PRESENTED BY: THE BUSINESS BANKRUPTCY COMMITTEE OF THE ABA SECTION OF BUSINESS LAW

SURPRISE!: WAYS IN WHICH THE AUTOMATIC STAY OR DISCHARGE INJUNCTION

CAN SNEAK UP ON YOU Panelists: The Honorable Erithe Smith United States Bankruptcy Judge United States Bankruptcy Court for the Central District of California, Santa Ana Division Santa Ana, California

Craig Goldblatt, Esquire Partner WilmerHale Washington, D.C

Linda Leali, Esquire Shareholder Linda Leali, P.A. Miami, Florida

Sharon Weis, Esquire Partner Bryan Cave, LLP Santa Monica, California

Materials Coordinators: Dale Cathell, Esquire Partner DLA Piper LLP (US) Baltimore, Maryland

Ashley D. Champion Law Clerk to the Hon. Mary Grace Diehl United States Bankruptcy Court for the Northern District of Georgia

Moderator: Steven Kinsella, Esquire Senior Associate Fredrikson & Byron, P.A. Minneapolis, Minnesota

April 8, 2017 New Orleans, Louisiana

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TABLE OF CONTENTS

I. Overview of the Automatic Stay and the Discharge Injunction by The Honorable Erithe Smith…………………………………………………3 II. Attempts to Avoid the Automatic Stay May Be In Vain By Sharon Weis, Esquire……………………………………………………….10

III. How Reporting a Crime May Subject You to Sanctions By Sharon Weis, Esquire and Jennifer Odom, Esquire…………………………17 IV. The Discharge Injunction as a Negative Injunction Against Collection Activity

Rather Than The Source of Affirmative Obligations By Craig Goldblatt, Esquire…………………………………………………….21

IV. Violations of the Automatic Stay and Executory Contracts By Steven R. Kinsella, Esquire…………………………………….…………..25 V. Biographies……………………………………………………………………………..30

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Overview of the Automatic Stay and the Discharge Injunction

By:

The Honorable Erithe Smith United States Bankruptcy Judge United States Bankruptcy Court for the Central District of California, Santa Ana Division Santa Ana, California

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Overview of the Automatic Stay and the Discharge Injunction

Effect and Purpose of the Automatic Stay – 11 U.S.C. § 362

The filing of a bankruptcy petition triggers a temporary automatic stay, or injunction, that

enjoins creditors from commencing or continuing acts against the debtor and his assets for the

purpose of collecting on debts that exist as of the date of the filing. The stay provisions of

Section 362 of the Bankruptcy Code are effective without any order or action of the court and

apply to creditors whether or not they have notice of the bankruptcy. The stay is designed to

facilitate the reorganization of the debtor’s financial affairs and/or the orderly liquidation of the

debtor’s assets by providing the debtor breathing room from the collection efforts of creditors

and ensuring the equal distribution of assets among similarly situated creditors by preventing a

race to the courthouse by certain creditors for the purpose of seizing assets or obtaining a

strategic advantage over other creditors.

Types of Actions that are Stayed

The scope of Section 362 is broad and encompasses a wide range of actions. Generally

speaking, the following actions are stayed:

1. Commencement or Continuation of Litigation -- The commencement or continuation

of any judicial, administrative or other action against the debtor on account of a

prepetition claim. 11 U.S.C. §362(a)(1). The stay also applies to any appeals by the

debtor where the debtor was a defendant in the underlying action. See, e.g., Sheldon

v. Munford, Inc., 902 F.2d 7 (7th Cir. 1990) (Appeal by debtor-defendant is stayed).

As a general rule, the automatic stay protects the debtor only and not third parties.

However, in chapter 13 cases, Section 1301 provides a stay as to any non-filing co-

debtor who is liable with the debtor for a consumer debt.

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2. Enforcement of Judgments -- The enforcement of a prepetition judgment against

either the debtor or property of the estate. 11 U.S.C. §362(a)(2). This includes most

collection activities such as levies, garnishments, and other post-judgment remedies.

3. Possession or Control Over Property of the Estate -- Any act to obtain possession of

the bankruptcy estate or of property from the estate or the exercise of control over

property of the estate. 11 U.S.C. §362(a)(3).

4. Liens -- Any act to create, perfect, or enforce a lien against property of the estate or

against property of the debtor on account of a prepetition claim. 11 U.S.C.

§362(a)(4); 11 U.S.C. §362(a)(5).

5. Collections – Any act to collect, assess or recover a prepetition claim against the

debtor (such as collection telephone calls, dunning letters, etc.). 11 U.S.C. §362(a)(6).

6. Setoff – The setoff of any prepetition debt owing to the debtor against any claim

against the debtor. 11 U.S.C. §362(a)(7). Though Section 553 recognizes a right of

setoff of a mutual debt as permitted under applicable nonbankruptcy law (with certain

limitations), such setoff is nevertheless stayed under Section 362(a)(7) and may not

be exercised without permission of the bankruptcy court.

7. Tax Court Litigation – The commencement or continuation of a proceeding in the

U.S. Tax Court against the debtor. 11 U.S.C. §362(a)(8).

Types of Actions that are Not Stayed As a general matter, the stay does not apply to claims against the debtor arising

after the filing of the bankruptcy case. Section 362(b) lists twenty-eight exceptions to the

automatic stay, among them:

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1. Criminal Proceedings – The commencement or continuation of a criminal action or

proceeding against the debtor, including criminal investigations. 11 U.S.C.

§362(b)(1).

2. Paternity/Support/Alimony – The commencement or continuation of a civil action or

proceeding concerning paternity, child custody and marital dissolution as well as the

collection of support obligations from non-estate property. 11 U.S.C. §362(b)(2).

3. Perfection of Certain Liens – the perfection of statutory liens that cannot be avoided

under Section 546. 11 U.S.C. §362(b)(3). Section 546 “protects the unperfected

statutory lien claimant against the hypothetical lien creditor status the bankruptcy

trustee gains at the commencement of a bankruptcy case by allowing the claimant the

opportunity to perfect its security interest post-petition, so long as such perfection is

still within the statutory time periods for perfection.” In re Aznoe Agribiz, Inc., 416

B.R. 755, 763 (Bankr.D.Montana 2009).

4. Enforcement of Police and Regulatory Powers - The commencement or continuation

of acts to enforce the police or regulatory powers of a government unit, including the

enforcement of nonmonetary judgments. 11 U.S.C. §362(b)(4). While a government

unit may exercise its police or regulatory powers in the interest of protecting public

safety, health and welfare, the exception does not extend to the government unit’s

collection of a debt.

