United States District Court, D. Maryland
MEMORANDUM OPINION AND ORDER
XINIS UNITED STATES DISTRICT JUDGE
before the Court in the three above-captioned bankruptcy
appeals is the motion of Appellee Roger Schlossberg, Chapter
7 Trustee in the underlying bankruptcy case (“the
Trustee”), for relief from the automatic stay provision
of 11 U.S.C. § 362(a) and for dismissal of these appeals
as moot. (ECF No. 19.) The matter is fully briefed, and no
hearing is necessary. See D. Md. Loc. R. 105.6. Upon
consideration, the Court denies the Trustee's motion to
lift the stay, but grants the Trustee's motion to dismiss
the appeals as moot.
appeals all arise from an adversarial proceeding in the
bankruptcy case of Gregory B. Myers, who, along with his wife
Barbara Ann Kelly, are the appellants in these cases
(collectively, “Appellants”). Myers initiated an
adversary proceeding in his capacity as a Chapter 11
debtor-in-possession against Offit Kurman, a law firm
previously employed by Myers and Kelly. See Myers v.
Offit Kurman, P.A., Adversary Proceeding No. 16-00474,
ECF No. 59 at 3 (Bankr. D. Md. Dec. 18, 2017). Offit Kurman
had filed proofs of claim in Myers' bankruptcy
proceeding; the adversarial complaint followed in response.
Id. at 3-4. After the conversion of Myers'
underlying bankruptcy proceeding to one under Chapter 7 of
the Bankruptcy Code, which vested the Trustee with standing
to pursue or to settle the claims, the Trustee chose not to
pursue the adversary proceeding because he found it unlikely
to succeed and because Appellants-whose testimony would be
crucial to prosecuting the adversarial complaint-were, in the
Trustee's view, unreliable witnesses. Id. at
8-9. Instead, the Trustee moved for approval of a Compromise
and Settlement, which the Bankruptcy Court granted over
Appellants' objections. See generally id.
heart of the adversarial proceeding was who possessed the
right to the proceeds from the sale of Lot 6, real property
in Seaside, Florida, that was jointly owned by Myers and
Kelly. That property had been pledged by Appellants as
security for the payment of legal fees owed to Offit Kurman.
The settlement between the Trustee and Offit Kurman gave the
law firm an allowed secured joint claim in the amount of
$550, 000.00 to be paid from the balance of the Lot 6 sale
proceeds that had been held in escrow by the Trustee, along
with an allowed unsecured joint claim of $185, 116.27. The
Trustee and Offit Kurman also agreed that upon approval of
the settlement, $525, 000.00 would be disbursed from the
escrowed funds, while the Trustee would retain $210, 116.27
to help defray the estate's administrative expenses. The
settlement was consummated prior to January 10, 2018. Those
amounts were disbursed according to the settlement terms.
See Myers v. Offit Kurman, P.A., Adversary
Proceeding No. 16-00474, ECF No. 80 at 3 (Bankr. D. Md. Jan.
10, 2018); Myers v. Offit Kurman, P.A., Adversary
Proceeding No. 16-00474, ECF No. 83 at 1-2 (Bankr. D. Md. Jan
thereafter filed separate, parallel appeals of the Bankruptcy
Court's order approving the settlement docketed as
PX-17-3846 and PX-17-3847. Appellants also moved for a stay
in the Bankruptcy Court pending appeal, which the Bankruptcy
Court denied, finding that such a stay was moot because the
approved settlement already had been consummated. See
Myers v. Offit Kurman, P.A., Adversary Proceeding No.
16-00474, ECF No. 83 at 1-2 (Bankr. D. Md. Jan. 18, 2018).
Appellants jointly appeal the Bankruptcy Court's denial
of the stay in PX-18-0336. All three appeals are the subject
of this Opinion.
the three appeals pending, Kelly alerted this Court on March
22 that on March 13, 2018, she had filed a voluntary petition
for bankruptcy under Chapter 13 of the Bankruptcy Code. Kelly
further asserted that the new bankruptcy petition operated to
stay automatically the appeals pursuant to11 U.S.C. §
362(a) (the automatic stay provision). See ECF No.
12. On the new Chapter 13 petition, Kelly lists the
“Lot 6 Sale Proceeds in Escrow” as a purported
asset of her estate. The Court directed the Trustee to advise
the Court on his position as to whether Kelly's Chapter
13 bankruptcy operated to stay these appeals, and whether the
appeals were moot. See ECF No. 13. The Court
subsequently directed the Trustee to file additional briefing
on the issue of whether relief from the stay should be
granted. See ECF No. 18. The Trustee formally moved
for relief from stay and for dismissal, which Appellants
timely opposed. See ECF Nos. 19, 21. The Trustee
replied, and the matter now is ripe for consideration.
See ECF No. 23.
The § 362(a) Stay
362(a) of the Bankruptcy Code, the automatic stay provision,
applies to (1) the “commencement or continuation”
of a “judicial, administrative or other action or
proceeding against the debtor that was or could have been
commenced” before the bankruptcy proceeding; (2) the
enforcement of a judgment against the debtor or against
property of the estate of a judgment obtained before the
commencement of the bankruptcy proceeding; or (3) any act to
obtain possession of property of the estate; and in certain
other enumerated circumstances not directly at issue here. 11
U.S.C. § 362(a). The purpose of this automatic stay is
to prevent “disruption of the debtor's business and
a disorderly scramble for the debtor's remaining
assets” while the bankruptcy action proceeds.
