Maritime Asbestosis Legal Clinic v. LTV Steel Co. (In Re Chateaugay Corp.)

112 B.R. 526, 1990 U.S. Dist. LEXIS 3014, 1990 WL 31551
CourtDistrict Court, S.D. New York
DecidedMarch 17, 1990
Docket89 Civ. 4304 (KC)
StatusPublished
Cited by16 cases

This text of 112 B.R. 526 (Maritime Asbestosis Legal Clinic v. LTV Steel Co. (In Re Chateaugay Corp.)) is published on Counsel Stack Legal Research, covering District 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
Maritime Asbestosis Legal Clinic v. LTV Steel Co. (In Re Chateaugay Corp.), 112 B.R. 526, 1990 U.S. Dist. LEXIS 3014, 1990 WL 31551 (S.D.N.Y. 1990).

Opinion

CONBOY, District Judge:

This is an appeal from an order of the Bankruptcy Court of the Southern District of New York (Lifland, C.J.) awarding damages and sanctions pursuant to Section 362(h) of the Bankruptcy Code for numerous violations of the automatic stay.

BACKGROUND

Judge Burton Lifland made the following findings of fact and conclusions of law in his Order dated May 18, 1989 (“Order”). On July 17, 1986, LTV Corporation and sixty-six of its affiliates including LTV Steel Company, Inc. (collectively “LTV”) filed for voluntary bankruptcy in the Bankruptcy Court of the Southern District of New York under 11 U.S.C. § 301. Order, Finding of Fact No. 1. As a consequence of LTV’s filing, the automatic stay of section 362(a) of the Bankruptcy Code (the “Code”) prohibited all entities from commencing any action or proceeding “to recover a claim against the debtor that arose before the commencement of the case under this title” or “to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title.” 11 U.S.C. § 362(a)(1),(2). Subsequent to the filing of the bankruptcy petition, the Maritime Asbestosis Legal Clinic and its counsel Leonard C. Jaques (collectively “MALC”), who handle litigation on behalf of merchant seamen exposed to asbestos during their seafaring days, filed with the Bankruptcy Court proofs of claims on behalf of 157 maritime asbestos claimants. Each claimant alleged that LTV was indebted to him in the amount of $1 million. Order, Findings of Fact Nos. 3 and 4. These proofs of claims were based on causes of action for personal injuries resulting from exposure to asbestos on board ships owned or operated by LTV. Id. 1 These actions were “related” to asbestos actions already pending in the District Court for the Northern District of Ohio.

In addition, the following facts are not disputed by the parties to this appeal. On July 13, 1988, MALC instituted lawsuits in the United States District Court for the Eastern District of Michigan on behalf of 220 merchant seamen. LTV was named as a defendant in three of these suits. Since any acts of LTV that could have been responsible for the alleged injuries to the asbestos plaintiffs had already occurred, these asbestos proceedings could have been commenced prior to the filing date and thus were subject to the automatic stay provision of section 362(a) of the Code. These three suits were voluntarily dismissed by MALC after a request from LTV’s in-house counsel. At that time, MALC changed the computer program it had used to process asbestos related litigation documents so as *528 to remove LTV as a defendant in the Michigan proceeding.

In the fall of 1988, Judge Thomas Lamb-ros of the United States District Court for the Northern District of Ohio, who was presiding over the asbestos litigations in Michigan and Ohio, ordered the filing of amended complaints in the actions. Between March 1 and March 10, 1989, amended complaints were filed by MALC on behalf of 1,373 plaintiffs, naming 1,382 defendants, for a total of 20,493 amended complaints. MALC had written a computer changeover program to accomplish this task. The program writer, a non-lawyer, erred and replaced LTV’s name into the program as a defendant. As a result, thirty-eight amended complaints were served on LTV. Each denominated LTV as “BANKRUPT” and was signed by a senior MALC attorney. Included in the thirty-eight amended complaints were the three complaints that had been filed and then withdrawn in July, 1988. Further, Judge Lifland found that proofs of claims had been previously filed in all of these thirty-eight cases. Order, Finding of Fact Nos. 5-6. On this occasion, rather than notifying MALC of its violation of the section 362(a) automatic stay and thereby enabling MALC to have the thirty-eight complaints that were in violation of the stay dismissed, LTV moved directly in the Bankruptcy Court, of the Southern District of New York for damages against MALC and in-junctive relief against the filing of any future complaints. LTV sent notice of its application to the Clerk of the District Court for the Northern District of Ohio. LTV did not contact MALC by telephone or otherwise to determine whether MALC was willing to rectify its error by withdrawing its thirty-eight complaints. MALC was, however, willing to rectify the error. MALC attorney Robert Swickle wrote LTV on March 20, 1989, offering to move to dismiss the cases and enclosing dismissal stipulations which LTV declined to sign.

In his Order dated May 18, 1989, Judge Lifland found that “[a]s of the date of the hearing [on LTV’s motion for damages and injunctive relief] (April 19, 1989), ... [MALC] had failed and/or refused to withdraw or dismiss” the thirty-eight amended complaints. Order, Finding of Fact No. 7. He held that insofar as MALC and the asbestos plaintiffs had “irrefutable” knowledge of LTV’s chapter 11 proceedings at the time they filed amended complaints as demonstrated by their previous filing of proofs of claims in bankruptcy and the three prior cases that had to be dismissed, MALC’s acts were “intentional, wanton, willful” violations of the automatic stay. Order, Conclusions of Law Nos. 6-10. Because MALC had acted with “reckless misconduct,” Judge Lifland imposed an award of damages against MALC under section 362(h) of the Code. Order, Conclusion of Law No. 11. Section 362(h) provides: “An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.” 11 U.S.C. § 362(h). The parties somewhat interchangeably refer to these damages as sanctions, as does the relevant case authority. Although Judge Lifland found that MALC’s actions were “clearly contumacious,” he “held in abeyance” LTV’s request for sanctions under section 105(a) of the Code and Bankruptcy Rule 9020. Order, Conclusion of Law No. 11. Judge Lifland also enjoined further claims against LTV. Id.

MALC originally filed a notice of appeal relating to the propriety of both the sanctions and the injunction, but in a stipulation subsequently filed with this Court, both parties have agreed to withdraw from the current appeal the issue of the propriety of the injunction. In the present appeal, MALC urges the following: (1) that Judge Lifland erred in imposing sanctions under section 362(h) because his fact finding that as of April 19, 1989, MALC had “refused and/or failed” to withdraw the amended complaints was clearly erroneous; 2 and (2) that even if we do not disturb this fact finding, Judge Lifland misapplied the law *529 because (a) an intentional violation of the automatic stay, even if reckless, is not “willful” and “there must be proof [either] of an intention to violate the stay or ...

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Bluebook (online)
112 B.R. 526, 1990 U.S. Dist. LEXIS 3014, 1990 WL 31551, Counsel Stack Legal Research, https://law.counselstack.com/opinion/maritime-asbestosis-legal-clinic-v-ltv-steel-co-in-re-chateaugay-corp-nysd-1990.