5. Enforcement of Liens Against an Ineligible Debtor – Any act to enforce a lien or

security interest against real property if the debtor is ineligible under Section 109(g)

or if the case was filed in violation of bankruptcy court order prohibiting the filing of

the case. 11 U.S.C. §362(b)(21).

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For a complete list of the statutory exceptions to the automatic stay see . 11 U.S.C. §§ 362(b)(1)

– (b)(28).

Termination of the Automatic Stay

Under Section 362(c), subject to 362(d), (e), (f) and (h), the stay of an act against

property of the estate prohibited by Section 362(a) continues until the property is no longer

property of the estate (e.g., the property is sold pursuant to Section 363 or abandoned pursuant to

Section 554). As to all other acts, the stay continues until the earliest of the closing of the case,

the dismissal of the case, or the time a discharge is granted or denied.

Remedies for Violation of the Automatic Stay

Generally, under Section 362(k), an individual injured by the willful violation of the stay

is entitled to recover from the violator actual damages, attorneys’ fees and costs, and in certain

circumstances, punitive damages. Individual debtors, as well as corporate debtors and

bankruptcy trustees may also seek damages for stay violations under the civil contempt powers

of the bankruptcy court pursuant to Section 105(a). See, Knupfer v. Lindblade (In re Dyer), 322

F.3d 1178, 1190 (9th Cir. 2003) (Trustee may seek damages for violation of the automatic stay

under civil contempt remedy provided by 11 U.S.C. §105(a)); In re H Granados

Communications, Inc., 503 B.R. 726, 734-735 (9th Cir. BAP 2013) (Section 362(k) only applies

to individuals and excludes corporation. Corporation may be entitled to recovery under Section

105(a) as a sanction for civil contempt).

Effect and Purpose of the Discharge Injunction – 11 U.S.C. § 524(a)

Upon the termination of the automatic stay under Section 362(c), if the debtor receive a

discharge, the discharge injunction provisions of Section 524(a) are triggered. Under Section

524(a), a discharge:

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1. voids any judgment concerning the personal liability of the debtor with respect to any

debt discharged under chapters 7, 9, 11, 12 or 13;

2. operates as a permanent injunction against action to collect, recover or offset any

discharged debt as a personal liability of the debtor; and

3. operates as a permanent injunction against any act to collect, recover from, or offset

against, certain community property of the debtor that is acquired after the

commencement of the case on account of any community claim (except a claim that

is excepted from discharge under the Bankruptcy Code.)

The legislative history to Section 524 makes clear that discharge injunction is intended to

enjoin all forms of collection efforts, including telephone calls, letters, and personal contacts to

collect, recover or offset any discharged debt as a personal liability of the debtor and is further

intended to ensure that once a debt is discharged, the debtor will not be pressured to repay it.

House Report No.95-595, 95th Cong, 2st Sess. 365-6 (1977); Senate Report No. 95-989, 95th

Cong., 2d Sess. 80 (1978).

Although the bankruptcy discharge eliminates a debt as a personal liability of the debtor,

it does not extinguish any lien that provides security for the debt. 11 U.S.C. § 522(c)(2). Stated

otherwise, a discharge does not discharge a lien against real or personal property; liens survive or

pass through bankruptcy unaffected. See, e.g., Johnson v. Home State Bank, 501 U.S. 78, 83, 111

S.Ct. 2150, 2153, 115 L.Ed.2d 66 (1991); Long v. Bullard, 117 U.S. 617, 620, 6 S.Ct. 917, 918,

29 L.Ed. 1004 (1886).

While the automatic stay temporarily enjoins any act to enforce a lien against property of

the estate, there is no comparable lien enforcement prohibition in the discharge injunction. Thus,

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once the automatic stay expires, the creditor may proceed to enforce the lien in accordance with

applicable state law.

Remedy for Violation of the Discharge Injunction

Section 524(a) does not expressly provide a remedy for a violation of the discharge

injunction. Nevertheless, the majority of circuit courts have upheld the authority of bankruptcy

courts under Section 105(a) to enforce Section 524(a) through contempt proceedings. In re Paul,

534 F.3d 1303, 1306–1307 (10th Cir. 2008) (citing Walls v. Wells Fargo Bank, N.A., 276 F.3d

502, 506–07 (9th Cir. 2002), Cox v. Zale Del., Inc., 239 F.3d 910, 916–17 (7th Cir. 2001),

Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439, 444 (1st Cir. 2000)); In re Nat'l Gypsum Co.,

118 F.3d 1056, 1063 (5th Cir. 1997); In re Hardy, 97 F.3d 1384, 1389 (11th Cir. 1996). A court

may impose civil contempt sanctions where there is clear and convincing evidence that (1) a

valid order of the court existed; (2) the defendant had knowledge of the order; and (3) the

defendant disobeyed the order. See Robin v. Woods, 28 F.3d 396, 399 (3d Cir.1994).

In In re Fauser, 545 B.R. 907 (Bankr.S.D. Texas 2016), the court aptly observed that:

Though the injunction is statutory in nature, its effect is equivalent to that of a court order. In re Sandburg Fin, Corp., 446 B.R. 793,803 (S.D.Tex), aff'd sub nom. In re Am. Rice, Inc., 448 Fed.Appx. 415 (5th Cir.2011). Accordingly, the consequences for violating the discharge injunction are identical to the consequences attendant to violating a court order, namely, civil contempt. Collier at ¶ 524.02[2][c].

Section 524 does not specifically address awarding monetary relief for violations

of the discharge injunction, but courts have fashioned such relief through their inherent contempt power and statutory authority under § 105. In re Ritchey, 512 B.R. 847, 860 (Bankr.S.D.Tex.2014). For willful violations of the discharge injunction, courts have awarded actual damages, emotional distress damages, and attorney's fees. In order to support finding a willful violation of § 524(a)(2), the offending creditor must “(1) know the injunction has been entered, and (2) intend[ ] the actions that violate it.” In re Contreras, 2007 WL 273128 at *1 (Bankr.S.D.Tex.Jan. 26, 2007). Punitive damages may also be awarded in certain situations. Collier at ¶ 524.02[2][c].

Id. at 912-913.

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Attempts to Avoid the Automatic Stay May Be In Vain

By:

Sharon Weis, Esquire Partner Bryan Cave, LLP Santa Monica, California Telephone: (310)576-2276 Email: sharon.weiss@bryancave.com

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Attempts to Avoid the Automatic Stay May Be In Vain

Most state court judges and litigators have a working knowledge of the automatic stay

and the harsh results that may ensue for a violation of the stay. For one thing, actions taken in

violation of the automatic stay are void. More seriously, an offending party may be subject to

sanctions. Therefore, most attorneys at least attempt to navigate around a possible violation of

the stay.

