the insersection of bankruptcy and criminal law · alycia m. peloso, criminal restitution...

1

WRITTEN MATERIALS FOR:

THE INSERSECTION OF BANKRUPTCY AND CRIMINAL LAW

Presented By:

Arizona Bankruptcy American Inn of Court

Pupillage No. 6

March 11, 2020

Arizona Country Club

Hilary Barnes Anthony Cali Dean Dinner

Patricia Doyle-Kossick Byron Forrester Ilene Lashinsky Michael Rolland

Shawn Stone Andrea Wimmer

2

TABLE OF CONTENTS

I. Program Materials

A. The Intersection of Bankruptcy and Criminal Law

II. Relevant Statutes

A. 11 U.S.C. § 362(b)(1)

B. 11 U.S.C. § 523

C. 11 U.SC. § 1328

D. 18 U.S.C. § 152

E. 18 U.S.C. § 157

F. 18 U.S.C. § 371

G. 18 U.S.C. § 1519

III. Selected Cases and Articles

A. Kelly v. Robinson, 479 U.S. 36 (1986)

B. U.S. v. Doe, 465 U.S. 605 (1984)

C. Baxter v. Palmigiano, 425 U.S. 308 (1976)

D. Gruntz v. County of Los Angeles (In re Gruntz), 202 F.3d 1074 (9th Cir.

2000)

E. Butcher v. Bailey, 753 F.2d 465 (6th Cir. 1985)

F. Lowery v. Cardwell, 575 F.2d 727 (9th Cir. 1978)

G. Ryan v. United States (In re Ryan), 389 B.R. 710 (B.A.P. 9th Cir. 2008)

H. State v. Jefferson, 615 P.2d 638 (Ariz. 1980)

3

PROGRAM MATERIALS

The Intersection of Bankruptcy and Criminal Law

It is axiomatic that one of the primary goals of bankruptcy is to provide a debtor with a fresh start.1 That goal may be denied, however, when a debtor has a criminal background, is currently in a criminal proceeding, or commits a crime while seeking the benefits of bankruptcy law. Criminal law intersects with bankruptcy law in at least four key areas: (i) the automatic stay makes certain exceptions for the continuation of criminal proceedings; (ii) an award of criminal restitution against a debtor may be excepted from the Bankruptcy Code's discharge provisions; (iii) the Fifth Amendment's privilege against self-incrimination frequently arises in bankruptcy proceedings; and (iv) federal law criminalizes certain actions within the confines of the bankruptcy system.

I. The Automatic Stay and Criminal Proceedings

A debtor's fresh start generally begins with the imposition of the automatic stay. Bankruptcy Code § 362(b)(1), however, provides that the automatic stay does not operate to suspend the "commencement or continuation of a criminal action or proceeding against the debtor . . . ." While the statute appears relatively clear on its face, some courts have disagreed as to what exact proceedings it encompasses. See, e.g. In re Wohleber, 596 B.R. 554, 559 (B.A.P. 6th Cir. 2019) (noting that "there does not appear to be 'any mandatory authority in this Circuit regarding the appropriate method of evaluating whether a particular proceedings falls within the meaning of § 363(b)(1)").

A split of authority has developed as to how to apply Bankruptcy Code § 362(b)(1). See In re Caravona, 347 B.R. 259, 266 (Bankr. N.D. Ohio 2006). Some courts hold that prosecutors are barred from continuing with criminal proceedings if the motivation is merely to collect a debt, while others find that the unambiguous language of § 362(b)(1) compels that conclusions that the stay does not apply to any criminal prosecution of a debtor. Id.; In re Bibbs, 282 B.R. 876 (Bankr. E.D. Ark. 2002) (collecting cases on both sides).

1 See, e.g., Perez v. Campbell, 402 U.S. 637, 648 (1971) (noting that a primary purpose of bankruptcy law is to allow the debtors the opportunity to be unhampered by preexisting debts).

4

Courts that have broadly construed Bankruptcy Code § 362(b)(1) will examine prosecutorial purpose in order to determine whether the automatic stay applies. Such courts will find that the automatic stay does not apply if the prosecutorial purposes is merely to collect a debt rather than the vindication of public rights. St. Joseph Wholesale Liquor Co. v. Butler (In re Butler), 74 B.R. 106, 107 (W.D. Mo. 1985) (ruling that stay is violated when state initiates criminal action for purpose of collecting debt); Rainwater v. Alabama (In re Rainwater), 233 B.R. 126, 157 (Bankr. N.D. Ala. 1999) (stating that probation revocation for debtor's theft conviction violated stay because it was an attempt to collect restitution) vacated sub nom, Bryan v. Rainwater, 254 B.R. 273 (N.D. Ala. 2000); In re Perrin, 233 B.R. 71, 78 (Bankr. D. N.J. 1999) (concluding that if state's motive is collection of prepetition debt then prosecution is not excepted from the automatic stay).

Courts that have found the language of Bankruptcy Code § 362(b)(1) to be unambiguous have allowed criminal proceedings to continue where the proceedings involved the debtor's nonpayment of taxes, where the debtor received a jail term for failure to pay a criminal monetary penalty, and where a restitution order was enforced. See In re H Cohen Caterers, Inc., 26 B.R. 1 (Bankr. W.D. Ky. 1981); Matter of Sims, 101 B.R. 52 (Bankr. W.D. Wis. 1989); In re Pellegrino, 42 B.R. 129 (Bankr. D. Conn. 1984).

The Ninth Circuit has adopted the more narrow interpretation of Bankruptcy Code § 362(b)(1). In In re Gruntz, the Ninth Circuit Court of Appeals examined whether Bankruptcy Code § 362(b)(1) allowed continuation of a criminal proceeding against a debtor for repayment of child support obligations. Gruntz v. County of Los Angeles (In re Gruntz), 202 F.3d 1074 (9th Cir. 2000). In so holding, the Ninth Circuit overruled its previous position on the issue as set forth in Hucke v. Oregon. In Hucke v. Oregon, the Ninth Circuit previously held that, if a criminal proceeding had the collection of debt as its underlying aim, then the automatic stay would apply and the criminal action would be enjoined. 992 F.2d 950 (9th Cir. 1993). In Gruntz, the Ninth Circuit noted that the holding of Hucke was "well within the mainstream of thought at the time" but that "[o]ther circuits have declined to follow our lead and . . . it is a doctrine difficult to apply in practice." Gruntz, 202 F.3d at 1085. Rather, in Gruntz, the Ninth Circuit adhered to the plain wording of the statute: "On its face, it does not provide any exception for prosecutorial purpose or bad faith." Id.

II. Criminal Restitution and Dischargeability

One of the primary ways in which the Bankruptcy Code affords debtors a "fresh start" is through discharge of obligations. In order for an obligation to be discharged, however, it must first be a "debt". Criminal restitution is often imposed by states as a condition of probation and generally falls within the discretion of the sentencing court. See Alycia M. Peloso, Criminal Restitution Obligations as Debts Under the Bankruptcy Code, 54 FORDHAM LAW REV. 869, 872 (1986). Prior to 1986, the majority of bankruptcy courts held that criminal restitution obligations were not "debts" within the meaning of the Bankruptcy Code. See, e.g., In re Oslager, 46 Bankr. 58, 61 (Bankr. M.D. Pa. 1985); In re

5

George G. Solar Co., 44 Bankr. 828, 830 (Bankr. M.D. Fla. 1984); In re Vik, 45 Bankr. 64, 67 (Bankr. N.D. Iowa 1984); In re Johnson, 32 Bankr. 614, 616-17 (Bankr. D. Colo. 1983); In re Magnifico, 21 Bankr. 800, 803 (Bankr. D. Ariz. 1982). Prior to 1986, and the Supreme Court's decision in Kelly v. Robinson, many bankruptcy courts, however, found that criminal restitution was a dischargeable obligation in bankruptcy. See, e.g., In re Robinson, 776 F.2d 30, 38–40 (2d Cir. 1985); In re Brown, 39 B.R. 820, 826 (Bankr. M.D. Tenn. 1984).

In Kelly v. Robinson, a debtor had been ordered to pay restitution to a Connecticut state probation agency based on her illegal receipt of welfare benefits. 479 U.S. 36 (1986). The payments were then to be forwarded to the victim of the debtor's crime. While Bankruptcy Code § 523(a)(2) excepts debts arising from larceny or fraud from discharge, the Connecticut agencies did not bring timely proceedings to assert such exemptions. The Second Circuit ruled that the restitution was a prepetition debt and therefore dischargeable in bankruptcy. Kelly v. Robinson (In re Robinson), 776 F.2d 30, 38–40 (2d Cir. 1985). The Supreme Court reversed. 479 U.S. 36. In doing so, it declined to decide whether such restitution sentences were debts. Rather, the Supreme Court based its holding on Bankruptcy Code § 523(a)(7), which excepts from discharge liabilities that qualify as debts if they are "for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and . . . not compensation for actual pecuniary loss." Id. at 50 (citing 11 U.S.C. § 523(a)(7)).

Because Bankruptcy Code § 523(a)(7) does not require a party to bring a special proceeding, the debtor's debt was excepted form discharge automatically: "The court stated that the appropriate Connecticut agency probably could have avoided discharge of the debt if it had objected under §§ 523(a)(2) or (a)(4) of the Code. As no objections to discharge were filed the court concluded that the State could rely on § 523(a)(7), the subsection that provides for automatic nondischargeability for certain debts." Id. at 42. Accordingly, the victim that is awarded restitution in a criminal proceeding does not need to file an adversary proceeding or file a motion to have his or her restitution award declared non-dischargeable in a debtor's bankruptcy case.

The majority in Kelly relied primarily on two arguments. First, it noted that, under the Bankruptcy Act of 1898, courts refused to discharge criminal restitution and that Congress had not expressed any intention to change the interpretation of the judicially created concept. Id. at 44–47. "If congress had intended by § 523(a)(7) or by any other provision, to discharge state criminal sentences, 'we can be certain that there would have been hearings, testimony, and debate concerning consequences so wasteful, so inimical to purposes previously deemed important, and so likely to arouse public outrage.'" Id. at 51 (quoting TVA v. Hill, 437 U.S. 152 (1978) (Powell, J., dissenting)). Second, the Supreme Court found the right to create and enforce penal sanctions to be an important aspect of the sovereignty retained by the States. Id. at 47. Accordingly, the Court expressed its "deep

6

conviction that federal bankruptcy courts should not invalidate the results of state criminal proceedings." Id.

Subsequent to Kelly, several courts extended the rationale in that case to determine that prosecution costs imposed as a penalty in criminal proceedings are excepted from a debtor's discharge in chapter 7 pursuant to Bankruptcy Code § 523(a)(7). In re Ryan, 389 B.R. 710, 715 (B.A.P. 9th Cir. 2008) (citing Thompson v. Virginia (In re Thompson), 16 F.3d 576, 581 (4th Cir. 1994)). In spite of the foregoing, costs imposed as part of a criminal sentence may be dischargeable in a Chapter 13 bankruptcy. In Ryan, the Bankruptcy Appellate Panel for the Ninth Circuit found as follows:

The exception to discharge in chapter 7 included in § 523(a)(7) has been interpreted since Kelly to cover costs of prosecution imposed as part of a criminal sentence, whether they are considered as a "fine, penalty, or forfeiture," but the language of § 1328(a)(3) is different. By its terms, it provides a more limited exception to discharge in Chapter 13, one that we determine does not encompass costs of prosecution imposed as part of a criminal sentence.

Ryan, 389 B.R. at 719. The Ryan court found that if Congress had so intended, it could have adopted an exception to discharge in Chapter 13 that mirrored Bankruptcy Code § 523(a)(7). Id.

III. The Fifth Amendment in Bankruptcy Proceedings

Among other things, the Fifth Amendment to the U.S. Constitution protects against self-incrimination in the American judicial system. While someone "taking the 5th" often happens in the context of criminal proceedings, it also may arise in the context of bankruptcy proceedings—most often during 341 meetings of creditors, Rule 2004 examinations, depositions in administrative or adversary proceedings, and in response to written discovery.

The Fifth Amendment privilege is not a complete shield and will not protect against all acts that would tend to incriminate an individual For example, an individual acting in an official capacity may not invoke the Fifth to avoid producing corporate records in response to a document request or subpoena as corporate business records are not privileged. See, e.g., Fisher v. United States, 425 U.S. 391, 409 (1976) ("[T]he Fifth Amendment would not be violated by the fact alone that the papers on their face might incriminate the taxpayer, for the privilege protects a person only against being incriminated by his own compelled testimonial communications."); Braswell v. United States, 487 U.S. 99, 110 (1988) ("[T]he custodian's act of production is not deemed a personal act, but rather an act of the corporation. Any claim of Fifth Amendment privilege asserted by the agent would be tantamount to a claim of privilege by the corporation—which of course possesses no such privilege."). An individual, however, may properly assert the Fifth Amendment

7

privilege where the act of production itself would incriminate that individual. See United States v. Doe, 465 U.S. 605, 613 (1984). In Doe, the Supreme Court found that a sole proprietor responding to a document production request was protected by the Fifth Amendment privilege.

A debtor can waive his or her Fifth Amendment privilege, but in order to do so, the debtor must have testified to incriminating facts. In re Gi Yeong Nam, 245 B.R. 216, 234 (Bankr. E.D. Pa. 2000). Citing McCarthy v. Arndstein, 262 U.S. 355, 359 (1923), the Gi Yeong Nam court noted that "the Supreme Court found that in the involuntary examination of a debtor, he is practically in the position of a witness under cross examination, and where the previous disclosure (in this case, the debtor's schedules) is not incriminating, he is not deprived of stopping short in his testimony whenever it may fairly tend to incriminate him." Id.

Where, however, a debtor has voluntarily disclosed incriminating facts, the privilege against self-incrimination has been waived and cannot be invoked to avoid disclosure of details. Rogers v. United States, 340 U.S. 367, 373 (1951). "As to each question to which a claim of privilege is directed, the court must determine whether the answer to that particular question would subject the witness to a 'real danger' of further crimination. Id. at 374. A debtor can refuse to testify as to details of previously disclosed facts if the details would further incriminate him or subject him to new areas of incrimination. In re Blan, 239 B.R. 385 396 (Bankr. W.D. Ark. 1999). These distinctions ensure that a witness cannot "pick and choose" aspects of a particular subject to discuss. Mitchell v. United States, 526 U.S. 314 (1999). To hold otherwise "would open the way to distortion of facts by permitting a witness to select any stopping place in the testimony." Id. quoting Rogers, 340 U.S. at 371. "The fear of incrimination must be reasonable in light of the circumstances, the content of the questions and the setting in which the questions are asked." United States v. Jones, 703 F.2d 473, 475 (10th Cir. 1983).

A negative inference based upon a party's invocation of the Fifth Amendment may also be employed in bankruptcy proceedings, subject to certain restrictions as to its use. A plaintiff seeking to secure a favorable Fifth Amendment inference "must first offer evidence which at least tends to prove each part of the plaintiff's case." Waddell v. Landis, 551 B.R. 74, 80 (D. Nev. 2016). "A court may then add to the weight of that evidence by drawing inferences against the party remaining silent, but cannot rely on inferences alone in determining that a moving party has met its burden." Id.; see also Avirgan v. Hull, 932 F.2d 1572, 1580 (11th Cir. 1991) ("The negative inference, if any, to be drawn from the assertion of the fifth amendment does not substitute for evidence need to meet the burden of production."); United States v. White, 589 F.2d 1283, 1287 (5th Cir. 1979) ("[A] grant of summary judgment merely because of the invocation of the fifth amendment would unduly penalize the employment of the privilege.").

