FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE MARK DINGLEY, No. 14-60055
Debtor,
BAP No.
13-1261
MARK DINGLEY,
Appellant,
OPINION
v.
YELLOW LOGISTICS, LLC;
YELLOW EXPRESS, LLC,
Appellees.
Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Kirscher, Jury, and Taylor, Bankruptcy Judges, Presiding
Argued and Submitted November 14, 2016
San Francisco, California
Filed April 3, 2017
Before: Ronald M. Gould, Richard R. Clifton,
and Paul J. Watford, Circuit Judges.
Opinion by Judge Clifton
2 IN RE DINGLEY
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.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
IN RE DINGLEY 3
COUNSEL
Christopher P. Burke (argued), Las Vegas, Nevada, for
Appellant.
Mark Wray (argued), Reno, Nevada, for Appellees.
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.
4 IN RE DINGLEY
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 Nevada Revised Statutes §§ 22.010(3) and
22.030 requiring Dingley to show cause why he should not be
held in contempt for his failure to pay the court-ordered
discovery sanctions.
After the state court set a hearing date on its order to show
cause, Dingley filed for Chapter 7 bankruptcy in Nevada
bankruptcy court. On the date of the hearing, Dingley’s
counsel notified the state court of his bankruptcy petition.
The state court took the hearing off its calendar and issued an
order requiring the parties to address the effect of the
automatic stay on the pending civil contempt proceedings.
In accordance with the court’s order, Yellow filed
supplemental briefing with the state court arguing that the
automatic stay did not apply to the pending contempt
proceedings. In arguing that the contempt proceedings were
exempted from the automatic stay, Yellow relied on our
court’s decision in David v. Hooker, Ltd., 560 F.2d 412 (9th
Cir. 1977), where we held that civil contempt proceedings
IN RE DINGLEY 5
were not automatically stayed under the Federal Rules of
Bankruptcy Procedure, the regime governing bankruptcy
actions and the automatic stay before the enactment of the
modern Bankruptcy Code.1
In response, Dingley moved for sanctions under 11 U.S.C.
§ 362(k) in the bankruptcy court,2 contending that Yellow
violated the automatic stay by filing the supplemental brief
with the state court. The bankruptcy court agreed and
awarded sanctions against Yellow in the amount of $1,500.
The bankruptcy court did not address whether Hooker
exempted the contempt proceedings from the automatic stay.
Yellow appealed to the Bankruptcy Appellate Panel,
which reversed the bankruptcy court in a published opinion.
In re Dingley, 514 B.R. 591 (9th Cir. BAP 2014). In its
opinion, the BAP agreed with Yellow and held that the civil
contempt proceedings were exempted from the automatic
stay. Id. at 592–93. The BAP reasoned that, under our
decision in Hooker, civil contempt proceedings are exempted
from the automatic stay unless the proceedings turn on the
determination or collection of an underlying debt or are a
ploy to harass the debtor. Id. at 597 (citing Hooker, 560 F.2d
at 418). Because the contempt proceedings against Dingley
were not related to his pre-petition debts and were instead
intended to sanction him for litigation misconduct, the
1
Congress enacted the Bankruptcy Code in November 1978, about
one year after Hooker was decided in September 1977. See Bankruptcy
Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549 (codified as
amended at 11 U.S.C. §§ 101–1532 (2012)).
2
As relevant here, § 362(k) provides that “an individual injured by
any willful violation of a stay . . . shall recover actual damages, including
costs and attorneys’ fees . . . .”
6 IN RE DINGLEY
automatic stay did not apply. Id. at 600. On that basis, the
BAP concluded, the bankruptcy court erred by finding that
Yellow violated the automatic stay. Id.
In a concurring opinion, Judge Jury reluctantly agreed
with the BAP majority’s application of Hooker. Id. at 600.