Those attempts become tricky when a debtor may have fractional or contingent interest in

property. In Harsh Investment Corp. v. Bialac, 712 F.2d 426 (1983), the Ninth Circuit found that

a creditor violated the automatic stay when a chapter 11 debtor owned one-sixth of a note. The

post-petition act in Bialac that violated the stay was a foreclosure sale by the secured creditor on

the five non-debtors' interest in the pledged note and not the debtor's interest. However,

foreclosure of the interest of non-debtors' violated the stay because it altered and diminished the

debtor's right of redemption, whereas prior to foreclosure the debtor could have paid $450,000 to

redeem the entire note, afterwards he would have to pay $300,000 to protect only his 1/6 interest.

In Bialac, the Ninth Circuit Court of Appeals recognized that although a state court action may

not be directly against a debtor party, it may nevertheless violate the automatic stay when the

underlying claims involve property of the estate. The Ninth Circuit developed a three-part

analysis to determine if a party violated the stay. First, the court must determine whether there

was a property right as defined under state law. Second, if a property right exists, then the court

must determine whether that property right is property of the bankruptcy estate under 11 U.S.C.

§ 541. Third, the court must consider whether the property was altered in a manner contrary to

the relevant provisions of 11 U.S.C. § 362(a). Bialac, 712 F.2d at 429-430.

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In deciding on the first two factors, the Ninth Circuit ruled that the property right in

question was the debtor's right to redeem his interest in a note. The Ninth Circuit ruled that

under California law, a pre-foreclosure right to redeem is property under section 541 whether it

stems from ownership for the entire underlying property or only a fractional share. Bialac, 712

at 431.

In order to determine the third prong under Bialac and decide whether the action attempts

to exercise control over property of the estate, the Court may evaluate the nexus between the

conduct at issue and the property interests of the bankruptcy estate, as well as the degree of

impact on the bankruptcy estate and the competing legal interests of the non-debtor

parties. Allentown Ambassadors, Inc. v. Northeast American Baseball, LLC, 361 B.R. 422

(Bankr. E.D. Pa 2007).

The Ninth Circuit in Bialac made an interesting observation - not only did the creditor's

action cut off the debtor's pre-foreclosure right of redemption, "it would be more consistent with

the best interest of the debtor and all creditors if the division of property in which the debtor has

a fractional interest is under the auspices of the trustee in bankruptcy." Bialac, 712 at 432. In

other words, the Ninth Circuit reasoned that even though the debtor only had a fractional interest

in the note, the estate and its creditors would be better served by the sale of the entire note.

Therefore, that ground alone could be sufficient to find that the act interfered with property of

the estate, and hence, a violation of the automatic stay.

Open Question - The Impact of the Automatic Stay on Redemption Rights

While it is clear that a debtor's redemption rights may be property of the bankruptcy

estate, it is less clear whether the bankruptcy code tolls the time for the debtor to exercise his or

her right to redeem the property.

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Under California Code of Civil Procedure § 729.030(b), a borrower is entitled to a one

year right of redemption. The “right of redemption” is simply the right of the foreclosed

homeowner to buy the home back from the person who bought it at the foreclosure at the

redemption price. Any tolling of this deadline is governed by 11 U.S.C. 108(b). In re Rugroden,

481 B.R. 69 (Bankr. N.D. Cal. 2012).

In Rugroden, the IRS had seized the debtor’s real properties for nonpayment of income

taxes and sold the real properties to a third party purchaser. Id. at 71. After the sales, the debtor

had a 180-day statutory right to redeem each of the real properties under the Internal Revenue

Code, 26 U.S.C. § 6337. Id. The debtor filed for bankruptcy protection before the right of

redemption periods expired (the deadline to exercise the right of redemption was different for

each real property because they were sold on different dates). Id. After the redemption periods

expired, and without obtaining relief from the automatic stay, the IRS issued deeds to the

purchaser of the real properties. Id. The debtor claimed that the IRS violated the automatic stay

by issuing the deeds. Id. The debtor argued that the right of redemption periods was tolled by

the automatic stay. Id. at 72. The IRS responded that the statutory redemption periods were not

tolled by 11 U.S.C. § 362 and that the redemption periods expired 60 days after the debtor’s

bankruptcy petition filing pursuant to 11 U.S.C. § 108. Id.

The court found no Ninth Circuit or Ninth Circuit Bankruptcy Appellate Panel decisions

on point. Id. at 75. In considering these arguments, Judge Weissbrodt opined that, “[a] unique

situation occurs when a bankruptcy petition is filed after the sale of real property but during a

debtor’s statutory redemption period.” Id. at 74. Several lower courts, with varying results, have

addressed whether a redemption period is stayed by § 362 or § 108(b). Id. citing In re Farmer,

81 B.R. 857 (Bankr. E.D. Pa. 1988); Johnson v. First Nat. Bank of Montevideo, Minn., 719 F.2d

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270 (8th Cir. 1983); Martinson v. First Nat. Bank of Oakes (In re Martinson), 26 B.R. 648

(D.N.D. 1983), reversed in part, 731 F.2d 543 (8th Cir. 1984); Heikkila v. Carver (In re Carver),

828 F.2d 463 (8th Cir. 1987); Multnomah Cty. v. Rudolph (In re Rudolph), 166 B.R. 440 (D. Or.

1994).

Section 108(b) provides that when applicable nonbankruptcy law fixes a period within

which the debtor may file any pleading, demand, notice, or proof of claim or loss, cure a default,

or perform any other similar act, and that period did not expire before the petition date then the

debtor-in-possession may only perform such act before the later of the period for performance, or

60 days after the order for relief. Id.

There are cases to the contrary. See for example Hamblen v. Fed. Savings & Loan Ins.

Corp. (In re Thomas J. Grosso Investment, Inc.), 457 F.2d 168 (9th Cir. 1972) and Sapphire

Investments v. Steward Title & Trust of Tucson (In re Sapphire Investments), 19 B.R. 492

(Bankr. D. Az. 1982). However, Judge Weissbrodt specifically considered these decisions and

found them to be inapplicable. Id. at 75, 76.

Hamblen addressed a similar set of facts but was decided under the Bankruptcy Act. The

Ninth Circuit ruled that the predecessor to § 108 did not apply to reorganization cases under the

Act. Id. at 75. Hamblen was overturned by statute and is no longer viable because § 108 of the

Bankruptcy Code expressly applies to reorganization cases. Id. Additionally, Hamblen is

contrary to the majority decisions after § 108(b) was effectuated. Id. at 75-76 citing Farmer, 81

B.R. 859-61; Johnson, 719 F.2d at 277-78; In re Liddle, 75 B.R. 41, 43-44 (Bankr. D. Mont.

