Team P32

No. 12-628

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 2012

IN RE SINGSONG ELECTRONICS, INC., Debtor

PLUM, INC.,

Petitioner, v.

SINGSONG ELECTRONICS, INC.,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRTEENTH CIRCUIT

BRIEF FOR PETITIONER

ORAL ARGUMENT REQUESTED

TEAM P32 COUNSEL FOR PETITIONER

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QUESTIONS PRESENTED

I. Whether a valid Chapter 11 petition may be filed on behalf of a corporation that voluntarily amended its by-laws to revoke the corporation’s authority to file bankruptcy.

II. Whether the automatic stay protects a debtor from an action enjoining the debtor’s

unlawful post-petition conduct.

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TABLE OF CONTENTS

QUESTIONS PRESENTED ................................................................................................ i TABLE OF CONTENTS .................................................................................................... ii TABLE OF AUTHORITIES ...............................................................................................v OPINIONS AND ORDERS BELOW ............................................................................... ix JURISDICTIONAL STATEMENT .................................................................................. ix CONSTITUTIONAL AND STATUTORY PROVISIONS .............................................. ix STATEMENT OF THE CASE ............................................................................................1 SUMMARY OF THE ARGUMENT ..................................................................................3 ARGUMENT .......................................................................................................................5 I. THIS COURT SHOULD DISMISS SINGSONG’S VOLUNTARY

PETITION BECAUSE PLUM HAS STANDING, SINGSONG’S BY-LAW IS ENFORCEABLE, AND THEREFORE, SINGSONG’S BOARD LACKED AUTHORITY TO FILE ......................................................................6

A. Plum has standing because it has a sufficient stake in the outcome of

this case and its challenge to Singsong’s authorization to file bankruptcy is a challenge to the court’s jurisdiction ................................6

1. Plum has standing because its relationship with Singsong gives Plum

a sufficient stake in the outcome of the case..........................................7

2. Plum has standing because Plum’s motion to dismiss challenges the Bankruptcy Court’s jurisdiction over Singsong’s case ........................10

B. Singsong’s by-law is enforceable, as it does not waive all

bankruptcy relief and bankruptcy law accepts the limitations posed by the by-law ...............................................................................................11

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1. Singsong’s by-law is enforceable because it neither bars access to bankruptcy relief, nor relinquishes to a third party the autonomous discretion to resort to bankruptcy ........................................................12

2. Bankruptcy law’s acceptance of certain limitations on bankruptcy rights favors enforcement of Singsong’s by-law .................................14

C. Singsong’s voluntary petition is invalid because Singsong’s Board and CEO lacked authority to file bankruptcy .................................................17

II. PLUM DID NOT VIOLATE THE AUTOMATIC STAY BECAUSE § 362(a)

DOES NOT APPLY TO PLUM’S REQUEST AND § 959(a) OPERATES AS AN INDEPENDENT EXCEPTION ...................................................................20

A. The automatic stay does not apply to Plum’s request for injunctive

relief because the injunction only applies to pre-petition conduct and does not exercise control over property of the bankruptcy estate..........21 1. Plum’s request for injunctive relief is excepted from § 362(a)(1)

because it only applies to post-petition conduct ..................................22

2. § 362(a)(3) is inapplicable to Plum’s request for injunctive relief because an action enjoining tortious conduct does not constitute “exercising control over” property of the estate ..................................26

B. § 959(a) permits Plum’s request for injunctive relief and operates as an

independent exception to § 362’s automatic stay .....................................29

1. Congress intended § 959(a) to operate as an independent exception to the automatic stay ................................................................................30

2. Plum’s request for injunctive relief satisfies § 959(a)’s requirements because the injunction relates to Singsong’s post-petition tortious acts and does not embarrass the reorganization proceedings ......................32

CONCLUSION ..................................................................................................................35 APPENDIX A ...................................................................................................................... I APPENDIX B ..................................................................................................................... II

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APPENDIX C ....................................................................................................................III APPENDIX D ................................................................................................................... IV APPENDIX E ..................................................................................................................... V APPENDIX F.................................................................................................................... VI

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TABLE OF AUTHORITIES CASES Amplifier Research Corp. v. Hart, 144 B.R. 693 (Bankr. E.D. Pa. 1992) .......................................................27, 28, 29 Barton v. Barbour, 104 U.S. 126 (1881) ...................................................................................30, 31, 32 Boyce v. Chem. Plastics, Inc., 175 F.2d 839 (8th Cir. 1949) .................................................................................19 Chamberlain Grp., Inc. v. Lear Corp., 758 F. Supp. 2d 542 (N.D. Ill. 2010) .....................................................................24 Dewsnup v. Timm,

