St. Paul Fire & Marine Insurance v. Labuzan

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
August 18, 2009

No. 08-20229 Charles R. Fulbruge III
Clerk

ST PAUL FIRE & MARINE INSURANCE COMPANY

Plaintiff-Appellee
v.

THEODORE F LABUZAN; DEEANN S LABUZAN

Defendants-Appellants

Appeal from the United States District Court
for the Southern District of Texas

Before REAVLEY, BARKSDALE, and GARZA, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge:
This appeal presents an issue of first impression for our court: to what
extent, if any, do Theodore F. Labuzan, and his wife, Deeann Labuzan, creditors
of the bankruptcy debtor, have standing to claim damages based on violations
of the bankruptcy automatic-stay provision, 11 U.S.C. § 362(k) (“[A]n individual
injured by any willful violation of a stay . . . shall recover actual damages,
including costs and attorneys’ fees, and, in appropriate circumstances, may
recover punitive damages”.). The Labuzans challenge the district court’s ruling
they lack standing to pursue a claim under § 362(k). VACATED and
REMANDED.
 No. 08-20229

I.
The Labuzans owned 99 percent of the limited, and 100 percent of the
general, partnership interest in Contractor Technology, Ltd. (CTL), a
construction company. St. Paul Fire & Marine Insurance Company provided
payment and performance bonds for several of CTL’s projects. In turn, the
Labuzans had a personal indemnity agreement with St. Paul in the event it had
to pay claims under those bonds.
On 15 May 2005, with several projects ongoing, CTL filed a voluntary
petition for Chapter 11 bankruptcy reorganization. Approximately one week
later, in claimed violation of the 11 U.S.C. § 362(k) automatic-stay provision, St.
Paul contacted the owners of those ongoing projects and advised them: CTL was
in bankruptcy; and, if a project owner made payment to CTL and St. Paul was
later required to pay under the CTL bonds, St. Paul would reduce its liability to
the project owner by any amount paid CTL by that owner.
Because of alleged resulting reduced revenues, CTL was unable to meet
its financial obligations. Its Chapter 11 reorganization was converted into a
Chapter 7 liquidation proceeding in June 2005.
St. Paul paid over $32 million on its CTL bonds. Along that line, in
November 2005, St. Paul sued the Labuzans in district court for breach of their
indemnity agreement with St. Paul.
In response, the Labuzans, inter alia, raised as an affirmative defense St.
Paul’s claimed violation of the § 362(k) automatic-stay provision. The Labuzans
claimed such violation prevented CTL from reorganizing successfully and,
therefore, caused St. Paul’s having to pay on its CTL bonds. The Labuzans
claimed the following damages: $51,087,855 for loss of value suffered by CTL;

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$2,245,000 for judgments against Theodore Labuzan, and $1,167,000 for other
possible judgments that might be entered against him; $634,187 for IRS liens
against CTL; $414,101 for attorney’s fees; and $2,900,000 for loss of Theodore
Labuzan’s earning capacity.
In January 2007, St. Paul moved for summary judgment on its indemnity
claims. On the other hand, that January and February, respectively, the
Labuzans and CTL’s Bankruptcy Trustee (the Trustee) filed adversary
proceedings against St. Paul in bankruptcy court, seeking compensatory and
punitive damages based on St. Paul’s claimed violation of § 362(k)’s automatic-
stay provision.
That May, St. Paul’s action against the Labuzans in district court, and the
Labuzans’ adversary proceeding against St. Paul in bankruptcy court, were
consolidated by the district court. That June, the district court granted in part
and denied in part St. Paul’s summary-judgment motion. The court ruled St.
Paul proved its case-in-chief, but the Labuzans retained their § 362(k) defense
because material issues of fact existed “concerning whether any portion of St.
Paul’s CTL bond losses was caused by St. Paul’s own unlawful conduct”. The
district court granted St. Paul’s summary-judgment motion regarding a number
of the Labuzans’ affirmative defenses, including failure to mitigate, assumption
of risk, estoppel, discharge, and tortious interference with contractual relations.
That August, St. Paul and the Trustee entered into a global resolution of
competing claims in CTL’s Chapter 7 bankruptcy. Pursuant to the settlement
agreement, and in exchange for St. Paul’s reducing or waiving its claims against
the bankruptcy estate, St. Paul received $600,000 from it. The Trustee also
permitted St. Paul to retain certain funds in an amount over $1 million.