1987); Glenn, 76 F.2d at 1438-40; Goldberg v. Tynan (In re Tynan), 773 F.2d 177, 179-80 (7th

Cir. 1985); Peterson, 42 B.R. at 41-42; 4 Collier on Bankruptcy, ¶ 541.04[2] (16th ed. 2012);

Norton Bankruptcy Law and Practice 3d, § 61:5 at 61-20 (3d ed. 2012).

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The specific provisions of § 108(b), made applicable to reorganization cases under §

103(a), are dispositive. Id. at 76. “If the Court were to rule that § 362(a) extended the statutory

redemption period throughout the bankruptcy case, then such ruling would have the effect of

rendering § 108(b) a nullity.” Id.

That said, the United States Bankruptcy Appellate Panel for the Ninth Circuit recently

ruled that even though a chapter 7 debtor's rights of redemption expired, the County nevertheless

violated the automatic stay by conducting an internet tax auction because the Debtor (and hence

the estate) still had an equitable and legal interest in the underlying property which was not

divested upon the expiration of the debtor's right to redeem. County of Imperial Treasurer - Tax

Collector v. Stadmueller, Trustee; RW Meridian LLC, __ B.R. __, 2017 WL473808 (BAP 9th

Cir. 2017).

These types of cases demonstrate that one can never be to careful when trying to navigate

the automatic stay.

Scope of Sanctions

While no party likes the word "sanction", it's important to understand that even sanctions

for a willful violation of the automatic stay should have limits. The aggrieved debtor must show

a causal relationship between the violation of the stay and any damages, including actual

damages. It is Plaintiff’s ultimate burden to demonstrate a causal link. Snowden v. Check Into

Cash of Wash. Inc. (In re Snowden), 769 F.3d 651, 657 (9th Cir. 2014). And even if there is

some causal link, a plaintiff had an absolute obligation to mitigate his or her damages. Id., at 658

(attorneys’ fees incurred after the stay violation has ended are not recoverable); In re Bourke,

543 B.R. 657 (Bankr. D. Mont. 2015); see also Van Durden v. Redwood Radiology Group, Inc.,

2015 WL 3507074 at *6 (Bankr. N.D. Cal. June 2, 2015).

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Conclusion

The breath of the automatic stay is wide-spread. Even those who carefully try to avoid

violating it may fall short. This is not a situation where is will be "easier to ask forgiveness than

tit is to get permission". If in doubt, move for relief from stay.

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How Reporting a Crime May Subject You to Sanctions

By:

Sharon Weis, Esquire Partner Bryan Cave, LLP Santa Monica, California Telephone: (310)576-2276 Email: sharon.weiss@bryancave.com And Jennifer Odum, Esquire Partner Bryan Case, LLP Atlanta, Georgia Telephone: (40) 572-6713 Email: jennifer.odom@bryancave.com

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Sharon Weiss

Jennifer Odom

How Reporting a Crime May Subject You to Sanctions You are a creditor and your loan is secured by personal property, let’s say equipment. The borrower recently filed for bankruptcy protection. You receive a phone call from a friend advising you that someone has a moving truck outside the borrower’s business location and it looks like they are stealing equipment. You don’t know who is moving the equipment — but you do know it’s without your permission and in violation of the security agreement. You are furious. You think a crime is being committed and you want tell the appropriate authorities. You call the police, file a police report and hope the police will recover the equipment so your collateral remains intact. A few weeks later, the chapter 11 debtor files an action against you for willful violation of the automatic stay and requests sanctions against you under 11 U.S.C. 362(k)(1)! Will you have to pay sanctions?

Believe it or not, the answer may be yes.

Most business professionals know about the automatic stay under 11 U.S.C. 362. When a debtor files for bankruptcy protection, a creditor may not take any action to collect on its debt without a court order granting it relief from stay. One exception to the automatic stay is the “commencement or continuation of a criminal action or proceeding against the debtor” but that exception is not absolute. 11 U.S.C. 362(b)(1). Litigation over this exception generally arises over whether a particular proceeding is in fact a “criminal action or proceeding,” or is it really just a disguised attempt to collect a debt.

Courts have taken two positions on this issue.

Authors

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Prosecuting Authority Pursuing Criminal Charges: The first is that a criminal proceeding initiated by a prosecuting authority is excepted from the stay, regardless of whether the proceeding results from the debtor’s failure to pay a debt.

Creditor Pursuing Criminal Charges: The courts are split on whether a creditor may pursue criminal charges after a bankruptcy has been filed. Some courts consider the creditor’s motivation for initiating the criminal prosecution: if the creditor did so to collect a debt rather than to benefit the public good, the action violates the stay. Courts that consider the creditor’s motives generally apply a “stringent” test that finds a stay violation only when the creditor’s primary motive was to collect its debt.

Prosecuting Authority:

The 9th Circuit provides the leading authority on Section 362(b)(1), in County of Los Angeles v. Gruntz (In re Gruntz) , 202 F.3d 1074 (9th Cir. 2000) (en banc). Before Gruntz , a cr iminal proceeding did not fal l under the 362(b)(1) exception if the purpose of a cr iminal proceeding was to collect upon a f inancial obligation. Hucke v. State of Oregon , 992 F.2d 950, bankruptcycave.com 953 (9th Cir. 1993). The Ninth Circuit in Gruntz overruled Hucke and held that Section 362(b)(1) applies to all criminal proceedings regardless of whether there is a financial element. 992 F.2d at 1085-86. Several other courts around the country follow this ruling. See, e.g., Weary v. Potent (In re Poteat), 2015 WL 4747883, *4 (E.D. Tenn. 2015); In re Dunn, 2013 WL 1091737, *7 (Bankr. E.D. Tenn. 2013); Simonini v. Bell (In re Simonini), 69 F. App’x 169, 170-71 (4th Cir. 2003); In re Bartel, 404 B.R. 584, 590-91 (BAP 1st Cir. 2009).

While that long standing principle is clear enough, Gruntz did not address the issue of criminal proceedings vis-à-vis nongovernmental actors. Rather, Section 362(b)(1) is limited to only governmental entities. Weary v. Poteat (In re Poteat), 2015 WL 4747883, *4 (E.D. Tenn. 2015); Bender Industrial Group, Inc. V. Herbert (In re Herbert), 2015 WL 1579575, *3 (Bankr. D. Or. 2015) see also Heath v. Alabama, 474 U.S. 82, 88 (1985) (“The dual sovereignty doctrine is founded on the common-law conception of crime as an offense against the sovereignty of the government”). The Herbert bankruptcy court reviewed the Ninth Circuit’s opinion in Gruntz and several other authorities, observing that Gruntz refers to state sovereignty several times, and most importantly specifically states that the parties to a criminal proceeding are between the state and the accused. Herbert, at *3.

