United States v. Robinson (In re Robinson)

• Decision Date: 22 August 2014
• Docket Number: No. 13–5857.,13–5857.
• Citation: 764 F.3d 554
• Court: U.S. Court of Appeals — Sixth Circuit
• Parties: In re James D. ROBINSON, Jr., Debtor. United States of America, Appellee, v. James D. Robinson, Jr., Appellant.

764 F.3d 554

In re James D. ROBINSON, Jr., Debtor.United States of America, Appellee,

v.James D. Robinson, Jr., Appellant.

No. 13–5857.

United States Court of Appeals, Sixth Circuit.

Aug. 22, 2014.

ON BRIEF:John E. Dunlap, The Law Office of John E. Dunlap, P.C., Memphis, Tennessee, for Appellant. Barbara M. Zoccola, United States Attorney's Office, Memphis, Tennessee, for Appellee.

Before: COLE, Chief Judge; GRIFFIN, Circuit Judge; PEARSON, District Judge.^*

OPINION

COLE, Chief Judge.

After James Robinson defrauded more than one thousand victims in mail and wire fraud schemes, the district court ordered him to pay criminal restitution. Robinson did not comply with the court's order, and he later filed a petition for Chapter 13 bankruptcy. Filing for bankruptcy triggered the Bankruptcy Code's automatic stay, which suspends all activities related to the collection and enforcement of prepetition debts. See11 U.S.C. § 362(a). The government seeks to bypass the automatic stay by invoking 18 U.S.C. § 3613(a), which provides that the government may enforce a judgment imposing restitution “notwithstanding any other Federal law.” Based on the plain meaning of § 3613 and the approach adopted by our sister circuits in interpreting this statute, § 3613 supersedes the automatic stay and allows the government to enforce restitution orders against property included in the bankruptcy estate. We therefore affirm the district court's judgment.

I. BACKGROUND

In 1996, Robinson pleaded guilty to mail fraud and aiding and abetting under 18 U.S.C. §§ 1341 and 1342. The district court sentenced Robinson to 97.5 months of imprisonment followed by three months of supervised release and ordered him to pay criminal restitution in the amount of $286,875. A year later, Robinson pleaded guilty to a second set of criminal violations, resulting in convictions of wire fraud and aiding and abetting under 18 U.S.C. §§ 1342 and 1343. The district court imposed a twenty-four-month term of imprisonment and once again ordered Robinson to pay restitution, this time in the amount of $100,000. Although required to pay both restitution orders “in full immediately,” Robinson paid only $7,779.44 of the first judgment and $200 of the second. Before satisfying the restitution judgments, Robinson filed for bankruptcy under Chapter 13.

The government, by virtue of the criminal restitution judgments, is a lien creditor. Thus, the Department of Justice is listed as a general unsecured creditor on Robinson's Bankruptcy Schedule F, with a $283,101 claim. Robinson's schedule of assets listed an IRA account valued at $47,000, a tax refund valued at $4,500, and three automobiles—a 2006 Toyota Highlander valued at $6,000, a 2001 Toyota Solara valued at $2,000, and a 1999 Infiniti valued at $900. Robinson claimed two exemptions under Tennessee law: the entire value of his IRA account and $1,500 in the 2006 Toyota.

The government moved for a declaratory judgment to determine whether the automatic stay prevented its actions to collect restitution. According to the government, it had the authority to enforce the restitution judgments under 11 U.S.C. § 362(b)(1) and alternatively under 18 U.S.C. § 3613(a), which provides that “notwithstanding any other Federal law ... a judgment imposing a fine may be enforced against all property or rights to property of the person fined,” with certain exceptions not relevant here. The government also sought to terminate the stay as to all of Robinson's assets, and specifically moved to allow for the enforcement and execution on Robinson's IRA account, pension fund, and two of his three automobiles under 11 U.S.C. § 362(d)(2)(B).

The bankruptcy court denied the government's “request to terminate the automatic stay as to all assets,” but granted relief from the stay as to Robinson's IRA account and two of his three automobiles. With respect to the IRA account, the court found that “[i]t would be patently unfair ... to allow [Robinson] to save for his retirement utilizing the IRA at the expense of his restitution creditors.” See11 U.S.C. § 362(d)(1). After determining that three vehicles were unnecessary for Robinson's reorganization, the court terminatedthe stay as to two of his three automobiles.