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The bankruptcy court approved the settlement agreement in November
2007. In its order approving the settlement, the bankruptcy court allowed, inter
alia, the Labuzans’ unsecured claim in the amount of $200,000 against the
estate.
Earlier, in September 2007, St. Paul raised in district court whether the
Labuzans have standing to pursue a claim under § 362(k) based on St. Paul’s
claimed violation of the automatic stay created by CTL’s bankruptcy. In
January 2008, the district court ruled the Labuzans lack standing to assert the
§ 362(k) claim, based on its ruling that CTL, not the Labuzans, owned that claim
against St. Paul. The district court reasoned:
Assuming that a violation occurred, the [Labuzans] would be
required to show that the claim actually belonged to them as
indemnitors. And they would have to show that as indemnitors they
are the proper parties to bring this suit.
Now, what the evidence shows is that the [Labuzans], while
they were . . . owners of CTL, first, they were not creditors of CTL.
There were no claims, I believe, made by them against the estate, as
I understand it. Additionally, CTL was a separate entity or is a
separate entity from the [Labuzans] and, therefore, the [Labuzans]
are not and were not the primary owners of any claim that belonged
to CTL. Particularly, they were not the owners of the claim that
there was a stay violation.
The record shows that CTL resolved its claims against St.
Paul and dismissed its adversary proceeding against St. Paul and
in that regard, the Court is of the opinion that the [Labuzans] are
barred from bringing a claim [on] behalf of CTL, because that would
be the way in which it would have to be brought. They have no
right to bring a separate and independent claim because the claim
does not belong to them.
Transcript of Hearing at 13-14, St. Paul Fire & Marine Ins. Co. v. Labuzan, No.
H-05-3811 (S.D. Tex. 15 Jan. 2008). The district court stated that, on behalf of

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a debtor, creditors could seek equitable remedies for § 362(k) violations, but they
could not recover damages.
Because the district court’s ruling precluded the Labuzans from asserting
a § 362(k) claim against St. Paul, the Labuzans abandoned their only affirmative
defense: St. Paul’s claimed automatic-stay violation. Accordingly, the Labuzans
allowed the district court to enter judgment for St. Paul in March 2008 for, inter
alia, approximately $32 million. The Labuzans’ motion for reconsideration was
denied.
II.
A district court’s rulings on jurisdictional issues, such as standing, and on
questions of statutory interpretations are, of course, reviewed de novo. E.g.,
Texas v. United States, 497 F.3d 491, 495 (5th Cir. 2007), cert. denied, 129 S. Ct.
32 (2008). “A district court’s factual findings, including those on which the court
based its legal conclusions, are reviewed for clear error.” Id.
The automatic-stay provision states, inter alia:
[A] petition filed under . . . this title . . . operates as a stay,
applicable to all entities, of –
(1) the commencement or continuation . . . 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 . . . , or to recover a claim against the debtor that arose before
the commencement of the case under this title;
...
(3) any act to obtain possession of property of the estate or of
property from the estate or to exercise control over property of the
estate;
(4) any act to create, perfect, or enforce any lien against property of
the estate;
...

