City of Chicago v. Timothy Shannon ( 2021 )

NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
ON REMAND FROM THE SUPREME COURT OF THE UNITED STATES
Submitted March 9, 2021
Decided April 12, 2021
Before
JOEL M. FLAUM, Circuit Judge
MICHAEL S. KANNE, Circuit Judge
MICHAEL Y. SCUDDER, Circuit Judge
No. 18-2527
IN RE: ROBBIN L. FULTON, Appeal from the United States
Debtor-Appellee. Bankruptcy Court for the Northern
District of Illinois, Eastern Division.
No. 18-02860
APPEAL OF: CITY OF CHICAGO Jack B. Schmetterer,
Bankruptcy Judge.
No. 18-2793
IN RE: JASON S. HOWARD, Appeal from the United States
Debtor-Appellee. Bankruptcy Court for the Northern
District of Illinois, Eastern Division.
No. 17-25141
APPEAL OF: CITY OF CHICAGO Jacqueline P. Cox,
Bankruptcy Judge.
Nos. 18-2527, 18-2793, 18-2835 & 18-3023 Page 2
No. 18-2835
IN RE: GEORGE PEAKE, Appeal from the United States
Debtor-Appellee. Bankruptcy Court for the Northern
District of Illinois, Eastern Division.
No. 18-16544
APPEAL OF: CITY OF CHICAGO Deborah L. Thorne,
Bankruptcy Judge.
No. 18-3023
IN RE: TIMOTHY SHANNON, Appeal from the United States
Debtor-Appellee. Bankruptcy Court for the Northern
District of Illinois, Eastern Division.
No. 18-04116
APPEAL OF: CITY OF CHICAGO Carol A. Doyle,
Bankruptcy Judge.
ORDER
This appeal returns to us on remand from the Supreme Court of the United States.
In 2019, we considered this consolidated direct appeal of four Chapter 13 bankruptcies
filed by debtors Robbin Fulton, Jason Scott Howard, George Peake, and Timothy
Shannon. Prior to the debtors’ bankruptcy filings, the City of Chicago had impounded
the vehicles of all four debtors for failure to pay multiple traffic fines. After the debtors
filed their bankruptcy petitions, the City refused to return the vehicles, claiming it needed
to maintain possession to continue perfection of its possessory lien on the vehicles and
that it would only return the vehicles when the debtors paid in full their outstanding
fines. Relying on Thompson v. General Motors Acceptance Corp., 566 F.3d 699 (7th Cir. 2009)
and 11 U.S.C. § 362(a)(3), we affirmed the bankruptcy courts’ conclusions that the City
violated the Bankruptcy Code’s automatic stay by exercising control over property of the
bankruptcy estate and that none of the exceptions to the stay applied. See In re Fulton,
Nos. 18-2527, 18-2793, 18-2835 & 18-3023 Page 3
926 F.3d 916 (7th Cir. 2019), vacated and remanded sub nom. City of Chicago v. Fulton, 141 S.
Ct. 585 (2021). This Court explicitly did not reach violation theories grounded in
§ 362(a)(4) or (a)(6). Id. at 926 n.1 (“Because the City is bound by the stay under § 362(a)(3),
we do not reach the applicability of the additional stay provisions.”).
The City petitioned for a writ of certiorari. The Supreme Court granted the petition
to consider whether an entity violates § 362(a)(3) by retaining possession of a debtor’s
property after a bankruptcy petition is filed. Holding “only that mere retention of estate
property after the filing of a bankruptcy petition does not violate § 362(a)(3) of the
Bankruptcy Code,” the Supreme Court vacated our initial decision and remanded for
further proceedings. Fulton, 141 S. Ct. at 592.
With respect to applicability of § 362(a)(4) and (a)(6), the Supreme Court declined
to “settle the meaning of other subsections of § 362(a).” Id. at 592 & n.2. In her
concurrence, Justice Sotomayor agreed with the majority that the City had not violated
§ 362(a)(3) but “wr[o]te separately to emphasize that the Court ha[d] not decided whether
and when § 362(a)’s other provisions may require a creditor to return a debtor’s
property.” Id. at 592 (Sotomayor, J., concurring). “Nor ha[d] the Court addressed how
bankruptcy courts should go about enforcing creditors’ separate obligation to ‘deliver’
estate property to the trustee or debtor under [11 U.S.C.] § 542(a).” Id. Consistent with the
majority opinion, this logic does not foreclose an adverse finding against the City, on
other grounds. As the concurrence notes, “[t]he City’s conduct may very well violate one
or both of these other provisions.” Id.
In its statement under Circuit Rule 54, the City urges this Court to summarily
reverse the bankruptcy courts’ decisions in the cases below and vacate the orders
sanctioning the City for violating the automatic stay. The City requests the reversal
extend to the Shannon court’s judgment that the City violated § 362(a)(4) and (a)(6) of the
automatic stay. By contrast, the debtors ask this Court on remand to address the open
questions of whether the City violated the automatic stay imposed by § 362(a)(4) or (a)(6)
by making demands that were not justified under the Bankruptcy Code and conditioning
its release of the debtors’ cars on the satisfaction of those demands. We decline to adopt
either request in full.
The common question raised and addressed on direct appeal centered on
§ 362(a)(3). Upon further review of the records below, we find that both In re Fulton and
In re Shannon presented arguments that the City’s conduct violated provisions of the
Bankruptcy Code other than § 362(a)(3), while In re Peake and In re Howard confined their
arguments to § 362(a)(3). Accordingly, the question of whether or not the City’s conduct
Nos. 18-2527, 18-2793, 18-2835 & 18-3023 Page 4
was impermissible on grounds other than § 362(a)(3) remains unresolved. Therefore,
with our prior judgment now vacated, we REMAND to the relevant bankruptcy courts In
re Shannon and In re Fulton for further proceedings consistent with the Supreme Court’s
decision and further REMAND In re Peake and In re Howard with instructions to vacate their
respective judgments.