In re Congregation Birchos Yosef

535 B.R. 629, 74 Collier Bankr. Cas. 2d 326, 2015 Bankr. LEXIS 2807, 61 Bankr. Ct. Dec. (CRR) 139, 2015 WL 5012592
CourtUnited States Bankruptcy Court, S.D. New York
DecidedAugust 24, 2015
DocketCase No. 15-22254 (RDD)
StatusPublished
Cited by7 cases

This text of 535 B.R. 629 (In re Congregation Birchos Yosef) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Congregation Birchos Yosef, 535 B.R. 629, 74 Collier Bankr. Cas. 2d 326, 2015 Bankr. LEXIS 2807, 61 Bankr. Ct. Dec. (CRR) 139, 2015 WL 5012592 (N.Y. 2015).

Opinion

MEMORANDUM OF DECISION ON DEBTOR’S MOTION TO ENFORCE THE AUTOMATIC STAY

Hon. Robert D. Drain, United States Bankruptcy Judge:

This Memorandum of Decision amends and supersedes the Court’s bench ruling, issued at the end of the July 1, 2015 hearing on a motion (the “Motion”) of the debtor and debtor in possession (the “Debtor”) to enforce the automatic stay under 11 U.S.C. § 362(a) against Bais Chi-nuch L’Bonois, Inc. (“Bais Chinuch”) and certain named individuals and those acting with them, based on their post-bankruptcy invocation of a beis din proceeding against principals of the Debtor. The Court found and concluded that Bais Chinuch and the named individuals violated the automatic stay and that the Motion should be granted, and I have entered an order to that effect. This Memorandum of Decision sets forth in more detail the reasons for that result.

Facts

After filing this chapter 11 case, the Debtor commenced an adversary proceeding in this Court against Bais Chinuch and the other subjects of the Motion asserting various claims for fraud, breach of fiduciary duty and looting of the Debtor’s assets. Then Bais Chinuch and the other named defendants invoked a beis din, or Jewish religious court, specifically Beis Din Mecho L‘Hora‘ah, which (a) “invited,”, or issued a hazmana to, the Debtor’s principals, though not the Debtor itself, to participate in a beis din proceeding regarding the parties’ dispute — i.e., the subject matter of the adversary proceeding— and (b), enjoined the Debtor’s principals, through an ekul, from continuing to pursue the adversary proceeding in this Court.1 The hazmana, or summons, also [632]*632warned the Debtor’s principals that if they did not participate in the beis din proceeding they could be subject to a sirov, which the parties agree at a minimum constitutes a shunning by their religious community and potentially by all Orthodox Jews.

The Debtor’s counsel wrote to those who had invoked the beis din that they had violated the automatic stay and needed to stop the beis din proceeding, and also that the ekul, as a violation of the automatic stay, was void ab initio. Notwithstanding that warning and Bais Chinuch and the other individuals’ knowledge of the commencement of this chapter 11 case (which they had when they invoked the beis din), Bais Chinuch and the individuals did not withdraw their request to the beis din for relief against the Debtor’s principals or seek vacatur of the ekul. In fact, the beis din issued a second invitation, or hazma-na, again informing the Debtor’s principals of the potential consequences of ignoring its summons: a sirov, or communal shunning, at a minimum.

Based on the record of the hearing, while the full extent of the effect of a sirov, if issued, is somewhat unclear, the mere threat of the issuance of a sirov, and, in fact, the commencement of the beis din proceeding itself, has already adversely affected the Debtor, through its principals, and made it more difficult to conduct this case by exerting significant pressure to cease pursuing the Debtor’s claims against those who invoked the beis din.

The Debtor’s principals can choose to ignore the ekul, or injunction and not appear before the beis din, but that choice would involve substantial courage in light of the clear and imminent harm that would result to them if they did so. The beis din proceeding and the threat of the sirov have already affected not only their standing in the community but also their children, who have been harassed and threatened with expulsion from school. There is no question that those who invoked the beis din foresaw the consequences of their actions on the Debtor and this case and that they are engaging in considerable hypocrisy in arguing to the contrary.

The Debtor’s principals have not yet bowed to this pressure, however; instead, the Debtor filed its Motion to enforce the automatic stay, requesting the imposition of sanctions comprising both actual and punitive damages as well as coercive sanctions to ensure future compliance with the stay.

Jurisdiction

The Court has jurisdiction to decide the Motion, which arises under § 362 of the Bankruptcy Code as well as the Court’s general contempt power and § 105(a) of the Bankruptcy Code (invoked in furtherance of § 362),2 pursuant 28 U.S.C. §§ 157(a)-(b) and 1334(b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) that is central to the administration of the Debtor’s case and estate.

Discussion

The Automatic Stay Applies. The automatic stay under 11 U.S.C. § 362(a) is what it says: an automatic statutory injunction that came into effect upon the commencement of this chapter 11 case. It embodies Congress’s determination that automatically staying all activity to the extent set forth in § 362(a) — including, as most relevant here, “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 commence[633]*633ment 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,” 11 U.S.C. § 362(a)(1), and “any act to obtain possession of property of the estate or property from the estate or to exercise control over property of the estate,” 11 U.S.C. § 362(a)(3) — is a fundamental protection not only of debtors in bankruptcy cases, but also of debtors’ estates and creditors. See, e.g., 3 Collier on Bankruptcy ¶ 362.03 (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2015)(quoting H.R.Rep. No. 595, 95th Cong. 1st Sess. 340 (1977)).

Indeed, the automatic stay is the debtor’s primary protection during a bankruptcy case, just as the discharge is the debtor’s primary protection at the end of the case. As noted, it serves not only the debtor, but also the debtor’s creditors in the collective context of the case by ensuring the orderly determination of the debt- or’s liabilities, realization on the estate’s assets, and allocation of that value to creditors and interest holders according to the Bankruptcy Code’s priority scheme and policy of equality of distribution. Id.; SEC v. Brennan, 230 F.3d 65, 70 (2d Cir.2000); In re Parr Meadows Racing Ass’n, Inc., 880 F.2d 1540, 1545 (2d Cir.1989). In an context where every dollar counts, the automatic stay prevents unilateral races to dismember the debtor and actions outside the bankruptcy court’s supervision with their attendant diversion of resources and impairment of the debtor’s value.

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535 B.R. 629, 74 Collier Bankr. Cas. 2d 326, 2015 Bankr. LEXIS 2807, 61 Bankr. Ct. Dec. (CRR) 139, 2015 WL 5012592, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-congregation-birchos-yosef-nysb-2015.