Creditors: In In re Byrd, 256 B.R. 246 (Bankr. E.D.N.C. 2000), the court addressed Section 362(b)(1) as it pertains to a creditor. Byrd involved a violation of the discharge injunction (which is not materially different than a violation of the automatic stay). In that case, the debtor negotiated two checks pre-petition. While the debtor’s civil liability was discharged, the debtor was subsequently arrested and required to repay the creditor in full to be released from custody. The bankruptcy court ruled that Section 362(b)(1) did not protect the creditor, but nonetheless concluded that the creditor did not violate the discharge injunction because the creditor did not take any affirmative action to collect on his debt.

Conversely, the bankruptcy court in Pearce v. E.L.W. Corp. (In re Pearce), 400 B.R. 126 (Bankr. N.D. Iowa 2009), sanctioned a creditor who filed a post-petition criminal complaint for non-payment of a pre-petition debt. The court ruled that every creditor has a right under Section 523 to seek to except a debt from a debtor’s discharge or object to discharge under Section 727, but a creditor cannot utilize the criminal process to improve its position at the expense of other creditors. Pearce, 400 B.R. at 132.

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The Nevada bankruptcy court reached a similar conclusion as the courts in Byrd and Pearce. See Fidler v. Donahue (In re Fidler), 442 B.R. 763 (Bankr. D. Nev. 2010). While the Court did not enjoin the criminal prosecution, it left the bankruptcy court open to determine whether the creditor violated the bankruptcy discharge.

There are courts that hold that a creditor does not violate the automatic stay when it reports a crime to the police or applies for a criminal warrant that would initiate a criminal complaint pursuant to state law. In re Dunn, 2013 WL 1091737 at *2 (Bankr. E.D. Tenn. 2013). In Dunn, the bankruptcy court recognized the split of authority among the courts. While the Court believed the facts created a close question, it was ultimately persuaded that it should apply the unambiguous language of § 362(b) to except all criminal proceedings from the automatic stay regardless of who initiated the criminal proceeding or the purpose for which the proceeding was brought. It noted that “Congress was capable of being very specific when it intended to be.” Id. at *7. Interestingly, the District Court in Tennessee in Poteat (2015 WL 474883 *5) recognized the bankruptcy court’s reasoning in Dunn. It accepted the Dunn holding but distinguished it by stating “to the extent that the criminal prosecution exception of subsection (b)(1) covers the actions of private parties, the scope of the exception is limited to conduct that fundamentally advances the important state interest at stake – the commencement or continuation of a criminal action or proceeding.” Poteat, *5. However, the § 362(b) exception does not apply to an action beyond that purpose to include collecting a debt.

It appears that if a creditor is accused of violating the automatic stay (or discharge injunction) by initiating a criminal complaint or proceeding, then at least some bankruptcy courts will require the creditor to prove that it did not intend to collect on its debt when it initiated the criminal prosecution. Whether the creditor’s intent is ultimately exonerated, it will require the creditor to defend itself before a bankruptcy court, which will likely include an expenditure of attorney’s fees, cost, and attendant risk.

Word to the wise: if a creditor is truly concerned about its collateral, the safest avenue is to bring the issue to the attention of the bankruptcy court or bankruptcy trustee as soon as possible.

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The Discharge Injunction as a Negative Injunction Against Collection

Activity Rather Than The Source of Affirmative Obligations

By:

Craig Goldblatt, Esquire Partner WilmerHale Washington, D.C Telephone: (202) 663-6483 Email: craig.goldblatt@wilmerhale.com

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The Discharge Injunction as a Negative Injunction Against Collection Activity

Rather Than The Source of Affirmative Obligations

In In re Haynes, Bankr. SDNY No. 11-23212, a bankruptcy court found that creditors

that fail to update prior credit reporting, even with respect to discharged credit card debt they no

longer hold, are liable for violating the discharge injunction. Lenders have also faced claims that

the failure to credit report on a discharged chapter 7 home mortgage may interfere with a

borrower’s ability to obtain a new loan and thus interfere with the “fresh start.” In other cases,

borrowers have contended that the discharge injunction imposes an affirmative obligation on a

borrower to release a properly recorded lien in cases in which that lien has been validly stripped

off in bankruptcy.

These arguments run counter to the traditional understanding of the role of the discharge

injunction, which is that it operates as a negative injunction against the commencement or

continuation of some form of affirmative collection activity. In fact, the discharge injunction,

properly interpreted, prohibits only affirmative action taken by a creditor in order to collect on a

discharged debt.

As one bankruptcy court has explained, “[t]he operative words of [the] statute require

some affirmative collection efforts on the part of the creditor in order for the discharge injunction

to be violated.” In re Dendy, 396 B.R. 171, 178 (Bankr. D.S.C. 2008) (finding that “the mere

failure to remove a void lien, without further collection efforts, does not violate the discharge

injunction); see also In re Bruno, 356 B.R. 89, 92 (Bankr. W.D.N.Y. 2006) (“[N]either 11 U.S.C.

§ 524 nor the discharge orders that are routinely entered by this Court expressly compel any

affirmative action of any sort by any creditor whose debt has been discharged. . . . . “[A]lmost

never do we command involuntary participants in bankruptcy proceedings to take affirmative

steps to implement our decisions.”); In re Mogg, No. 05-34066, 2007 WL 2608501, at *4

(Bankr. S.D. Ill. Sept. 5, 2007) (“The plain language of § 524(a) and the prohibitions therein do

not encompass or otherwise proscribe passivity.”); In re Nash, 464 B.R. 874, 880 (B.A.P. 9th

23

Cir. 2012) (“Hard Rock had not taken any collection actions against Nash after he filed his

bankruptcy petition. Consequently . . . Hard Rock could not have violated the discharge

injunction.”).

It follows from this understanding of the discharge injunction as a negative injunction

against actions of creditors to collect on discharged debt that the mere passive failure of a

secured creditor to release a stripped or voided lien following a bankruptcy discharge, to provide

new credit reporting on a previously discharged loan, or to update credit reporting that was

correct at the time, does not violate the discharge injunction. See Dendy, 396 B.R. at 178; In re

Ibuos, No. 3:09-cv-113, 2010 WL 1759551, at *2 (M.D. Fla. Apr. 29, 2010) (“Bankruptcy

discharge provisions do not require creditors to release their liens within any specified amount of

time, but do prohibit them from affirmatively seeking to collect those debts after discharge.”); In

re Casarotto, 407 B.R. 369, 377 (Bankr. W.D. Mo. 2009) (noting that the “mere act of refusing

to release a lien, even if invalid, does not violate the discharge injunction absent an attempt to

enforce the lien, a violation of a court order, or an intent to collect the debt.”); In re Pollilo, 2010

WL 235125, at *7 (Bankr. E.D. Pa. Jan. 15, 2010) (“[Debtor] fails to posit facts that support his

implied conclusion: that not providing the certificate . . . was intended . . . to coerce him to pay a

discharged obligation. He alleges no demands . . . nor collection actions . . . The allegation that

Harleysville failed to . . . note the satisfaction of its vehicle lien, without more, fails to plead any

act of coercion and thus any violation of the discharge injunction.”).