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(6) any act to collect, assess, or recover a claim against the debtor
that arose before the commencement of the case under this title;
[and]
(7) the setoff of any debt owing to the debtor that arose before the
commencement of the case under this title against any claim against
the debtor . . . .
11 U.S.C. § 362(a). Section 362(k) (formerly § 362(h)) provides in part:
[A]n individual 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.
11 U.S.C. § 362(k) (emphasis added).
Our court has held that § 362(k) creates a private remedy for automatic-
stay violations. Pettitt v. Baker, 876 F.2d 456, 457-58 (5th Cir. 1989) (“We
conclude that [§ 362(k)] creates a private remedy for one injured by a willful
violation of an automatic stay.”). Pettitt was decided, however, in the context of
a claim by a debtor. Id. at 457. In this instance, CTL, not the Labuzans, is the
debtor. Along that line, dicta in In re Pointer, 952 F.2d 82, 86 (5th Cir. 1992),
provided: “[I]t seems illogical to conclude that Congress intended to limit
§ 362[(k)] to debtors when one of the principal purposes behind the automatic
stay is to protect creditors from unequal treatment”. Id. (holding that creditors
do not have standing to invoke avoidance powers under 11 U.S.C. § 549).
Accordingly, at issue is whether, pursuant to § 362(k), individuals other
than the debtor, who claim injury from an automatic-stay violation, have
standing to pursue a claim for resulting damages. Although § 362(k) was added
to the Bankruptcy Code in 1984, this issue has not been addressed by many
circuits, and it is one of first impression for our court.

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To establish standing pursuant to § 362(k), the Labuzans are required to
meet both constitutional and prudential requirements. Procter & Gamble Co.
v. Amway Corp., 242 F.3d 539, 560 (5th Cir. 2001). For the reasons that follow,
they satisfy the requirements for each.
A.
“To meet the [Article III] constitutional standing requirement, a plaintiff
must show (1) an injury in fact (2) that is fairly traceable to the actions of the
defendant and (3) that likely will be redressed by a favorable decision.” Id. This
constitutional requirement is easily satisfied by the Labuzans. Their alleged
injuries sustained as a result of CTL’s failure to reorganize under Chapter 11
can fairly be traced to St. Paul’s claimed violation of the automatic stay by
contacting the project owners and instructing them about the consequences of
payments to CTL. Further, at least some of the Labuzans’ injuries are likely to
be redressed by a favorable decision.
B.
“Prudential standing requirements exist in addition to ‘the immutable
requirements of Article III’ as an integral part of ‘judicial self-government.’” Id.
(quoting ACORN v. Fowler, 178 F.3d 350, 362 (5th Cir. 1999)). “These judicially
created limits concern [(1)] whether a plaintiff’s grievance arguably falls within
the zone of interests protected by the statutory provision invoked in the suit,
[(2)] whether the complaint raises abstract questions or a generalized grievance
more properly addressed by the legislative branch, and [(3)] whether the plaintiff
is asserting his or her own legal rights and interests rather than the legal rights
and interests of third parties.” Id. (citing ACORN, 178 F.3d at 363).

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The Labuzans claim standing because § 362(k) expressly gives standing
to “an individual” injured by St. Paul’s claimed automatic-stay violation.
Further, they contend they satisfy the prudential requirements because: as
creditors and equity holders of CTL, their interests fall within the zone of
interests protected by § 362(k); their injury, sustained as a result of the
conversion to Chapter 7, was neither abstract nor generalized; and they have
shown that their injury is separate and distinct from that sustained by CTL.
St. Paul maintains: the Labuzans lack standing because they do not own
the claims they seek to pursue; rather, those claims belong to CTL’s bankruptcy
estate. St. Paul asserts each item of damages claimed by the Labuzans derives
from harm to CTL, with CTL being the primary obligor, and the Labuzans being
secondary obligors, and only indirectly results in harm to the Labuzans. Finally,
St. Paul raises res judicata, based on the Trustee’s adversary proceeding against
St. Paul “for the very same debt the Labuzans seek to bring” here, and the
subsequent settlement reached by the Trustee and St. Paul and approved by the
bankruptcy court.
Congress can “modify or even abrogate prudential standing requirements,
thus extending standing to the full extent permitted by Article III”. Procter &
Gamble, 242 F.3d at 560. “We therefore look to the statute in question to
determine whether Congress expressed an intent to negate the background of
prudential standing doctrine.” Id. (footnote call and internal citations omitted).
1.
Again, § 362(k) provides:
[A]n individual injured by any willful violation of a stay provided by
this section shall recover actual damages, including costs and