8

IV. Bankruptcy Crimes

Every iteration of American bankruptcy law, from the first bankruptcy statute in 1800, to the present Bankruptcy Code and corresponding statutes, has provided criminal sanctions for the abuse of the bankruptcy process. Tamara Ogier & Jack F. Williams, Bankruptcy Crimes & Bankruptcy Practice, 6 AM. BANKR. INST. L. REV. 317, 320 (1998). Most bankruptcy crimes are currently covered by 18 U.S.C. § 152, which identifies nine separate offenses. Those offenses include doing the following in a case arising under Title 11: (1) knowingly and fraudulently concealing assets; (2) knowingly and fraudulently making of a false oath; (3) knowingly and fraudulently making a false declaration or statement under penalty of perjury; (4) knowingly and fraudulently presenting a false proof of claim; (5) knowingly and fraudulently receiving property from a debtor after the filing of a bankruptcy case with the intent to defeat provisions of Title 11; (6) knowingly and fraudulently receiving or attempting to obtain and money or remuneration for acting or forbearing to act; (7) knowingly and fraudulently transferring or concerning any personal property of the property of another person or corporation; (8) knowingly and fraudulently concealing, destroying of falsifying recorded information; and (9) knowingly and fraudulently withholding and recorded information from a trustee or officers of the court related to the property or financial affairs of a debtor. 18 U.S.C. § 152.

All of the crimes outlined in 18 U.S.C. § 152 require both knowing and fraudulent behavior. Courts have held that "knowingly" requires that a defendant's conduct be voluntary and intentional. See, e.g., Untied States v. Zehrbach, 47 F.3d 1252, 1258 (3d Cir. 1994); United States v. Defazio, 899 F.2d 626, 635 (7th Cir. 1990). That a defendant has acted fraudulently generally requires a finding that the defendant acted with an intent to deceive or cheat a creditor, trustee, or the court. See, e.g., Zehrbach, 47 F.3d at 1258-59 (stating that proving fraudulent element of bankruptcy fraud requires finding that defendant acted knowingly with purposeful, specific intent to deceive for purpose of causing financial loss to creditor or bringing about financial gain for oneself); United States v. Lerch, 996 F.2d 158, 161 (7th Cir. 1993) (upholding lower court's determination that an act is fraudulent if done with intent to deceive or cheat any creditor, trustee, or bankruptcy judge).

The prohibitions of 18 U.S.C. § 152 are broad. They not only encompass the acts of a debtor, but also the acts of any party seeking an advantage in violation of the Bankruptcy Code, including attorneys. To that end, a debtor accused of a bankruptcy crime under 18 U.S.C. § 152 may not necessarily rely on advice of counsel as a defense:

Although several courts have found that advice of counsel may excuse some kinds of bankruptcy fraud, they adopt two different approaches to the reliance argument. The first approach is subjective; that is, as long as a debtor honestly believes what a lawyer says, the debtor can rely on any advice given, even if peculiar or unreasonable. The second approach is objective; that is, mere honest reliance will not suffice -- a debtor can only follow the advice that an ordinary debtor would reasonably follow.

9

3 Norton Bankr. Law & Practice 2d § 49.2 at 48–7 (William L. Norton, Jr. et al eds. 1997).

In addition to the nine offenses spelled out in 18 U.S.C. § 152, five other sections of Title 18 identify bankruptcy related crimes: (1) 18 U.S.C. § 153 (fraud and embezzlement by trustees or officers of the court); (2) 18 U.S.C. § 154 (imposition of fines and removal from office for unlawfully benefitting from position, conflicts of interest, or other abuses of power); (3) 18 U.S.C. § 155 (prohibiting any party-in-interest from fraudulently entering into fee agreement for services rendered with respect to a bankruptcy case where the fee is paid from estate property); (4) 18 U.S.C. § 156 (providing that it is an offense if a bankruptcy petition preparer knowingly disregards Title 11, the U.S. Code, or the Federal Rules of Bankruptcy Procedure requirements); and (5) 18 U.S.C. § 157 (providing for a broad prohibition against any form of criminal conduct engaged in with respect to a bankruptcy case).

Commentators have noted that allegations of actions that would subject a party to criminal prosecution under 18 U.S.C. § 152 are infrequently prosecuted:

It is noteworthy that section 152 criminalizes much of the conduct that results in a denial of a debtor's discharge pursuant to 11 U.S.C. § 727. However, while debtors are frequently denied a discharge for concealments or false statements in their schedules, conduct that could clearly result in a conviction under section 152, they are rarely prosecuted under section 152. Indeed, while not true in all districts, there are relatively few prosecutions involving exclusively false oath or failure to disclose in the debtor's schedules. Thus, the vast majority of prosecutions occur in cases involving substantial sums of money, particularly egregious behavior, concealments, transfers or misrepresentations by the debtor and/or his attorney.

Bankruptcy Crimes & Bankruptcy Practice, 6 AM. BANKR. INST. L. REV. at 347–48. Statistics show that 18 U.S.C. § 152 and similar statutes under Title 18, are infrequently invoked. Id.

10

Relevant Statutes

11 U.S.C. § 362(b)(1)

(b)The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970, does not operate as a stay—

(1) under subsection (a) of this section, of the commencement or continuation of a criminal action or proceeding against the debtor . . .

11 U.S.C. § 523. Exceptions to Discharge

(a) A discharge under section 727, 1141, 1192, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt–

. . .

(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty—

(A) relating to a tax of a kind not specified in paragraph (1) of this subsection; or

(B) imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition;

11. U.S.C. § 1328. Discharge

(a)Subject to subsection (d), as soon as practicable after completion by the debtor of all payments under the plan, and in the case of a debtor who is required by a judicial or administrative order, or by statute, to pay a domestic support obligation, after such debtor certifies that all amounts payable under such order or such statute that are due on or before the date of the certification (including amounts due before the petition was filed, but only to the extent provided for by the plan) have been paid, unless the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter, the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt—

(3) for restitution, or a criminal fine, included in a sentence on the debtor's conviction of a crime . . .

11

18 U.S.C. § 152. Concealment of Assets; False Oaths and Claims; Bribery

A person who—

(1) knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11, from creditors or the United States Trustee, any property belonging to the estate of a debtor;

(2) knowingly and fraudulently makes a false oath or account in or in relation to any case under title 11;

(3) knowingly and fraudulently makes a false declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, in or in relation to any case under title 11;

(4) knowingly and fraudulently presents any false claim for proof against the estate of a debtor, or uses any such claim in any case under title 11, in a personal capacity or as or through an agent, proxy, or attorney;

(5) knowingly and fraudulently receives any material amount of property from a debtor after the filing of a case under title 11, with intent to defeat the provisions of title 11;

(6) knowingly and fraudulently gives, offers, receives, or attempts to obtain any money or property, remuneration, compensation, reward, advantage, or promise thereof for acting or forbearing to act in any case under title 11;

(7) in a personal capacity or as an agent or officer of any person or corporation, in contemplation of a case under title 11 by or against the person or any other person or corporation, or with intent to defeat the provisions of title 11, knowingly and fraudulently transfers or conceals any of his property or the property of such other person or corporation;

(8) after the filing of a case under title 11 or in contemplation thereof, knowingly and fraudulently conceals, destroys, mutilates, falsifies, or makes a false entry in any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor; or

(9) after the filing of a case under title 11, knowingly and fraudulently withholds from a custodian, trustee, marshal, or other officer of the court or a United States Trustee entitled to its possession, any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor,

shall be fined under this title, imprisoned not more than 5 years, or both.

12

18 U.S.C. § 155. Fee Agreements in Cases under Title 11 and Receiverships.

Whoever, being a party in interest, whether as a debtor, creditor, receiver, trustee or representative of any of them, or attorney for any such party in interest, in any receivership or case under title 11 in any United States court or under its supervision, knowingly and fraudulently enters into any agreement, express or implied, with another such party in interest or attorney for another such party in interest, for the purpose of fixing the fees or other compensation to be paid to any party in interest or to any attorney for any party in interest for services rendered in connection therewith, from the assets of the estate, shall be fined under this title or imprisoned not more than one year, or both.

18 U.S.C. § 156. Knowing Disregard of Bankruptcy Law or Rule

(a)Definitions.—In this section—

(1) the term “bankruptcy petition preparer” means a person, other than the debtor’s attorney or an employee of such an attorney, who prepares for compensation a document for filing; and

(2) the term “document for filing” means a petition or any other document prepared for filing by a debtor in a United States bankruptcy court or a United States district court in connection with a case under title 11.

(b)Offense.—If a bankruptcy case or related proceeding is dismissed because of a knowing attempt by a bankruptcy petition preparer in any manner to disregard the requirements of title 11, United States Code, or the Federal Rules of Bankruptcy Procedure, the bankruptcy petition preparer shall be fined under this title, imprisoned not more than 1 year, or both.

18 U.S.C. § 157. Bankruptcy Fraud

A person who, having devised or intending to devise a scheme or artifice to defraud and for the purpose of executing or concealing such a scheme or artifice or attempting to do so—

(1) files a petition under title 11, including a fraudulent involuntary petition under section 303 of such title;

(2) files a document in a proceeding under title 11; or

(3) makes a false or fraudulent representation, claim, or promise concerning or in relation to a proceeding under title 11, at any time before or after the filing of the petition, or in relation to a proceeding falsely asserted to be pending under such title,

shall be fined under this title, imprisoned not more than 5 years, or both.

13

18 U.S.C. § 371. Conspiracy to commit offense or to defraud United States

If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.

If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.

18 U.S.C. § 1519. Destruction, alteration, or falsification of records in Federal investigations and bankruptcy

Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.

1074 202 FEDERAL REPORTER, 3d SERIES

son’s medical care and negligently refusedto implement the treatment recommendedby her treating physicians. We rejectedthis same argument in Kuhl v. LincolnNat’l Health Plan, Inc., 999 F.2d 298, 303(8th Cir.1993), cert. denied, 510 U.S. 1045,114 S.Ct. 694, 126 L.Ed.2d 661 (1994). Asin Kuhl, the summary judgment recordestablishes that Gencare’s only role inMrs. Thompson’s cancer treatments was tomake pre-certification benefit decisions onbehalf of the plan. Although Mrs. Thomp-son was perhaps unable or unwilling toundergo costly treatments not covered bythe plan, that does not mean Gencare asplan administrator controlled her medicalcare. Linda Thompson as patient and hertreating physicians retained the ultimatedecision-making authority regarding hermedical care. If she disagreed with Gen-care’s pre-certification decisions, ERISAafforded her a timely equitable remedy toreview Gencare’s interpretation of theplan, a remedy she did not pursue.

In substance, Thompson now asserts atort claim for damages on account of Gen-care’s allegedly wrongful benefits decisionsas plan administrator. Pilot Life, Hull,and Kuhl make clear that claim is com-pletely preempted by ERISA’s remedies.As Thompson does not argue he has aremedy under ERISA, the judgment ofthe district court dismissing his complaintmust be affirmed.

,

In re Robert GRUNTZ, Debtor.

Robert Gruntz, Plaintiff–Appellant,v.

County of Los Angeles; Los AngelesDistrict Attorney, Defendants–

Appellees.No. 97–55379.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted Aug. 6, 1998

Opinion Filed Feb. 4, 1999

Amended Opinion Filed May 19, 1999

Withdrawn and Rehearing En BancGranted July 20, 1999

Argued and Submitted on RehearingSept. 23, 1999

Filed Feb. 3, 2000

After the California Court of Appeal,29 Cal.App.4th 412, 35 Cal.Rptr.2d 55, af-firmed his conviction on criminal chargesof failing to pay child support, Chapter 11debtor filed adversary complaint seekingorder that California state court convictionwas invalid as in violation of the automaticstay. The Bankruptcy Court dismissedcomplaint, and debtor appealed. The Unit-ed States District Court for the CentralDistrict of California, Robert J. Timlin, J.,affirmed. Debtor appealed. The Court ofAppeals, Thomas, Circuit Judge, held that:(1) federal courts are not bound, pursuantto Rooker-Feldman doctrine, by statecourt modifications of the automatic stay,and thus the doctrine did not strip federalcourt of jurisdiction; (2) automatic staydoes not enjoin state criminal prosecutions,even if underlying purpose of the criminalproceedings is debt collection, overrulingHucke v. Oregon, 992 F.2d 950 (9th Cir.1993); and (3) automatic stay thus did notapply to preclude state court criminal pro-ceedings against debtor for failure to paychild support.

Affirmed.Opinions, 166 F.3d 1020, 177 F.3d 728,

vacated and superseded.

1075IN RE GRUNTZCite as 202 F.3d 1074 (9th Cir. 2000)

1. Courts O509 Federal Courts O1142

Because federal district courts arecourts of original, not appellate, jurisdic-tion, they have no authority to review thefinal determinations of a state court injudicial proceedings, and direct federal ap-pellate review of state court decisions mustoccur, if at all, in the Supreme Court. 28U.S.C.A. §§ 1257, 1331, 1332.

2. Courts O509Rooker–Feldman doctrine does not

touch the writ of habeas corpus. 28U.S.C.A. § 2254.

3. Bankruptcy O2043(2)In general, a ‘‘core proceeding’’ in

bankruptcy is one that invokes a substan-tive right provided by Title 11 or a pro-ceeding that, by its nature, could arise onlyin context of a bankruptcy case, while‘‘non-core proceedings’’ are those not inte-gral to restructuring of debtor-creditor re-lations and not involving a cause of actionarising under Title 11. 28 U.S.C.A. § 157.

See publication Words and Phras-es for other judicial constructionsand definitions.

4. Bankruptcy O2393Automatic stay is self-executing, effec-

tive upon filing of the bankruptcy petition.Bankr.Code, 11 U.S.C.A. § 362(a).

5. Bankruptcy O2391 Judgment O479

Automatic stay is an injunction issuingfrom authority of the bankruptcy court,and bankruptcy court orders are not sub-ject to collateral attack in other courts.Bankr.Code, 11 U.S.C.A. § 362.

6. Bankruptcy O2062Any state court modification of auto-

matic stay would constitute an unautho-rized infringement upon bankruptcycourt’s jurisdiction to enforce the stay.Bankr.Code, 11 U.S.C.A. § 362.

7. Bankruptcy O2462Actions taken in violation of the auto-

matic stay are void. Bankr.Code, 11U.S.C.A. § 362.

8. Bankruptcy O2462Judicial proceedings in violation of the

automatic stay are void. Bankr.Code, 11U.S.C.A. § 362.

9. Bankruptcy O2462 Judgment O828.21(2)

Because, among other reasons, judi-cial proceedings in violation of the auto-matic stay are void ab initio, bankruptcycourt is not obligated to extend full faithand credit to such judgments. 28 U.S.C.A.§ 1738.

10. Judgment O828.11(1)Infirm judgments are not entitled to

full faith and credit in federal courts. 28U.S.C.A. § 1738.

11. Judgment O660.5Judgments issued without authority

are void as a matter of California state lawand, therefore, can have no preclusive ef-fect under full faith and credit statute. 28U.S.C.A. § 1738.

12. Bankruptcy O2062 Courts O509

By virtue of power vested in them byCongress, federal courts have final author-ity to determine scope and applicability ofautomatic stay, and, as such, Rooker–Feld-man doctrine is not implicated by collater-al challenges to automatic stay in bank-ruptcy; bankruptcy court does not conductan improper appellate review of a statecourt when it enforces an automatic staythat issues from its own federal statutoryauthority, but, rather, when state courtsdecide to proceed in derogation of the stay,it is state court which is attempting imper-missibly to modify federal court’s injunc-tion. Bankr.Code, 11 U.S.C.A. § 362.

