7 ABR 65

7 ABR 65

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

	)
In re:	)
	)
GOOD TASTE, INC.,	)	Case No. A-00-00880-DMD
	)	Chapter: 7
Debtor	)
___________________________________________	)

ORDER GRANTING MOTION FOR FINDING OF AND DAMAGES FOR
VIOLATION OF AUTOMATIC STAY

The debtor's motion for order re: finding of and damages for violation of the automatic stay duly came before the court for hearing on December 4, 2000. Thomas Yerbich appeared for the debtor. William Brattain appeared for United Airlines, Inc. After hearing the arguments of counsel and reviewing their memoranda,

IT IS ORDERED that the debtor's motion is granted. The actions of United Airlines and its counsel, Baker Brattain, LLC, in filing Case No. 3AN-00-010760-CIV in the Superior Court of the Third Judicial District for the State of Alaska violated the automatic stay. The debtor is awarded reasonable attorney's fees and costs for its motion. No other damages are awarded. Mr Yerbich shall file an affidavit with an itemized statement of attorney's fees and costs on or before January 12, 2001. The court will determine the amount of fees payable without further notice or hearing.

Analysis

United Airlines, Inc. (United) obtained a state court judgment against the debtor for attorney's fees. The debtor allegedly made a number of fraudulent transfers to its sole shareholder and president, Connie Bennett, and other Bennett relatives and entities. The debtor filed for chapter 7 relief on September 5, 2000. Tom Yerbich, attorney for the debtor, informed United's attorney, William Brattain, of the bankruptcy filing and advised Brattain that further litigation would violate the automatic stay. Nonetheless, Brattain and United filed 7 ABR 66 an action in state court on September 20, 2000, seeking to recover fraudulent transfers allegedly made by the debtor.

The filing of a bankruptcy petition operates as a stay of enforcement of any judgment against the debtor or property of the estate and any act to obtain possession of property of the estate. ⁽¹⁾ Damages for violations of the automatic stay may be recovered by individuals under 11 U.S.C. § 362(h). Other entities may recover damages as a sanction for ordinary civil contempt. ⁽²⁾ Usually, actions against third parties are not subject to the stay. When property of the estate is involved, however, actions against third parties are stayed. An action to recover property fraudulently transferred by the debtor is an act to obtain property of the estate and subject to the stay.⁽³⁾ Further, I see no basis for distinguishing an action for damages for conspiracy to fraudulently transfer property from an action to recover fraudulent transfers. Both claims impact property of the estate and are subject to the stay. ⁽⁴⁾

Here, United chose to proceed with its fraudulent transfer action in state court, even though it knew of the debtor's bankruptcy filing. United disregarded the automatic stay. It did not seek relief from stay before it pursued its claims in state court. The debtor's motion will be granted and it may recover its reasonable attorney's fees and costs incurred in this matter.

DONALD MacDONALD IV
United States Bankruptcy Judge

N O T E S:

1.		11 U.S.C. § 362(a).
2.		Havelock v. Taxel (In re Pace), 67 F.3d 187, 193 (9th Cir. 1995).
3.		American Nat'l Bank of Austin v. MortgageAmerica Corp.,(In re MortgageAmerica Corp.), 714 F.2d 1266, 1275 (5th Cir. 1983).
4.		Under appropriate circumstances, following a demand and a failure to act by the trustee and relief from stay, a creditor may pursue fraudulent transfer claims on behalf of the estate.