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attorneys’ fees, and, in appropriate circumstances, may recover
punitive damages.
11 U.S.C. § 362(k) (emphasis added).
The term “individual” is not defined by the Bankruptcy Code, but it is used
throughout the Code to refer to debtors and non-debtors. See Homer Nat’l Bank
v. Namie, 96 B.R. 652, 654 (W.D. La. 1989) (citing, inter alia, 11 U.S.C. §§ 522(b)
(individual as debtor), 321(a)(1) (individual as trustee), and 1129(a)(5)(A)(i)
(individual as “director, officer, or voting trustee of the debtor”)). When referring
to § 362(k), Collier uses the terms “debtor” and “individual” interchangeably. See
C OLLIER ON B ANKRUPTCY ¶ 362.11[3] (15th ed. 2009).
Congress’ using the term “individual” in § 362(k) might “lead one to
conclude that Congress intended to abrogate the background of prudential
standing for purposes of [§ 362(k)] and allow anyone to sue who could achieve
Article III standing”. Procter & Gamble, 242 F.3d at 561. As discussed,
however, “individual” is not defined in the Bankruptcy Code. If Congress
intended to abrogate the prudential standing requirement by enacting § 362(k),
that intent is not expressed clearly. Therefore, we have to ascertain Congress’
intent by examining the Code’s legislative history. See id. at 562. That history
for § 362 states in part:
The automatic stay is one of the fundamental debtor protections
provided by the bankruptcy laws. It gives the debtor a breathing
spell from his creditors. It stops all collection efforts, all
harassment, and all foreclosure actions. It permits the debtor to
attempt a repayment or reorganization plan, or simply to be relieved
of the financial pressures that drove him into bankruptcy.
H.R. Rep. No. 595, 95th Cong. 1st Sess. (1977), S. Rep. No. 989, 95th Cong. 2d
Sess. 49 (1978) (capitalization altered).

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Undoubtedly, based on the above-referenced language, the term
“individual” includes debtors, and our court has so held. See Pettitt, 876 F.2d at
457-58. The inquiry, however, does not end here. The relevant part of the
legislative history states:
The automatic stay also provides creditor protection. Without it,
certain creditors would be able to pursue their own remedies against
the debtor’s property. Those who acted first would obtain payment
of the claims in preference to and to the detriment of other creditors.
Bankruptcy is designed to provide an orderly liquidation procedure
under which all creditors are treated equally. A race of diligence by
creditors for the debtor’s assets prevents that.
H.R. Rep. No. 595, 95th Cong. 1st Sess. (1977), S. Rep. No. 989, 95th Cong. 2d
Sess. 49 (1978) (capitalization altered); see also Hunt v. Bankers Trust Co., 799
F.2d 1060, 1069 (5th Cir. 1986) (“The purpose of the automatic stay is to protect
creditors in a manner consistent with the bankruptcy goal of equal treatment.”);
Namie, 96 B.R. at 655 (same); United States v. Miller, No. 5:02-CV-0168, 2003
WL 23109906, at *7 (N.D. Tex. 22 Dec. 2003) (unpublished) (noting that
creditors are “clearly intended to benefit from § 362”).
Although, as noted, the authorities on the scope of the term “individual”
as used in the Bankruptcy Code are scant, decisions interpreting § 362 in
general, and § 362(k) in particular, are nevertheless instructive.
In re Fuel Oil Supply & Terminaling, Inc., 30 B.R. 360, 361-62 (N.D. Tex.
1983), involved a bankruptcy-debtor corporation interpleaded by an insurance
company in state-court litigation, in violation of the automatic stay. After the
debtor removed the matter to bankruptcy court, other parties to the litigation
moved for remand, claiming void both the interpleader in violation of the stay
and the subsequent removal. Id. at 362. The bankruptcy court stated: “The

