FILED FEB 13 2024 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. NV-23-1111-NFB SILVER STATE BROADCASTING, LLC, Debtor; GOLDEN STATE Bk. No. 21-14978-ABL BROADCASTING, LLC, Jointly Administered Debtor; MAJOR MARKET RADIO, LLC, Jointly Administered Debtor.
SILVER STATE BROADCASTING, LLC; GOLDEN STATE BROADCASTING, LLC; MAJOR MARKET RADIO, LLC, Appellants, v. MEMORANDUM* MICHAEL WARREN CARMEL, Chapter 11 Trustee; W. LAWRENCE PATRICK, Receiver; U.S. TRUSTEE, Appellees.
Appeal from the United States Bankruptcy Court for the District of Nevada August B. Landis, Chief Bankruptcy Judge, Presiding
Before: NIEMANN,** FARIS, and BRAND, Bankruptcy Judges. * This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. ** Hon. Jennifer E. Niemann, U.S. Bankruptcy Judge for the Eastern District of California, sitting by designation. INTRODUCTION
A federal court entered judgment against Silver State Broadcasting,
LLC (“Silver State”), Golden State Broadcasting, LLC (“Golden State”), and
Major Market Radio, LLC (together, “Chapter 111 Debtors”), and others,
jointly and severally. The Chapter 11 Debtors moved the bankruptcy court
to extend the automatic stay to protect other judgment debtors from
collection actions. The bankruptcy court denied the motion, and the
Chapter 11 Debtors appealed. We discern no error and AFFIRM.
FACTS
A. Background of the Chapter 11 Debtors
The Chapter 11 Debtors own several radio stations. Royce
International Broadcasting Corporation (“Royce”) holds the equity interest
in the Chapter 11 Debtors, and Edward Stolz owns Royce. Ownership of
the equipment and personal property required to operate the Chapter 11
Debtors’ various radio stations is in dispute. Mr. Stolz contends that such
equipment and personal property belong to him, while the chapter 11
trustee contends that the equipment and personal property belong to the
Chapter 11 Debtors.
B. Prepetition Lawsuit
In August 2018, a judgment was entered by the United States District
Court for the Central District of California (“District Court”) against Silver
Unless specified otherwise, all chapter and section references are to the 1
Bankruptcy Code, 11 U.S.C. §§ 101-1532. 2 State, Golden State, Royce, Mr. Stolz, and Playa Del Sol Broadcasters
(“Playa”) (together, “Judgment Debtors”), jointly and severally in the
amount of $1,249,563.46 for violation of the Federal Copyright Act. WB
Music Corp. v. Royce Int’l Broad. Corp., 47 F.4th 944, 946 (9th Cir. 2022). The
Judgment Debtors did not pay the judgment.
In July 2020, the District Court appointed W. Lawrence Patrick
(“Receiver”) as a receiver to facilitate collection of the outstanding
judgment from the Judgment Debtors. Id. at 947-48. The Judgment Debtors
subsequently deposited enough funds with the District Court to satisfy the
original judgment plus interest but not enough to ensure that all expenses
of the receivership would be paid. Id. at 948-49. The receivership was still
in place when the Chapter 11 Debtors filed their voluntary petitions on
October 19, 2021.
C. Postpetition Collection Efforts in Prepetition Lawsuit
After the Ninth Circuit affirmed the District Court’s decision not to
terminate the receivership until all receivership expenses had been paid,
the District Court signed an order in February 2023 approving a total of
$2,078,076.95 in additional fees and costs to Receiver and his professionals
as to all the Judgment Debtors except Silver State and Golden State (“Fee
Order”).
On March 10, 2023, Michael Carmel (“Trustee”) was appointed as the
chapter 11 trustee for the Chapter 11 Debtors’ jointly administered
bankruptcy cases.
3 On May 5, 2023, Receiver applied to the District Court for the
issuance of a writ of execution to enforce the Fee Order as to Royce,
Mr. Stoltz, and Playa, but not as to Silver State and Golden State. The
District Court granted Receiver’s ex parte application on May 9, 2023.
D. Emergency Motion in Bankruptcy Court
On May 15, 2023, the Chapter 11 Debtors filed an emergency motion
in the bankruptcy court for an order determining that Receiver violated the
automatic stay imposed by § 362(a)(1) and (6) by his attempts to have the
District Court determine the amount of fees as set forth in the Fee Order
and permit Receiver to collect on the Fee Order by levying on assets owned
by non-debtors Royce and Mr. Stolz.