502 U.S. 410 (1992) ..............................................................................................31 Dominic’s Rest. of Dayton, Inc. v. Mantia, 683 F.3d 757 (6th Cir. 2012) ..........................................................................27, 29 FDIC v. Prince George Corp., 58 F.3d 1041 (4th Cir. 1995) .....................................................................15, 16, 17 Hager v. Gibson, 108 F.3d 35 (4th Cir. 1997) .................................................................10, 11, 19, 20 Hazelquist v. Guchi Moochie Tackle Co., 437 F.3d 1178 (Fed. Cir. 2006)........................................................................22, 24 Horne v. Flores, 557 U.S. 433 (2009) .................................................................................................7 In re Alexander SRP Apartments, LLC, No. 12-20272, 2012 WL 1910088 (S.D. Ga. Apr. 20, 2012) ................................15 In re Arkco Props., Inc., 207 B.R. 624 (Bankr. E.D. Ark. 1997) ..................................................................17 In re Atrium High Point Ltd., 189 B.R. 599 (Bankr. M.D.N.C. 1995) ............................................................15, 16 In re Autumn Press, Inc., 20 B.R. 60 (Bankr. D. Mass. 1982) .................................................................18, 20

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In re Bryan Rd., LLC, 382 B.R. 844 (Bankr. S.D. Fla. 2008)....................................................................15 In re Colo. Altitude Training LLC, No. 10-21951, 2012 WL 993530 (Bankr. D. Colo. Mar. 23, 2012) ......................27 In re Consol. Auto Recyclers, Inc., 123 B.R. 130 (Bankr. D. Me. 1991).....................................................................8, 9 In re Crown Vantage, Inc., 421 F.3d 963 (9th Cir. 2005) .................................................................................31 In re DB Capital Holdings, LLC, No. 10-23242, 2010 WL 4925811 (B.A.P. 10th Cir. Dec. 6, 2010) ..........18, 19, 20 In re DeLorean Motor Co., 991 F.2d 1236 (6th Cir. 1993) ...............................................................................31 In re Desai, 282 B.R. 527 (Bankr. M.D. Ga. 2002) ...................................................................13 In re Detrano, 222 B.R. 685 (Bankr. E.D. N.Y. 1998) ......................................................12, 13, 14 In re Frye,

320 B.R. 786 (Bankr. D. Vt. 2005) ........................................................................15 In re Giggles Rest., Inc., 103 B.R. 549 (Bankr. D.N.J. 1989) ............................................................... passim In re Great Northwest Dev. Co., 28 B.R. 141 (Bankr. E.D. Mich. 1983) ..................................................................18 In re Gucci,

174 B.R. 401 (Bankr. S.D.N.Y. 1994) .............................................................10, 11 In re Madison, 184 B.R. 686 (Bankr. E.D. Pa. 1995) ....................................................................12 In re MBD, Inc., No. 208BK34347, 2008 WL 7404597 (Bankr. E.D. Cal. Dec. 1, 2008) ..............15 In re Orchard at Hansen Park, LLC, 347 B.R. 822 (Bankr. N.D. Tex. 2006) ................................................................7, 8

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In re Pease, 195 B.R. 431 (Bankr. D. Neb. 1996) .........................................................12, 13, 14 In re Runaway II, Inc., 159 B.R. 537 (Bankr. W.D. Mo. 1993)..................................................................18 In re Telegroup, Inc., 237 B.R. 87 (Bankr. D.N.J. 1999) .............................................................33, 34, 35 In re Television Studio Sch. of N.Y., 77 B.R. 411 (Bankr. S.D.N.Y. 1987) .........................................................33, 34, 35 In re Verrazzano Towers, Inc., 10 B.R. 387 (Bankr. E.D.N.Y. 1981) .....................................................................10 In re VistaCare Grp., LLC, 678 F.3d 218 (3d Cir. 2012).............................................................................30, 31 Larami Ltd. v. Yes! Entm’t Corp., 244 B.R. 56 (D.N.J. 2000) ........................................................................27, 28, 29 Lawlor v. Nat’l Screen Serv. Corp., 349 U.S. 322 (1955) ....................................................................................... passim Lujan v. Defenders of Wildlife,