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automatic stay is for the benefit of the debtor and if it chooses to ignore stay
violations other parties cannot use such violations to their advantage.” Id. The
action was remanded, however, based on “equitable grounds”—mainly because
the bankruptcy court determined that the parties’ litigating their state-law
claims in state court would not interfere with the debtor’s reorganization efforts.
Id. at 363. Fuel Oil, decided in the context of the removal statute, 28 U.S.C.
§ 1441(c), did not hold that non-debtors lack standing to challenge automatic-
stay violations. Further, the decision was rendered before § 362(k) was enacted,
and, as such, is inapplicable to whether “individual” in § 362(k) includes non-
debtors.
In this regard, a more recent decision is on point. In the earlier-cited
Namie, 96 B.R. 652, the court held that a corporate creditor had standing to
assert an automatic-stay violation by another creditor. Id. at 655-66. In Namie,
owners of a mobile home leased to the debtor seized it after the debtor became
delinquent on lease payments. Id. at 652. They also sued the debtor in state
court. Id. The debtor filed for Chapter 7 bankruptcy a few weeks later. Id.
Although the owners received notice of the debtor’s bankruptcy filing, they
obtained in state court a default judgment against the debtor several weeks
later, and then sold the mobile home at a sheriff’s sale. Id. at 652-53.
The bankruptcy trustee, with the bankruptcy court’s approval,
subsequently sold the mobile home to a bank. Id. at 653. After the bank was
unable to take possession of the mobile home due to the previous sheriff’s sale,
it filed an adversary proceeding against the subsequent owners of the mobile
home. Id. In defense, the owners claimed that § 362(k)’s remedies were not
available to creditors. Id. at 654. The district court disagreed and held that the

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bank, as an “individual” under § 362(k), had standing to pursue a damages claim
against the owners. Id. at 655. The court reasoned, inter alia:
If Congress intended to limit the remedies in § 362[(k)] to debtors it
could have done so by the simple expedient of replacing the term
“individual” with “debtor.” Congress chose not to do so, and this
court is unwilling to impose limitations not supported by the
statutory language, jurisprudence, or legislative history. Moreover,
it seems illogical to conclude that Congress intended to limit
§ 362[(k)] to debtors when one of the principal purposes behind the
automatic stay is to protect creditors from unequal treatment.
Id. Accordingly, the bankruptcy court’s awarding damages and attorney’s fees
to the bank was affirmed. Id. at 656.
In an unpublished decision, the same district court (but a different judge)
held the United States, as a creditor, had standing to assert automatic-stay
violations under § 362(k). See Miller, 2003 WL 23109906, at *10. In Miller, the
United States made a loan to the debtor to enable it to purchase a house. Id. at
*1. The loan was secured by a vendor’s lien and a deed of trust. Id.
Subsequently, the United States paid delinquent ad valorem property taxes on
the property for the years 1991 through 1994. Id. The debtor’s ad valorem
property taxes for 1995 became due on 1 October. Id.
On 2 October 1995, the debtor filed for Chapter 13 bankruptcy. Id. In
May 1998, a state-court judgment for the 1995-1997 ad valorem taxes was
entered against the debtor, and the property was sold at a tax sale that
September. Id. at *2. After learning of the bankruptcy closing in 2001, the
United States filed an action in district court, seeking to have the property
transfer declared void as violative of § 362. Id. at *5.
The district court concluded that the United States, as a creditor, met both
the constitutional and prudential standing requirements to pursue a

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declaratory-judgment action against the debtor’s other creditors, based on their
having violated the automatic stay. Id. at *10. The court’s holding was
grounded in its analysis of § 362(k)’s language, the Bankruptcy Code’s legislative
history and purposes, and this and other circuits’ jurisprudence. Id. at *6-10.
Among other things, the court also noted the consequences of denying creditor
standing under § 362:
First, it would suggest that, where . . . neither the debtor nor the
trustee had any economic interest in the subject property (because
the debtor has no equity in the property), a creditor could proceed
against the property in violation of the stay with impunity because
the one party that has an incentive to complain of the violation
([another] creditor whose interest in the property has been harmed)
is without standing to call the violation to the court’s attention.
Second, it creates a facially anomalous result in that, even though
a violation of the automatic stay has occurred, and even though the
actions . . . are void ab initio, a creditor who is adversely affected by
that action nevertheless is without standing to seek redress in the
very forum established to enforce the statute that created the
automatic stay.
Id. at *9 (quoting In re Ring, 178 B.R. 570, 577 (S.D. Ga. 1995)) (alterations in
original).
Bankruptcy and district courts in other circuits have allowed pre-petition
creditors’ damages claims to proceed, or at least recognized that pre-petition
creditors can assert such claims, where automatic-stay violations occur. See,
e.g., In re Winters, No. 93-7381, 1995 WL 453053, at *6-8 (N.D. Ill. 28 July 1995)
(upholding the bankruptcy court’s award of damages but not addressing
standing); In re Prairie Trunk Ry., 112 B.R. 924, 929 (N.D. Ill. 1990) (“The
weight of persuasive case authority is that only a debtor or creditor ‘may attack
any acts in violation of the automatic stay’”.) (quoting In re Brooks, 79 B.R. 479,

