Opinion
CIVIL ACTION NO. 00-66-JMH
December 17, 2002
MEMORANDUM OPINION AND ORDER
This matter is before the Court on the plaintiff's Response to Defendant's Suggestion of Bankruptcy and Motion for the Withdrawal of the Reference to Bankruptcy Court [Record No. 63]. Defendant has not responded to Plaintiff's motion. This matter is now ripe for decision.
The Equal Employment Opportunity Commission ("EEOC") filed its complaint on September 22, 2000, alleging that Defendant Shelbyville Mixing Center, Inc. ("Shelbyville Mixing"), failed to hire women as a class because of their sex in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq., and seeking backpay and injunctive relief. On November 6, 2002, Defendant filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code in the Northern District of Texas, Dallas Division. On November 12, 2002, Shelbyville Mixing filed a Suggestion of Bankruptcy with this Court, stating that the instant proceeding would be automatically stayed under the Bankruptcy Code, 11 U.S.C. § 362 (a).
Upon the Defendant's Suggestion of Bankruptcy, this matter was referred to the U.S. Bankruptcy Court for the Eastern District of Kentucky pursuant to Local Rule 83.12(a) and 28 U.S.C. § 157 (d). Defendant then filed a Notice of Removal and Motion to Transfer with the U.S. Bankruptcy Court for the Eastern District of Kentucky, asking the Bankruptcy Court to remove the above-captioned action from this Court and to transfer the action to the U.S. Bankruptcy Court in the Northern District of Texas. To the best of this Court's knowledge, the Motion to Transfer is still pending before the Bankruptcy Court for the Eastern District of Kentucky.
Section 362(b)(4) of the Bankruptcy Code provides that:
[T]he filing of a petition under section 301, 302, or 303 of this title, . . . does not operate as a stay —
(4) under subsection (a)(1) of this section, of the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power;11 U.S.C. § 362 (b)(4) (emphasis added).
Lawsuits filed by the EEOC have been construed as actions brought to enforce its police or regulatory power within the meaning of Section 362(b)(4) of the Bankruptcy Code and may therefore be excepted from the automatic stay imposed by the filing of a petition in bankruptcy. See EEOC v. McClean Trucking Co., 834 F.2d 398, 402 (4th Cir. 1987); EEOC v. Hall's Motor Transit Co., et al., 789 F.2d 1011, 1014 (3rd Cir. 1986); EEOC v. Rath Packing Co., 787 F.2d 318, 325-26 (8th Cir. 1986), cert. denied, 479 U.S. 910 (1986); EEOC. v. Guerdon Industries, 76 B.R. 102 (W.D.Ky. 1987); In re Valley Kitchens, Inc., 68 B.R. 372, 374 (S.D. Ohio 1986); EEOC v. Sambo's Restaurants, Inc., 1982 WL 207, *2 (S.D.Tex. 1982).
As taught by the Fourth Circuit Court of Appeals, any Title VII suit continues to serves as an exercise of the EEOC's police or regulatory power, even where the bankruptcy ultimately leads to the demise of the defendant employer:
We have no doubt that when EEOC sues to enjoin violations of Title VII or ADEA and seeks reinstatement of the victims of alleged discrimination and adoption of an affirmative action plan in a Title VII case, and couples these prayers for relief with a claim for back pay, EEOC is suing in exercise of its police or regulatory power and is not subject to the automatic stay until its monetary claims are reduced to judgment.McClean Trucking Co., 834 F.2d at 402, n. 8.
Similarly, in EEOC v. Sambo's Restaurants, Inc., the court rejected the defendant's argument that EEOC's goal in proceeding with its Title VII lawsuit was to achieve some pecuniary benefit for the claimant on whose behalf the agency sued and permitting the Commission to obtain a preferential treatment to the detriment of all other creditors. Sambo's Restaurants, Inc., 1982 WL 207 at *3. Rather, that district court noted:
The Court is compelled to construe the EEOC's ambitions as somewhat loftier than that advanced by the respondent. It has been held that, "the EEOC represents the public interest when it sued to enforce Title VII, not solely the interests of the private charging parties." EEOC v. Kimberly-Clark Corp., 511 F.2d 1352, 1359 (6th Cir. 1975). . . .The Fifth Circuit describes EEOC litigation in a similar fashion, saying, "[O]nce the judicial machinery has been set in train, the proceeding takes on a public character in which remedies are designed to vindicate the policies of the Act, not merely to afford private relief to the employee." Hutchings v. U.S. Industries, Inc., 428 F.2d 303, 311 (5th Cir. 1970).Id.
The legislative history of the automatic stay provision of § 362 also demonstrates the propriety of excepting Title VII actions from the stay. As explained in the Congressional House Report:
Where a governmental unit is suing a debtor to prevent or stop violation of fraud, environmental protection, consumer protection, safety, or similar police or regulatory laws, or attempting to fix damages for violation of such a law, the action or proceeding is not stayed under the automatic stay."
H.R. Rep. No. 595, 95th Cong., 1st Sess. 343 (1977) (emphasis added).
Accordingly, as this matter turns entirely on the resolution of claims alleged under Title VII of the Civil Rights Act of 1964 and demonstrates, as such, an exercise of the EEOC's police or regulatory power, the Court recognizes that the matter is not subject to the provisions of the automatic stay under 11 U.S.C. § 362 (a).
28 U.S.C. § 157 (d) provides that:
[t]he district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.28 U.S.C. § 157 (d). Plaintiffs have shown cause as to why this matter should be withdrawn from the Bankruptcy Court, as it is not subject to the mandatory stay of § 362(a) pursuant to the terms of § 362(d)(4). However, it is also apparent that the resolution of the instant proceeding will require an in-depth consideration of "other laws of the United States regulating organizations or activities affecting interstate commerce, specifically the federal antidiscrimination law as contained in Title VII. Having so observed, this Court will now withdraw this case from the jurisdiction of the Bankruptcy Court.
Accordingly, IT IS ORDERED:
(1) that Plaintiff's motion for the Withdrawal of the Reference to Bankruptcy Court [Record No. 63] be, and hereby is, GRANTED; and
(2) that this matter be, and hereby is, WITHDRAWN from the jurisdiction of the Bankruptcy Court for the Eastern District of Kentucky.