Receiver and Trustee both opposed the Chapter 11 Debtors’
emergency motion. Trustee asserted that, based on Trustee’s preliminary
investigations, the bankruptcy estates owned (or at least had an interest in)
the equipment and personal property used to operate the Chapter 11
Debtors’ radio stations. Trustee argued that the automatic stay protected
the radio station equipment or personal property, and the bankruptcy
court should not lift the stay as to those items. Trustee also stated that the
automatic stay did not prevent Receiver from collecting from Mr. Stolz’s
property, citing Aerodynamics Inc. v. Caesars Entertainment Operating Co.,
Case No. 2:15-cv-01344-JAD-BNW, 2020 WL 5995488, at *2 (D. Nev. Oct. 9,
2020).
4 To avert needless litigation, Receiver agreed not to execute on
equipment or personal property used by the Chapter 11 Debtors in the
operation of their radio stations. Receiver argued that the Fee Order was an
award of fees against only the non-debtor Judgment Debtors, as was the
right to execute on the Fee Order. Therefore, the Fee Order and related
right to execute were not actions with respect to a claim against the
Chapter 11 Debtors. Receiver also argued that while the motion sought to
enjoin Receiver from seeking to execute against assets of the Judgment
Debtors other than the Chapter 11 Debtors, such a request should have
been brought as an adversary proceeding. Moreover, even if such a request
had been made properly, the Chapter 11 Debtors would be unable to
satisfy their burden to justify such an injunction.
The bankruptcy court heard oral argument on the Chapter 11
Debtors’ motion on June 7, 2023. The Chapter 11 Debtors argued that the
automatic stay should apply to the non-debtor Judgment Debtors for two
reasons. First, Receiver should not be permitted to execute on the
equipment used by the Chapter 11 Debtors to operate their radio stations
and prevent Trustee from selling the Chapter 11 Debtors’ assets as a “going
concern.” Second, Receiver filed a proof of claim in the Chapter 11 Debtors’
cases in January or February 2022 for the same fees that were the subject of
the Fee Order and, because Receiver filed a proof of claim in the
bankruptcy court, jurisdiction over Receiver’s fee claims was transferred to
the bankruptcy court. The Chapter 11 Debtors asserted that the bankruptcy
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FILED FEB 13 2024 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. NV-23-1111-NFB SILVER STATE BROADCASTING, LLC, Debtor; GOLDEN STATE Bk. No. 21-14978-ABL BROADCASTING, LLC, Jointly Administered Debtor; MAJOR MARKET RADIO, LLC, Jointly Administered Debtor.
SILVER STATE BROADCASTING, LLC; GOLDEN STATE BROADCASTING, LLC; MAJOR MARKET RADIO, LLC, Appellants, v. MEMORANDUM* MICHAEL WARREN CARMEL, Chapter 11 Trustee; W. LAWRENCE PATRICK, Receiver; U.S. TRUSTEE, Appellees.
Appeal from the United States Bankruptcy Court for the District of Nevada August B. Landis, Chief Bankruptcy Judge, Presiding
Before: NIEMANN,** FARIS, and BRAND, Bankruptcy Judges. * This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. ** Hon. Jennifer E. Niemann, U.S. Bankruptcy Judge for the Eastern District of California, sitting by designation. INTRODUCTION
A federal court entered judgment against Silver State Broadcasting,
LLC (“Silver State”), Golden State Broadcasting, LLC (“Golden State”), and
Major Market Radio, LLC (together, “Chapter 111 Debtors”), and others,
jointly and severally. The Chapter 11 Debtors moved the bankruptcy court
to extend the automatic stay to protect other judgment debtors from
collection actions. The bankruptcy court denied the motion, and the
Chapter 11 Debtors appealed. We discern no error and AFFIRM.
FACTS
A. Background of the Chapter 11 Debtors
The Chapter 11 Debtors own several radio stations. Royce
International Broadcasting Corporation (“Royce”) holds the equity interest
in the Chapter 11 Debtors, and Edward Stolz owns Royce. Ownership of
the equipment and personal property required to operate the Chapter 11
Debtors’ various radio stations is in dispute. Mr. Stolz contends that such
equipment and personal property belong to him, while the chapter 11
trustee contends that the equipment and personal property belong to the
Chapter 11 Debtors.
B. Prepetition Lawsuit
In August 2018, a judgment was entered by the United States District
Court for the Central District of California (“District Court”) against Silver
Unless specified otherwise, all chapter and section references are to the 1
Bankruptcy Code, 11 U.S.C. §§ 101-1532. 2 State, Golden State, Royce, Mr. Stolz, and Playa Del Sol Broadcasters
(“Playa”) (together, “Judgment Debtors”), jointly and severally in the
amount of $1,249,563.46 for violation of the Federal Copyright Act. WB
Music Corp. v. Royce Int’l Broad. Corp., 47 F.4th 944, 946 (9th Cir. 2022). The
Judgment Debtors did not pay the judgment.