504 U.S. 555 (1992) .................................................................................................7 Price v. Gurney, 324 U.S. 100 (1945) ....................................................................................... passim SEC v. U.S. Realty & Improvement Co., 310 U.S. 434 (1940) ...............................................................................................11 Williams v. Gillette Co., 887 F. Supp. 181 (N.D. Ill. 1995) ....................................................................22, 23 STATUTORY PROVISIONS 11 U.S.C. § 101 (2006) ........................................................................................................8 11 U.S.C. § 301 (2006) ......................................................................................................17 11 U.S.C. § 362 (2006) .............................................................................................. passim 11 U.S.C. § 365 (2006) ........................................................................................................9

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11 U.S.C. § 524 (2006) ......................................................................................................24 28 U.S.C. § 959 (2006) ..................................................................................................3, 33 Model Bus. Corp. Act § 2.05 (2007) ..................................................................................19

Model Bus. Corp. Act § 2.06 (2007) .................................................................................19

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OPINIONS AND ORDERS BELOW

The United States Bankruptcy Court for the Eastern District of Moot entered an

order denying Singsong’s emergency motion to enjoin Plum from proceeding in the

patent infringement action. R. at 6. On the same day, the Bankruptcy Court granted

Plum’s Motion to Dismiss Singsong’s voluntary Chapter 11 petition. R. at 6. The

bankruptcy judge stayed the dismissal order to allow Singsong to seek appellate review.

R. at 6. Additionally, the Bankruptcy Court granted Singsong leave to appeal the order

denying Singsong’s emergency motion pursuant to 28 U.S.C. § 158(a). R. at 6. The

District Court for the Eastern District of Moot combined the appeals and reversed both

orders. R. at 6. The United States Court of Appeals for the Thirteenth Circuit affirmed

the district court on October 14, 2012. R. at 7. This Court granted certiorari on

December 14, 2012. R. at 1.

JURISDICTIONAL STATEMENT

The formal statement of jurisdiction is waived pursuant to Competition Rule VIII.

STATUTORY PROVISIONS The following statutory provisions are relevant to the facts of this case and are set

forth in Appendices A-H: 11 U.S.C. §§ 101, 105, 301, 362, 365, 524, 959; Model Bus.

Corp. Act §§ 2.05, 2.06.

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STATEMENT OF THE CASE

Petitioner, Plum, Inc. (“Plum”), revolutionized the consumer electronics market when it

introduced its multifunction smart phone, the e-Phone in March, 2011. R. at 3. The e-Phone was

a huge success for Plum and “generat[ed] orders for millions of units within days of its release

and [grew] in popularity in the months that followed.” R. at 3. Importantly, the e-Phone

represented the joint efforts of both Plum and Respondent, Singsong Electronics, Inc.

(“Singsong”). Although Plum is famous for its design and the genius of founder, Steve Works,

Plum contracts with companies like Singsong to manufacture its products. R. at 2-3.

The relationship between Singsong and Plum began several years prior when Singsong

was experiencing financial difficulties. R. at 4. Plum wanted to partner with Singsong, but was

concerned about Singsong’s financial instability. R. at 4. Wanting to safeguard the Plum

product line against Singsong’s instability, Plum offered Singsong an exclusive manufacturing

contract in exchange for Singsong’s promise to amend its by-laws to remove the corporation’s

authority to file for bankruptcy. R. at 5. Singsong agreed and amended its by-laws to state that

Singsong did not have authority to file bankruptcy. R. at 5. The by-laws were also amended to

state Singsong’s Board of Directors (the “Board”) “did not have authority to consider or approve

a resolution to file a voluntary petition in bankruptcy and no Officer has any authority to sign

any such petition or cause it to be filed.” R. at 5. Thereafter, the two corporations embarked on

a mutually successful partnership. R. at 5.

For the e-Phone, Plum created the design and developed the technology, including

Plum’s patented software and turned to Singsong to manufacture the phone. R. at 3. The e-

Phone’s success prompted other phone producers “to roll out e-Phone clones.” R. at 3. Even

Singsong, while still manufacturing e-Phones for Plum, rushed to develop its own smart phone to

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compete with the e-Phone. R. at 3. Shortly after, Singsong introduced its own smart phone, the

Galactica, priced significantly below the e-Phone. R. at 3. Though it doubted whether any

company could patent software, Singsong readily admitted that the Galactica software infringed

on Plum’s software patent. R. at 3.