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481 (9th Cir. 1987)); In re Int’l Forex of Cal., 247 B.R. 284, 291 (S.D. Cal. 2000)
(expressly finding creditor-standing); In re Clemmer, 178 B.R. 160, 165 (E.D.
Tenn. 1995) (reserving the issue, but acknowledging the weight of authority
supporting creditor-standing).
In claiming lack of standing, St. Paul relies, inter alia, on several Ninth
Circuit decisions. In Re Globe Investment & Loan Co., 867 F.2d 556, 559 (9th
Cir. 1989), addressed whether property owners who filed a proof of claim with
a bankruptcy court, and who claimed to be “creditors” of the bankruptcy estate,
had standing to challenge a trustee’s sale of the property at issue. The court
held standing was lacking because, “although it [was] questionable whether
creditors of an estate may invoke the protections of section 362”, plaintiffs
proceeded as owners of the property, rather than as creditors. Id. at 559-60
(noting that plaintiffs’ “cause of action under section 362 [was] a disingenuous
attempt to use the Bankruptcy Code to their advantage”). Therefore, plaintiffs
were “outside parties”, not entitled to challenge the sale. Id. at 560.
Accordingly, whether individuals other than debtors, such as creditors, have
standing to challenge automatic-stay violations, was not resolved in Globe
Investment.
In re Pecan Groves of Arizona, 951 F.2d 242, 245 (9th Cir. 1991), held “a
creditor has no independent standing to appeal an adverse decision regarding
a violation of the automatic stay”. Id. The holding was based on several prior
decisions that had concluded § 362 was “intended solely to benefit the debtor
estate”. Id. (citing In re Brooks, 871 F.2d 89, 90 (9th Cir. 1989), In re Stivers,
31 B.R. 735, 735, 737 (N.D. Cal. 1983), In re Fuel Oil, 30 B.R. at 362). The court
also reasoned: “Allowing unsecured creditors to pursue claims the trustee

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abandons could subvert the trustee’s powers.” Id. Again, as in Globe
Investment, not resolved in Pecan Grove was whether creditors could initiate an
action based on an automatic-stay violation (as opposed to appealing it where a
trustee fails to do so). See In re Int’l Forex, 247 B.R. at 291 (noting In re Pecan
Grove’s holding “has been overstated for the proposition that the automatic stay
is solely for the benefit of the debtor, and a creditor cannot have standing under
§ 362[(k)]”).
When the Ninth Circuit confronted whether the term “individual” includes
corporate entities, the court stated, without citing to authority: “Normally, pre-
petition creditors . . . shall recover damages under 11 U.S.C. §§ 362[(k)] and
1109(b) for willful violations of the automatic stay”. In re Goodman, 991 F.2d
613, 618 (9th Cir. 1993). (The court proceeded to hold the term “individual” does
not include a corporation or other “artificial entit[ies]”. Id. at 619.)
The Ninth Circuit’s position on creditor standing is consistent with our
circuit’s jurisprudence. It appears that, had the creditor in Goodman, who
proceeded as creditor, rather than as owner, been a non-corporate entity, the
Ninth Circuit would have found standing. In sum, St. Paul’s reliance on the
above-referenced Ninth Circuit decisions to assert lack of standing is misplaced.
As discussed supra, the decisions “favoring creditor standing are often
strongly rooted in an analysis of the legislative history of § 362 and the goals of
the Bankruptcy Code”. Miller, 2003 WL 23109906, at *8. Congress’ intent to
enable pre-petition creditors to assert automatic-stay violations may also be
ascertained by reading other provisions of the Bankruptcy Code.
In this instance, the Labuzans claim: due to St. Paul’s violating the
automatic stay, CTL was unable to reorganize under Chapter 11 and had to

