Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Diane Davis
Sept. 22 — Plaintiffs can't pursue a civil rights action against the city of San Bernardino, Calif., and its employees for alleged violations of the Fourth Amendment because the city is reorganizing in Chapter 9 bankruptcy, a district court in California held Sept. 19 ( Newberry v. City of San Bernardino (In re City of San Bernardino), 2016 BL 308312, C.D. Cal., No. 6:12-bk-28006-MJ, 9/19/16 ).
Filing for bankruptcy imposes an automatic stay under the Bankruptcy Code, which halts all judicial proceedings against the debtor. A party must get court permission to lift the automatic stay in order to proceed with an action against the debtor. The city of San Bernardino filed for Chapter 9 protection, which is a form of bankruptcy available to municipalities.
Judge Otis D. Wright, II, of the U.S. District Court for the Central District of California affirmed the bankruptcy court's denial of plaintiff Raymond Newberry's motion for relief from the Bankruptcy Code's automatic stay.
Newberry filed a civil rights action in the district court two years after the bankruptcy court determined that the city of San Bernardino was eligible for Chapter 9 relief. Newberry alleged that in 2014, the city's police department conducted an unlawful search of an apartment complex to “root out criminal elements,” and the search was conducted with media present under an inspection warrant rather than a criminal search warrant. Under California law, inspection warrants are “intended to grant access to structures only for the purpose of investigating potential safety risks or code violations,” the court said.
The district court determined that the city and its officers were subject to the automatic stay.
Newberry asked the bankruptcy court for relief from the stay, which it denied, but entered an order enjoining the city from entering any apartment in that complex or in the city based solely on an inspection warrant.
On appeal, Newberry argued that intentional tort claims and constitutional claims against a municipality that arise after the bankruptcy petition is filed are a “special breed of claims” that should be exempt from a stay.
The district court said it didn't take Newberry's “assertions of Fourth Amendment violations lightly,” but still didn't find these claims enough to overcome the automatic stay. Newberry isn't left without a remedy for these violations, the court said. Newberry could file a claim for administrative expenses or file an adversary proceeding (another lawsuit) against the city for the same claims and neither required relief from the automatic stay, the court said.
The court also expressed concern that introducing an unpredictable variable like this case into the city's reorganization efforts could delay confirmation, and granting Newberry relief would be unfair to other similarly situated creditors.
Jason Michael Ewert, San Bernardino City Attorney's Office, San Bernardino, Calif., represented The City of San Bernardino; Marjorie Barrios, Law Offices of Marjorie Barrios, San Bernardino, Calif., represented appellant Raymond Newberry; Gary David Saenz, San Bernardino City Attorneys Office, San Bernardino, Calif., and Paul Robert Glassman, Stradling Yocca Carlson and Rauth PC, Santa Monica, Calif., represented appellee The City of San Bernardino; Matthew J. Troy, U.S. Department of Justice, Washington, D.C., represented Intervenor United States.
To contact the reporter on this story: Diane Davis in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jay Horowitz at email@example.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)