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In re Dingley

United States Court of Appeals, Ninth Circuit

April 3, 2017

In re Mark Dingley, Debtor,
v.
Yellow Logistics, LLC; Yellow Express, LLC, Appellees. Mark Dingley, Appellant,

          Argued and Submitted November 14, 2016 San Francisco, California

         Appeal from the Ninth Circuit Bankruptcy Appellate Panel BAP No. 13-1261 Kirscher, Jury, and Taylor, Bankruptcy Judges, Presiding

          Christopher P. Burke (argued), Las Vegas, Nevada, for Appellant.

          Mark Wray (argued), Reno, Nevada, for Appellees.

          Before: Ronald M. Gould, Richard R. Clifton, and Paul J. Watford, Circuit Judges.

         SUMMARY[*]

         Bankruptcy

         Affirming the Bankruptcy Appellate Panel's opinion, though on a different basis than that discussed by the BAP, the panel held that the bankruptcy court erred by sanctioning creditors for violating the automatic stay by pursuing civil contempt proceedings against the debtor based on his failure to pay discovery sanctions in a state court action.

         The Bankruptcy Code imposes an automatic stay prohibiting creditors from attempting to collect pre-petition debts against the debtor. The panel held that civil contempt proceedings are exempted from the automatic stay under the Bankruptcy Code's government regulatory exemption, 11 U.S.C. § 362(b)(4), when, as here, the contempt proceedings are intended to effectuate the court's public policy interest in deterring litigation misconduct.

         The BAP reasoned that the civil contempt proceedings were exempted from the automatic stay because, under David v. Hooker Ltd., 560 F.2d 412 (9th Cir. 1977), they did not turn on the determination or collection of an underlying debt and were not a ploy to harass the debtor. Because the panel relied instead upon the government regulatory exemption set forth in the Bankruptcy Code, enacted after Hooker, it did not address whether Hooker remains good law.

          OPINION

          CLIFTON, Circuit Judge

         Once a debtor files for bankruptcy, the Bankruptcy Code imposes an automatic stay prohibiting creditors from attempting to collect pre-petition debts against the debtor. This rule, however, is subject to certain statutorily-enumerated exceptions. In this appeal we must determine whether civil contempt proceedings fall under one of these exceptions. We hold that under In re Berg, 230 F.3d 1165 (9th Cir. 2000), civil contempt proceedings are exempted from the automatic stay under the Bankruptcy Code's government regulatory exemption, 11 U.S.C. § 362(b)(4), when, as here, the contempt proceedings are intended to effectuate the court's public policy interest in deterring litigation misconduct. Accordingly, we conclude that the bankruptcy court erred by sanctioning creditor-appellees Yellow Logistics, LLC and Yellow Express, LLC for violating the automatic stay by pursuing civil contempt proceedings against debtor-appellant Mark Dingley based on his failure to pay discovery sanctions in a state court action. We affirm the decision of the Bankruptcy Appellate Panel to that effect, though on a different basis than that discussed by the BAP opinion.

         I. Background

         Debtor Mark Dingley is the former owner and operator of two towing companies. Creditors Yellow Logistics, LLC and Yellow Express, LLC (collectively, Yellow) are transportation companies. In 2011, Yellow sued Dingley and his towing companies in Nevada state court alleging various state law claims related to the improper towing, storage, and sale of a semi-truck and trailer belonging to Yellow. After Dingley failed to appear for a deposition in that action, the state court imposed discovery sanctions against Dingley under Nevada Rule of Civil Procedure 37(d) in the amount of approximately $4, 000. Dingley failed to timely pay the sanctions, and, on Yellow's application, the court issued an order under ...


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