In July 2020, the District Court appointed W. Lawrence Patrick
(“Receiver”) as a receiver to facilitate collection of the outstanding
judgment from the Judgment Debtors. Id. at 947-48. The Judgment Debtors
subsequently deposited enough funds with the District Court to satisfy the
original judgment plus interest but not enough to ensure that all expenses
of the receivership would be paid. Id. at 948-49. The receivership was still
in place when the Chapter 11 Debtors filed their voluntary petitions on
October 19, 2021.
C. Postpetition Collection Efforts in Prepetition Lawsuit
After the Ninth Circuit affirmed the District Court’s decision not to
terminate the receivership until all receivership expenses had been paid,
the District Court signed an order in February 2023 approving a total of
$2,078,076.95 in additional fees and costs to Receiver and his professionals
as to all the Judgment Debtors except Silver State and Golden State (“Fee
Order”).
On March 10, 2023, Michael Carmel (“Trustee”) was appointed as the
chapter 11 trustee for the Chapter 11 Debtors’ jointly administered
bankruptcy cases.
3 On May 5, 2023, Receiver applied to the District Court for the
issuance of a writ of execution to enforce the Fee Order as to Royce,
Mr. Stoltz, and Playa, but not as to Silver State and Golden State. The
District Court granted Receiver’s ex parte application on May 9, 2023.
D. Emergency Motion in Bankruptcy Court
On May 15, 2023, the Chapter 11 Debtors filed an emergency motion
in the bankruptcy court for an order determining that Receiver violated the
automatic stay imposed by § 362(a)(1) and (6) by his attempts to have the
District Court determine the amount of fees as set forth in the Fee Order
and permit Receiver to collect on the Fee Order by levying on assets owned
by non-debtors Royce and Mr. Stolz.
Receiver and Trustee both opposed the Chapter 11 Debtors’
emergency motion. Trustee asserted that, based on Trustee’s preliminary
investigations, the bankruptcy estates owned (or at least had an interest in)
the equipment and personal property used to operate the Chapter 11
Debtors’ radio stations. Trustee argued that the automatic stay protected
the radio station equipment or personal property, and the bankruptcy
court should not lift the stay as to those items. Trustee also stated that the
automatic stay did not prevent Receiver from collecting from Mr. Stolz’s
property, citing Aerodynamics Inc. v. Caesars Entertainment Operating Co.,
Case No. 2:15-cv-01344-JAD-BNW, 2020 WL 5995488, at *2 (D. Nev. Oct. 9,
2020).
4 To avert needless litigation, Receiver agreed not to execute on
equipment or personal property used by the Chapter 11 Debtors in the
operation of their radio stations. Receiver argued that the Fee Order was an
award of fees against only the non-debtor Judgment Debtors, as was the
right to execute on the Fee Order. Therefore, the Fee Order and related
right to execute were not actions with respect to a claim against the
Chapter 11 Debtors. Receiver also argued that while the motion sought to
enjoin Receiver from seeking to execute against assets of the Judgment
Debtors other than the Chapter 11 Debtors, such a request should have
been brought as an adversary proceeding. Moreover, even if such a request
had been made properly, the Chapter 11 Debtors would be unable to
satisfy their burden to justify such an injunction.
The bankruptcy court heard oral argument on the Chapter 11
Debtors’ motion on June 7, 2023. The Chapter 11 Debtors argued that the
automatic stay should apply to the non-debtor Judgment Debtors for two
reasons. First, Receiver should not be permitted to execute on the
equipment used by the Chapter 11 Debtors to operate their radio stations
and prevent Trustee from selling the Chapter 11 Debtors’ assets as a “going
concern.” Second, Receiver filed a proof of claim in the Chapter 11 Debtors’
cases in January or February 2022 for the same fees that were the subject of
the Fee Order and, because Receiver filed a proof of claim in the
bankruptcy court, jurisdiction over Receiver’s fee claims was transferred to
the bankruptcy court. The Chapter 11 Debtors asserted that the bankruptcy
5 court needed to be able to decide the amount of Receiver’s filed fee claims
without interference by another court, citing Celotex Corp. v. Edwards, 514
U.S. 300 (1995). According to the Chapter 11 Debtors, the Aerodynamics case
did not preclude the bankruptcy court from dealing with the non-debtor
Judgment Debtors if such interference is important to the success of the
bankruptcy estate.
Trustee and Receiver confirmed that they had agreed between
themselves that any order entered on the Chapter 11 Debtors’ motion
should provide specifically that the automatic stay extends to any
equipment or personal property necessary to operate the stations whether
the property belongs to the Chapter 11 Debtors or to Mr. Stolz.