In response to Singsong’s ongoing infringement of its patented software, Plum filed a

patent infringement suit against Singsong in the United States District Court for the Western

District of Washington (the “Washington Court”). R. at 3-4. The District Court granted

summary judgment against Singsong on the issue of infringement and invited Plum to move for

an injunction. R. at 4. Singsong tried to negotiate a licensing deal with Plum to continue using

the infringing software in the Galactica, but Plum refused. R. at 4. In an effort to avoid the

inevitable injunction, Singsong filed for Chapter 11 bankruptcy in the Eastern District of Moot

(the “Bankruptcy Court”). R. at 4. The following day, Plum filed a motion for an injunction in

the Washington Court. R. at 4. The injunction sought to enjoin Singsong from “distributing,

displaying, selling, or taking orders” for the 100 million infringing Galactica phones in

Singsong’s inventory. R. at 4. Singsong responded by filing an emergency motion in the

Bankruptcy Court alleging Plum violated the automatic stay resulting from Singsong’s

bankruptcy filing. R. at 5. Singsong’s emergency motion sought an injunction to prohibit Plum

“from proceeding with patent infringement action” in the Washington Court. R. at 5. In the

Bankruptcy Court, Plum responded to Singsong’s emergency motion arguing that the automatic

stay did not apply to a request for injunctive relief aimed at post-petition tortious conduct. R. at

5-6. Plum also filed a Motion to Dismiss Singsong’s bankruptcy filing arguing it was filed

without authorization. R. at 6. The Bankruptcy Court agreed with Plum and denied Singsong’s

emergency motion for an injunction and also granted Plum’s Motion to Dismiss for lack of

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authorization. R. at 6. After the District Court for the Western District of Moot reversed the

Bankruptcy Court and the Thirteenth Circuit affirmed, this appeal followed. R. at 1.

SUMMARY OF THE ARGUMENT

Singsong did not file a valid bankruptcy petition because at the time of filing, there was a

provision in Singsong’s corporate documents prohibiting it from a voluntary petition. Plum has

standing to challenge Singsong’s authority to file the petition because Plum has a sufficient stake

in the outcome of the case as well as the authority to challenge the Bankruptcy Court’s

jurisdiction. Plum has a sufficient stake in the outcome because the trustee’s power under

section 365 will give Singsong the authority to reject, assume, or assume and assign the contract

to another manufacturer. A bankruptcy court does not have jurisdiction over a case if the person

that filed the petition on behalf of the corporation lacked authority to do so. Thus, Plum’s

challenge of Singsong’s authority to file bankruptcy is a challenge of the Bankruptcy Court’s

jurisdiction.

The provision at issue is enforceable because it does not permanently waive a legally

protected bankruptcy right, and it fits within the scope of limitations on bankruptcy rights that

courts have found enforceable. The provision does not waive Singsong’s right to file for

bankruptcy because Singsong can unilaterally reacquire the authority by amending its by-laws.

In addition, bankruptcy courts have found waivers of the automatic stay and terms within loan

agreements that effectively waive the right to file for bankruptcy to be enforceable. The

provision merely functions as a speed bump to bankruptcy, rather than a roadblock, because it

only requires Singsong to amend its by-laws before filing. Thus, the provision limiting

Singsong’s ability to file a voluntary petition in bankruptcy is enforceable.

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Singsong does not have authority to file a bankruptcy petition because the provision at

issue is enforceable. A corporation’s authority, or lack thereof, is proscribed by the terms

contained in the corporation’s governing documents. Because the provision in Singsong’s by-

laws is enforceable, Singsong does not have the authority to file bankruptcy.

Plum’s request for injunctive relief is not automatically stayed because sections

362(a)(1), (a)(3) do not apply and section 959(a) operates as an exception to the automatic stay.

Section 362(a)(1) of the automatic stay only applies to pre-petition conduct and does not protect

a bankruptcy estate from liability for post-petition tortious conduct. Therefore, section 362(a)(1)

does not bar Plum’s claim because each act of patent infringement allows for a new cause of

action and the injunction only seeks a remedy for Singsong’s post-petition tortious acts.

Further, section 362(a)(3) of the automatic stay only applies to actions that “exercise

control over” property of the estate. Enjoining the debtor in possession from using estate

property in a tortious manner does not constitute “exercising control over” the property of the

estate within the meaning of section 362(a)(3). Here, Plum is not controlling estate property

because the injunction only prevents Singsong’s tortious uses of Plum’s patent.

