Opinion
Case No. 02-00981.
June 7, 2007
MEMORANDUM DECISION RE THIRD SANCTIONS MOTION AND RE ORDER TO SHOW CAUSE REGARDING RE PURSUIT OF ITALIAN ACTION
On May 15, 2007, the court held a hearing to consider imposing sanctions against creditor Conseil Alain Aboudaram, S.A. ("CAASA") pursuant to three matters:
(1) the Debtor's Motion for Finding of Contempt and Imposition of Sanctions Against [CAASA] for Violation of Automatic Stay (Docket Entry ("DE") # 88) ("Second Sanctions Motion");
(2) the Debtor's Third Motion for Sanctions against CAASA for Willfully Violating the Automatic Stay [DE # 250] ("Third Sanctions Motion"), which the court's February 10, 2005 Supplemental Decision Regarding Debtor's Third Sanctions Motion [DE # 299] granted (finding that CAASA had violated the automatic stay) but left for later resolution the fixing of the amount of sanctions; and
(3) Order Directing [CAASA] to Dismiss Foreign Judicial Proceedings and Appear and Show Cause Why It Should Not be Held in Contempt [DE # 493] ("Show Cause Order").
The court heard evidence and the argument of counsel. The following findings of fact and conclusions of law supplement the court's oral decision issued at the hearing regarding the Third Sanctions Motion and the Show Cause Order. A separate Memorandum Decision will address the Second Sanctions Motion.
1. As held in Armstrong v. Executive Office of the President, Office of Admin., 1 F.3d 1274 (D.C. Cir. 1993), for civil contempt sanctions to be imposed there must be a violation of an order (or a statutory stay) that is clear and unambiguous and the violation must be proven by clear and convincing evidence. The Debtor has met this exacting standard with respect to the violations of the automatic stay of 11 U.S.C. § 362(a) and the violations of the discharge injunction and confirmation order discussed below. With respect to sanctions under 11 U.S.C. § 362(h), an individual debtor "injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages." To the extent that the court awards under § 362(h), it is clear that CAASA willfully violated the automatic stay. CAASA was aware of the pendency of the bankruptcy case and received notice of the commencement of the case reciting the terms of the automatic stay. Moreover, CAASA proceeded in violation of the stay even after the court had already ruled at a hearing of September 18, 2002, that postpetition collection efforts by it were in violation of the automatic stay despite arguments it raised that the automatic stay was inapplicable to foreign proceedings. Finally, CAASA failed to discontinue its Belgium judicial proceedings even after the court had adjudicated that they violated the automatic stay.
Section 362(h) was re-numbered § 362(k)(1) under 2005 amendments to the Bankruptcy Code that are inapplicable here.
In an oral ruling of September 18, 2002, this court adjudicated the Debtor's Motion to Compel Conseil Alain Aboudaram, S.A. to Release Post-Petition Attachment and for Finding of Contempt and Imposition of Sanctions for Violation of Automatic Stay [DE # 34] ("First Sanctions Motion"). In granting the First Sanctions Motion, the court found that CAASA is subject to the automatic stay, which it plainly violated by serving a post-petition writ to collect a debt. The court supplemented its oral ruling with a written decision entered on October 17, 2003.
Third Sanctions Motion
2. The court already issued a ruling in February 2005 on the Third Sanctions Motion and determined that CAASA had violated the automatic stay by reason of its postpetition pursuit of judicial proceedings (its saisie immobiliere conservatoire) in Brussels, Belgium to obtain a lien against the debtor's interests in certain real properties. Despite this adjudication, and despite the continued bar of the automatic stay against pursuit of the judicial proceedings (until confirmation of the debtor's plan in 2006 replaced the automatic stay with a discharge injunction), CAASA continued to violate the automatic stay by failing to discontinue its postpetition pursuit of the judicial proceedings. Under the circumstances, it is appropriate to award the Debtor compensatory damages of $10,867.50 for legal fees incurred by lead bankruptcy counsel and $10,000 for legal fees incurred by special counsel. In addition, it is appropriate to award the Debtor $40,000 in punitive damages under § 362(h). CAASA's continued pursuit of obtaining a lien, in the face of this court's ruling that its actions in doing so violated the automatic stay, was egregious.
Show Cause Order
3. After confirmation of the debtor's plan under chapter 11 of the Bankruptcy Code on November 19, 2006, CAASA continued to prosecute two actions in foreign courts to collect the debts it had claimed de Groote owed it, namely, an action in Siena, Italy, to set aside a conveyance of a farm to de Groote's daughters, and its judicial proceedings (its saisie immobiliere conservatoire) in Brussels, Belgium to obtain a lien against certain real properties (the topic of the Third Sanctions Motion). These actions are an outrageous case of contempt, as CAASA has violated not only the discharge injunction (which replaced the automatic stay once the debtor's plan was confirmed) but also the explicit commands of the court's confirmation order.
