U.S. Abatement Corp., Matter of, 93-3582

Decision Date23 November 1994
Docket NumberNo. 93-3582,93-3582
Parties32 Collier Bankr.Cas.2d 769, 26 Bankr.Ct.Dec. 364, Bankr. L. Rep. P 76,209 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.
CourtU.S. Court of Appeals — Fifth Circuit

Richard W. Martinez, Tranchina & Martinez, New Orleans, LA, for appellant.

Sherman Gene Fendler, James D. McMichael, Liskow & Lewis, New Orleans, LA, for appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

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. Sec. 362(h) against a creditor who willfully violates the automatic stay of 11 U.S.C. Sec. 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. Sec. 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 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. Sec. 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 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. Sec. 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. Sec. 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, Mobil requested the bankruptcy court to reconsider its ruling that sanctions under 11 U.S.C. Sec. 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., USA's) original counterclaim was not an action "against the debtor" within the meaning of 11 U.S.C. Sec. 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. Sec. 362(h) against those who willfully violate the automatic stay. We now proceed to address each of these claims.

II. STANDARD OF REVIEW

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 Sec. 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.

More specifically, USA contends that Bankruptcy Rules 9020 3 and 9033 4 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 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. Sec. 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.

It is well-settled that a civil contempt order is not "final" for purposes of appeal unless two actions...

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