In re Siskin

• Decision Date: 13 February 2001
• Docket Number: Bankruptcy No. 898-82271-478. Adversary No. 898-8393-478.
• Citation: 258 BR 554
• Parties: In re Myron W. SISKIN, Debtor. Myron W. Siskin and Miriam Siskin, Plaintiffs, v. Complete Aircraft Services, Inc., Harry K. Kutner, Jr., Esq., Sylvia Ross and Marvin A. Bass, Esq., Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of New York

258 B.R. 554 (2001)

In re Myron W. SISKIN, Debtor Myron W. Siskin and Miriam Siskin, Plaintiffs, v. Complete Aircraft Services, Inc., Harry K. Kutner, Jr., Esq., Sylvia Ross and Marvin A. Bass, Esq., Defendants.

Bankruptcy No. 898-82271-478. Adversary No. 898-8393-478.

United States Bankruptcy Court, E.D. New York.

February 13, 2001.

Tracy L. Klestadt & Associates, by Tracy L. Klestadt, Wayne D. Holly, New York City, for the debtor-plaintiff.

Certilman, Balin, Adler & Hyman, Complete Aircraft Services, Inc. and Harry Kutner, Jr., by Michael D. Brofman, East Meadow, NY, for the defendants.

MEMORANDUM DECISION ON MOTION BY PLAINTIFFS TO RECONSIDER DECISION DISMISSING COMPLAINT AS TO COMPLETE AIRCRAFT SERVICE, INC. AND HARRY H. KUTNER, JR., ESQ.

DOROTHY EISENBERG, Bankruptcy Judge.

Myron Siskin (the "Debtor") and his wife, Miriam Siskin ("Miriam"), commenced an adversary proceeding against Sylvia Ross ("Ross"), her counsel, Marvin Bass, Esq. ("Bass") (Ross and Bass, collectively, the "Bass Defendants"), and Complete Aircraft Services, Inc. ("CASI") and its counsel, Harry Kutner, Jr., Esq. (CASI and Kutner, collectively, the "Kutner Defendants"), seeking damages pursuant to 11 U.S.C. § 362(h) for willful violation of the automatic stay. At a trial held before the Honorable Francis G. Conrad, U.S.B.J., it was found that the Bass Defendants and the Kutner Defendants willfully violated the automatic stay, and a trial on the issue of damages was scheduled for a later date. Judge Conrad also dismissed the portion of the action pursuant to which Miriam sought recovery of certain funds paid to CASI post-petition, as she was a non-debtor and had no standing to seek relief pursuant to 11 U.S.C. § 362(h).

Prior to the hearing on the issue of damages, which was reassigned to this Court, the Kutner Defendants filed a motion to dismiss the adversary proceeding as against them based on their argument that this Court lacks subject matter jurisdiction to hear the complaint because a State Court previously adjudicated the issues decided by Judge Conrad and rejected the Debtor's argument. By Memorandum Decision and Order dated February 23, 2000 (the "February 23 Decision and Order"), this Court granted the Kutner Defendants' motion to dismiss, finding that, if the Court upheld Judge Conrad's decision that the Kutner Defendants willfully violated the automatic stay, then the prior State Court decision would be nullified, a result which is strictly prohibited by the Rooker-Feldman doctrine.

Now before the Court is the motion by the Plaintiffs for Reconsideration, Reargument and/or Relief from the February 23 Decision and Order (the "Motion for Reconsideration"), urging this Court to adopt the holding in the Ninth Circuit's en banc decision in In re Gruntz, 202 F.3d 1074 (9th Cir.2000), that (i) "by virtue of the power vested in them by Congress, the federal courts have the final authority to determine the scope and applicability of the automatic stay"; (ii) "the States cannot, in the exercise and control over local laws and practice, vest State courts with power to violate the supreme law of the land"; (iii) "the Rooker-Feldman doctrine is not implicated by collateral challenges to the automatic stay in bankruptcy"; and (iv) "a bankruptcy court simply does not conduct an improper appellate review of a state court when it enforces an automatic stay that issues from its own federal statutory authority." Id., at 1082, as applicable, to this case. Since the applicability of the Rooker-Feldman doctrine in the context of automatic stay litigation is a matter of first impression in the Eastern District of New York and in the Second Circuit,¹ the Court agreed to entertain the Motion for Reconsideration. The matter for reconsideration is solely an issue of law.

After consideration of all the papers, memoranda of law and proceedings had herein, and after undertaking an exhaustive review of the jurisdictional underpinnings of bankruptcy courts and the case law analyzing the applicability of the Rooker-Feldman doctrine to automatic stay litigation in bankruptcy cases, the Court declines to follow the Ninth Circuit's en banc decision in Gruntz, which is not binding authority in this Circuit. Instead, the Court holds that the Rooker-Feldman doctrine precludes this Court from upsetting a New York Supreme Court judgment which determined that the automatic stay did not apply to the contempt proceeding before it, absent the enactment by Congress of a statute specifically depriving State Courts of jurisdiction to determine in the first instance whether the automatic stay applies to it. This decision constitutes the Court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52, as made applicable herein by Fed.R.Bankr.P. 7052.