Although broad, the discharge injunction is not limitless in scope.

[T]he discharge prohibits prepetition creditors only from collecting their prepetition debts. It is not lifelong shield against other acts—including demands, threats, assertions of claims, and litigation—by those same creditors, even where these other acts are undertaken wrongfully and in bad faith. If an act is not in fact one to collect or enforce a prepetition debt, then whatever its faults, it is not a violation of the discharge, even though undertaken by the holder of a discharged debt.

In re Schlichtmann, 375 B.R. 41, 97 (Bankr. D. Mass. 2007).

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At bottom, the discharge injunction operates to prohibit collection activity. To be sure,

there are cases in which some affirmative creditor conduct might well be helpful or beneficial in

effectuating a debtor’s fresh start. See In re Luchini, 511 B.R. 664 (Bankr. E.D. Cal. 2014)

(discussing non-bankruptcy law claims flowing from failure to release lien in California). But to

say that such action might serve an objective recognized by bankruptcy law is not to say that it is

required by the Bankruptcy Code.

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Violations of the Automatic Stay and Executory Contracts

By:

Steven Kinsella, Esquire Senior Associate Fredrikson & Byron, P.A. Minneapolis, Minnesota Telephone: (612) 492-7244 Email: skinsella@fredlaw.com

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Violations of the Automatic Stay and Executory Contracts When a debtor files for protection under the Bankruptcy Code, the subsequently created

bankruptcy estate includes all of the debtor’s legal and equitable interests in property as of the

date the bankruptcy petition is filed. 11 U.S.C. § 541(a)(1). A debtor’s rights under contracts

are included as property of the estate. In re AMR Corp., 485 B.R. 279, 294 (Bankr. S.D.N.Y.),

aff'd, 730 F.3d 88 (2d Cir. 2013). For this reason, termination or other types of interference with

a debtor’s rights under a contract generally constitute violations of the automatic stay.

However, the following three scenarios raise some questions about this general proposition:

Post-Petition Termination Notice If a contract provides for the termination of a contract by either party at any time as long

as a termination notice is provided, does the non-debtor party violate the automatic stay if it

sends a termination notice to the debtor?

Most courts have held that section 362(a)(3) of the Bankruptcy Code prohibits unilateral

cancellation of contracts and that attempting to terminate violates the automatic stay. Computer

Communications, Inc. v. Codex Corp. (In re Computer Communications, Inc.), 824 F.2d 725,

728 (9th Cir. 1987) ("Even if [the creditor] had a valid reason for terminating the Agreement, it

still was required to petition the court for relief from the automatic stay under section 362(d).");

see also In re 48th St. Steakhouse, 835 F.2d 427, 430 (2d Cir. 1987) (holding that providing a

termination notice to a third-party subtenant violated the automatic stay); see also In re

Friedman's, Inc., 372 B.R. 530, 549 (Bankr. S.D. Ga. 2007). However, the Third Circuit has

determined that a party may unilaterally terminate a contract, without violating the automatic

stay, if the contract is not assumable or assignable under 11 U.S.C. § 362. Watts v. Pennsylvania

Hous. Fin. Co., 876 F.2d 1090, 1096 (3d Cir. 1989).

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Ipso Facto Clauses If a contract contains a provision that terminates the contract if a party files for

bankruptcy, is the contract terminated upon filing and are there any automatic stay concerns?

Under the Bankruptcy Code, a contract may not be terminated solely based on the

commencement of a bankruptcy case. 11 U.S.C. § 365(e)(1)(B). The rule under section

365(e)(1)(B) of the Bankruptcy Code does not apply if (1) applicable law would excuse the non-

debtor from accepting performance and the non-debtor party does not consent to the assumption

or assignment of the contract or (2) the contract is a contract to make a loan or some other type

of debt financing. 11 U.S.C. § 365(e)(2). Courts disagree as to whether a non-debtor party

violates the automatic stay by terminating or otherwise repossessing property of the estate if the

contract satisfies one of these exemptions. Compare In re Mirant Corp., 440 F.3d 238, 252 (5th

Cir. 2006) (determining that the automatic stay prohibits the termination of such a contract and

requiring the non-debtor party to seek relief from the automatic stay) with In re Am. Home

Mortg. Holdings, Inc., 388 B.R. 69, 88 (Bankr. D. Del. 2008) (concluding that, if the contract

satisfied the exceptions of § 365(e)(1), a non-debtor party does not violate the automatic stay if it

forecloses or liquidates property under the contract).

Effective Termination of the Contract Can a non-debtor party to a contract violate the automatic stay if the party refuses act

when the party is not required to act by the contract, but when the failure to act effectively causes

the debtor to be unable to perform under the contract?

Generally, courts have found that the automatic stay only applies to rights provided by

the terms of the contract. In re Benz, 368 B.R. 861, 866-67 (B.A.P. 9th Cir. 2007) (concluding

that the Bankruptcy Code does not and should not grant a debtor greater contractual rights or

28

powers that the debtor would have outside of bankruptcy and declining to find a violation of the

automatic stay because the debtor’s interpretation of the contract would expand the terms of the

contract and give the debtor new contractual rights); see also In re Albion Disposal, Inc., 217

B.R. 394, 408 (W.D.N.Y. 1997) (holding that the automatic stay did not apply to rights provided

by alleged contractual terms that were either non-existent or unenforceable under law); see also

United States v. Inslaw, Inc., 932 F.2d 1467, 1472 (D.C. Cir. 1991) (declining to find a violation

of the automatic stay when the debtor did not have a clear contractual right or other possessory

interest in the property and the opposing party, at a minimum, had an arguable contractual right

to the property). Therefore, if the contract does not provide a debtor with the right to the non-

debtor party’s action, the non-debtor’s failure to act would not violate the automatic stay.

