Southwest Airlines Co. v. Tidewater Finance Co. (In re Cole), ___BR___ 15-70960 (N.D. Ga. June 24, 2016)
Southwest Airlines Co. v. Tidewater Finance Co. (In re Cole), ___BR___ 15-70960 (N.D. Ga. June 24, 2016) is yet another bankruptcy case which rules on the issue of whether the Rooker-Feldman doctrine prohibits a bankruptcy court (or any other federal court except the US Supreme Court) from changing a ruling made by a state court, or whether the federal court can change/overrule the state court’s ruling on an automatic stay. With cases going both ways on this issue, this will likely eventually be a “Circuit split” (conflicting decisions by various US Circuit Courts). Circuit splits usually eventually get ruled on by the US Supreme Court.
Here is a discussion of Southwest Airlines by ABI (American Bankruptcy Institute):
Bankruptcy Judge James R. Sacca of Atlanta came down on the side of the Third and Ninth Circuits by holding that bankruptcy courts can review decisions of state courts on the automatic stay. He disagreed with the Sixth Circuit Bankruptcy Appellate Panel and bankruptcy courts in New York and Florida.
Judge Sacca’s case was more difficult because a non-bankrupt third party sought to revisit the state court’s decision. Moreover, the debtor’s liability evidently would not have been affected whichever way the courts ruled.
Judge Sacca began his analysis on June 24 by remarking that the stay “is one of the most fundamental protections” in the Bankruptcy Code. Significantly, he said, bankruptcy courts have exclusive jurisdiction to grant relief from the stay. In addition, state court suits in violation of the stay are void ab initio.
Thus, he concluded that he was not bound by the state court’s ruling on the stay, although he conceded that state courts have concurrent jurisdiction to rule on the applicability of the stay.
On the merits of the alleged stay violation, Judge Sacca held that the stay did not apply because the suit in state court affected only the separate liability of a garnishee for failing to set aside the debtor’s wages before bankruptcy.