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convert to Chapter 7. In Chapter 11 matters, in finding creditor-standing, some
courts, cited infra, relied on 11 U.S.C. § 1109(b). That section states:
A party in interest, including the debtor, the trustee, a creditors’
committee, an equity security holders’ committee, a creditor, an
equity security holder, or any indenture trustee, may raise and may
appear and be heard on any issue in a case under this chapter.
11 U.S.C. § 1109(b) (emphasis added). Regarding such reliance, see, e.g., In re
Reserves Dev. Corp., 64 B.R. 694, 699-700 (W.D. Mo. 1986) (creditor-standing
based on, inter alia, § 1109(b)); In re Int’l Forex, 247 B.R. at 289 (same); In re
Clemmer, 178 B.R. at 165 (providing, in dicta, that § 1109(b), along with
decisions finding creditor standing, supported the proposition that “creditors
have standing to challenge automatic stay violations and seek damages under
§ 362[(k)] in Chapter 7 and 11 cases”, but declining to resolve the issue because
the automatic-stay violation was challenged by a non-creditor).
When 11 U.S.C. § 1109(b) is read in conjunction with § 362(k), it becomes
clear that Congress did not enact § 362(k) solely for the benefit of debtors.
Accordingly, based on § 362(k)’s plain language, the above-discussed
congressional purpose of § 362(k) to provide both debtor and creditor protection,
and the weight of authority finding creditor-standing, we hold debtors and
creditors are entities whose grievances fall “within the zone of interests”
protected by § 362(k).
2.
Because, as noted, the congressional purposes behind § 362(k) were debtor,
as well as creditor, protection, the Labuzans, as creditors of CTL, also
adequately meet the second prudential concern—“whether the complaint raises

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abstract questions or a generalized grievance more properly addressed by the
legislative branch”. Procter & Gamble, 242 F.3d at 560.
3.
A less obviously satisfied prudential concern is whether the Labuzans are
asserting claims that belong to CTL’s bankruptcy estate. In that regard, St.
Paul claims that, pursuant to In re Educators Group Health Trust, 25 F.3d 1281
(5th Cir. 1994), the estate, rather than the Labuzans, owns the claims they seek
to pursue because: the loss in equity alleged by the Labuzans was directly
suffered by CTL; the judgments entered against the Labuzans were based on
CTL’s failure to meet its own obligations; and the tax liens owed by CTL to the
IRS are derivative obligations. Regarding the Labuzans’ standing as creditors,
St. Paul claims the Labuzans do not have standing because they are CTL’s
unsecured creditors. The Labuzans, on the other hand, claim that Educators
Trust applies only to pre-petition claims, and is, therefore, inapposite.
We agree with the Labuzans for several reasons. In Educators Trust, a
group of school districts participated in Educators Group Health Trust to provide
health benefits for its teachers. Id. at 1283. After Educators Trust filed for
Chapter 7 relief, the school districts became creditors of the estate. Id. Two
years after the filing, the school districts instituted a state-court action against
the principals of Educators Trust, asserting, inter alia, mismanagement and
fraud. Id. The trustee intervened in the state-court action, asserting the school
districts’ claims were instead property of the bankruptcy estate. Id. The
bankruptcy court agreed. Id.
In Educators Trust, our court interpreted the 11 U.S.C. § 541(a)(1)
property-of-the-estate provision, which provides, in part, that property of the