13. Courts O509 Judgment O828.21(2)

In non-core proceedings that do notimplicate substantive rights granted underTitle 11 or affect the administration of thebankruptcy case, the normal rules of pre-clusion, including the Rooker–Feldman


doctrine, apply. Bankr.Code, 11 U.S.C.A.§ 101 et seq.; 28 U.S.C.A. § 157.

14. Courts O509Rooker–Feldman doctrine did not

preclude exercise of federal jurisdiction todetermine whether automatic stay en-joined state criminal proceedings againstChapter 11 debtor for failure to pay childsupport. Bankr.Code, 11 U.S.C.A. § 362.


Federal courts are not bound, pursu-ant to Rooker–Feldman doctrine, by statecourt modifications of the automatic stay,as modifying the automatic stay is not theact of a state court merely interpretingfederal law, but is an intervention in theoperation of an ongoing federal bankrupt-cy case, the administration of which isvested exclusively in the bankruptcy court.Bankr.Code, 11 U.S.C.A. § 362.

16. Bankruptcy O2402(5)Automatic stay does not enjoin state

criminal prosecutions, even if underlyingpurpose of the criminal proceedings is debtcollection; overruling Hucke v. Oregon, 992F.2d 950 (9th Cir.1993). Bankr.Code, 11U.S.C.A. § 362(b)(1).

17. Bankruptcy O3767, 3784Bankruptcy court’s decision granting

or denying relief from automatic stay isfinal decision which Court of Appeals re-views for abuse of discretion. Bankr.Code, 11 U.S.C.A. § 362.

18. Bankruptcy O3782Court of Appeals reviews de novo the

district court’s decision on appeal frombankruptcy court.

19. Courts O509Federal bankruptcy courts should not

invalidate the results of state criminal pro-ceedings, given the fundamental policyagainst federal interference with statecriminal prosecutions, and given that theright to formulate and enforce penal sanc-tions is an important aspect of the sover-eignty retained by the States.

20. Bankruptcy O2402(5)Bankruptcy Code’s automatic stay

provision does not stay the commencementor continuation of a criminal action or pro-ceeding against the debtor, and this stat-ute does not provide any exception forprosecutorial purpose or bad faith. Bankr.Code, 11 U.S.C.A. § 362(b)(1).

21. Bankruptcy O2021.1If statutory command of Bankruptcy

Code is clear, court need look no further,and Code must be enforced according toits terms. Bankr.Code, 11 U.S.C.A. § 101et seq.

22. Bankruptcy O2156 Habeas Corpus O446

Debtor alleging that his state courtconviction was obtained in violation of fed-eral bankruptcy law should seek federalrelief via writ of habeas corpus, not via anadversary proceeding in bankruptcy. 28U.S.C.A. § 2254.

23. Bankruptcy O2125, 2369To forfend state actions that are not

subject to the automatic stay but thatthreaten the bankruptcy estate, party mayrequest an injunction under BankruptcyCourt’s equitable powers. Bankr.Code, 11U.S.C.A. § 105.

24. Bankruptcy O2402(5)Automatic stay did not apply to pre-

clude state court criminal proceedingsagainst Chapter 11 debtor for failure topay child support. Bankr.Code, 11U.S.C.A. § 362(b)(1); West’s Ann.Cal.Pe-nal Code § 270.

25. Bankruptcy O2402(5)Unless a specific bankruptcy court-

ordered injunction applies, state trialcourts need not seek bankruptcy court ap-proval before commencing criminal pro-ceedings. Bankr.Code, 11 U.S.C.A.§§ 105, 362.

26. Bankruptcy O2062Bankruptcy courts have the ultimate

authority to determine the scope of the


automatic stay, subject to federal appellatereview, and state court does not have thepower to modify or dissolve the stay.Bankr.Code, 11 U.S.C.A. § 362(a).


Because Rooker–Feldman doctrinedoes not render a state court judgmentmodifying the automatic stay binding on abankruptcy court, state court risks havingits final judgment declared void if it pro-ceeds without obtaining bankruptcy courtpermission. Bankr.Code, 11 U.S.C.A.§ 362.

Robert C. Moest, Redondo Beach, Cali-fornia; Fritz Furman, Law Offices of Jo-seph A. Weber, Costa Mesa, California, forthe plaintiff-appellant.

Calvin House, Gutierrez & Preciado,Pasadena, California, for the defendants-appellees.

Margarita Padilla, Deputy AttorneyGeneral, Oakland, California; Michael D.Reynolds, Soliciter General, Portland, Ore-gon; James J. Gold, Gold and Hammes,San Jose, California, for the amici.

Appeal from the United States DistrictCourt for the Central District of Califor-nia; Robert J. Timlin, District Judge, Pre-siding. D.C. No. CV–95–00414 RT.

Before: HUG, Chief Judge,PREGERSON, BRUNETTI,O’SCANNLAIN, TROTT, T. G. NELSON,THOMAS, SILVERMAN, GRABER,WARDLAW, and FLETCHER, CircuitJudges.

THOMAS, Circuit Judge:

In this appeal, we consider (1) whether astate court modification of the bankruptcyautomatic stay binds federal courts; and(2) whether the automatic stay enjoins acriminal prosecution for the willful failureto pay child support. We hold that federalcourts are not bound by state court modifi-cations of the automatic stay, but that theautomatic stay does not enjoin state crimi-nal prosecutions.

I

It is not an inspirational tale. A divorcedecree obligated Robert Gruntz to pay therelatively modest sum of $300 a month inchild support. He failed to do so andultimately filed a Chapter 13 petition inbankruptcy. Under his confirmed reorga-nization plan, he was to pay $300 permonth as continuing child support, plus$291 a month toward the discharge of anaccrued $5,100 in past due child supportpayments. Gruntz began making the pay-ments to the trustee, but the case wasconverted to Chapter 11. Accordingly, theChapter 13 trustee did not disburse thechild support payments to Gruntz’s ex-spouse. Frustrated, she took her com-plaints to the Los Angeles District Attor-ney, who filed a misdemeanor criminalcomplaint charging Gruntz with violationof California Penal Code § 270 (failure tosupport dependent children). A jury con-victed Gruntz.

After conviction, Gruntz filed an adver-sary complaint against the County of LosAngeles (‘‘County’’) in bankruptcy courtand sought a temporary restraining orderto prevent the state court from proceedingwith sentencing. The bankruptcy courtdeclined the invitation to restrain the stateproceedings, and Gruntz received a sen-tence of 360 days in jail. The CaliforniaCourt of Appeal affirmed his conviction.See People v. Gruntz, 29 Cal.App.4th 412,35 Cal.Rptr.2d 55 (1994). While Gruntz’scriminal appeal was pending, he suffered asecond conviction for violating CaliforniaPenal Code § 270 and was also convictedfor violating California Penal Code § 166.4(failure to obey a state court order).

Subsequently, Gruntz filed the instantadversary proceeding against the Countyin bankruptcy court, requesting the courtto declare the state criminal proceedingsvoid as violative of the automatic stay im-posed under 11 U.S.C. § 362. The bank-ruptcy court dismissed the complaint ascollaterally estopped by the state judg-ment. On appeal, the district court af-


firmed the dismissal on the basis of theRooker–Feldman doctrine.1

A divided three-judge panel of this courtreversed, holding that the Rooker–Feld-man doctrine did not preclude the bank-ruptcy court from determining whetherthe conviction was void because the crimi-nal proceedings violated the automaticstay. See Gruntz v. County of Los Ange-les, 177 F.3d 728 (9th Cir.1999). We va-cated the panel’s decision and agreed torehear the appeal en banc.

II

Because Rooker–Feldman arises fromfederal jurisdictional statutes, the thresh-old question is whether the doctrine allowsfederal courts to entertain these adversaryproceedings at all. In this appeal, theCounty contends that the state court’sjudgment included a determination thatthe automatic stay did not enjoin the statecriminal proceedings. Therefore, theCounty reasons, if a state court has con-cluded that the bankruptcy automatic staydoes not apply, the resulting state judg-ment divests federal courts of jurisdictionto consider that question. Decidingwhether the Rooker–Feldman doctrine hassuch an effect is not a simple matter andrequires an examination of the federal dis-

trict court’s general, bankruptcy, and ha-beas corpus jurisdiction.

[1] At its core, the Rooker–Feldmandoctrine stands for the unremarkableproposition that federal district courts arecourts of original, not appellate, jurisdic-tion. See 28 U.S.C. §§ 1331, 1332. Thus,it follows that federal district courts have‘‘no authority to review the final determi-nations of a state court in judicial proceed-ings.’’ Worldwide Church of God v.McNair, 805 F.2d 888, 890 (9th Cir.1986).Direct federal appellate review of statecourt decisions must occur, if at all, in theSupreme Court. See 28 U.S.C. § 1257.

Rooker–Feldman is not a constitutionaldoctrine. Rather, the doctrine arises outof a pair of negative inferences drawn fromtwo statutes: 28 U.S.C. § 1331, which es-tablishes the district court’s ‘‘original juris-diction of all civil actions arising under theConstitution, laws, or treaties of the Unit-ed States’’; and 28 U.S.C. § 1257, whichallows Supreme Court review of ‘‘[f]inaljudgments or decrees rendered by thehighest court of a State in which a decisioncould be had.’’ 2

Rooker itself relied upon ‘‘the legislationof Congress,’’ namely the predecessors ofthese statutes in the Judicial Code. SeeRooker, 263 U.S. at 416, 44 S.Ct. 149 (con-

1. The doctrine takes its name from Rooker v.Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149,68 L.Ed. 362 (1923), and District of ColumbiaCourt of Appeals v. Feldman, 460 U.S. 462,103 S.Ct. 1303, 75 L.Ed.2d 206 (1983).Rooker held that federal statutory jurisdictionover direct appeals from state courts lies ex-clusively in the Supreme Court and is beyondthe original jurisdiction of federal districtcourts. See 263 U.S. at 415–16, 44 S.Ct. 149.Feldman held that this jurisdictional bar ex-tends to particular claims that are ‘‘inextrica-bly intertwined’’ with those a state court hasalready decided. See 460 U.S. at 486–87, 103S.Ct. 1303.

2. The history of § 1331 elucidates the statuto-ry, nonconstitutional dimension of the Rook-er–Feldman doctrine’s respect for state courtresolution of federal questions. In the Repub-lic’s first century, aside from a year of generaljurisdiction during the 1801 ‘‘MidnightJudges’’ episode, Congress chose to leave

most federal questions to state courts. See,e.g., Judiciary Act of 1789, § 9, 1 Stat. 73, 77.Following the Civil War, however, Congressgranted the federal courts concurrent civiljurisdiction, subject to a $500 amount-in-con-troversy requirement, coextensive with the Ar-ticle III, § 2 power over all cases ‘‘arisingunder the Constitution or laws of the UnitedStates.’’ Judiciary Act of 1875, § 1, 18 Stat.470. After a century of minor revisions to thefederal district courts’ original jurisdiction,Congress eliminated the jurisdictionalamount, creating today’s 28 U.S.C. § 1331.See Act of Dec. 1, 1980, Pub.L. No. 96–486,§ 2(a), 94 Stat. 2369. Similarly, § 1257 re-flects Congress’s choice to minimize federalclashes with state courts and its judgmentthat only the Supreme Court ‘‘had sufficientdignity to make federal review of state courtsreasonably palatable.’’ David P. Currie, ResJudicata: The Neglected Defense, 45 U. Chi.L.Rev. 317, 323 (1978).


struing Judicial Code, § 237, ch. 448, § 2,39 Stat. 726 (1916)) (current version at 28U.S.C. § 1257 (1988)), and Judicial Code,§ 24, ch. 231, § 24, 36 Stat. 1091 (1911)(current version at 28 U.S.C. § 1331(1980)); see also Feldman, 460 U.S. at 476,103 S.Ct. 1303 (construing 28 U.S.C.§ 1257); cf. ASARCO Inc. v. Kadish, 490U.S. 605, 622, 109 S.Ct. 2037, 104 L.Ed.2d696 (1989) (‘‘The Rooker–Feldman doc-trine interprets 28 U.S.C. § 1257 as ordi-narily barring direct review in the lowerfederal courts of a decision reached by thehighest state courtTTTT’’). Since Feldman,the Supreme Court has declined opportu-nities to extend, or even apply, the doc-trine.3

Of course, the statutes that form thebasis of the Rooker–Feldman doctrine co-exist among other federal jurisdictionallaws. To derive a coherent theory of fed-eral jurisdiction, one must consider theentire federal jurisdictional constellation.In this case, aside from the statutes ofgeneral jurisdiction, two other fixed juris-dictional stars draw our attention: the fed-eral law of habeas corpus and bankruptcy.

[2] It is well-settled that the Rooker–Feldman doctrine does not touch the writof habeas corpus. See Plyler v. Moore,129 F.3d 728, 732 (4th Cir.1997); Ritter v.Ross, 992 F.2d 750, 753 (7th Cir.1993);Blake v. Papadakos, 953 F.2d 68, 71 n. 2(3d Cir.1992). Indeed, federal habeas-cor-pus law turns Rooker–Feldman on itshead. Rather than leaving state courtjudgments undisturbed, it provides ex-pressly for federal collateral review of finalstate court judgments, see, e.g., 28 U.S.C.§ 2254, and requires exhaustion of stateremedies as a precondition for federal re-lief, see 28 U.S.C. § 2254(b)(1)(A). As we

shall discuss when examining the merits ofthis appeal, through the statutory writ ofhabeas corpus Congress has created acomprehensive system of federal collateralreview of state court criminal judgments.Thus, habeas corpus is not an ‘‘exception’’to Rooker–Feldman, but a procedure withroots in statutory jurisdiction parallel to-and in no way precluded by-the doctrine.

So, too, it is with bankruptcy law. Inapparent contradiction to the Rooker–Feldman theory, bankruptcy courts areempowered to avoid state judgments, see,e.g., 11 U.S.C. §§ 544, 547, 548, 549; tomodify them, see, e.g., 11 U.S.C. §§ 1129,1325; and to discharge them, see, e.g., 11U.S.C. §§ 727, 1141, 1328. By statute, apost-petition state judgment is not bindingon the bankruptcy court to establish theamount of a debt for bankruptcy purposes.See 11 U.S.C. § 109(e); Slack v. WilshireIns. Co. (In re Slack), 187 F.3d 1070, 1073(9th Cir.1999), as amended 1999 WL694990 (Sept. 9, 1999).

Thus, final judgments in state courts arenot necessarily preclusive in United Statesbankruptcy courts. Indeed, the rule haslong stood that ‘‘[a] state court judgmententered in a case that falls within thefederal courts’ exclusive jurisdiction is sub-ject to collateral attack in the federalcourts.’’ Gonzales v. Parks (In re Gon-zales), 830 F.2d 1033, 1036 (9th Cir.1987).The United States Supreme Court ex-plained in Kalb v. Feuerstein, 308 U.S.433, 438–39, 60 S.Ct. 343, 84 L.Ed. 370(1940):

It is generally true that a judgmentby a court of competent jurisdictionbears a presumption of regularity and isnot thereafter subject to collateral at-

3. In Pennzoil Co. v. Texaco, Inc., 481 U.S. 1,107 S.Ct. 1519, 95 L.Ed.2d 1 (1987), in whichthe Court required Younger abstention by fed-eral courts pending resolution of the issue bystate courts, five Justices expressly refused toapply Rooker–Feldman to a federal cause aris-ing from state proceedings. See id. at 18, 107S.Ct. 1519 (Scalia, J., joined by O’Connor, J.,concurring); id. at 21, 107 S.Ct. 1519 (Bren-nan, J., concurring); id. at 28, 107 S.Ct. 1519(Blackmun, J., concurring); id. at 31 n. 3, 107

S.Ct. 1519 (Stevens, J., concurring). Morerecently, the Court held Rooker–Feldman in-applicable to federal cases involving partiesother than those before the state court, term-ing it an ‘‘abstention doctrine, under which aparty losing in state court is barred fromseeking what in substance would be appellatereview of the state judgment in a UnitedStates district court.’’ Johnson v. De Grandy,512 U.S. 997, 1005–06, 114 S.Ct. 2647, 129L.Ed.2d 775 (1994).


tack. But Congress, because its powerover the subject of bankruptcy is plena-ry, may by specific bankruptcy legisla-tion create an exception to that principleand render judicial acts taken with re-spect to the person or property of adebtor whom the bankruptcy law pro-tects nullities and vulnerable collateral-ly.