Section 959(a) operates as an exception to the automatic stay in this case because

legislative history shows Congress intended for section 959(a) to control when a debtor in

possession conducts the post-petition business of the estate in a tortious manner. Section 959(a)

requires that the action not frustrate the reorganization of the estate. Plum is seeking to enjoin

Singsong from continuing unlawful post-petition conduct. In contrast, Plum is not seeking to

recover damages, or harm the estate in any way, but rather, protect itself from future harm. In

addition, Plum is not attempting to gain possession of the Galactica phones. Instead, Plum is

seeking to prevent Singsong’s continued unlawful use of them. Based upon these facts, Plum’s

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action will not frustrate the reorganization of Singsong’s estate. Thus, Plum’s suit should

proceed because section 959(a) operates as an exception to the automatic stay and section

959(a)’s equitable considerations are satisfied. Therefore, the automatic stay does not apply to

Plum’s action enjoining Singsong’s unlawful post-petition infringement.

ARGUMENT

Singsong cannot file a voluntary petition in bankruptcy because the provision in

Singsong’s corporate documents prohibiting the filing of a voluntary petition in bankruptcy is

enforceable, thereby rending Singsong without authority to file the petition. Plum has standing

to challenge Singsong’s authority to file the petition because Plum has a substantial stake in the

outcome of the case and, in substance, Plum is asserting that the Bankruptcy Court lacks

jurisdiction over Singsong’s case. The provision at issue is enforceable because it does not

waive a legally protected bankruptcy right and it fits within the scope of limitations on

bankruptcy rights that courts have found enforceable. Singsong only has the authority that is

proscribed in its governing corporate documents. Therefore, Singsong cannot file a voluntary

petition in bankruptcy because it lacks authority to do so.

Plum’s injunction is not automatically stayed because section 362(a)(1), (a)(3) do not

apply and section 959(a) supersedes the automatic stay in this case. Section 362(a)(1) does not

apply because it only concerns pre-petition conduct and Plum’s injunction is only targeted at

Singsong’s post-petition infringement. Section 362(a)(3) does not apply because enjoining the

post-petition tortious use of estate property does not constitute “exercising control over” property

of the estate. Section 959(a) supersedes the automatic stay in this case because legislative

history demonstrates that Congress intended for section 959(a) to control when a debtor in

possession conducts the post-petition business of the estate in a tortious manner. Therefore, the

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automatic stay does not apply to Plum’s action enjoining Singsong’s unlawful post-petition

infringement.

I. THIS COURT SHOULD DISMISS SINGSONG’S VOLUNTARY PETITION BECAUSE PLUM HAS STANDING, SINGSONG’S BY-LAW IS ENFORCEABLE, AND THEREFORE, SINGSONG’S BOARD LACKED AUTHORITY TO FILE.

Singsong cannot file a voluntary petition in bankruptcy because the provision in

Singsong’s corporate documents prohibiting the filing of a voluntary petition in bankruptcy is

enforceable, thereby rendering Singsong without authority to file the petition. Plum has standing

to challenge Singsong’s authority to file the petition because Plum has a substantial stake in the

outcome of the case, and Plum’s motion is effectively challenging the jurisdiction of the

Bankruptcy Court. The provision at issue is enforceable because it does not waive a legally

protected bankruptcy right and it fits within the scope of limitations on bankruptcy rights that

courts have found enforceable. A corporation’s authority, or lack thereof, is determined by the

terms contained in the corporation’s articles of incorporation and by-laws. Thus, Singsong does

not have authority to file a voluntary petition in bankruptcy because the amendment to its by-

laws prohibiting such a filing is enforceable. Therefore, Singsong cannot file a voluntary

petition in bankruptcy because it lacks authority to do so pursuant to the enforceable by-law

provision at issue.

A. Plum has standing because it has a sufficient stake in the outcome of this case and its challenge to Singsong’s authorization to file bankruptcy is a challenge to the court’s jurisdiction.