Advanced Comput. Servs. of Mich., Inc. v. MAI Sys.
Corp., 161 B.R. 771, 774 (E.D. Va. 1993); see also
In re Dubois, 834 F.3d 522, 528 (4th Cir. 2016)
(“The automatic stay helps channel debt collection
activity into the bankruptcy process.”); In re
McCrimmon, 536 B.R. 374, 380 (Bankr. D. Md. 2015) (a
chief purpose of the automatic stay is to allow for a
systematic liquidation proceeding and avoid a variety of
uncoordinated proceedings in different courts).
a § 362(a) stay, the Court retains jurisdiction to
determine the applicability of that stay in the action
pending before it, and to enter orders not inconsistent with
the stay. Adv. Comput. Servs., 161 B.R. at 775 n.4
(“[I]t is sensibly settled that both the bankruptcy
court and the court in which the action against the debtor is
pending may decide the applicability of the § 362(a)
stay.”); Sawyer v. Jackson, 224 F.Supp.3d 461,
462 n.3 (E.D. Va. 2016) (citing Arnold v. Garlock
Inc., 288 F.3d 234, 236 (5th Cir. 2002)). Importantly,
the automatic stay imposed by § 362(a) is inapplicable
to “dismissing . . . [a] case on jurisdictional
grounds.” MTGLQ Inv'rs, L.P. v. Guire, 286
F.Supp.2d 561, 563 (D. Md. 2003); id. at 564 n.3
(citing with approval a case in which a court ruled on a
motion to dismiss for lack of venue during the period of the
applicable § 362(a) stay); cf. Sanders v.
Farina, 67 F.Supp.3d 727, 729 (E.D. Va. 2014) (remand is
permissible in the face of a stay because it “is simply
a finding that the court lacks power to hear the case and
that the case belongs in another court” (citing
MTGLQ Inv'rs, 286 F.Supp.2d at 563)); Ward
v. Reinheimer, Civil Action No. WMN-13-3174, 2014 WL
346646, at *1 (D. Md. Jan. 28, 2014) (if a Court's action
“expresses no opinion regarding the merits” of a
claim, and the action addresses a procedural issue, it
“does not continue the case in any significant
manner” (discussing remand)).
so because the purpose of the § 362(a) stay is to
maintain the priority of claims against a debtor's
estate. If consideration of the issues raised in the
otherwise stayed proceeding will not affect either the
debtor's assets or the creditors' standing in the
bankruptcy action, the Court is free to address those issues.
See ComUnity Collectors LLC v. Mortg. Elec. Registration
Servs., Inc., Nos. C-11-4777 EMC, C-12-0771 EMC, 2012 WL
3249509, at *5 (N.D. Cal. Aug. 7, 2012) (“while some of
Defendants' motions to dismiss would likely run afoul of
the automatic stay, here [the motion] demonstrates that the
Court lacks subject matter jurisdiction over this action. . .
. Because considering this motion does not implicate the
underlying issues or merits of this action, the automatic
stay does not apply.”); Schaffer v. Atl.
Broadcasting, Civil No. 10-5449 (RBK/KMW), 2011 WL
1884734, at *4 (D.N.J. May 17, 2011) (remand would not
further the collection efforts of debtor's creditors, or
otherwise encourage creditors to harass debtor during the
pendency of the bankruptcy proceedings); Cook v. Mellon
Stuart Co., 812 F.Supp. 793, 798 n.3 (N.D. Ill. 1992)
(“the present inquiry respects this court's subject
matter jurisdiction . . . . The subsequent bankruptcy filing
and resulting stay under section 362 of the Bankruptcy Code .
. . do not prevent this court from remanding an improperly
Court has jurisdiction only to hear actual cases and
controversies. See U.S. Const. art. III, § 2.
Accordingly, if a case is moot, the Court lacks jurisdiction
to consider it. See Simmons v. United Mortg. & Loan
Inv., LLC, 634 F.3d 754, 763 (4th Cir. 2011) (mootness
constitutes part of the limit on federal court jurisdiction);
Int'l Brotherhood of Teamsters, Local Union No. 639
v. Airgas, Inc., 885 F.3d 230, 235-36 (4th Cir. 2018)
(quoting United States v. Hardy, 545 F.3d 280, 283
(4th Cir. 2008)). “[A]n appeal is moot when an
affirmance would ostensibly require something to be done
which had already taken place, and a reversal would
ostensibly avoid an event which had passed beyond
recall.” In re Carr, 321 B.R. 702, 706 (E.D.
Va. 2005) (internal quotation marks omitted) (quoting
Brownlow v. Schwartz, 261 U.S. 216, 217-18 (1923)).
“If intervening factual or legal events effectively
dispel the case or controversy during pendency of the suit,
the federal courts are powerless to decide the questions
presented.” Simmons, 634 F.3d at 763 (quoting
Ross v. Reed, 719 F.2d 689, 693-94 (4th Cir. 1983)).
If a case is moot, and the Court cannot possibly provide
effective relief, then the Court lacks ...