As Representative Kastenmeier furthernoted in discussing the Bankruptcy Code:

State law rights arising in core bank-ruptcy proceedings are functionallyequivalent to congressionally createdrights, because Congress has the powerto modify State law rights in bankruptcyproceedings. Unlike the States, Con-gress may impair the obligation of con-tracts through the bankruptcy clause.Indeed, the very purpose of bankruptcyis to modify the rights of debtors andcreditors, and the bankruptcy code au-thorizes the bankruptcy court to abro-gate or modify State-created obligationsin many ways.

130 Cong. Rec. H1110 (daily ed. Mar. 20,1984).

Congress’s plenary power over bank-ruptcy derives from the constitutional im-perative ‘‘[t]o establish TTT uniform Lawson the subject of Bankruptcies throughoutthe United States.’’ U.S. Const., Art. I,§ 8. ‘‘The Constitution grants Congressexclusive power to regulate bankruptcyand under this power Congress can limitthat jurisdiction which courts, State orFederal, can exercise over the person andproperty of a debtor who duly invokes thebankruptcy law.’’ Kalb, 308 U.S. at 439,60 S.Ct. 343. In furtherance of thischarge, jurisdiction and authority overbankruptcies has been vested, from thebeginning of the Republic, in the federaldistrict courts. See, e.g., Bankruptcy Actof 1800, § 2, 2 Stat. 19, 21; BankruptcyAct of 1841, § 6, 5 Stat. 440, 445; Bank-ruptcy Act of 1867, § 1, 14 Stat. 517, 517;

Bankruptcy Act of 1898, § 2, 30 Stat. 544,545.

The current bankruptcy jurisdictionalstatute, 28 U.S.C. § 1334, expands the his-toric role of the federal district courts inbankruptcy.4 District courts have ‘‘origi-nal and exclusive jurisdiction of all casesunder title 11.’’ 28 U.S.C. § 1334(a) (em-phasis added). By the plain wording ofthe statute, Congress has expressed itsintent that bankruptcy matters be handledexclusively in a federal forum. See MSRExploration, Ltd. v. Meridian Oil, Inc., 74F.3d 910, 913 (9th Cir.1996). In short,‘‘ ‘Congress intended to grant comprehen-sive jurisdiction to the bankruptcy courtsso that they might deal efficiently andexpeditiously with all matters connectedwith the bankruptcy estate.’ ’’ CelotexCorp. v. Edwards, 514 U.S. 300, 308, 115S.Ct. 1493, 131 L.Ed.2d 403 (1995) (quot-ing Pacor, Inc. v. Higgins, 743 F.2d 984,994 (3d Cir.1984)).

Not all matters related to bankruptciesfall within the orbit of those subject tofederal plenary power. In this respect,the distinctions made between ‘‘core’’ and‘‘non-core’’ proceedings in the BankruptcyAmendments and Federal Judgeship Actof 1984, Pub.L. No. 98–353, 98 Stat. 340,are instructive. The 1984 Act was passed,in part, in response to Northern PipelineConstruction Co. v. Marathon Pipe LineCo., 458 U.S. 50, 71, 102 S.Ct. 2858, 73L.Ed.2d 598 (1982), which distinguishedbetween the ‘‘restructuring of debtor-cred-itor relations, which is at the core of thefederal bankruptcy power,’’ and ‘‘the adju-dication of state-created private rights.’’As to the latter function, the Court heldthat Congress did not have the power togrant jurisdiction to the Article I bank-ruptcy courts over proceedings related to abankruptcy case involving rights ‘‘createdby state law’’ and ‘‘independent of andantecedent to the reorganization petition

4. By the powers afforded them under 28U.S.C. § 157(a), district courts may refercases and proceedings under title 11 to thebankruptcy courts, which are ‘‘unit[s] of thedistrict court’’ pursuant to 28 U.S.C. § 151.

All districts currently automatically referbankruptcy cases to bankruptcy courts by lo-cal rule, as it was in this instance by C.D. Cal.Gen. Order 266 (Oct. 9, 1984) (since amendedby Gen. Order 266–A (Feb. 13, 1995)).


that conferred jurisdiction upon the Bank-ruptcy Court.’’ Id. at 84, 102 S.Ct. 2858.However, as to the former, the Court not-ed that ‘‘[o]f course, bankruptcy adjudica-tions themselves, as well as the manner inwhich the rights of debtors and creditorsare adjusted are matters of federal law.’’Id. at 84 n. 36, 102 S.Ct. 2858.

[3] Thereafter, Congress defined anddistinguished ‘‘core’’ and ‘‘non-core’’ pro-ceedings in the 1984 Act. See 28 U.S.C.§ 157.5 In general, a ‘‘core proceeding’’ inbankruptcy is one that ‘‘invokes a substan-tive right provided by title 11 or TTT aproceeding that, by its nature, could ariseonly in the context of a bankruptcy case.’’Wood v. Wood (In re Wood), 825 F.2d 90,97 (5th Cir.1987). ‘‘Non-core proceedings’’are those not integral to the restructuringof debtor-creditor relations and not involv-ing a cause of action arising under title 11.See Windsor Communications Group, Inc.v. Grant (In re Windsor CommunicationsGroup), 75 B.R. 713, 721 (E.D.Pa.1985).Under the 1984 Act, bankruptcy judgesmay hear and decide core proceedings.See 28 U.S.C. § 157(b)(1). However,bankruptcy judges may only propose find-ings of fact and conclusions of law to feder-al district courts as to non-core proceed-ings related to a case under title 11. See28 U.S.C. § 157(c)(1). Thus, the separa-tion of ‘‘core’’ and ‘‘non-core’’ proceedingsin the 1984 Act creates a distinction be-tween those judicial acts deriving from theplenary Article I bankruptcy power andthose subject to general Article III federalcourt jurisdiction.

Central to the bankruptcy ‘‘case’’ as towhich exclusive Article I federal jurisdic-tion lies is the automatic stay imposed by11 U.S.C. § 362(a). Congress has de-clared that actions to ‘‘terminate, annul, or

modify’’ the automatic stay are core bank-ruptcy proceedings. 28 U.S.C.§ 157(b)(2)(G). The ‘‘automatic stay givesthe bankruptcy court an opportunity toharmonize the interests of both debtor andcreditors while preserving the debtor’s as-sets for repayment and reorganization ofhis or her obligations.’’ MacDonald v.MacDonald (In re MacDonald), 755 F.2d715, 717 (9th Cir.1985). By halting allcollection efforts, the stay affords the debt-or time to propose a reorganization plan,or simply ‘‘to be relieved of the financialpressures that drove him into bankruptcy.’’Benedor Corp. v. Conejo Enters., Inc. (Inre Conejo Enters.), 96 F.3d 346, 351 (9thCir.1996) (quoting S.Rep. No. 95–989, at54–55 (1978), reprinted in 1978U.S.C.C.A.N. 5787, 5840–41). The auto-matic stay also ‘‘assures creditors that thedebtor’s other creditors are not racing tovarious courthouses to pursue independentremedies to drain the debtor’s assets.’’Dean v. Trans World Airlines, Inc., 72F.3d 754, 755–56 (9th Cir.1995); see alsoH.R.Rep. No. 95–595, at 340, reprinted inpart in 1978 U.S.C.C.A.N. 5787, 6297.

[4] The automatic stay is self-execut-ing, effective upon the filing of the bank-ruptcy petition. See 11 U.S.C. § 362(a);The Minoco Group of Companies v. FirstState Underwriters Agency of New Eng-land Reinsurance Corp. (In re The Mino-co Group of Companies), 799 F.2d 517, 520(9th Cir.1986). The automatic stay sweepsbroadly, enjoining the commencement orcontinuation of any judicial, administrative,or other proceedings against the debtor,enforcement of prior judgments, perfectionof liens, and ‘‘any act to collect, assess orrecover a claim against the debtor that

5. A non-exclusive list of ‘‘core’’ bankruptcyproceedings, set forth in 28 U.S.C. § 157(b),includes, among others: ‘‘matters concerningthe administration of the estate’’; ‘‘allowanceor disallowance of claims against the estate’’;‘‘orders to turn over property of the estate’’;‘‘motions to terminate, annul, or modify theautomatic stay’’; ‘‘proceedings to determine,avoid, or recover fraudulent conveyances’’;

‘‘determinations as to the dischargeability ofparticular debts’’; ‘‘orders approving the saleof property’’; and ‘‘other proceedings affect-ing the liquidation of the assets of the estateor the adjustment of the debtor-creditor orthe equity security holder relationship, exceptpersonal injury tort or wrongful deathclaims.’’


arose before the commencement of thecase.’’ 11 U.S.C. § 362(a)(6).

[5] The automatic stay is an injunctionissuing from the authority of the bankrupt-cy court, and bankruptcy court orders arenot subject to collateral attack in othercourts. See Celotex Corp., 514 U.S. at 313,115 S.Ct. 1493. That is so not only be-cause of the ‘‘comprehensive jurisdiction’’vested in the bankruptcy courts, see id. at308, 115 S.Ct. 1493, but also because‘‘ ‘persons subject to an injunctive orderissued by a court with jurisdiction areexpected to obey that decree until it ismodified or reversed, even if they haveproper grounds to object to the order.’ ’’Id. at 306, 115 S.Ct. 1493 (quoting GTESylvania, Inc. v. Consumers Union ofUnited States, Inc., 445 U.S. 375, 386, 100S.Ct. 1194, 63 L.Ed.2d 467 (1980)). In thiscase, as in most bankruptcy cases, thebankruptcy court notified the creditors, in-cluding the complaining witness in thecriminal proceedings, of the applicability ofthe stay.

[6] Any state court modification of theautomatic stay would constitute an unau-thorized infringement upon the bankruptcycourt’s jurisdiction to enforce the stay.‘‘While Congress has seen fit to authorizecourts of the United States to restrainstate-court proceedings in some special cir-cumstances,’’ such as the automatic stay,‘‘it has in no way relaxed the old and well-established judicially declared rule thatstate courts are completely without powerto restrain federal-court proceedings in inpersonam actions.’’ Donovan v. City ofDallas, 377 U.S. 408, 412–13, 84 S.Ct. 1579,12 L.Ed.2d 409 (1964) (footnote omitted).Although Donovan discussed this rule asapplied to in personam actions, its holding

applies even more strongly to federal inrem proceedings under the BankruptcyCode, in which a ‘‘federal court havingcustody of such property has exclusive jur-isdiction to proceed.’’ Id. at 412, 84 S.Ct.1579; see also Hong Kong & ShanghaiBanking Corp. v. Simon (In re Simon),153 F.3d 991, 996 (9th Cir.1998).

[7–11] For these reasons, actions tak-en in violation of the automatic stay arevoid. See Schwartz v. United States (In reSchwartz), 954 F.2d 569, 571 (9th Cir.1992). Further, ‘‘[j]udicial proceedings inviolation of th[e] automatic stay are void.’’Phoenix Bond & Indemnity Co. v. Sham-blin (In re Shamblin), 890 F.2d 123, 125(9th Cir.1989) (emphasis added).6 As theSupreme Court explained in Kalb, discuss-ing the weaker predecessor statute to 11U.S.C. § 362(a), ‘‘[b]ecause that Statecourt had been deprived of all jurisdictionor power to proceed with the foreclosure,[all acts in aid of collection]-to the extentbased upon the court’s actions-were allwithout authority of law.’’ Kalb, 308 U.S.at 443, 60 S.Ct. 343. We reached a similarconclusion in Noli v. Commissioner of In-ternal Revenue, 860 F.2d 1521 (9th Cir.1988), reasoning that, ‘‘because only anorder of the bankruptcy court can autho-rize any further progress in the stayedproceedings, it follows that the continua-tion of the [stayed] proceeding can derivelegitimacy only from the bankruptcy courtorder.’’ Id. at 1525 (quoting Casperone v.Landmark Oil & Gas Corp., 819 F.2d 112,114 (5th Cir.1987)).

Because of the bankruptcy court’s plena-ry power over core proceedings, the Coun-ty’s argument that states have concurrentjurisdiction over the automatic stay under

6. Because, among other reasons, judicial pro-ceedings in violation of the stay are void abinitio, the bankruptcy court is not obligated toextend full faith and credit to such judgments.Infirm judgments are not entitled to full faithand credit in federal courts. See Kremer v.Chemical Construction Corp., 456 U.S. 461,482–83, 102 S.Ct. 1883, 72 L.Ed.2d 262(1982); see also Matsushita Electric Indus.Co. v. Epstein, 516 U.S. 367, 386, 116 S.Ct.

873, 134 L.Ed.2d 6 (1996) (noting that statecourt judgments are binding only if the statecourt had power to enter the judgment).Judgments issued without authority are voidas a matter of California state law and, there-fore, can have no preclusive effect under 28U.S.C. § 1738. See Plaza Hollister Ltd. Part-nership v. County of San Benito, 72 Cal.App.4th 1, 84 Cal.Rptr.2d 715, 728 (Cal.Ct.App.1999).


28 U.S.C. § 1334(b) is unavailing. Thatsection provides that the district courts‘‘have original but not exclusive jurisdic-tion of all civil proceedings arising undertitle 11, or arising in or related to a caseunder title 11.’’ Of course, nothing in thatsection vests the states with any jurisdic-tion over a core bankruptcy proceeding,including ‘‘motions to terminate, annul, ormodify the automatic stay.’’ 28 U.S.C.§ 157(b)(2)(G). The only grant of jurisdic-tion to do so involves the exercise of feder-al bankruptcy power. Indeed, the purposeof this section is not to create jurisdictionin non-bankruptcy courts, but to allow dis-trict courts in which the bankruptcy case isfiled to adjudicate bankruptcy-related ac-tions in which jurisdiction has been vestedin other courts. See 1 Collier on Bank-ruptcy ¶ 3.01[4], at 3–14, 3–15 (15thed.1999).

However, even assuming that the stateshad concurrent jurisdiction, their judg-ment would have to defer to the plenarypower vested in the federal courts overbankruptcy proceedings. Indeed, that wasprecisely the issue in Kalb, in which thestate was proceeding within its jurisdic-tional powers as to the subject matter, butin derogation of the federal bankruptcystay. ‘‘A Congressional grant of exclusivejurisdiction to the federal courts includes

the implied power to protect that grant.’’Gonzales, 830 F.2d at 1036.