Plum has standing to seek dismissal of Singsong’s voluntary petition because Plum has a

sufficient stake in the outcome of the case, and Plum’s challenge to Singsong’s authorization is a

challenge to the jurisdiction of the bankruptcy court. While the Thirteenth Circuit expressed

doubt concerning Plum’s standing to file a motion to dismiss, it declined to rule on the issue of

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standing because it decided Singsong’s board of directors had authority to file bankruptcy and

dismissed Plum’s Motion to Dismiss. Despite its erroneous conclusion regarding Singsong’s

authority, standing is a threshold issue. Horne v. Flores, 557 U.S. 433, 445 (2009). It must exist

for any party seeking judicial action as “‘an essential and unchanging part of the case-or-

controversy requirement of Article III.’” Id. (quoting Lujan v. Defenders of Wildlife, 504 U.S.

555, 560 (1992)).

Specifically, the Thirteenth Circuit questioned whether a creditor had standing to

challenge a corporation’s authority to file bankruptcy. Nevertheless, creditors with a substantial

stake in the outcome of the case have standing to challenge corporate authority to file

bankruptcy. The relationship between Plum and Singsong as “frenemies”—partners in contract

but adversaries in litigation—gives Plum a sufficient stake in the outcome of this case.

Moreover, creditors always have standing to challenge a bankruptcy court’s jurisdiction.

Because jurisdiction does not vest where a voluntary petition is filed without authority, Plum’s

challenge to Singsong’s authority is a challenge of the bankruptcy court’s jurisdiction.

Therefore, Plum has standing.

1. Plum has standing because its relationship with Singsong gives Plum a sufficient stake in the outcome of the case.

Plum has both a contractual relationship and an ongoing adversarial relationship with

Singsong. Since the court’s decision on Plum’s Motion to Dismiss will significantly affect both

relationships, Plum has a sufficient stake in the outcome of this case. A creditor with a sufficient

stake in the outcome of a bankruptcy has standing to seek dismissal for lack of corporate

authorization. In re Orchard at Hansen Park, LLC, 347 B.R. 822, 825 (Bankr. N.D. Tex. 2006)

(holding that a creditor that held both an unsecured lien over debtor’s property and secured lien

in debtor’s equity had a sufficient stake, and thus, standing to challenge the debtor’s authority to

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file bankruptcy). To have standing, the requisite stake in the outcome of a case must give a

creditor a greater interest than a mere general creditor. In re Consol. Auto Recyclers, Inc., 123

B.R. 130, 138 (Bankr. D. Me. 1991); Orchard, 347 B.R. at 825.

A general creditor is one who has a right to payment or specific performance against the

bankruptcy estate that arose “at the time of or before the order for relief concerning the debtor[.]”

11 U.S.C. §§ 101(10)(A), 101(5)(A-B) (defining “creditor” and “claim” under Title 11). Also,

pre-petition contractual relationships between the creditor and debtor can give the creditor an

interest greater than a general creditor, “who is otherwise a stranger to the debtor entities.” Auto

Recyclers, 123 B.R. at 138. While a general creditor alone may not have standing, a general

creditor who is also a party to a lawsuit subject the automatic stay under section 362 does have

standing. In re Giggles Rest., Inc., 103 B.R. 549, 555 (Bankr. D.N.J. 1989). In Giggles, the

property owner had standing to challenge the authority to file bankruptcy where his lawsuit to

recover real property was stayed by the automatic stay. Id.

In Auto Recyclers, the creditor (“Allied”) sought to have debtor’s (“CARM”) petition for

bankruptcy dismissed for lack of corporate authority to file the petition, and CARM asserted that

Allied did not have standing to file such an action. 123 B.R. at 137. The court held that Allied

had standing to seek dismissal because Allied possessed a sufficient stake in the outcome of the

case. Id. at 138. The court reasoned that because Allied was a creditor of the debtor and its non-

debtor subsidiary and a holder of rights under a stock pledge agreement with subsidiary, Allied’s

relationship with the debtor was sufficiently complex to give it a stake in the outcome of the case

greater than mere general creditors. Id.

Here, Plum has a sufficient stake in the outcome of this case because of its executory

contract with Singsong and the patent infringement suit against Singsong. Several years prior to

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this litigation, Plum and Singsong entered into an exclusive manufacturing contract that made

Singsong the exclusive manufacturer of all Plum’s products. However, as a result of Singsong’s

bankruptcy and under section 365(a), (f), Singsong will have the ability to either “assume the

Plum contract and force Plum to continue the relationship post-petition, or to assume the contract

and assign it to a different supplier without Plum’s consent.” 11 U.S.C. § 365(a), (f) (2006). Not

only would the contractual relationship make Plum a creditor, but like Allied in Auto Recyclers,

the trustee’s powers under section 365 could result in a complex relationship with the bankruptcy

estate far greater than a general creditor. Moreover, as Singsong’s partner in the release of

multiple Plum products such as the e-Pod and e-Phone, Plum certainly is not a stranger to

Singsong.

