City Could Not Avoid Liability for Stay Violation by Invoking Sovereign Immunity Defense Based on State Law

City Could Not Avoid Liability for Stay Violation by Invoking Sovereign Immunity Defense Based on State Law

In this adversary proceeding, Plaintiff/Debtor seeks damages under 11 U.S.C. §362(k) from the Defendant City Agency (“PPA”) for an alleged “willful” violation of the automatic stay, 11 U.S.C. §362(a). The Debtor requests compensatory damages, punitive damages, as well as attorney’s fees and costs. Presently before the court are the parties’ cross motions for summary judgment.

The facts are not complicated. The parties agree that approximately a year and a half after the Debtor filed for bankruptcy protection, the PPA impounded the Debtor’s automobile and did not return it for six (6) days.

In the cross motions, the parties spar primarily on one (1) legal issue and one (1) fact question.

The primary legal issue is whether the PPA is immune from liability based upon Local Law (the “PSTCA”). The PPA posits that the PSTCA provides a complete, affirmative defense to the Debtor’s claim. However, in this bankruptcy proceeding, in which the Debtor asserts a cause of action created by the Bankruptcy Code, the statutory immunity provided by the PSTCA has no applicability. Therefore, the PPA’s motion, on this theory, must be denied.

The primary fact question is: when did the PPA receive notice of the Debtor’s bankruptcy filing? That question leads to two (2) subsidiary questions:

(1) Did the PPA receive notice before it impounded the Debtor’s car on June 11, 2016?

(2) Did the PPA receive notice on June 11, 2016, the day after it impounded the car (but refused to release the car for an additional five (5) days); or did the PPA first receive notice of the bankruptcy filing on June 16, 2016, the day that it released the car to the Debtor (rendering the stay violation non-willful and precluding the recovery of damages under 11 U.S.C. §362(k))?

The Debtor owns a 2007 Audi Q7 (“the Car”). The PPA acknowledges that

• the Debtor was in a bankruptcy as of December 22, 2015;

• the PPA impounded the Car on June 10, 2016, while the Debtor was still in a bankruptcy;

• on June 16, 2016, the PPA received oral notice of the Debtor’s bankruptcy filing; and

• on June 16, 2016, after receiving that oral notice, the PPA released the Car to the Debtor.

Each side believes that the facts are undisputed in its favor, justifying the entry of partial summary judgment (the Debtor) or complete summary judgment (the PPA). However, both sides are incorrect. Based on the present record, the central material fact (i.e., when was the PPA on notice of the Debtor’s bankruptcy case?) is in dispute, precluding summary judgment for either side.

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