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estate includes “all legal or equitable interests of the debtor in property as of the
commencement of the case”. Id. (quoting 11 U.S.C. § 541(a)(1)) (emphasis added).
In that regard, Educators Trust established the following legal framework:
If a cause of action belongs to the estate, then the trustee has
exclusive standing to assert the claim. If, on the other hand, a cause
of action belongs solely to the estate’s creditors, then the trustee has
no standing to bring the cause of action.
Whether a particular state cause of action belongs to the estate
depends on whether under applicable state law the debtor could
have raised the claim as of the commencement of the case. As part
of this inquiry, we look at the nature of the injury for which relief is
sought. If a cause of action alleges only indirect harm to a creditor
(i.e., an injury which derives from harm to the debtor), and the
debtor could have raised a claim for its direct injury under the
applicable law, then the cause of action belongs to the estate.
Conversely, if the cause of action does not explicitly or implicitly
allege harm to the debtor, then the cause of action could not have
been asserted by the debtor as of the commencement of the case,
and thus is not property of the estate.
Id. at 1284 (internal citations omitted). Applying the above-referenced
framework to the school districts’ claims, our court held that, although some of
the claims derived from the injury to the bankruptcy estate, others, such as
fraud and negligence claims, belonged solely to the school districts. Id. at 1285-
86.
Therefore, our inquiry is whether Educator Trust’s framework concerning
§ 541(a)(1) is applicable to claims asserted under § 362(k); we conclude that it is
not. At the outset, we note: whether the Trustee had standing to assert an
automatic-stay violation claim against St. Paul in bankruptcy court is not before
us. As discussed, however, our court has held that debtors have a private action
for damages under § 362(k). See Pettitt, 876 F.2d at 457-58. Consequently,

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assuming the Trustee had standing to assert a § 362(k) claim against St. Paul,
that standing was not exclusive.
Further, the earlier-referenced plain language of § 541(a)(1) implies that
a § 362(k) claim can never be brought as of commencement of the case because,
by definition, an automatic-stay violation occurs post-filing. Our conclusion that
Educators Trust is not applicable to § 362(k) claims is further guided by the
principle that Congress usually “says in a statute what it means and means in
a statute what it says there”. Conn. Nat’l Bank v. Germain, 503 U.S. 249, 254
(1992). Congress could have easily included § 362(k) claims under the “property
of the estate” umbrella of § 541. Likewise, if Congress intended to grant the
trustee exclusive standing to assert automatic-stay violations, it could have done
so by replacing the term “individual” with “trustee”. Accordingly, we conclude
that § 362(k) automatic-stay-violation claims are not property of the estate as
defined in § 541 and Educators Trust, at least to the extent they are not asserted
by the trustee. (Again, as noted, whether a trustee has standing to pursue
§ 362(k) claims is not at issue.)
Finally, CTL’s possibly being harmed by its inability to reorganize does not
mean that no other harm resulted from St. Paul’s violating the automatic stay.
It is “possible for a bankruptcy estate and a creditor to own separate claims
against a third party arising out of the same general series of events and broad
course of conduct”. In re Seven Seas Petroleum, 522 F.3d 575, 585 (5th Cir.
2008). The Labuzans’ claims and those of the CTL bankruptcy estate are not
mutually exclusive. See id. at 587. “[T]here is nothing illogical or contradictory
about saying that [St. Paul] might have inflicted direct injuries on both the

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[Labuzans] and [CTL] during the course of dealings that form the backdrop of
both sets of claims”. Id.
Therefore, based on § 362(k)’s plain language, its legislative history, the
Bankruptcy Code’s purposes, and the weight of judicial authority, we hold:
pursuant to § 362(k), the Labuzans, as pre-petition creditors of CTL, have
standing to assert a claim against St. Paul. Accordingly, to the extent the
Labuzans’ claims are based on their status as owners/equity holders of CTL,
§ 362(k) cannot be invoked. Along those lines, we decline to hold, as St. Paul
urges, that only secured creditors may challenge automatic-stay violations.
Neither the statute, its legislative history, nor the above-cited authority stands
for this proposition.
Obviously, because our holding is limited to the issue of standing, we do
not consider what, if any, injuries claimed by the Labuzans were sustained in
their capacity as CTL’s creditors. Neither do we consider the res judicata effect,
if any, the settlement of the Trustee’s claims against St. Paul has on the
Labuzans’ claims.
III.
For the foregoing reasons, the judgment is VACATED and this matter is
REMANDED to district court for further proceedings consistent with this
opinion.
VACATED and REMANDED.

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