However, at least one court has found that, if a non-debtor party’s failure to act would be

a functional termination, the failure to act could constitute a violation of the automatic stay. In

re Ernie Haire Ford, Inc., 403 B.R. 750, 760-61 (Bankr. M.D. Fla. 2009). Moreover, non-debtor

parties should be cautious to avoid any interpretation that the terms of the contract do in fact

require action, which may result in a failure to act violating the automatic stay. In re

Broadstripe, LLC, 402 B.R. 646, 657 (Bankr. D. Del. 2009), as amended (Mar. 10, 2009)

(finding that a non-debtor party violated the automatic stay by failing to perform obligations

based on a broad interpretation of the relevant agreements).

Conclusion

The scenarios and case law above demonstrate potential ways the automatic stay may or

may not apply in relation to contracts between debtors and non-debtor parties. While some of

the decisions may provide a basis for arguing that relief from the automatic stay is not required

29

in certain situations, it likely remains advisable for a party wishing to terminate such a contract

to seek relief from the automatic stay under 11 U.S.C. § 362(d).

30

Biographies

31

ERITHE A. SMITH United States Bankruptcy Court 411 West 4th Street, Suite 5040

Santa Ana, California 92701 The Honorable Erithe A. Smith is a United States Bankruptcy Judge for the Central District of California, Santa Ana Division. She was appointed by the Ninth Circuit Court of Appeals in 1994 and was reappointed to a second term in 2007. In 2004, Judge Smith was appointed by the Circuit to the Bankruptcy Appellate Panel (“BAP”) and served on the BAP until 2007. Comprised of six bankruptcy judges, the BAP presides over bankruptcy appeals throughout the Ninth Circuit. A native of Los Angeles, Judge Smith graduated from Loyola Marymount University in 1979 and from Boalt Hall School of Law (Berkeley Law) in 1982. From 1982 to 1985 she served as law clerk to the Honorable Marcus M. Kaufman of the California Court of Appeal and to the Honorable Peter M. Elliott of the United States Bankruptcy Court. Prior to taking the bench, she was a partner in a “boutique” law firm in Irvine, California specializing in corporate insolvency and bankruptcy law. In past years, Judge Smith has served as an associate editor of the American Bankruptcy Institute Law Journal, a member of the Judicial Advisory Council of the Association of Business Trial Lawyers (Orange County Chapter), past president of the Orange County Bankruptcy Forum, and as an appointed member of the Bankruptcy Education Committee of the Federal Judicial Center. In October, 2012, she was appointed by Chief Justice John G. Roberts to the Committee on the Administration of the Bankruptcy System, a standing committee of the Judicial Conference of the United States. Judge Smith is a frequent speaker and lecturer at various professional conferences, seminars and workshops.

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Practice Area

Litigation/Controversy Appellate and Supreme Court Litigation

Bankruptcy Litigation, Regulation and Policy

Business Trial Group

Regulatory and Government Affairs Financial Institutions

Transactional Bankruptcy and Financial Restructuring

Education JD, with honors, University of Chicago Law School, 1993, Comment Editor, University of Chicago Law Review BA, magna cum laude, Georgetown University, 1990

Bar Admissions District of Columbia

United States Supreme Court

Clerkships

The Hon. David H. Souter, US Supreme Court, 1995 - 1996 The Hon. Richard D. Cudahy, US Court of Appeals for the Seventh Circuit, 1993 - 1994

Craig Goldblatt Partner

craig.goldblatt@wilmerhale.com

1875 Pennsylvania Avenue, NW, Washington, DC 20006 +1 202 663 6483 (t) +1 202 663 6363 (f)

Craig Goldblatt is an experienced bankruptcy litigator, with a focus on complex bankruptcy disputes and bankruptcy appeals. The core of his practice has been protecting the interests of secured creditors, financial institutions and insurance companies in bankruptcy-related disputes, though he has also represented leading technology, transportation and communications industry clients in bankruptcy matters. Mr. Goldblatt, who joined the firm in 1994, is a member of the firm's Management Committee.

Mr. Goldblatt represents parties in all stages of bankruptcy proceedings. The core of his practice involves bankruptcy and insolvency related trial-level matters and appeals—particularly the representation of financial institutions and other commercial creditors in bankruptcy litigation. He has argued three bankruptcy cases before the Supreme Court of the United States, and one before the en banc Third Circuit. He has also developed a particular expertise on consumer bankruptcy matters, representing several major mortgage servicers, holders of credit card and other unsecured debt, and bankruptcy trustees in a variety of regulatory investigations, bankruptcy disputes and appeals.

Outside of his bankruptcy practice, Mr. Goldblatt participated in WilmerHale's representation of the University of Michigan, from the district court to the Supreme Court, in Grutter v. Bollinger, 539 US 306 (2003). The Supreme Court's decision in that case held that institutions of higher education may consider race as a factor in admissions decisions. He has also represented an array of pro bono clients in civil rights, criminal and constitutional litigation.

Mr. Goldblatt is a conferee of the National Bankruptcy Conference and is the chair of the ABA Business Bankruptcy Committee’s Subcommittee on Bankruptcy Litigation. He previously served as Chair of the Subcommittees on Bankruptcy Appeals and on Environmental and Mass Tort Claims. He has taught as an adjunct professor at the Georgetown University Law Center. He is a regular speaker at ABA, ABI and other conferences on bankruptcy matters. Mr. Goldblatt also serves on the Board of Trustees of the Lawyers’ Committee for Civil Rights Under Law and is a Fellow in the American College of Bankruptcy.

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Steven R. Kinsella SENIOR ASSOCIATE

skinsella@fredlaw.com 612.492.7244

Assistant: Shataia Stallings sstallings@fredlaw.com 612.492.7730

Steve’s practice assists businesses, commercial lenders, and individuals in the areas of corporate restructuring, creditors’ remedies, bankruptcy, commercial litigation, and related matters, including reorganizing or liquidating under the Bankruptcy Code or in or out of court workouts and liquidations.

In the Bankruptcy context, Steve has represented corporations, small businesses, individuals, and a chapter 11 trustee on the debtor-side in a number of cases. In addition, Steve has also represented creditors, contract or lease counterparties, parties sued to recover preference and fraudulent transfer, and potential asset purchasers in bankruptcy cases. Aside from providing bankruptcy-related services, Steve also has experience with assisting clients with other debtor/creditor matters, such as negotiating with creditors outside of court, commencing or participating in receiverships, and representing clients in state and federal litigation relating to debt obligations.

In 2016, Steve was a part of the team that won the Transaction of the Year from the Turnaround Management Association, Upper Midwest Chapter. Steve has been named a Minnesota Lawyer of the Year and a North Star Lawyer. Steve was also part of the team that won the Global Pro Bono Dispute of the Year award from the American Lawyer in 2015.