While the contractual relationship with Singsong gives Plum a sufficient stake, Plum’s

interest is even greater. Plum’s patent infringement lawsuit against Singsong, currently stayed

by the bankruptcy, gives Plum an additional stake in the outcome of the case. Like the property

owner in Giggles, Plum’s interest in the protection of its intellectual property, which is hindered

by the automatic stay, gives Plum a sufficient stake in the outcome of the case. Therefore, Plum

has standing to challenge Singsong’s authority to file bankruptcy because the outcome of the

case will affect both its exclusive manufacturing contract and patent suit. This result gives Plum

a significant stake in the outcome of the case and significantly differentiates Plum from any mere

general creditor of Singsong.

2. Plum has standing because Plum’s motion to dismiss challenges the Bankruptcy Court’s jurisdiction over Singsong’s case.

Plum’s challenge of Singsong’s authority to file the voluntary petition in bankruptcy is a

challenge of the Bankruptcy Court’s jurisdiction. Bankruptcy courts look to the underlying

policies and principles invoked by a creditor’s action in order to determine the underlying

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policies and principles that it invokes. A bankruptcy court does not acquire jurisdiction over a

case if the person that filed the petition on behalf of the corporation lacked authority to do so.

Thus, Plum’s assertion that Singsong’s Board of Directors and CEO lacked authority to file the

bankruptcy petition is an assertion that the bankruptcy court does not have jurisdiction.

To determine whether a creditor has standing, courts look to the substance of the

allegations rather than their form. In re Gucci, 174 B.R. 401, 412 (Bankr. S.D.N.Y. 1994) (“[I]n

determining whether a creditor has standing to seek a dismissal, the court should consider . . . the

policies underlying the principles . . . [the creditor] invokes and the scope of protections intended

to be afforded by those policies.”). In substance, a challenge to validity of a bankruptcy petition

is a challenge to the Court’s subject matter jurisdiction. See Hager v. Gibson, 108 F.3d 35 (4th

Cir. 1997) (“[W]here a voluntary petition for bankruptcy is filed on behalf of a corporation, the

bankruptcy court does not acquire jurisdiction unless those purporting to act for the corporation

have authority under local law ‘to institute the proceedings.’”) (quoting Price v. Gurney, 324

U.S. 100, 106 (1945)).

Therefore, a creditor alleging that a corporation lacked authority to file a bankruptcy

petition has standing because, in substance, the creditor is challenging the bankruptcy court’s

jurisdiction and creditors always have standing to challenge jurisdiction. A creditor has standing

to challenge the jurisdiction of the bankruptcy court. Verrazzano Towers, 10 B.R. 387, 391

(Bankr. E.D.N.Y. 1981). “[I]t has long been the practice of bankruptcy courts to permit creditors

. . . to move for the . . . dismissal of a petition on grounds, whether strictly jurisdictional or not,

that the proceeding ought not be allowed to proceed.” SEC v. U.S. Realty & Improvement Co.,

310 U.S. 434, 457-58 (1940) (emphasis added).

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In this case, Plum’s motion to dismiss Singsong’s voluntary petition alleges “that

Singsong lacked corporate authority to file a voluntary petition in bankruptcy.” Like Gucci, this

Court should look to the substance, rather than the form, of Plum’s motion while taking into

consideration the policies implicated by it. Following Hager, the bankruptcy court never

acquired jurisdiction over Singsong’s bankruptcy petition if Singsong’s Board did not have the

authority to file the petition on Singsong’s behalf. Plum’s challenge to the Board’s authority is a

challenge to the Bankruptcy Court’s jurisdiction. Following the rationale of U.S. Realty, whether

Plum’s motion is strictly jurisdictional or jurisdictional in nature, its ultimate challenge is to the

Bankruptcy Court’s jurisdiction. Because creditors always have standing to challenge

jurisdiction, Plum has standing.

B. Singsong’s by-law is enforceable, as it does not waive all bankruptcy relief and bankruptcy law accepts the limitations posed by the by-law.