Although the government relied on 11 U.S.C. § 362(b)(1) and 18 U.S.C. § 3613 to bypass the stay, the bankruptcy court concluded that neither statute allowed the government to enforce the restitution orders against property of the bankruptcy estate. Section 362(b)(1) excepts from the automatic stay “the commencement or continuation of a criminal action or proceeding against the debtor.” In ruling out this exception, the bankruptcy court concluded that § 362(b)(1) allows enforcement actions only against the debtor, not against property of the estate. It noted that the stay and its exceptions apply to different entities—the debtor in personam, property of the debtor, and property of the estate—and that these categories must be examined carefully “to assure that the correct entity ... has the intended statutory protection of the automatic stay.” Because § 362(b)(1) does not mention property of the estate, the bankruptcy court concluded that the government's collection efforts were prohibited.

The bankruptcy court then addressed 18 U.S.C. § 3613(a). While recognizing that this statute is “powerful and far-reaching,” the court held that § 3613 does not overcome the automatic stay, absent the court's authorization. Reiterating its main premise that “ property of the debtor and property of the estate are separate legal terms of art,” the court reasoned that § 3613 does not apply to property of the estate because it too mentions only “property of the person fined.” Therefore, according to the bankruptcy court, property of the estate is protected during the pendency of Robinson's bankruptcy proceeding.

The government appealed the bankruptcy court's order and elected to have a district court hear the appeal. See28 U.S.C. § 158(c)(1)(B). The district court did not analyze the “criminal action or proceeding” exception in § 362(b)(1); instead, it concluded that 18 U.S.C. § 3613(a) “renders the Bankruptcy Code's distinctions between ... property of the debtor ... and property of the bankruptcy estate a nullity.” In the district court's view, it did not matter “whether the debtor in bankruptcy or the bankruptcy estate holds nominal title to such property” because § 3613(a) allows the government to enforce a restitution order against all property of the person ordered to pay. The district court emphasized the “clear Congressional policy” of § 3613(a), which was to ensure that “no Federal law ... interfere with the United States' enforcement of a fine or restitution order.” It was therefore insignificant to the district court that Robinson's property was recast as property of the bankruptcy estate because § 3613 prevented application of the stay. Any other interpretation, the court indicated, would “rob fines and restitution orders of their teeth.”

Robinson timely appealed the district court's order.

II. ANALYSIS

When reviewing an appeal that originated in a bankruptcy court, “[w]e evaluate the bankruptcy court decision directly, without being bound by the district court's determinations, and conduct an independent examination of the record.” In re John Richards Homes Bldg. Co., L.L.C., 439 F.3d 248, 254 (6th Cir.2006). We review the bankruptcy court's interpretation of 11 U.S.C. § 362 and 18 U.S.C. § 3613 de novo. See In re Vause, 886 F.2d 794, 798 (6th Cir.1989).

A debtor's filing for bankruptcy automatically triggers several provisions of the Bankruptcy Code. First, 11 U.S.C. § 541(a) divests a debtor of the property he or she owned at the time of the filing and vests that property in a bankruptcy trustee. See, e.g., Bauer v. Commerce Union Bank, 859 F.2d 438, 440–41 (6th Cir.1988). In other words, property of the debtor becomes property of the bankruptcy estate, which consists of “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). Property of the estate is central to the bankruptcy process. It “becomes the ‘pot’ from which all claims against the debtor will be paid pursuant to the [Bankruptcy] Code's priority scheme.” Chao v. Hosp. Staffing Serv. Inc., 270 F.3d 374, 382 (6th Cir.2001) (internal citations omitted).

Second, filing for bankruptcy stays a number of enforcement actions against the debtor, his or her property, and property of the estate. See11 U.S.C. § 362(a). The stay seeks to “preserve what remains of the debtor's insolvent estate and ... provide[s] a systematic equitable liquidation procedure for all creditors, secured as well as unsecured, thereby preventing a ‘chaotic and uncontrolled scramble for the debtor's assets in a variety of uncoordinated proceedings in different courts.’ ” Chao, 270 F.3d at 382–83 (quoting Holtkamp v. Littlefield, 669 F.2d 505, 508 (7th Cir.1982)). The purpose of the automatic stay is to

give[ ] the debtor a breathing spell from his 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. 95–595, at 340 (1978), 1978 U.S.C.C.A.N. 5963, 6297. In effect, the stay offers debtors a “new opportunity” to organize their financial affairs, “unhampered by the pressure and discouragement of pre-existing debt.” Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 78 L.Ed. 1230 (1934).

But the stay is not absolute: while it “repel[s]” many prepetition collection actions, “[s]ome governmental attacks on the estate ... penetrate the barrier.” In re Javens, 107 F.3d 359, 363 (6th Cir.1997). For example, under the “criminal action or proceeding” exception, filing for bankruptcy does not stay the “commencement or continuation of a criminal action or...