Steve received his law degree from the University of Minnesota Law School and his undergraduate degree from the University of St. Thomas. Steve clerked for Judge Kathleen H. Sanberg, Chief Judge of the United States Bankruptcy Court of Minnesota prior to joining Fredrikson & Byron. Steve is the current vice chair of the Litigation Subcommittee of the Business Bankruptcy Section of the ABA.

34

Linda Leali, lleali@lealilaw.com Linda Leali is the founding shareholder of Linda Leali P.A. located in Miami, Florida. She concentrates her practice on bankruptcy, creditors rights, and receivership. Ms. Leali has extensive experience and expertise with bankruptcy reorganizations, receiverships, debt restructuring and creditors’ rights. She has been involved in some of the largest cases in U.S. history including the bankruptcies of a Fortune 100 publicly traded energy producer, a publicly traded real estate development company, large privately owned physician staffing company and automotive parts manufacturer. Ms. Leali also regularly serves as a court-appointed receiver. She frequently lectures to both attorneys and judges on both bankruptcy and receivership law.

In 2014, Ms. Leali was appointed to the Resource Board of the National Association of Women Judges. NAWJ is the leading voice for women jurists throughout the United States. Ms. Leali co-chairs the NAWJ’s flagship voter education project titled Informed Voters, Fair Judges.

In 2014, Ms. Leali was also appointed as the Chair and Co-chair, respectively, of the Consumer Bankruptcy Committee and Avoidance Power Sub-committee of the American Bar Association.

In 2013, Ms. Leali was honored as a Leader in the Law by the Florida Association for Women Lawyers. She is also the recipient both in 2014 and 2011 of the President’s Award presented to the outstanding member of the Miami-Dade Chapter of the Florida Association for Women Lawyers.

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Sharon Z. Weiss

Sharon Z. Weiss Partner, Los Angeles T: +1 310 576 2276 sharon.weiss@bryancave.com

PRACTICE Bankruptcy, Restructuring and Creditors' Rights; Commercial AREAS Litigation ADMISSIONS California, 1993; United States Supreme Court; United States Court of

Appeals for the Ninth Circuit; United States District Courts for the District of Colorado, and Central, Eastern, Northern and Southern Districts of California

EDUCATION Southwestern University, J.D., 1993; University of California-Irvine, B.A., 1990

Sharon Weiss brings an exceptional breadth of local, state, and national level bankruptcy community ties to her insolvency practice. Through these substantive relationships, including those with co-counsel, adversaries, and clients, Ms. Weiss has attained a base of experience from which she serves as a true client advocate. She offers her clients the personal attention and warmth of her small firm background combined with the added benefits of the firm’s wide array of department resources.

Ms. Weiss has extensive experience in a wide area of insolvency matters from various perspectives, including representation of creditors, individual and corporate debtors, trustees, and creditors’ committees. She has served as lead trial counsel in bankruptcy and commercial litigation, including alternative dispute resolution, and has considerable experience in handling fraud and Ponzi scheme litigation and bankruptcy appeals, which have resulted in published Ninth Circuit opinions. Her clients include parties engaged in banking, real estate, consumer electronics, healthcare, restaurant, garment, entertainment, and retail sales industries. Ms. Weiss has served as lead counsel in out-of-court workouts and in the bankruptcy courts in cases involving such varied issues as disputed asset sales and financing, the avoiding powers, executory contracts, pension plans, claims priority, plan confirmation, surcharges, and the court’s inherent powers.

Ms. Weiss was recognized as one of the “Top Women Lawyers” in California by the Daily Journal in 2013 and as a notable practitioner in Chambers USA since 2012 in the California bankruptcy and restructuring practice area. She frequently speaks on panels regarding insolvency-related topics. Ms. Weiss has organized dozens of programs and panels and delivered presentations to industry groups such as the California Society of CPAs and The Alternative Board. She is also invited annually to speak to the Women in the Law Seminar Class at Southwestern University School of Law in Los Angeles, California.

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Dale K. Cathell Partner

dale.cathell@dlapiper.com

The Marbury Building, 6225 Smith Avenue, Baltimore, Maryland, 21209-3600, United States T: +1 410 580 4122 F: +1 410 580 3122

37

With a diverse commercial litigation and bankruptcy practice, Dale Cathell regularly represents financial institutions and other creditor clients in a broad range of matters before state and federal courts.

Additionally, he represents secured and unsecured creditors, debtors, trustees, lessors and committees in bankruptcy cases. Dale has experience at both the trial and appellate level in a wide variety of complex litigation matters including the defense of lender liability claims, professional malpractice claims, and commercial contract claims.

Dale has experience in a wide variety of debtor-creditor disputes (including loan workouts, collection matters and lender liability matters), Uniform Commercial Code disputes (including breach of warranty matters, consignor matters, lien priority contests and matters relating to the enforcement of remedies by a secured creditor), and real estate disputes (including receiverships, fraudulent conveyance matters, foreclosures and title insurance matters).

PROFESSIONAL MEMBERSHIPS Maryland State Bar Association

American Bar Association

Bankruptcy Bar of Maryland

Chesapeake Chapter of the Turnaround Management Association

CLERKSHIPS The Honorable Joseph F. Murphy, Jr., Chief Judge, Court of Special Appeals of Maryland, 2001-2002

RECOGNITIONS

In 2016, Dale was named to The Daily Record's Very Important Professionals (VIP) list. The annual list recognizes Maryland professionals under the age of 40 for their professional accomplishments, community service and the impact of their achievements in the community.

CREDENTIALS Education

University of Baltimore (2001) J.D., magna cum laude Heisler Honor Society University of Baltimore Law Review Staff Member

University of Maryland (1998) B.A.

Admissions

Maryland

38 EAST\140332708.1

Ashley D. Champion Career Clerk to the Honorable Mary Grace Diehl Bankruptcy Court, Northern District of Georgia

75 Ted Turner Dr. SW, Atlanta GA 30303 Ashley_D_Champion@ganb.uscourts.gov

Ashley D. Champion earned her undergraduate degrees from The University of Georgia in 2006 and graduated magna cum laude from Georgia State University College of Law in 2013 Ashley clerked for the Honorable Katharine M. Samson in the Bankruptcy Court for the Southern District of Mississippi from 2013 to 2015. She is currently serving as the career law clerk to the Honorable Mary Grace Diehl in the Bankruptcy Court for the Northern District of Georgia.

Ashley is currently a member of the ABI and has published several articles on various topics related to bankruptcy. Recent publications include How to Get Paid Your Attorney’s Fees Post-Harris, which was published in the November 2016 edition of the ABI Journal and a chapter on avoidance powers that Ashley contributed to the Bankruptcy and Intellectual Property Deskbook: A Guide to IP, the Internet, and Bankruptcy Law, which was authored by Warren E. Agin and published by the ABA in 2016.