The bankruptcy court determined that § 362(a) applies to the
equipment and personal property used by the Chapter 11 Debtors in the
operation of their radio stations. However, the bankruptcy court
determined that § 362(a) does not protect assets of Royce and Mr. Stolz
under the plain language of the Bankruptcy Code and black-letter law,
citing Aerodynamics, notwithstanding the fact that they are jointly and
severally liable with two of the Chapter 11 Debtors (Silver State and
Golden State) on the judgment. The court granted the Chapter 11 Debtors’
motion as to all equipment, personal property, and other assets used in the
operation of the Chapter 11 Debtors’ radio stations and denied it in all
other respects.
The Chapter 11 Debtors timely appealed.
6 JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A) and (G). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bankruptcy court err by holding that the automatic stay did
not protect the non-debtor Judgment Debtors Royce and Mr. Stolz and by
not enjoining Receiver, who had filed a proof of claim in the Chapter 11
Debtors’ bankruptcy cases, from liquidating or enforcing a joint and several
claim against the non-debtor Judgment Debtors Royce and Mr. Stolz in the
District Court?
STANDARD OF REVIEW
We review de novo the bankruptcy court’s conclusions of law. Parks
v. Drummond (In re Parks), 475 B.R. 703, 706 (9th Cir. BAP 2012). The
bankruptcy court’s determination regarding the scope or applicability of
the automatic stay is also reviewed de novo. Lehman Com. Paper, Inc. v.
Palmdale Hills Prop., LLC (In re Palmdale Hills Prop., LLC), 423 B.R. 655, 663
(9th Cir. BAP 2009), aff’d, 654 F.3d 868 (9th Cir. 2011).
Under de novo review, we “consider a matter anew, as if no decision
had been made previously.” Francis v. Wallace (In re Francis), 505 B.R. 914,
917 (9th Cir. BAP 2014).
DISCUSSION
The Chapter 11 Debtors’ appeal stems from their contention that once
Receiver filed a proof of claim in the Chapter 11 Debtors’ bankruptcy cases,
7 Receiver subjected himself to the bankruptcy court’s jurisdiction to
adjudicate those claims and could no longer adjudicate those claims in the
District Court. Citing Katchen v. Landy, 382 U.S. 323 (1966), the Chapter 11
Debtors assert that a creditor who invokes the aid of the bankruptcy court
by filing a proof of claim and demanding its allowance must abide the
consequences of that procedure. “By filing a claim against a bankruptcy
estate, the creditor triggers the process of allowance and disallowance of
claims, thereby subjecting himself to the bankruptcy court’s equitable
power.” Langenkamp v. Culp, 498 U.S. 42, 44 (1990) (cleaned up).
While the bankruptcy court has jurisdiction to allow or disallow
Receiver’s claim against the Chapter 11 Debtors, that was not the question
before the bankruptcy court. Rather, the question was whether filing a
proof of claim under which a debtor has joint and several liability with a
non-debtor should “extend the automatic stay” to the non-debtor judgment
debtor. As correctly analyzed by the bankruptcy court, the answer is no.
Nothing in the express language of § 362(a) extends the automatic
stay to non-debtors. The automatic stay protects only the debtor, the
debtor’s property, and the property of the debtor’s bankruptcy estate.
§ 362(a). It does not protect the debtor’s owners, affiliates, or co-obligees.
Chugach Timber Corp. v. N. Stevedoring & Handling Corp. (In re Chugach Forest
Prods., Inc.), 23 F.3d 241, 246 (9th Cir. 1994) (stating that the automatic stay
“protects only the debtor, property of the debtor or property of the estate
. . . [and] does not stay actions against guarantors, sureties, corporate
8 affiliates, or other non-debtor parties liable on the debts of the debtor”).
The filing of a proof of claim by a party does not alter this analysis.
Moreover, “extensions” of the automatic stay to non-debtors,
“although referred to as extensions of the automatic stay, are in fact
injunctions issued by the bankruptcy court after hearing and the
establishment of unusual need to take this action to protect the
administration of the bankruptcy estate.” Aerodynamics, 2020 WL 5995488,
at *2. Injunctions against non-debtors may only be obtained through
§ 105(a) after application of the “usual preliminary injunction standard,”
which “helps to ensure that stays would not be granted lightly.” Solidus
Networks, Inc. v. Excel Innovations, Inc. (In re Excel Innovations, Inc.), 502 F.3d
1086, 1094-95 (9th Cir. 2007). Here, the Chapter 11 Debtors sought to extend
the automatic stay to the non-debtor Judgment Debtors Royce and Mr.
Stolz only through a motion, rather than an adversary proceeding seeking
to enjoin Receiver, and without satisfying the exacting standard for
preliminary injunctive relief.
CONCLUSION
The bankruptcy court correctly held that the automatic stay does not
protect Royce and Mr. Stolz. Accordingly, we AFFIRM.