FACTS

The facts of this case are undisputed. On March 3, 1998 (the "Petition Date"), the Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code. Pre-petition, in a State Court civil action entitled Sylvia Ross v. Myron Siskin, Ross obtained a judgment against the Debtor in the approximate amount of $15,000 on February 4, 1997. After numerous attempts by the judgment creditor to obtain documents and other information and after several judgment enforcement proceedings, the Honorable Edward Hart, Jr., J.S.C., issued a warrant of arrest dated December 2, 1997 (the "Warrant of Arrest"), of the Debtor due to the Debtor's failure to comply with certain court orders made in connection with. Ross' judgment enforcement proceedings. The Warrant of Arrest, which adjudicated the Debtor guilty of civil contempt for failure to comply with the proceedings commenced by Bass, counsel to Ross, to enforce Ross' civil judgment against the Debtor, remained outstanding as of the Petition Date.

Also outstanding against the Debtor as of the Petition Date was an order of commitment (the "Order of Commitment") which had been entered prepetition on or about February 28, 1998 by the Honorable John DiNoto, J.S.C., in a separate State Court civil action entitled Complete Aircraft Services, Inc. v. Hook Creek Industrial Park, Inc. v. Myron Siskin. The Debtor was the business attorney for CASI in the 1970's. In 1980, the Debtor borrowed $10,000 from CASI, which funds were never repaid. In September 1982, CASI obtained a money judgment against the Debtor in the sum of $14,418 (the "CASI Judgment"). In the meantime, the Debtor was disbarred from the practice of law in 1983.

Soon after entry of the CASI Judgment, counsel to CASI sought to examine the Debtor in order to collect on the CASI Judgment, but the Debtor defied the Court process and he was found in contempt of court. Kutner took over representing CASI on this matter in 1985, and, in 1986, the Debtor was held in contempt of court two times for failing to produce certain documents to assist CASI in collecting on its judgment.

Eventually, an Order of Commitment for the Debtor's arrest and confinement was issued on November 30, 1990. For the next seven years, the Debtor evaded the Sheriff. On February 27, 1998, a new Order of Commitment was issued containing another contempt finding. The Order of Commitment was issued upon the motion by CASI and supported by an affidavit submitted by Kutner, its counsel, and (a) adjudicated the Debtor guilty of civil contempt for failure to produce records in connection with CASI's civil judgment enforcement proceedings against the Debtor, (b) ordered the Debtor to make periodic payments of $5,000 per month until the CASI Judgment was satisfied, and (c) directed the Sheriff of Nassau County to locate, arrest, and detain the Debtor in the Nassau County Jail until (i) the Debtor satisfied the terms of the contempt order, (ii) satisfied the CASI Judgment, or (iii) for a period of sixty days, at which time a further determination of custody would be made. The Order of Commitment was stamped "Received" by the Nassau County Sheriffs Department on March 10, 1998, seven days after the Petition Date.

On March 16, 1998, the Debtor was arrested by the Nassau County Sheriff pursuant to the Order of Commitment entered on behalf of the Kutner Defendants. The Debtor was detained in the Nassau County Jail for seventeen (17) days until his release on April 2, 1998. Both the Kutner Defendants and the Bass Defendants were found to have had notice of the Debtor's bankruptcy and the pendency of the automatic stay at least as of March 17, 1998.

On the morning following the Debtor's arrest, March 17, 1998, counsel to the Debtor telephoned Judge Eisenberg's chambers to inquire whether the Court would entertain an emergency ex parte order directing the release of the Debtor, who had been incarcerated pursuant to a State Court order, and scheduling a hearing and oral argument on the Debtor's request for sanctions against the Kutner Defendants and the Bass Defendants for violating the stay. Judge Eisenberg's chambers advised that, without any knowledge of the State Court proceeding, a hearing would have to be scheduled in the Bankruptcy Court on written application and notice to opposing parties. Since the Debtor had already been jailed, the Debtor elected to appear in State Court through counsel on an emergency basis to argue for the Debtor's immediate release pursuant to Section 362 of the Bankruptcy Code. On March 18, 1998, without advance notice to the Kutner Defendants, the Debtor's attorneys appeared before the Honorable John DiNoto, J.S.C., to make an oral application on the record for the Debtor's release, claiming that the Debtor should be released pursuant to Sections 362(a)(1), (2) and (6) of the Bankruptcy Code. Justice DiNoto requested Kutner to appear immediately to be heard on the application. Upon his appearance, argument on the record proceeded. Debtor's counsel did not file pleadings and elected to be heard based on oral argument seeking a release of the Debtor from incarceration. Kutner did not affirmatively seek or consent to...