[12] In sum, by virtue of the powervested in them by Congress, the federalcourts have the final authority to deter-mine the scope and applicability of theautomatic stay.7 ‘‘The States cannot, inthe exercise of control over local laws andpractice, vest State courts with power toviolate the supreme law of the land.’’Kalb, 308 U.S. at 439, 60 S.Ct. 343. Thus,the Rooker–Feldman doctrine is not impli-cated by collateral challenges to the auto-matic stay in bankruptcy.8 A bankruptcycourt simply does not conduct an improperappellate review of a state court when itenforces an automatic stay that issuesfrom its own federal statutory authority.In fact, a reverse Rooker–Feldman situa-tion is presented when state courts decideto proceed in derogation of the stay, be-cause it is the state court which is attempt-ing impermissibly to modify the federalcourt’s injunction.

The rule urged by the County wouldundermine the principle of a unified feder-al bankruptcy system, as declared in theConstitution and realized through theBankruptcy Code. If state courts were em-powered to issue binding judgments modi-fying the federal injunction created by theautomatic stay, creditors would be free to

7. For this reason, among others, the County’sreliance on dicta in Erti v. Paine Webber Jack-son & Curtis, Inc. (In re Baldwin–United Corp.Litigation), 765 F.2d 343 (2d Cir.1985), andNLRB v. Edward Cooper Painting, Inc., 804F.2d 934 (6th Cir.1986), is misplaced. Thosecases deal with the plenary power of federal—not state—courts concerning the automaticstay, and they recognize that, among federalcourts, ‘‘[t]he necessary uniformity is bestachieved by centralizing construction of theautomatic stay in the Bankruptcy Court’’ sub-ject to federal appellate review. Baldwin–United, 765 F.2d at 349. In addition, EdwardCooper Painting recognized that the NLRB‘‘proceeded at its own risk’’ with an unfairlabor practice proceeding after imposition ofthe automatic stay. 804 F.2d at 940. TheSixth Circuit recognized that ‘‘[i]f it was laterdetermined that the proceeding was not ex-cepted from the automatic stay, the entireNLRB proceeding would be void ab initio as

an act taken in violation of the stay.’’ Id.Thus, to the extent that either case is applica-ble, the holdings support our conclusions.The County has not been able to cite to asingle case holding that a state court has theunilateral binding power to modify the federalautomatic stay.

8. See Appeal of Gajkowski (In re HighwayTruck Drivers & Helpers Local Union # 107),888 F.2d 293, 299 n. 9 (3d Cir.1989) (noting,in the context of a challenge to the automaticstay, that the ‘‘Rooker–Feldman doctrine doesnot preclude a collateral attack of state courtproceedings or judgments in the context of anappeal involving an exclusive federal ques-tion’’); compare Reitnauer v. Texas Exotic Fe-line Found., Inc. (In re Reitnauer), 152 F.3d341, 344 (5th Cir.1998) (applying Rooker–Feldman to bar district court review, in bank-ruptcy case, of state court judgment on stateconstitutional grounds).


rush into friendly courthouses around thenation to garner favorable relief. Thebankruptcy court would then be strippedof its ability to distribute the debtor’s as-sets equitably, or to allow the debtor toreorganize financial affairs. ‘‘Such an ex-ercise of authority would be inconsistentwith and subvert the exclusive jurisdictionof the federal courts by allowing statecourts to create their own standards as towhen persons may properly seek relief incases Congress has specifically precludedthose courts from adjudicating.’’ Gon-zales, 830 F.2d at 1035. It is but slighthyperbole to say that chaos would reign insuch a system.

[13] This is not to say that the Rook-er–Feldman doctrine or the related con-cepts of res judicata and collateral estoppelare wholly inapplicable in bankruptcy law.Preclusive effect is often extended to pre-petition state judgments as to identicalissues raised in subsequent bankruptcyproceedings. See, e.g., Grogan v. Garner,498 U.S. 279, 284, 111 S.Ct. 654, 112L.Ed.2d 755 (1991); Gayden v. Nour-bakhsh (In re Nourbakhsh), 67 F.3d 798,801 (9th Cir.1995). When the bankruptcycourt has lifted the stay, federal courtshave given subsequent state decisions fullfaith and credit, ‘‘as they have by law orusage in the courts of such State.’’ 28U.S.C. § 1738; see Gajkowski, 888 F.2d at299 (holding that, once the stay was lifted,the state court was free to proceed and itsdecision on the merits was binding on thebankruptcy court, but noting that the pro-ceedings would have been void if bankrupt-cy court consent had not been obtained).In non-core proceedings that do not impli-cate substantive rights granted under title11 or affect the administration of the bank-ruptcy case, the normal rules of preclusion,including the Rooker–Feldman doctrine,apply.

[14, 15] However, modifying the auto-matic stay is not the act of a state court

merely interpreting federal law; it is anintervention in the operation of an ongoingfederal bankruptcy case, the administra-tion of which is vested exclusively in thebankruptcy court. Rooker–Feldman doesnot allow a state court to interfere with thecore administrative functions of an opera-tive bankruptcy. Just as federal districtcourts are not part of the state appellatesystem, neither are state courts grantedsupervisory or appellate jurisdiction overfederal courts. Thus, Rooker–Feldmandoes not nullify federal courts’ authority toenforce the automatic stay, nor does itstrip us of jurisdiction to entertain thisappeal.

III

[16–18] Having concluded that the fi-nal decision concerning the applicability ofthe automatic stay must rest with the fed-eral courts, we proceed to the merits ofwhether the stay applied to the criminalprosecution of Gruntz.9 In examining thisquestion, we turn to the other side of thejurisdictional coin: the proper role of fed-eral bankruptcy courts, if any, in statecriminal proceedings.

[19] We maintain the ‘‘deep convictionthat federal bankruptcy courts should notinvalidate the results of state criminal pro-ceedings.’’ Kelly v. Robinson, 479 U.S. 36,47, 107 S.Ct. 353, 93 L.Ed.2d 216 (1986).This rule reflects a ‘‘fundamental policyagainst federal interference with statecriminal prosecutions.’’ Younger v. Har-ris, 401 U.S. 37, 46, 91 S.Ct. 746, 27L.Ed.2d 669 (1971). It also recognizesthat ‘‘[t]he right to formulate and enforcepenal sanctions is an important aspect ofthe sovereignty retained by the States.’’Kelly, 479 U.S. at 47, 107 S.Ct. 353.

With that philosophy in mind, we beginwith an analysis of the statute. Althoughthe automatic stay is extremely broad inscope, there are a number of statutoryexceptions. Relevant to our case is the

9. The bankruptcy court’s decision granting ordenying relief from an automatic stay is afinal decision which we review for an abuseof discretion. See Benedor, 96 F.3d at 351.

We review de novo the district court’s deci-sion on an appeal from bankruptcy court.See id.


exception provided in 11 U.S.C.§ 362(b)(1), which provides:

(b) The filing of a petition under section301, 302 or 303 of this title, or of anapplication under section 5(a)(3) of theSecurities Investor Protection Act of1970 does not operate as a stay—

(1) under subsection (a) of this sec-tion, of the commencement or continu-ation of a criminal action or proceed-ing against the debtor[.]

This exception would seem to end theargument because, under its plain word-ing, the automatic stay would not apply tothe criminal action initiated againstGruntz. However, Gruntz claims that thepurpose of the criminal actions against himis debt collection, thus falling within theprotection afforded by Hucke v. Oregon,992 F.2d 950 (9th Cir.1993). Hucke heldthat, if a criminal proceeding has the col-lection of a debt as its underlying aim,then the automatic stay imposed by 11U.S.C. § 362(a)(6) would apply and thecriminal action would be enjoined. See id.at 953. This is in accordance with theviews of several commentators, who re-gard the exception contained in § 362(b)(1)as being limited to those proceedings‘‘brought for the purpose of enforcing thecriminal law.’’ See, e.g., 3 Collier onBankruptcy 362–48 (15th ed.1999).10

[20, 21] Although Hucke was well with-in the mainstream of thought at the time,it is time to reexamine it.11 Other circuitshave declined to follow our lead and, asthis case demonstrates, it is a doctrinedifficult to apply in practice. Most impor-tantly, it is at odds with the plain words ofthe statute. Quite simply, the BankruptcyCode declares that § 362 does not stay

‘‘the commencement or continuation of acriminal action or proceeding against thedebtor.’’ On its face, it does not provideany exception for prosecutorial purpose orbad faith. If the statutory command ofthe Bankruptcy Code is clear, we needlook no further: it must be enforced ac-cording to its terms. See United States v.Ron Pair Enterprises, Inc., 489 U.S. 235,241, 109 S.Ct. 1026, 103 L.Ed.2d 290(1989). Indeed, to do otherwise would in-sert phrases and concepts into the statutethat simply are not there.

Interpreting § 362(b)(1) as renderingthe automatic stay as inapplicable to allcriminal proceedings is consistent with‘‘the provisions of the whole law, and to itsobject and policy.’’ Kelly, 479 U.S. at 43,107 S.Ct. 353. Not only does our notion ofcooperative federalism caution against in-terference with ongoing state criminal pro-ceedings, but the theory of bankruptcy lawdoes as well. ‘‘The purpose of bankruptcyis to protect those in financial, not moral,difficulty.’’ Barnette v. Evans, 673 F.2d1250, 1251 (11th Cir.1982). The Bankrupt-cy Code reflects this philosophy. Al-though most state civil actions are subjectto removal to bankruptcy courts, actionsbrought pursuant to a government’s policepowers are not. See 28 U.S.C. § 1452.Federal bankruptcy original, but non-ex-clusive, jurisdiction is limited to ‘‘civil pro-ceedings.’’ 28 U.S.C. § 1334(b) (emphasisadded).

Gruntz contends that the purpose ofbankruptcy would be thwarted if a crimi-nal prosecution were allowed as a means ofdebt collection for dissatisfied creditors.However, there is ‘‘no rationale or justifi-cation for severing economic and noneco-nomic ramifications of the debtor’s crimi-

10. Bankruptcy courts have attempted an ar-ray of tests for assaying any hint of a collectorin the prosecutor’s guise, such as examiningthe primary motivation for the prosecution orapplying a ‘‘bad faith’’ test. See generallyBrinkman v. City of Edina (In re Brinkman),123 B.R. 318, 322 (Bktcy.D.Minn.1991) (de-scribing the various tests); see also Howard v.Allard, 122 B.R. 696, 699(Bktcy.W.D.Ky.1991) (‘‘[B]ankruptcy courtscan, and should, enjoin such proceedings

when the facts reveal they were initiated forthe purpose of collecting debts’’).

11. The three-judge panel that considered thisappeal was bound by Hucke; however, an enbanc court is not. See Nghiem v. NEC Elec-tronic, Inc., 25 F.3d 1437, 1441 (9th Cir.1994)(‘‘ ‘We are bound by decisions of prior panels’unless an en banc decision, Supreme Courtdecision or subsequent legislation underminesthose decisions.’ ’’).


nal conduct.’’ 3 Collier on Bankruptcy362–48 (15th ed.1999). Further, in thecase of the automatic stay, Congress hasspecifically subordinated the goals of eco-nomic rehabilitation and equitable distribu-tion of assets to the states’ interest inprosecuting criminals. The State of Cali-fornia has chosen to criminalize a parent’sfailure to support a dependent child. SeeCal.Penal Code § 270. That is a judgmentreserved to the state; it is not for thebankruptcy court to disrupt that sovereigndetermination because it discerns an eco-nomic motive behind the criminal statuteor its enforcement. In the automatic stayexception, Congress clearly has instructedfederal courts not to allow bankruptcy pro-ceedings to impede such an exercise ofstate police powers.12

Further, any criminal prosecution of thedebtor is on behalf of all the citizens of thestate, not on behalf of the creditor. SeeDavis v. Sheldon (In re Davis), 691 F.2d176, 178–79 (3d Cir.1982). Once the statehas made an independent decision to filecriminal charges, the prosecution belongsto the government, not to the complainingwitness. We cannot, and should not, ‘‘re-quire a prosecutor to conduct a searchinginquiry into the public spirit of the victimof a crime before proceeding with whatappears to be an otherwise valid criminalprosecution.’’ Id. at 179.13 ‘‘In our sys-

tem, so long as the prosecutor has proba-ble cause to believe that the accused com-mitted an offense defined by statute, thedecision whether or not to prosecute, andwhat charge to file or bring before a grandjury, generally rests entirely in his discre-tion.’’ Bordenkircher v. Hayes, 434 U.S.357, 364, 98 S.Ct. 663, 54 L.Ed.2d 604(1978). As the Supreme Court noted inWayte v. United States, 470 U.S. 598, 607,105 S.Ct. 1524, 84 L.Ed.2d 547 (1985),‘‘[t]his broad discretion rests largely onthe recognition that the decision to prose-cute is particularly ill-suited to judicial re-view.’’ This admonition applies with spe-cial force to federal enjoinment of statecriminal actions, such as that urged byGruntz, because the stay would interdictstate prosecution at its inception, basedupon a bankruptcy court’s surmise of theprosecutor’s ‘‘true’’ motives.

[22] There is, of course, a federal rem-edy for state court convictions obtained inviolation of Constitution or statute: a writof habeas corpus. See, e.g. 28 U.S.C.§§ 2241, 2254. The federal habeas corpusstatute was ‘‘explicitly and historically de-signed to provide the means for a stateprisoner to attack the validity of his con-finement.’’ Preiser v. Rodriguez, 411 U.S.475, 489, 93 S.Ct. 1827, 36 L.Ed.2d 439(1973). An adversary proceeding in bank-ruptcy is not.14 Indeed, the Supreme

12. This statutory brand of comity conformswith other federal legislation enabling stateprosecutions for domestic arrearage. Con-gress itself has criminalized child support de-linquency to the limits of its CommerceClause powers in the Child Support RecoveryAct of 1992, 18 U.S.C. § 228, and we haveupheld the authority of federal courts to re-view and enforce, pursuant to the Act, thosestate court orders giving rise to such debts.See United States v. Mussari, 95 F.3d 787 (9thCir.1996). Furthermore, although Gruntzwas incarcerated for his crime, the Bankrupt-cy Code permits restitution of child supportunder penal laws. Even in the absence ofstate or federal criminal prosecutions, Con-gress has prohibited discharge of child sup-port debts under the Bankruptcy Code. See 11U.S.C. § 523(a)(5). Although it is inapplica-ble to these proceedings, the Bankruptcy Re-form Act of 1994 amended the automatic stayprovision to exempt actions for the collection

of alimony, maintenance, or support. See 11U.S.C. 362(b)(2).

13. In other contexts, we have eschewed gen-eral examination of prosecutorial motives.See Roe v. City and County of San Francisco,109 F.3d 578, 583–84 (9th Cir.1997) (afford-ing prosecutorial immunity for decisions torefrain from prosecution); cf. Imbler v. Pacht-man, 424 U.S. 409, 431, 96 S.Ct. 984, 47L.Ed.2d 128 (1976) (affording absolute prose-cutorial immunity for decisions to prosecute).

14. In fact, Congress first inserted, then re-moved, a provision that would have allowedbankruptcy courts to grant writs of habeascorpus in certain circumstances. The Bank-ruptcy Reform Act of 1978 specifically provid-ed for a habeas remedy in bankruptcy court.See P.L. 95–598, Title II, § 250(a), Title III,§ 314(j)(1), 92 Stat. 2672, 2677. The provi-sion was scheduled to take effect on June 28,


Court rejected a similar attempt to propa-gate additional avenues of federal relief forstate prisoners in Preiser, holding that,

when a state prisoner is challenging thevery fact or duration of his physicalimprisonment, and the relief he seeks isa determination that he is entitled toimmediate or speedier release TTT hissole federal remedy is a writ of habeascorpus.