4. The court's confirmation order directing cessation of the foreign proceedings gave effect to earlier judicial rulings that CAASA has no claims to pursue. Specifically, the courts of the United States had fully adjudicated that CAASA has no claim that it is entitled to pursue against de Groote. In a civil action CAASA pursued in the United States District Court for the District of Columbia, the District Court dismissed CAASA's claims against de Groote with prejudice. Based on the District Court's ruling, this court issued orders in the early part of 2005 disallowing CAASA's claims that CAASA had filed in this bankruptcy case against de Groote, and ruling that CAASA is barred from pursuing its fully adjudicated claims by the doctrine of res judicata (the doctrine of claim preclusion), unless the District Court's ruling in CAASA's civil action were to be reversed on appeal. On May 5, 2006, the United States District Court for the District of Columbia affirmed this court's res judicata ruling, and no appeal was taken from the District Court's affirmance. Meanwhile, an appeal from the District Court's ruling in the civil action was still pending in the United States Court of Appeals for the District of Columbia Circuit. On August 18, 2006, the Court of Appeals affirmed the District Court's ruling in the civil action (that had dismissed CAASA's claims with prejudice), and on October 19, 2006, the Court of Appeals issued its mandate to the District Court. CAASA thus has no right as a matter of nonbankruptcy law to continue to collect its disallowed claims.
5. On September 8, 2005, while CAASA's appeals were still pending, this court entered an Order Granting Motion of Conseil Alain Aboudaram, S.A. to Modify the Automatic Stay, which permitted CAASA "to commence the azione revocatoira against de Groote and all other necessary parties in an Italian court of competent jurisdiction, but solely for the purpose of suspending the applicable statute of limitations" (emphasis added). CAASA did commence such a proceeding in Siena, Italy to set aside the conveyance of the Italian farm to de Groote's daughters. This court's order specifically provided that "CAASA shall not, without leave of Court, prosecute the said action beyond the steps necessary to suspend the applicable statute of limitations." (Emphasis added.) The order was intended to allow CAASA to preserve its collection rights if, by reason of one or both of the pending appeals, CAASA had been able to establish that it still had a claim against de Groote (that is, if it were to prevail in its appeal of this court's order which had disallowed its claims on the basis of res judicata, or were to prevail in its appeal of the District Court's dismissal of CAASA's claims in the civil action (which dismissal was the basis for this court's res judicata ruling)). As already noted, as of October 19, 2006, both appeals had been fully resolved, and thus after October 19, 2006, CAASA no longer had a claim against de Groote.
6. On November 19, 2006, this court entered an Order Unconditionally Confirming Debtor's Plan of Reorganization ("Confirmation Order"), which, among other things, confirmed the Plan, granted the Debtor a discharge, and directed CAASA (by December 10, 2006) to dismiss:
(a) its saisie immobiliere conservatoire on the Debtor's Brussels property; and
(b) all proceedings in Italy and elsewhere relating to the Debtor's transfer of his interest in an Italian farm to his daughters in 2000.
7. Upon confirmation of de Groote's reorganization plan, he received a discharge pursuant to 11 U.S.C. § 1141(d)(1)(A) of all debts that arose before the date of the confirmation of the plan. Pursuant to 11 U.S.C. § 524(a)(2) this gave rise to a discharge injunction barring pursuit of such claims as a personal liability of de Groote. Specifically, under 11 U.S.C. § 524(a)(2), the debtor's discharge
operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any [discharged] debt as a personal liability of the debtor, whether or not discharge of such debt is waived[.]
8. Instead of withdrawing its Italian action after both of the appeals discussed above were concluded as of October 19, 2006, and after the entry of this court's Confirmation Order on November 19, 2006, CAASA set its case for trial in Italy in clear violation of the discharge injunction and the explicit command of the Confirmation Order that CAASA dismiss the Italian judicial proceedings.
9. CAASA's continued pursuit of the Belgian judicial proceedings also clearly violates the discharge injunction and the explicit command of the Confirmation Order that it dismiss the Belgian judicial proceedings.
10. The Debtor seeks to compel CAASA to dismiss its Belgian and Italian judicial proceedings. Although punitive damages are unavailable for violations of the discharge injunction and of the Confirmation Order, compensatory and coercive sanctions are permissible and appropriate in this case. The Debtor will have 14 days to submit an attorneys' fee affidavit in support of his claim for compensatory damages. Commencing 21 days hence, coercive sanctions of $1000 per day will be imposed against CAASA if it has not yet dismissed with prejudice its judicial proceedings against the debtor in Belgium and Italy.
11. Orders follow.
The decision below is signed as a decision of the court.