She questioned whether Hooker remained good law in light
of the Bankruptcy Code, which was enacted one year after
Hooker was decided and enumerates a list of express
exceptions to the automatic stay. Id. at 600–02. Judge Jury
also expressed the view that the Hooker rule was inconsistent
with more recent decisions from this court broadly
interpreting the scope of the automatic stay provisions in the
Bankruptcy Code. Id. at 602–03.
Dingley timely appealed the BAP decision to this court.
While the appeal was pending, the bankruptcy court
dismissed Dingley’s underlying bankruptcy case for cause.
The bankruptcy court vacated all pending hearings, except
adversary proceedings and fee applications.
II. Discussion
We review de novo whether the automatic stay has been
violated. In re Mwangi, 764 F.3d 1168, 1173 (9th Cir. 2014).
When determining whether there has been a violation of the
automatic stay, we must review a bankruptcy court decision
“independently and without deference” to the BAP’s
decision. In re Perl, 617 F.3d 1102, 1109 (9th Cir. 2010)
(internal quotation marks omitted).
We conclude, based on our post-Bankruptcy Code
precedent, that civil contempt proceedings such as Dingley’s
are not covered by the automatic stay because they qualify
IN RE DINGLEY 7
under the Bankruptcy Code’s statutorily-enumerated
exception for regulatory actions taken by a government
entity. See 11 U.S.C. § 362(b)(4). We thus affirm the BAP’s
decision reversing the sanctions award against Yellow
entered by the bankruptcy court, though on a different
ground. Because we rely upon the government regulatory
exemption, we do not need to address whether Hooker
remains good law.
A. Automatic bankruptcy stay
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.
11 U.S.C. § 362(a). Under the Bankruptcy Code’s automatic
stay provision, virtually all actions against debtors to collect
pre-petition debts are prohibited. This includes:
(1) the commencement or continuation,
including the issuance or employment of
process, of a judicial, administrative, or other
action or proceeding against the debtor that
was or could have been commenced before
the commencement of the case under this title,
or to recover a claim against the debtor that
arose before the commencement of the case
under this title; [and]
(2) the enforcement, against the debtor or
against property of the estate, of a judgment
obtained before the commencement of the
case under this title.
Id. § 362(a)(1)–(2).
8 IN RE DINGLEY
B. Government regulatory exemption
The reach of the automatic stay under the Bankruptcy
Code is not unlimited, however. To that end, the Bankruptcy
Code enumerates nearly thirty different statutory exceptions
to the automatic stay. Id. § 362(b)(1)–(28). One of them,
§ 362(b)(4), often called the “government regulatory
exemption,” provides that the automatic stay does not apply
to “the commencement or continuation of an action or
proceeding by a governmental unit . . . to enforce such
governmental unit’s . . . police and regulatory power.” This
exemption “has been applied in a variety of contexts,
including labor law enforcement, state bar disciplinary
proceedings, and employment discrimination actions brought
by the Equal Employment Opportunity Commission.” In re
Universal Life Church, Inc., 128 F.3d 1294, 1297 (9th Cir.
1997) (internal citations omitted).
In our circuit, courts have applied two alternative tests
when determining whether government action falls under the
government regulatory exemption: the pecuniary purpose test
and the public policy test. Id. (citing NLRB v. Continental
Hagen Corp., 932 F.2d 828, 833 (9th Cir. 1991)).
“Satisfaction of either test will suffice to exempt the action
from the reach of the automatic stay.” City & County of San
Francisco v. PG&E Corp., 433 F.3d 1115, 1124 (9th Cir.