Id. at 500, 93 S.Ct. 1827.Congress has provided for a comprehen-

sive legislative scheme to provide stateprisoners a post-conviction federal remedyto challenge their confinement. Any alter-native relief that one might conjure fromthe general provisions of bankruptcy lawmust yield to specific habeas remedy thatCongress created. Cf. id. at 490, 93 S.Ct.1827 (noting that the § 1983 actions couldnot be employed to replace a true habeasremedy).

[23] There also is a procedural avenueto forfend state actions that are not sub-ject to the automatic stay but that threat-en the bankruptcy estate: a request for aninjunction under 11 U.S.C. § 105. Thebankruptcy court’s injunctive power is notlimited by the delineated exceptions to theautomatic stay, nor confined to civil pro-ceedings.15 However, the only fair readingof the Bankruptcy Code is that Congressdid not intend the § 362(a) stay to enjoinall state criminal proceedings automatical-ly. ‘‘The bankruptcy courts were not cre-ated as a haven for criminals.’’ Barnette,673 F.2d at 1251. The fresh start affordeddebtors in bankruptcy does not includerelease from jail.

[24, 25] In the end, this is not a chroni-cle of creditor and debtor, but of crime andpunishment. Gruntz was lawfully prose-cuted, convicted, and ordered to be incar-cerated. As a matter of law, the automatic

stay did not apply to prevent this course ofevents. The words of the statute meanwhat they say: all criminal proceedings,including those to which Gruntz was sub-ject, are excepted from the reach of theautomatic stay. Thus, unless a specific§ 105 injunction applies, state trial courtsneed not seek bankruptcy court approvalbefore commencing criminal proceedings.To the extent that it conflicts with thisinterpretation of 11 U.S.C. § 362(b)(1),Hucke is overruled.

IV

[26, 27] In sum, bankruptcy courtshave the ultimate authority to determinethe scope of the automatic stay imposed by11 U.S.C. § 362(a), subject to federal ap-pellate review. A state court does nothave the power to modify or dissolve theautomatic stay. Accordingly, the Rooker–Feldman doctrine does not render a statecourt judgment modifying the automaticstay binding on a bankruptcy court. Thus,if it proceeds without obtaining bankruptcycourt permission, a state court risks hav-ing its final judgment declared void. Inthis case, the state court proceeded prop-erly because the automatic stay does notapply to enjoin state criminal actions, evenif the prosecution is motivated by the com-plaining witness’s desire to collect a debt.

The veneer of this case suggested juris-dictional discord among the bankruptcy,federal habeas corpus and state courtcriminal systems; in reality, there is har-mony. ‘‘Federalism in this nation relies inlarge part on the proper functioning of twoseparate court systems.’’ Davis, 691 F.2dat 179. In turn, the operation of eachsystem depends on freedom from unwar-ranted interference by the other. Statecriminal prosecutions should commenceand continue unimpeded by the federal

1984, but the provision was deleted before itseffective date by the Bankruptcy Amendmentsand Federal Judgeship Act of 1984. See P.L.98–353, Title I, § 113, 98 Stat. 343.

15. Other circuits have held that this authoritymust be exercised in conformance with the

principles of Younger abstention. See Fussellv. Price (In re Fussell), 928 F.2d 712, 715–16(5th Cir.1991); Barnette, 673 F.2d at 1251–52(11th Cir.); Davis, 691 F.2d at 177–78 (3dCir.).


bankruptcy courts. On the other hand,state courts should not intrude upon theplenary power of the federal courts inadministering bankruptcy cases by at-tempting to modify or extinguish federalcourt orders such as the automatic stay.

We also find concinnity among the rele-vant federal jurisdictional statutes. Con-gress established separate, but comple-mentary, comprehensive statutoryschemes governing federal habeas corpusand bankruptcy law. Rooker–Feldman,derived from the laws of general jurisdic-tion, does not supplant specific bankruptcyor habeas corpus jurisdiction.

Although the Rooker–Feldman doctrinedoes not apply in this instance, the resultis consistent with its philosophy of respectfor state court decisions. Twice the Stateof California has elected to prosecute Mr.Gruntz, twice he has been convicted, andtwice the state’s courts have duly sen-tenced him to a prison term. It is not theproper function of the bankruptcy court todisturb those decisions. Any post-convic-tion federal remedy lies in the writ ofhabeas corpus. Thus, both the bankruptcycourt and the federal district court correct-ly concluded that the automatic stay didnot void the state criminal judgments. Weagree, albeit for different reasons.

AFFIRMED

,

NOVA DESIGNS, INC., dba Perfor-mance Diver, Plaintiff–Counter–

Defendant–Appellant,

v.

SCUBA RETAILERS ASSOCIATION;Professional Association of Dive

Instructors, Defendants,

Electronic Instrumentation &Technology, Inc., Defendant–

Counter–Claimant,

EIT Manufacturing; Princeton Tecton-ics; Scuba Times; Beuchat USA, Inc.;Robert Holston; Harry Truitt; SalZammitti, Defendants,

Performance, Inc., a North Carolinacorporation, Counter–

Defendant,

and

International PADI, Inc.,Defendant–Appellee.

No. 98–55358.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted Dec. 7, 1999

Filed Feb. 8, 2000

Mail-order retailer of scuba equip-ment sued dive instructors association, al-leging that association and its retail mem-bers conspired to deny retailer access toscuba gear market in violation of ShermanAct and California Cartwright Act, andengaged in tortious interference with busi-ness relations and unfair competition. TheUnited States District Court for the Cen-tral District of California, Gary L. Taylor,J., granted summary judgment for associa-tion. Retailer appealed. The Court of Ap-peals, Schwarzer, Senior District Judge,held that: (1) retailer waived antitrustclaims under rule of reason; (2) agreementbetween association and scuba magazinepublisher did not establish per se ShermanAct violation; and (3) agreement did notsupport claim for Sherman Act violationunder per se rule for horizontal groupboycotts.

Affirmed.

1. Federal Courts O612.1Having failed to press antitrust claim

under rule of reason in district court,plaintiff could not attack judgment on ruleof reason grounds on appeal. ShermanAct, § 1, as amended, 15 U.S.C.A. § 1.

710 389 BANKRUPTCY REPORTER

I acknowledge that, under Golden, achapter 7 trustee does not bear the risk ofloss for ‘‘the debtor’s activities during thetemporary exemption periodTTTT’’ But it istoo simple to indict all debtors for dippinginto otherwise exempt money to meet dailyneeds. While the debtor’s decision to in-vest the homestead funds proved very un-wise, this case highlights the practicalproblems created when, under Golden, atrustee and bankruptcy court waits asmuch as eighteen months before finallydeciding whether homestead sale proceedsare, or are not, to be administered as partof the bankruptcy estate. Congress didnot contemplate this approach when, in§ 522(b)(2)(A) of the pre-BAPCPA Code,it provided that property protected fromthe reach of a debtor’s creditors underapplicable law on the date of the bankrupt-cy filing is exempt.

The Panel is bound to follow Golden.But given the opportunity, the Ninth Cir-cuit should reconsider that decision andhold that, under the Bankruptcy Code,homestead sale proceeds which are exemptfrom creditor’s claims under applicablestate law on the date a petition is filed are,for purposes of that bankruptcy case, ex-empt. Such a holding is not only correctunder the Code, it would avoid the recur-ring interpretative and practical challengespresented by Golden to debtors, trusteesand bankruptcy courts.

,

In re Joseph Elliott RYAN, Debtor.

Joseph Elliott Ryan, Appellant,

v.

United States of America, Appellee.

BAP No. ID–07–1316–DMkMo.Bankruptcy No. 03–21393.Adversary No. 07–07002.

United States Bankruptcy Appellate Panelof the Ninth Circuit.

Argued by Telephone Conference andSubmitted on Feb. 21, 2008.

Filed June 3, 2008.

Background: Chapter 13 debtor soughtdetermination as to whether his obligationto federal government for costs of prosecu-tion awarded in his criminal judgment wasexcepted from discharge. The UnitedStates Bankruptcy Court for the Districtof Idaho, Terry L. Myers, Chief Judge,2007 WL 2215387, ruled that costs of pros-ecution were ‘‘criminal fines’’ and wereexcepted from discharge. Debtor appealed.

Holdings: The Bankruptcy AppellatePanel, Dunn, J., held that:

(1) Chapter 13 exception to discharge for‘‘restitution, or a criminal fine’’ doesnot extend to costs of prosecution, and

(2) debtor’s Chapter 13 discharge appliedto unpaid balance of costs of prosecu-tion.

Reversed.

Markell, J., filed a dissenting opinion.

1. Bankruptcy O3782Bankruptcy appellate panel (BAP) re-

views issues of statutory construction and

emption law for the debtor to use the exemptproceeds to buy a replacement vehicle, or topay for a dependent’s medical treatments? I,for one, do not believe that, in a chapter 7context, Congress intended to postpone a

debtor’s right to a financial fresh start whilethese questions are settled, probably by litiga-tion, nor to allow trustees and bankruptcycourts to play such a pervasive, supervisoryrole in a debtor’s post-bankruptcy life.

711IN RE RYANCite as 389 B.R. 710 (9th Cir.BAP 2008)

conclusions of law, including interpretationof provisions of the Bankruptcy Code, denovo.

2. Statutes O188

Statutory interpretation begins with areview of the particular language used byCongress in the relevant version of thelaw.

3. Statutes O208, 217.4

When statutory language is ambigu-ous, courts may look beyond the specificstatute itself to the context in which it isused and to relevant legislative history, ifit exists.

4. Statutes O181(1)

Court’s duty, in matters of statutoryconstruction, is to give effect to the intentof Congress.

5. Statutes O190, 205, 208

Whether a statute is ambiguous is de-termined by reference to the language it-self, the specific context in which that lan-guage is used, and the broader context ofthe statute as a whole.

6. Constitutional Law O2473

In the absence of ambiguity, it is notthe role of the courts to remake statutorylanguage to fit the court’s conception ofwhat Congress may have meant to achievethrough its statutory enactments.

7. Bankruptcy O3341

In light of the objective to provide afresh start for debtors overburdened bydebts that they cannot pay, exceptions todischarge are interpreted strictly againstobjecting creditors and in favor of debtors.

8. Bankruptcy O3378

Chapter 13 exception to discharge for‘‘restitution, or a criminal fine’’ does notextend to costs of prosecution assessedpursuant to federal statute permitting dis-trict court to order convicted non-capitaldefendant to pay costs of prosecution. 11U.S.C.A. § 1328(a)(3); 28 U.S.C.A.§ 1918(b).

9. Bankruptcy O3378, 3718(9)

Costs of prosecution that were im-posed as part of debtor’s sentence forconviction of possession of unregisteredfirearm did not come within Chapter 13exception to discharge for restitution orcriminal fines, and therefore debtor’sChapter 13 discharge applied to unpaidbalance of debtor’s obligation to federalgovernment for costs of prosecution. 11U.S.C.A. § 1328(a)(3); 26 U.S.C.A.§ 5861(d); 28 U.S.C.A. § 1918(b).

Cameron Phillips, Couer d’Alene, ID, forAppellant.

Warren Derbidge, Boise, ID, for Appel-lee.

Before DUNN, MARKELL, andMONTALI, Bankruptcy Judges.

OPINION

DUNN, Bankruptcy Judge.

Joseph Elliott Ryan (‘‘Ryan’’) was con-victed of a felony in federal court. Afterserving a prison sentence and paying acriminal fine, he filed for bankruptcy un-der chapter 7.1 Shortly after receiving his

1. Unless otherwise indicated, all ‘‘Code,’’chapter and section references are to theBankruptcy Code, 11 U.S.C. §§ 101–1330,prior to its amendment by the BankruptcyAbuse Prevention and Consumer Protection

Act of 2005 (‘‘BAPCPA’’), Pub.L. 109–8, 119Stat. 23, as the case from which this appealarises was filed before October 17, 2005, theeffective date of most BAPCPA provisions.


chapter 7 discharge, Ryan filed for chapter13 relief, seeking to discharge costs ofprosecution awarded in his criminal judg-ment. The bankruptcy court held thatcosts of prosecution are ‘‘criminal fines’’under § 1328(a)(3) and thus are exceptedfrom discharge.

For the reasons stated below, we RE-VERSE.

I. FACTS

On July 13, 1995, Ryan was convicted ofpossession of an unregistered firearm un-der 26 U.S.C. § 5861(d) in the UnitedStates District Court for the District ofAlaska. Ryan was sentenced to fifty-sevenmonths in prison followed by three yearsof supervised release. In addition, Ryanwas ordered to pay a fine of $7,500, resti-tution in the amount of $750,000, costs ofprosecution in the amount of $83,420, anda special assessment of $50.00. Ryanserved his sentence. He also paid the$7,500 fine. The district court, followingan appellate mandate, ultimately eliminat-ed the restitution obligation.

On April 25, 2003, Ryan filed a petitionfor bankruptcy relief under chapter 7 inthe District of Idaho. He received hischapter 7 discharge on August 11, 2003.Shortly thereafter, Ryan filed a case underchapter 13, listing as his only obligationthe amount of unpaid costs of prosecutionowed to the United States (‘‘Government’’).

Before completing payments under hischapter 13 plan, Ryan filed an adversarycomplaint seeking to determine whetherhis obligation to the Government would bedischargeable under § 1328(a)(3). Thebankruptcy court dismissed the complaintas premature.

Ryan completed payments under theplan, and an ‘‘Order of Discharge’’ wasentered on October 5, 2006. The chapter13 trustee’s final report reflected that the

Government received $2,774.89 from pay-ments made by Ryan under his plan, but abalance of $77,088.34 on the Government’scosts of prosecution claim remained un-paid. Ryan then renewed his request fordetermination of dischargeability. Thebankruptcy court held that the unpaid por-tion of the Government’s claim for costs ofprosecution was excepted from dischargeby § 1328(a)(3). Ryan appealed.

II. JURISDICTION

The bankruptcy court had jurisdictionunder 28 U.S.C. §§ 157(a) and (b)(2)(I).We have jurisdiction under 28 U.S.C.§ 158.

III. ISSUE

Is an obligation for the costs of prosecu-tion imposed as part of a sentence in afederal criminal case excepted from thedebtor’s discharge under § 1328(a)(3)?

IV. STANDARDS OF REVIEW

[1] ‘‘We review issues of statutory con-struction and conclusions of law, includinginterpretation of provisions of the Bank-ruptcy Code, de novo.’’ Mendez v. Salven(In re Mendez), 367 B.R. 109, 113 (9th Cir.BAP 2007).

V. DISCUSSION

Section 1328(a)(3) provides an exceptionto discharge in chapter 13 for ‘‘restitution,or a criminal fine.’’ It states, in pertinentpart:

[A]s soon as practicable after the com-pletion by the debtor of all paymentsunder the plan, the court shall grant thedebtor a discharge of all debts providedfor by the plan or disallowed under sec-tion 502 of this title except any debt TTT

(3) for restitution, or a criminal fine,included in a sentence on the debtor’sconviction of a crime [.] (emphasisadded).


Here, the obligation to pay costs of pros-ecution was imposed as part of the judg-ment in Ryan’s criminal case. See 28U.S.C. § 1918(b).2 The essential question,then, is whether these costs of prosecutionconstitute a ‘‘criminal fine.’’

[2] Statutory interpretation beginswith a review of the particular languageused by Congress in the relevant versionof the law.

The starting point in discerning congres-sional intent is the existing statutorytext, see Hughes Aircraft Co. v. Jacob-son, 525 U.S. 432, 438, 119 S.Ct. 755, 142L.Ed.2d 881 (1999), and not the prede-cessor statutes. It is well establishedthat ‘‘when the statute’s language isplain, the sole function of the courts—atleast where the disposition required bythe text is not absurd—is to enforce itaccording to its terms.’’

