In response, the Secretary noted that
the cited provision stays the commencement or continuation of any administrative proceeding
against the debtor that was or could have been commenced prior to the bankruptcy case. The
Secretary noted that Torres had filed his complaint in January 1990 and the case was pending
before the ALJ for hearing in May of 1990, when Transcom was forced into involuntary
bankruptcy. The Secretary concluded therefore, that pursuant to §362(a)(1), further
action on Torres' complaint must be stayed.
The Secretary further found:
It does not follow from the stay of Torres' STAA proceeding,
however, that Torres' complaint is to be automatically
dismissed. The stay remains in effect only until a final
disposition of the bankruptcy case, see U.S.C.
§362(c), which may or may not result in the discharge of
Transcon from all of its debts. The fact that the bankruptcy
proceeding is a Chapter 7 liquidation proceeding and there has
been appointed a Trustee, whose duties include the liquidation
and the expeditious closing of the bankruptcy estate,
see 11 U.S.C. §204(1), presupposes that the
bankruptcy court will discharge Transcon from all of its debts on
liquidation of its assets. There is, however, nothing in the
record to indicate that this has occurred. Until the bankruptcy
court orders the discharge of Transcon from all its debts,
Complainant Torres has a viable (albeit stayed) claim.
Slip op. at 3. As was true in Torres, the ALJ in this case has cited to no
evidence establishing that the bankruptcy court has discharged KTL, Inc. from all of its
debts. However, the Chapter 7 Trustee alleged in its "Notice of Automatic Stay;
Response to Complainant's Appeal of OSHA Decision and Request for Permission to Attend
Hearing Via Telephone" filed with the ALJ that even if the exceptions to the automatic
stay provision were applicable to this case,
Complainant is forever barred from asserting his claims or
executing upon any decision or judgment on the merits against
the Debtor's bankruptcy estate as Complainant, despite having
ample notice of the bankruptcy proceedings and applicable bar
dates, failed to timely file a proof of claim against the Debtors'
estate and the time for so doing has run.
Notice of Automatic Stay at 3.
The Chapter 7 Trustee cites no support for its assertion that Haubold is
"forever barred from asserting his claims." However, even if the assertion is
correct, the automatic stay continues until the bankruptcy case is closed, dismissed, or
discharge is granted or denied, or until the bankruptcy court grants some relief from the stay.
11 U.S.C. §362(a), (c)(2), (e), (f). Although the stay by its statutory terms operates
against "the commencement or continuation" of judicial proceedings, and does
not specifically include "dismissal" of proceedings, the Fifth Circuit has held:
[I]t seems to us that ordinarily the stay must be construed to
apply to dismissal as well. First, if either of the parties takes any
step to obtain dismissal, such as motion to dismiss or motion for
summary judgment, there is clearly a continuation of the judicial
proceeding. Second, in the more technical sense, just the entry
of an order of dismissal, even if entered sua sponte, constitutes a
judicial act toward the disposition of the case and hence may be
construed as a "continuation of a judicial proceeding.
Third, dismissal of a case places the party dismissed in the
position of being stayed "to continue the judicial
proceeding," thus effectively blocking his right to appeal.
Thus, absent the bankruptcy court's lift of the stay, or perhaps a
stipulation of dismissal, a case such as the one before us must, as
a general rule, simply languish on the court's docket until final
disposition of the bankruptcy proceeding.
Pope v. Manville Forest Products , 778 F.2d 238, 239 (1985). See
also Dean v. Trans World Airlines, Inc. , 72 F.3d 754, 756 (9th Cir. 1995)(post-
filing dismissal in favor of the bankrupt of an action subject to the automatic stay
violates the stay where the decision to dismiss first requires the court to consider other
issues presented by or related to the underlying case). Thus, we conclude that
dismissal of this case, as the ALJ recommended, would violate the automatic stay to
which this case is subject.
Accordingly, we do not approve the ALJ's Recommended
Decision and Order Dismissing Complaint. Instead, we remand the matter to the ALJ
where the case will remain on the docket until the bankruptcy case is closed,
dismissed, or discharge is granted or denied or until the bankruptcy court lifts the stay
and the ALJ may then continue the proceedings to resolve the matter before him.
SO ORDERED.
PAUL GREENBERG
E. COOPER BROWN
[ENDNOTES]
1
2 Id.
3
(a) Except as provided in subsection (b) of this section, a
petition filed under section 301, 302, 04 303 of this title . . .
operates as a stay, applicable to all entities, of
(1) the commencement or
continuation, including the issuance or employment
of process, of a judicial, administrative ,
or other action or proceeding against the
debtor that was or could have been commenced
before the commencement of the case under this
title, or to recover a claim against the debtor that
arose before the commencement of the case under
this title . . . .
Emphasis supplied.
