Harris v. Shayla Stevens & Tozzi Law, LLC (In re Harris)

592 B.R. 750
CourtUnited States Bankruptcy Court, N.D. Georgia
DecidedOctober 16, 2018
DocketCase No. 18-21635-JRS; Adversary Proceeding Case No. 18-02043-JRS
StatusPublished
Cited by2 cases

This text of 592 B.R. 750 (Harris v. Shayla Stevens & Tozzi Law, LLC (In re Harris)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Harris v. Shayla Stevens & Tozzi Law, LLC (In re Harris), 592 B.R. 750 (Ga. 2018).

Opinion

James R. Sacca, U.S. Bankruptcy Court Judge

The issue before the Court is whether the exception to the automatic stay in § 362(b)(4) for a governmental unit exercising its police and regulatory powers is broad enough to include the imposition of sanctions by a court, including incarceration, in connection with a motion to compel discovery and for contempt against a non-attorney debtor in a post judgment collection proceeding. This Court concludes it is not so broad and that such proceedings are subject to the automatic stay. Although that conclusion seemed rather obvious to this Court, there does exist some case law - including at the level of the federal courts of appeal - that makes the issue more confusing than it should be with respect to which fact situations the exception should be applied in the context of sanctions motions and orders in non-bankruptcy forums.

Debtor Shawntae Harris ("Ms. Harris") filed for Chapter 11 bankruptcy relief on August 18, 2018. She filed this Adversary Proceeding on August 22, 2018, seeking injunctive relief against the continuation of state court proceedings on a Motion to Compel Discovery and for Contempt (the "Motion") filed by Creditor Shayla Stevens ("Ms. Stevens") by and through her counsel, Tozzi Law, LLC ("Tozzi Law") [Adv. Doc. 1]. Because a hearing in the state court was scheduled for August 24, 2018 on account of Ms. Harris' failure to appear at a post-petition contempt hearing in the state court on August 20, 2018, this matter came on for an expedited hearing before this Court on August 23, 2018, at which time the Court announced on the record that it was granting a temporary restraining order ("TRO") to maintain the status quo while the Court considered the issue of whether the automatic stay applied to the state court proceeding [Adv. Doc. 6]. After a continued hearing on September 6, 2018, the Court extended the TRO until October 16, 2018 and scheduled an additional hearing on the matter for that date [Adv. Doc. 11]. The relief sought by Ms. Harris is a determination that the automatic stay applied to the contempt proceedings in the Cobb County Superior Court such that the hearing that took place on August 20th was a violation of the stay and that sanctions should be levied against Ms. Stevens and Tozzi Law for "causing the [August 20th] hearing to go forward." [Adv. Doc. 1].

THE STATE COURT PROCEEDINGS

The Motion to Compel Discovery and for Contempt was filed in the Cobb County Superior Court on April 26, 2018. It arises *753out of Ms. Stevens' attempt to collect a judgment in her favor against Ms. Harris in the amount of $6,400,000 that was rendered by the Superior Court of Cobb County on March 3, 2014, a fi. fa. for which was issued on May 20, 2014 [Civ. Case No. 11-1-6943]. On August 1, 2018, the Honorable Reuben M. Green of the Cobb County Superior Court issued an order granting the motion, ordering Ms. Harris to produce all documents related to the motion, and awarding reasonable expenses and attorney's fees. The order further stated that: "Unless [the production of documents and payment of fees and expenses] have been fully complied with [by August 10, 2018], all parties and counsel shall report...on August 13, 2018...at which time the Court will determine whether to hold Shawntae Harris in willful contempt." [emphasis added]

Prior to the August 13th hearing, Ms. Harris' former state court counsel Durante Partridge filed a Request for Clarification and a Response to Plaintiff's Request for Production of Documents asserting that Ms. Harris had substantially complied with discovery requests and seeking clarification as to the scope of some of the Ms. Stevens' document production requests. During the compliance hearing on August 13, 2018, Ms. Stevens' state court counsel, Douglas Tozzi, told Judge Green that he was amenable to giving Ms. Harris another week to produce additional documents [Adv Doc. 13, p. 21]. The transcript from the hearing reveals the following;

* * * * *
Judge Green: So I want this stuff produced. I want this resolved, whether that's paying the total judgment or y'all work something out, fine. It doesn't matter to me. But I don't want to see you all back in front of me on discovery dispute. So you either give the stuff or you go to jail until they come in and show me all the line items they want and you provide every one of those line items. [Adv Doc. 13, p. 22-23].
* * * * *
Judge Green: Anything else other than the two dates that I've said, that you need?
Mr. Tozzi: No, Your Honor, Thank you.
Judge Green: All right. So the 17th and then the 20th. [Adv. Doc. 13, p. 27].
* * * * *
Judge Green: If she is - Mr. Tozzi if you'd listen for a second. If she is in, what you believe to be, sufficient compliance, even if it's not perfect, but if it's what you're comfortable with, let the other side know and y'all don't need to come on that Monday [August 20th] [emphasis added]. If it's sufficient for you to do the deposition and then you want more discovery after that, we can address more discovery in the future. But I don't want to make everybody come if we're close to compliance, at least sufficiently close that you can do your deposition. [Adv. Doc. 13, p. 29-30].
* * * * *

On or around Thursday, August 16th Mr. Partridge informed Mr. Tozzi that he was terminated by Ms. Harris, although this is disputed by Ms. Harris.1 On August 17th Mr. Tozzi stated in an email to Judge Green's Staff Attorney regarding the August 20th hearing: "I suspect we will need to attend the compliance hearing as I am uncertain as to the current status given this [Mr. Partridge's termination] development."

*754[Adv. Doc. 7]. Ms. Harris filed her petition under Chapter 11 the next day on August 18, 2018 [Bkry. Doc. 1] and informed the state court and opposing counsel of that fact prior to the August 20, 2018 hearing. Neither Ms. Harris' new state court counsel, Gary Freed, her bankruptcy counsel, Shayna Steinfeld, nor the Debtor herself attended the hearing on August 20th because they thought it was stayed on account of the bankruptcy, and that Mr. Partridge would appear to advise Judge Green of the bankruptcy. Judge Green clearly thought otherwise and issued a rule nisi setting a hearing on August 24th to address Ms. Harris' contempt regarding discovery and the failure to appear. Ms. Harris filed this adversary proceeding to stay the hearing scheduled for the 24th and obtain a permanent injunction against further proceedings in the state court on August 22, 2018 [Adv. Doc. 1].

DISCUSSION

Upon the filing of a bankruptcy petition, 11 U.S.C. § 362 provides for an automatic stay of actions against the debtor and property of the estate, including the continuation of judicial proceedings against the debtor that began before the bankruptcy petition was filed.

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Bluebook (online)
592 B.R. 750, Counsel Stack Legal Research, https://law.counselstack.com/opinion/harris-v-shayla-stevens-tozzi-law-llc-in-re-harris-ganb-2018.