Lamie v. United States Trustee, 540 U.S.526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024(2004) (citations omitted).

[3–6] Where statutory language is am-biguous, courts may look beyond the spe-cific statute itself to the context in which itis used and to relevant legislative history,if it exists. ‘‘Our duty, in matters of statu-tory construction, is to give effect to theintent of Congress.’’ A–Z Int’l v. Phillips,323 F.3d 1141, 1146 (9th Cir.2003) (cita-tions omitted).

[W]hether a statute is ambiguous is de-termined by reference to the languageitself, the specific context in which thatlanguage is used, and the broader con-text of the statute as a whole.

Hough v. Fry (In re Hough), 239 B.R. 412,414 (9th Cir. BAP 1999) (quoting Robinsonv. Shell Oil Co., 519 U.S. 337, 341, 117

S.Ct. 843, 136 L.Ed.2d 808 (1997)). How-ever, in the absence of ambiguity, it is notthe role of the courts to remake statutorylanguage to fit the court’s conception ofwhat Congress may have meant to achievethrough its statutory enactments.

[I]n our constitutional system the com-mitment to the separation of powers istoo fundamental for us to preempt con-gressional action by judicially decreeingwhat accords with ‘‘common sense andthe public weal.’’ Our Constitution vestssuch responsibilities in the politicalbranches.

TVA v. Hill, 437 U.S. 153, 195, 98 S.Ct.2279, 57 L.Ed.2d 117 (1978).

A. Opposing policy goals

[7] The term ‘‘criminal fine’’ is not de-fined in § 1328 or anywhere else in theBankruptcy Code. However, its use in§ 1328(a)(3) implicates two important poli-cies embedded in the Bankruptcy Code.First, in light of the objective to provide afresh start for debtors overburdened bydebts that they cannot pay, exceptions todischarge are interpreted strictly againstobjecting creditors and in favor of debtors.See, e.g., Snoke v. Riso (In re Riso), 978F.2d 1151, 1154 (9th Cir.1992); First Bev-erly Bank v. Adeeb (In re Adeeb), 787 F.2d1339, 1342 (9th Cir.1986); Devers v. Bankof Sheridan, Montana (In re Devers), 759F.2d 751, 754 (9th Cir.1985). In chapter 13,this principle is particularly important be-cause Congress adopted the liberal ‘‘super-discharge’’ provisions of § 1328 as an in-centive to debtors to commit to a plan topay their creditors all of their disposableincome over a period of years rather thansimply discharging their debts in a chapter7 liquidation.3

2. 28 U.S.C. § 1918(b) provides:

Whenever any conviction for any offensenot capital is obtained in a district court,

the court may order that the defendant paythe costs of prosecution.

3. The ‘‘superdischarge’’ in chapter 13 wassubstantially curtailed in provisions of BAPC-


Accordingly, Congress secured a broad-er discharge for debtors under Chapter13 than Chapter 7 by extending toChapter 13 proceedings some, but notall, of § 523(a)’s exceptions to discharge.See 5 Collier on Bankruptcy¶ 1328.01[1][c] (15th ed. 1986) (‘‘[T]hedischargeability of debts in chapter 13that are not dischargeable in chapter 7represents a policy judgment that [it] ispreferable for debtors to attempt to paysuch debts to the best of their abilitiesover three years rather than for thosedebtors to have those debts hangingover their heads indefinitely, perhaps forthe rest of their lives’’) (footnote omit-ted).

Pa. Dep’t of Pub. Welfare v. Davenport,495 U.S. 552, 563, 110 S.Ct. 2126, 109L.Ed.2d 588 (1990).

A second, countervailing policy consider-ation is a historic deference, both in theBankruptcy Code and in the administra-tion of prior bankruptcy law, to exceptingcriminal sanctions from discharge in bank-ruptcy. Application of this policy is con-sistent with a general recognition that,‘‘[t]he principal purpose of the BankruptcyCode is to grant a ‘fresh start’ to the‘honest but unfortunate debtor.’ ’’ Marra-ma v. Citizens Bank of Mass., ––– U.S.––––, 127 S.Ct. 1105, 1107, 166 L.Ed.2d 956(2007) (emphasis added).

These policies have been considered bythe Supreme Court in two decisions relat-ed to the issue before us in this appeal,Kelly v. Robinson, 479 U.S. 36, 107 S.Ct.353, 93 L.Ed.2d 216 (1986), and Pa. Dep’tof Pub. Welfare v. Davenport, 495 U.S.552, 110 S.Ct. 2126, 109 L.Ed.2d 588(1990).

B. Kelly and its progeny

In the Kelly case, the issue was whethera debtor could discharge a financial resti-tution obligation, imposed as a condition ofprobation in her Connecticut criminal sen-tence for wrongful receipt of welfare bene-fits, in a chapter 7 bankruptcy. Althoughnotified of the debtor’s bankruptcy filing,Connecticut authorities did not file a proofof claim or object to the debtor’s dis-charge, as their position was that the debt-or’s bankruptcy filing would not affect theconditions of her probation. The debtorultimately filed an adversary proceeding inbankruptcy court seeking a declaratoryjudgment that her criminal restitution obli-gation was discharged. The bankruptcycourt denied the relief requested. Thedistrict court affirmed, but the Second Cir-cuit reversed. The Second Circuit heldthat the restitution obligation was a ‘‘debt’’for purposes of the Bankruptcy Code andwas not excepted from the debtor’s dis-charge under § 523(a)(7) because underConnecticut law, restitution was assessed‘‘for the loss or damage caused [by thecrime].’’ Kelly, 479 U.S. at 43, 107 S.Ct.353.4

The Supreme Court reversed. As de-scribed by this Panel in Findley v. StateBar of California (In re Findley), 387 B.R.260 (9th Cir. BAP 2008), in Kelly, theSupreme Court

placed a two-part gloss on § 523(a)(7)that it justified by what it described as alongstanding ‘‘fundamental policyagainst federal interference with statecriminal prosecutions’’ in which ‘‘rehabil-itative’’ and ‘‘deterrent’’ goals loom largeand by a sense that it would be ‘‘un-

PA, but the language of § 1328(a)(3) was notchanged.

4. Section 523(a)(7) excepts from the debtor’sdischarge a fine, penalty or forfeiture payable

to or for the benefit of a governmental unit,[that] is not compensation for actual pecuni-ary lossTTTT


seemly to require state prosecutors tosubmit the judgments of their criminalcourts to federal bankruptcy courts.’’Kelly, 479 U.S. at 48–49 & n. 8[, 107S.Ct. 353]. These added up to a combina-tion of ‘‘strong interests of the States,’’and of a uniform hands-off-restitutionconstruction of the former BankruptcyAct as to which there was no indicationthat Congress meant to change the law.Kelly, 479 U.S. at 53, 107 S.Ct. 353.Under the first part of the Court’s gloss,restitution orders are more ‘‘for the ben-efit of a governmental unit,’’ as thatterm is used in § 523(a)(7), than for thebenefit of the victim who typically re-ceives the restitution. The Court rea-soned that the ‘‘criminal justice systemis not operated primarily for the benefitof victims, but for the benefit of societyas a whole.’’ Kelly, 479 U.S. at 52, 107S.Ct. 353. Accordingly, it was willing togloss over the reality that the actualrestitution payments generally wind upwith the victim.The second part of the Court’s glossholds that restitution orders are not, inthe words of § 523(a)(7), ‘‘compensationfor actual pecuniary loss.’’ The ratio-nale is that the ‘‘victim has no controlover the amount of restitution awardedor over the decision to award restitu-tion,’’ which decision ‘‘generally does notturn on the victim’s injury, but on thepenal goals of the State and the situa-tion of the defendant.’’ Kelly, 479 U.S.at 52, 107 S.Ct. 353. Thus, ‘‘they arenot assessed ‘for TTT compensation’ ofthe victim.’’ Kelly, 479 U.S. at 53, 107S.Ct. 353 (omission in original).

Accordingly, the Supreme Court held inKelly that criminal restitution obligationswere excepted from a debtor’s dischargeunder § 523(a)(7) in chapter 7 cases.

A number of courts have extended theKelly rationale to determine that costs of

prosecution imposed as a penalty or sanc-tion in criminal proceedings are exceptedfrom a debtor’s discharge in chapter 7pursuant to § 523(a)(7). See, e.g., Thomp-son v. Virginia (In re Thompson), 16 F.3d576, 581 (4th Cir.1994) (holding assessmentof costs of prosecution under state law aspart of a sentence nondischargeable); Ten-nessee v. Hollis (In re Hollis), 810 F.2d106, 108 (6th Cir.1987) (holding costs as-sessed as condition of probation in statecourt as nondischargeable); Matter ofZarzynski, 771 F.2d 304, 305–06 (7th Cir.1985) (holding costs imposed as part ofsentence in state criminal action are in-tended to punish and thus nondischarge-able); United States v. Garvin (In re Gar-vin), 84 B.R. 824, 826 (Bankr.M.D.Fla.1988) (holding costs of prosecution are notawarded to compensate for pecuniary loss-es); United States v. Cox (In re Cox), 33B.R. 657, 662 (Bankr.M.D.Ga.1983) (hold-ing that discretionary imposition of costs isnot compensation for pecuniary loss).

A majority of courts have used similarreasoning to bring costs incurred in con-nection with attorney disciplinary proceed-ings under the § 523(a)(7) exception todischarge in chapter 7 cases. See, e.g.,N.H. Supreme Court Prof’l ConductComm. v. Richmond (In re Richmond),351 B.R. 6, 14 (Bankr.D.N.H.2006) (costsawarded to state bar in attorney disciplin-ary proceedings are excepted from dis-charge). Accord Attorney GrievanceComm’n v. Smith (In re Smith), 317 B.R.302, 312 (Bankr.D.Md.2004); SupremeCourt of Ohio v. Bertsche (In re Bertsche),261 B.R. 436, 437–38 (Bankr.S.D.Ohio2000); State Bar of Mich. v. Doerr (In reDoerr), 185 B.R. 533, 537 (Bankr.W.D.Mich.1995); Cillo v. The Fla. Bar (Inre Cillo), 165 B.R. 46, 50 (M.D.Fla.1994);In re Williams, 158 B.R. 488, 491(Bankr.D.Idaho 1993); Attorney Reg. andDisciplinary Comm’n v. Betts (In reBetts), 149 B.R. 891, 898 (Bankr.N.D.Ill.1993); Board of Attorneys Prof’l Resp. v.


Haberman (In re Haberman), 137 B.R.292, 295–96 (Bankr.E.D.Wis.1992). Butsee State Bar of Cal. v. Taggart (In reTaggart), 249 F.3d 987 (9th Cir.2001)(holding costs of attorney disciplinary pro-ceedings to be compensatory under Cali-fornia law, thus dischargeable).5

The courts in these cases generally havedescribed costs of prosecution as withinthe overall coverage of the § 523(a)(7) dis-charge exception as fines, penalties or for-feitures, but in only one case did the courtdirectly characterize the costs of prosecu-tion as a fine. See Garvin, 84 B.R. at 826.The Garvin court based that characteriza-tion on its reading of the decisions inZarzynski and Cox. In Zarzynski, the Sev-enth Circuit determined that ‘‘[t]he costscan be viewed as part of the penalty TTT,’’771 F.2d at 306, and in Cox, the bankrupt-cy court characterized the costs of prose-cution as ‘‘a penalty to punish Defendantfor his violation of the criminal laws,’’ andas ‘‘punishment for his violation of thecriminal laws,’’ 33 B.R. at 662. In neitherdecision are the costs of prosecution de-scribed as a ‘‘fine.’’ In these circum-stances, the Garvin court’s characteriza-tion of costs of prosecution imposed in acriminal judgment as a ‘‘fine’’ is not per-suasive or in any sense dispositive.

C. Davenport and the chapter 13 dis-charge

In Davenport, the Supreme Court wasconfronted with debtors who had pleaded

guilty to welfare fraud and were sentencedto one year’s probation, with a condition totheir probation being that they wouldmake monthly restitution payments to thecounty probation department. Davenport,495 U.S. at 555–56, 110 S.Ct. 2126. Thedebtors subsequently filed a chapter 13petition and scheduled the restitution obli-gation as an unsecured debt. In response,the probation authorities commenced aprobation violation proceeding, allegingthat the debtors had violated the terms oftheir probation. The debtors then filed anadversary proceeding in bankruptcy court,seeking a declaration that their restitutionobligation was a dischargeable debt. Id.at 556, 110 S.Ct. 2126.

While the adversary proceeding waspending, the bankruptcy court confirmedthe debtors’ chapter 13 plan, without ob-jection from any creditor. The bank-ruptcy court subsequently held in theadversary proceeding that the debtors’restitution obligation was an unsecureddebt, dischargeable under § 1328(a) inchapter 13. Id. at 557, 110 S.Ct. 2126.6

On appeal, the district court reversed,holding that ‘‘state-imposed criminal res-titution obligations’’ could not be dis-charged in chapter 13. The Third Cir-cuit reversed again, ‘‘concluding that ‘theplain language of the chapter’ demon-strated that restitution orders are debtswithin the meaning of the [Bankruptcy]

5. Taggart turned on the Ninth Circuit’s inter-pretation of two statutes under the then-cur-rent version of the California Business andProfessions Code. Section 6086.10 of thatcode labeled fees levied under that section as‘‘costs’’ imposed for reimbursement of ex-penses of disciplinary proceedings. Taggart,249 F.3d at 992. On the other hand, feeslevied under § 6086.13 of the same code weredesignated as ‘‘monetary sanctions.’’ Id. TheNinth Circuit held that the statutory structurealong with its legislative history indicated that‘‘costs’’ were not fines. Id. at 994. The

Ninth Circuit specifically noted that all indi-cations were that California did not view theassessment of costs in the subject context aspenal in nature. Consequently, any analogyto the criminal context was ‘‘inapt.’’ Id. Ac-cordingly, the relevance of Taggart to the ap-peal in this case is limited.

6. At the time that Davenport was decided, the‘‘superdischarge’’ provisions in § 1328 didnot provide any exception to discharge inchapter 13 for criminal sanctions.


Code and hence dischargeable in pro-ceedings under Chapter 13.’’ Id.

The Supreme Court affirmed the ThirdCircuit, in an opinion written by JusticeMarshall, who had dissented in Kelly.The court held that the debtors’ restitutionobligation was a ‘‘debt’’ within the broadcompass of the definitions of ‘‘debt’’ and‘‘claim’’ in §§ 101(11) and 101(4)(A) of theBankruptcy Code. Id. at 558–60, 110 S.Ct.2126. In addition, while reaffirming itscommitment to the principles applied inKelly, the Supreme Court in Davenportconcluded that the debtors’ discharge inchapter 13 could encompass their criminalrestitution obligation. That conclusionwas based on Congress’s broader dis-charge provisions for debtors in chapter 13and the failure to include an exception todischarge provision comparable to§ 523(a)(7) in chapter 13. Id. at 562–64,110 S.Ct. 2126.

D. Congressional reaction to Davenport

The reaction of Congress to the Su-preme Court’s Davenport decision wasswift and direct. Section 1328(a) wasamended in 1990 to include an exception tochapter 13 discharge for awards of restitu-tion. See The Criminal Victims ProtectionAct of 1990, enacted as part of the CrimeControl Act of 1990, Pub.L. No. 101–647,104 Stat. 4789. The language expandingthe exception to cover ‘‘a criminal fine’’was added in the 1994 amendments to theBankruptcy Code. Bankruptcy Reform Actof 1994, Pub.L. 103–394, 108 Stat. 4106.

