankruptcy system enacted by Congress." Loveridge v. Hall (In re Renewable Energy Dev. Corp.), 500 B.R. 77, 93 (D.Utah 2013), remanded on other grounds, 792 F.3d 1274 (10th Cir.2015) ; see also Tow v. Henley (In re Henley), 480 B.R. 708, 765 (Bankr.S.D.Tex.2012) ("[Relief for violation of the automatic stay] is unique to the Code. Such relief is not possible to obtain under state law. As a result, this Court concludes that Stern is inapposite, and this Court is constitutionally authorized to enter a final judgment regarding the disputes at bar."). The Court therefore concludes that it has the constitutional authority to enter a final judgment on the Debtor's motion to enforce the automatic stay (the "Enforcement Motion") (Doc. 382).

III. Procedural History

On October 7, 2014 (the "Petition Date"), the Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. On May 4, 2015, an arbitrator with ADR Services, Inc. ("ADRS") entered an arbitration award in favor of RFF (the "Arbitration Award"). Ex. 7. Several months later, the Debtor filed the Enforcement Motion, thereby requesting an order enforcing the automatic stay and assessing damages under § 362(k) of the Bankruptcy Code

on account of the violation of the automatic stay that the Debtor alleged occurred when RFF obtained the Arbitration Award. In addition to seeking actual damages in the form of attorneys' fees and expenses, the Debtor requested that the Court impose punitive damages against RFF. Enf't Mot. at 8.

In the Enforcement Motion, the Debtor noted that RFF had filed a petition to confirm the Arbitration Award (the "Petition to Confirm") in an action (the "State Court Action") that RFF had commenced in the Superior Court of California, County of Los Angeles (the "State Court") and that a hearing on the Petition to Confirm was scheduled for October 16, 2015. Enf't Mot. at 3, 5. Despite this, the Debtor did not file a motion requesting that the Court set an expedited hearing on the Enforcement Motion so that it would be held before the hearing in the State Court Action. RFF filed a response to the Enforcement Motion (the "Response") (Doc. 389), and the Debtor filed a reply memorandum (the "Reply") (Doc. 392). Thereafter, RFF and the Debtor submitted a proposed scheduling order fixing, among other things, various deadlines for discovery and a hearing date. The Court entered the order (Doc. 429), setting the hearing on the Enforcement Motion and the Response for December 9, 2015 (the "Hearing").² Before the date set for the Hearing, the State Court entered both an order confirming the Arbitration Award and a judgment in favor of RFF. Exs. 12 & 13.

RFF and the Debtor attempted to resolve this matter consensually, but were unsuccessful, and the Court convened the Hearing as scheduled. During the Hearing, the Court heard arguments of counsel and admitted Debtor's Exhibits 1–38 into evidence, including a fee statement by the Debtor's bankruptcy counsel, Hahn Loeser & Parks LLP ("HLP"), for the period from June through September 2015 (the "First Fee Statement") (Ex. 32) and a fee statement for the period from October through November 2015 (Ex. 37), without objection. Although RFF filed an exhibit list (Doc. 438) and mentioned the existence of four proposed exhibits at the Hearing, RFF did not seek to admit any evidence at the...