2006) (citing Lockyer v. Mirant Corp., 398 F.3d 1098, 1108
(9th Cir. 2005)). Under the pecuniary purpose test, the court
must determine “whether the government action relates
primarily to the protection of the government’s pecuniary
interest in the debtor’s property or to matters of public safety
and welfare.” Universal Life Church, 128 F.3d at 1297
(citing Continental Hagen, 932 F.2d at 833). By contrast,
under the public policy test, the court must determine whether
IN RE DINGLEY 9
the government’s action is intended to either “effectuate
public policy” or to “adjudicate private rights.” Continental
Hagen, 932 F.2d at 833 (quoting NLRB v. Edward Cooper
Painting, Inc., 804 F.2d 934, 942 (6th Cir. 1986)). If the
court determines that the government’s action is intended
either to protect the government’s pecuniary interest in the
debtor’s property or to adjudicate private rights, the
government regulatory exemption will not apply and the
automatic stay will be imposed. Universal Life Church,
128 F.3d at 1297.
C. Civil contempt proceedings
We have previously considered whether the government
regulatory exemption applies to proceedings to collect a
sanctions award imposed against a debtor to deter litigation
misconduct. In In re Berg, we held that, under both the
pecuniary interest test and the public policy test,
“§ 362(b)(4)’s government regulatory exemption exempts
from the automatic stay an award of attorneys’ fees imposed
under [Federal Rule of Appellate Procedure] 38 as a sanction
for unprofessional conduct in litigation.” 230 F.3d 1165,
1168 (9th Cir. 2000). In extending the government regulatory
exemption to the Rule 38 sanctions proceedings at issue in
Berg,3 we reasoned that because the purpose of Rule 38
sanctions is to “effectuate public policy [in deterring
unprofessional conduct in litigation], not to protect private
rights or the government’s interest in the sanctioned person’s
property,” the government regulatory exemption applies to a
creditor’s attempt to collect sanctions against a debtor under
3
As relevant here, Rule 38 allows appellate courts to “award just
damages and single or double costs to the appellee” when the appellant
files a “frivolous” appeal. Fed. R. App. P. 38.
10 IN RE DINGLEY
Rule 38. Id. This is true regardless of whether the sanctions
are initially pursued by a private party or whether the
sanctions award is ultimately payable to a private party. Id.4
Berg controls this case. In Berg, this court awarded
sanctions against the debtor for filing a frivolous appeal.
230 F.3d at 1167. Here, Yellow attempted to collect
discovery sanctions previously awarded against Dingley by
a Nevada court under Nevada law for failing to comply with
a court order which required the payment of those sanctions.
In both cases, the creditor pursued the collection of sanctions
to effectuate the respective court’s public policy interest in
deterring certain kinds of litigation misconduct: in Berg, the
filing of a frivolous appeal, and here, the failure to comply
with a court order imposing discovery sanctions. See id.
Moreover, the bankruptcy court did not find, nor has Dingley
argued on appeal, that the contempt proceedings against
Dingley were intended to either protect the Nevada state
court’s pecuniary interest in Dingley’s property or adjudicate
any private rights in Dingley’s property. See Universal Life
Church, 128 F.3d at 1297. Accordingly, under Berg, the civil
contempt proceedings against Dingley were exempted from
the automatic stay. See 230 F.3d at 1168. Yellow therefore
did not violate the automatic stay by pursuing civil contempt
sanctions against Dingley.
4
In support of our decision in Berg, we cited Alpern v. Lieb, 11 F.3d
689 (7th Cir. 1993), where the Seventh Circuit held that sanctions
proceedings under Federal Rule of Civil Procedure 11 were exempted
from the automatic stay because the sanctions were “meted out by a
government unit, the court,” for the purpose of deterring litigation
misconduct. Id. at 690. Apart from Alpern and Berg, we have found no
published circuit court opinions addressing the application of the
government regulatory exemption to sanctions proceedings like the one
here.
IN RE DINGLEY 11
III. Conclusion
Civil contempt proceedings are exempted from the
automatic stay under the government regulatory exemption
when the proceedings are intended to effectuate the court’s
public policy interest in deterring litigation misconduct.
Here, Yellow pursued the collection of civil contempt
sanctions against Dingley to effectuate the Nevada state
court’s public policy interest in deterring litigants from
violating court orders imposing sanctions for litigation
misconduct. The civil contempt proceedings against Dingley
were therefore exempt from the automatic stay. We affirm
the BAP’s reversal of the bankruptcy court’s award of
sanctions against Yellow.
AFFIRMED.