The legislative history is clear that Con-gress intended to overrule the result inDavenport in its amendments to the Bank-ruptcy Code. See, e.g., S.Rep. No. 434, at 8(1990), reprinted in 1990 U.S.C.C.A.N.4065, 4071 (‘‘[T]his amendment will havethe effect of overruling the SupremeCourt’s recent decision in PennsylvaniaDepartment of Public Welfare v. Daven-

port, 495 U.S. 552, 110 S.Ct. 2126, 109L.Ed.2d 588 TTT (1990), which held thatcriminal restitution obligations are dis-chargeable debts under Chapter 13.’’);H.R.Rep. No. 681(I), at 165 (1990), re-printed in 1990 U.S.C.C.A.N. 6472, 6571(‘‘Section 1902 responds to the May 29,1990, Pennsylvania Department of PublicWelfare v. Davenport decision, in whichthe Supreme Court of the United Statesruled that criminal restitution debts aredischargeable upon completion of a Chap-ter 13 reorganization plan. Section 1902corrects this result by adding a new para-graph (3) to Section 1328(a) so that crimi-nal restitution payments will be nondis-chargeable in Chapter 13. Section 1902 isnot intended to alter in any way the cover-age of section 523(a)(7), as that paragraphhas been interpreted in Kelly v. Robinson,479 U.S. 36, 107 S.Ct. 353, 93 L.Ed.2d 216TTT (1986), to make criminal restitutionobligations nondischargeable in Chapter 7.As a result of the change made in Section1902, no debtor with criminal restitutionobligations will be able to discharge themthrough any bankruptcy proceeding.’’).

However, if Congress wanted to createan exception to discharge in chapter 13cases to cover all penal sanctions, it hadlanguage ready at hand to achieve thatresult in the language of § 523(a)(7), withthe expansive gloss of Kelly, and it did notuse it. In fact, the above-quoted languagefrom the House Report suggests that the1990 amendment to § 1328(a) specificallywas not intended to incorporate the fullscope of the exception to discharge setforth in § 523(a)(7) and thus preserved abroader discharge in chapter 13 than inchapter 7.

The legislative history of the 1994amendments to the Bankruptcy Codenotes that criminal fines were added to thelist of obligations that were not discharge-


able in chapter 13 but does not shed muchlight on the rationale behind that addition.7

A number of cases, including Hollis andZarzynski, holding that costs of prosecu-tion included in a criminal judgment arenondischargeable in chapter 7, had beendecided prior to the 1990 and 1994 amend-ments to § 1328(a) and presumably wereknown to Congress. That Congress didnot specifically include costs of prosecutionin the amendments to § 1328(a) informsour decision here. Further, the dissentsuggests that Congress likely intendedthat the term ‘‘criminal fine’’ include costsof prosecution. We are not free to favorsuch a perceived intent over the plainwords of the statute.

E. Criminal fines and costs of prosecu-tion

As noted above, ‘‘criminal fine’’ is notdefined in the Bankruptcy Code. Fines andcosts of prosecution are included in federalcriminal sentences pursuant to differentstatutes. Criminal fines are imposed pur-suant to 18 U.S.C. §§ 3571 and 3572.8 Thecosts of prosecution imposed as part of

Ryan’s sentence were imposed pursuant to28 U.S.C. § 1918(b).

Fines and costs are not treated as fungi-ble in federal criminal proceedings. See,e.g., United States v. Bevilacqua, 447 F.3d124, 127 (1st Cir.2006):

There are several distinctions importantto our analysis. The imposition on adefendant of the costs of a special prose-cutor is different from ordering a defen-dant to pay criminal fines. Costs arepaid to the entity incurring the costs;criminal fines are generally paid to aspecial fund for victims’ compensationand assistance in the U.S. Treasury.See 42 U.S.C. 10601(a), (b); UnitedStates v. Sun Growers of Cal., 212 F.3d603, 606 (D.C.Cir.2000).

Cf. United States v. Gering, 716 F.2d 615,623–26 (9th Cir.1983) (applying differentstatutory frameworks for analysis of crimi-nal restitution and costs of prosecutionawards).

In United States v. Ducharme, 505 F.2d691 (9th Cir.1974), the Ninth Circuit af-firmed a conviction for intentionally sup-plying false information on income taxwithholding exemption certificates but re-

7. See, e.g., 140 Cong. Rec. H S14597–02 (Oct.7, 1994):

The Bankruptcy Act closes another gap thatpermitted white collar crooks and others tohide behind bankruptcy protections toavoid payment of criminal fines. As indi-viduals have misused the bankruptcy pro-cess to avoid debt collection and foreclo-sure, so have persons convicted of crimessought to shield themselves from the pay-ment of court-imposed fines triggered bycriminal activity. My proposal TTT removesthis shield and creates continued liabilityfor the payment of criminal fines even ifbankruptcy is pursued.

8. 18 U.S.C. § 3571 provided at the time Ryanwas sentenced as follows:

(a) In general. A defendant who has beenfound guilty of an offense may be sentencedto pay a fine.

(b) Authorized fines. Except as otherwiseprovided in this chapter, the authorizedfines are—(1) if the defendant is an individual—(A) for a felony, or for a misdemeanor re-sulting in the loss of human life, not morethan $250,000;(B) for any other misdemeanor, not morethan $25,000; and(C) for an infraction, not more than $1,000;and(2) if the defendant is an organization—(A) for a felony, or for a misdemeanor re-sulting in the loss of human life, not morethan $500,000;(B) for any other misdemeanor, not morethan $100,000; and(C) for an infraction, not more than$10,000. 18 U.S.C. § 3572, among otherthings, specifies the factors to be consideredin imposing a fine.


versed the sentence imposed. The sen-tence required as a condition of probationthat the appellant pay a $500 fine pluscosts of prosecution. The court held that26 U.S.C. § 7205, the statute under whichthe appellant was convicted, did not au-thorize the assessment of costs in additionto a fine. Id. at 692. The subject statuteprovided that upon conviction for an of-fense thereunder, the offender would besubject to a fine up to $500, imprisonmentfor up to one year, or both, ‘‘in lieu of anyother penalty provided by law.’’ Id. at 692n. 1. Accordingly, the decision in Duc-harme effectively recognizes that an awardof costs against the defendant in a criminalcase constitutes a ‘‘penalty’’ but also clear-ly differentiates the costs of prosecutionfrom a criminal fine.

In dictum, the court in Ducharme notedthat since the maximum fine for the sub-ject offense was $500, the amount of thefine imposed on appellant, ‘‘the assessmentof costs of prosecution is tantamount toincreasing that fine.’’ Id. at 692. In Ger-ing, 716 F.2d at 625–26, the Ninth Circuitrejected the Ducharme dictum, as extend-ed in United States v. Taxe, 540 F.2d 961,970 (9th Cir.1976), cert. denied, 429 U.S.1040, 97 S.Ct. 737, 50 L.Ed.2d 751 (1977),and affirmed an award of costs of prosecu-tion under 28 U.S.C. § 1918(b) in additionto fines in the maximum amount of $1,000each, assessed on 23 of the 24 counts ofmail fraud on which the defendant-appel-lant was convicted. ‘‘Decisions from othercircuits persuade us that the dictum inTaxe [and hence, in Ducharme] was un-warranted.’’ Id. at 626.

[8] Definitions or interpretations ofterms under other relevant federal stat-utes are useful to inform our interpreta-tion of such terms, used but not defined inthe Bankruptcy Code. See, e.g., Pattersonv. Shumate, 504 U.S. 753, 757–60, 112S.Ct. 2242, 119 L.Ed.2d 519 (1992). Con-

sidering the term ‘‘criminal fine’’ as it isused in federal criminal law strongly sug-gests that it does not cover ‘‘costs of prose-cution,’’ and we conclude that the chapter13 exception to discharge for ‘‘restitution,or a criminal fine’’ does not extend to costsof prosecution assessed pursuant to 28U.S.C. § 1918(b).

The exception to discharge in chapter 7included in § 523(a)(7) has been interpret-ed since Kelly to cover costs of prosecu-tion imposed as part of a criminal sen-tence, whether they are considered as a‘‘fine, penalty, or forfeiture,’’ but the lan-guage of § 1328(a)(3) is different. By itsterms, it provides a more limited exceptionto discharge in chapter 13, one that we de-termine does not encompass costs of pros-ecution imposed as part of a criminal sen-tence.

To honor the principle that exceptions todischarge are to be construed narrowly infavor of debtors, particularly in chapter 13,where a broad discharge was provided byCongress as an incentive for debtors to optfor relief under that chapter rather thanunder chapter 7, it is not appropriate toexpand the scope of the § 1328(a)(3) ex-ception beyond the terms of the statute.Congress could have adopted an exceptionto discharge in chapter 13 that mirrored§ 523(a)(7). It did not do so. In contrast,under BAPCPA, when Congress wanted tolimit the chapter 13 ‘‘superdischarge,’’ itincorporated exceptions to discharge from§ 523 wholesale. See current § 1328(a)(2),excepting from the chapter 13 dischargeany debts of the kinds specified in subsec-tions (1)(B) and (C), (2), (3), (4), (5), (8) and(9) of § 523(a).

[9] As a bottom line matter, Ryanserved his time and paid in full the crimi-nal fine that was imposed as part of hissentence for conviction of possession of an


unregistered firearm.9 The restitution ob-ligation that was included as part of hissentence was voided. Ryan paid the Gov-ernment a total of $6,331.66 to be appliedto the costs of prosecution awarded as partof his criminal judgment, including$2,774.89 paid under his chapter 13 plan,leaving a balance of $77,088.34. We deter-mine that the unpaid balance of the costsof prosecution award was covered byRyan’s chapter 13 discharge.

VI. CONCLUSION

Based on the foregoing analysis, we con-clude that the exception to discharge in-cluded in § 1328(a)(3) for ‘‘restitution, or acriminal fine, included in a sentence on thedebtor’s conviction of a crime’’ does notcover costs of prosecution included in sucha sentence, and we REVERSE.

MARKELL, Bankruptcy Judge,dissenting:

I respectfully dissent.

This case requires us to determine whatCongress intended in 1994 when it exempt-ed ‘‘criminal fines’’ from the chapter 13discharge. Specifically, we must decidewhether that phrase covers court-orderedand statutorily authorized reimbursementof costs related to prosecuting a debtor fora federal crime.

The majority spends a great deal of timeand analysis essentially holding that therehabilitative and redemptive goals of

bankruptcy require a narrow constructionof ‘‘criminal fines.’’ I think it is morelikely that Congress intended that bank-ruptcy courts construe the term in theBankruptcy Code in the same way thatother courts construe it in the CriminalCode.

As noted in Collier on Bankruptcy: ‘‘Todetermine whether a particular fine is dis-chargeable under section 1328(a)(3), an ex-amination of applicable criminal law willoften be necessary.’’ 8 COLLIER ON BANK-

RUPTCY ¶ 1328.02[3][j] (Alan N. Resnick &Henry J. Sommer eds., 15th ed. rev.2008).See also Bova v. St. Vincent DePaul Corp.(In re Bova), 276 B.R. 726, 731–32 (1stCir.BAP2002) (examining Illinois and Cali-fornia criminal law to determine whethercivil enforcement of restitution judgmentaffected the judgment’s status as criminalrestitution).

If that proposition is accepted, UnitedStates v. Gering, 716 F.2d 615, 626 (9thCir.1983); United States v. Taxe, 540 F.2d961, 970 (9th Cir.1976), cert. denied, 429U.S. 1040, 97 S.Ct. 737, 50 L.Ed.2d 751(1977); and United States v. Ducharme,505 F.2d 691, 692 (9th Cir.1974) (per cu-riam) demonstrate that, in this circuit,costs of reimbursement count as criminalfines.10

Although reasonable minds might differ,I think treating reimbursement costs ascriminal fines within § 1328(a)(3) is a more

9. The judgment reflects that interest on the$7,500 fine was waived because the courtdetermined that ‘‘the defendant does not havethe ability to pay interest.’’

10. The majority cites Gering in an attempt todistinguish Ducharme. One cannot quibblewith the quotations used by the majority; theyare accurate. But the context is off. Geringdealt with whether costs could be imposedunder 28 U.S.C. § 1918(b) if the text of thestatute setting for the substantive crime didnot refer to costs. Distinguishing Ducharme

on the basis that it did not construe§ 1918(b), the circuit held that ‘‘unless thestatute under which a defendant is convictedprovides otherwise, a district court may in itsdiscretion impose costs of prosecution undersection 1918(b) on non-indigent defendants.’’Gering at 626. With all due respect to themajority, that holding does nothing to Duc-harme’s and Taxe’s indications that, for sen-tencing purposes, costs of prosecution aretreated as criminal fines.

721IN RE AVI, INC.Cite as 389 B.R. 721 (9th Cir.BAP 2008)

natural reading of that section, and, giventhe history behind the 1994 amendmentthat added ‘‘criminal fine’’ to § 1328(a)(3),the reading that Congress likely intended.I therefore dissent.

,

In re AVI, INC., Debtor.

Woods & Erickson, LLP, Appellant,

v.

William A. Leonard, Chapter7 Trustee, Appellee.

BAP No. NV–07–1266–JuKPa.Bankruptcy No. 04–14779–LBR.Adversary No. 06–01121–LBR.

United States Bankruptcy Appellate Panelof the Ninth Circuit.

Argued and Submitted on Feb. 21, 2008.

Filed June 13, 2008.

Background: Chapter 7 trustee broughtadversary proceeding to recover allegedunauthorized postpetition transfers re-ceived by law firm that negotiated sale ofdebtor’s undisclosed flight allocations. TheUnited States Bankruptcy Court for theDistrict of Nevada, Linda B. Riegle, J.,entered judgment for $38,354.30 againstfirm. Firm appealed.

Holdings: The Bankruptcy AppellatePanel, Jury, J., held that:

(1) dismissal of debtor’s pre-conversionChapter 11 case did not satisfy proce-dural or substantive requirements ofstatute;

(2) annulment of order dismissing Chapter11 case was not abuse of discretion;

(3) bankruptcy court had jurisdiction overavoidance action;

(4) reinstatement of Chapter 11 case, as ifthere had been no dismissal, did notviolate firm’s due process rights;

(5) as a matter of first impression, trusteeis not required to avoid initial transferfrom initial transferee before seekingrecovery from subsequent transferees;

(6) and firm failed to establish good faithdefense to trustee’s recovery claim.

Affirmed.

1. Bankruptcy O2398, 3504

Under bankruptcy statute generallyproviding that rights of aircraft equipmentlessor to take possession of its equipmentin compliance with lease and enforce anyof its other rights or remedies under leaseis not limited by Bankruptcy Code provi-sions or by any power of court, absenttimely cure of any default, lessor may re-cover aircraft equipment prior to any for-mal assumption or rejection of lease, unim-peded by automatic stay. 11 U.S.C.A.§§ 362, 1110.

2. Bankruptcy O3770

Any issue respecting bankruptcycourt’s calculation of amount of judgmententered against law firm on Chapter 7trustee’s claim to recover unauthorizedpostpetition transfers was waived whenamount of judgment was not questioned onappeal. 11 U.S.C.A. § 550.

3. Bankruptcy O3784

Bankruptcy appellate panel (BAP) re-views bankruptcy court’s decision to vacatean order of dismissal under the abuse ofdiscretion standard.

4. Bankruptcy O3782

Bankruptcy appellate panel (BAP) re-views issues of statutory construction andconclusions of law de novo.

the insersection of bankruptcy and criminal law · alycia m. peloso, criminal restitution...

Documents