The by-law at issue in Singsong’s corporate documents is enforceable because it does not

waive a legally protected bankruptcy right and it fits within the scope of limitations on

bankruptcy rights that courts have found enforceable. The by-law does not waive Singsong’s

right to file for bankruptcy because Singsong can unilaterally reacquire the authority to file for

bankruptcy at any time by amending its by-laws. In addition, an increasing number of

bankruptcy courts have recognized limitations on bankruptcy rights to be enforceable. The by-

law only functions as a small limitation on Singsong’s right to file for bankruptcy by requiring

Singsong to amend its by-laws prior to filing. Thus, the by-law prohibiting Singsong from filing

a voluntary petition in bankruptcy is enforceable.

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1. Singsong’s by-law is enforceable because it neither bars access to bankruptcy relief, nor relinquishes to a third party the autonomous discretion to resort to bankruptcy.

The provision in Singsong’s corporate documents prohibiting the filing of a voluntary

petition in bankruptcy does not possess the core components of an unenforceable waiver of a

bankruptcy right. Unenforceable waivers of bankruptcy rights give control over the debtor’s

bankruptcy rights to a third party and concern a right that is embodied within the Bankruptcy

Code. Singsong has the ability to unilaterally reacquire the authority to file for bankruptcy by

amending its by-laws and the provision’s only effect is to create a two-step process of filing for

bankruptcy. Thus, the provision is enforceable because it does not function as a waiver of a right

embodied within the Bankruptcy Code.

To constitute an unenforceable waiver of a bankruptcy right, the provision at issue must

not allow the debtor to unilaterally regain the right that the provision waived, and the right must

be embodied within the Bankruptcy Code. See In re Pease, 195 B.R. 431, 433 (Bankr. D. Neb.

1996); In re Detrano, 222 B.R. 685, 688 (Bankr. E.D.N.Y. 1998) (reversed on other grounds); In

re Madison, 184 B.R. 686, 688 (Bankr. E.D. Pa. 1995) (holding that a contractual agreement

waiving debtor’s right to file for bankruptcy is unenforceable).

An agreement between a debtor and creditor that waives the debtor’s right to file a

voluntary bankruptcy petition as well as the debtor’s right to protection by the automatic stay is

unenforceable. Pease, 195 B.R. at 433. In Pease, the debtors (farmers) were indebted to the

United Nebraska Bank for approximately 1.8 million dollars. Id. Prior to filing a petition for

Chapter 11 bankruptcy, the farmers entered into a debt resolution agreement with United

Nebraska Bank. Id. The terms of the agreement prohibited the farmers from filing a voluntary

petition for bankruptcy and from resisting a motion to lift the automatic stay. Id. The court held

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that these terms acted as waivers of the farmers’ right to file for bankruptcy and right to the

protection of the automatic stay and therefore were unenforceable. Id.

Prepetition waivers of the bankruptcy discharge are unenforceable. Detrano, 222 B.R. at

688. In Detrano, the plaintiff (Giaimo) and the defendant (Detrano) were negotiating a

settlement of a previous debt owed to Giaimo. Id. at 688. Recognizing that there was a chance

Detrano might file for bankruptcy relief, the parties included a clause in the settlement agreement

that stated “that the obligations arising under the settlement agreement would be non-

dischargeable in any subsequent bankruptcy case.” Id. The court held that the clause constituted

a pre-petition waiver of a discharge of a debt and was therefore unenforceable. Id.

Pease and Detrano demonstrate the two core characteristics possessed by virtually all

cases that find waivers of bankruptcy rights to be unenforceable: (1) the debtors cannot

unilaterally reacquire the right(s) that were waived; and (2) the right(s) waived were embodied

within the Bankruptcy Code. In this case, the provision at issue in Singsong’s corporate

documents demonstrates neither of these two core characteristics.

First, unlike the debtors in the previous two cases, Singsong possesses the ability too

unilaterally reacquire the right to file a voluntary petition in bankruptcy by amending its by-laws

to that effect. In fact, Singsong is the only party that has any direct control over this decision.

The facts state that Singsong amended its corporate by-laws to take away its corporate authority

to file for bankruptcy in connection with a business agreement with Plum. However, unlike

Pease where the creditor included the unenforceable waiver in its debt resolution agreement,

Plum’s mere insistence that Singsong amend its by-laws does not give Plum any control over

whether that amendment stays in place. Thus, Singsong ultimately retains sole discretion to

determine whether it has the authority to file for bankruptcy.

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Second, Singsong’s amendment to its by-laws does not does waive any right embodied

within the Bankruptcy Code. The rights waived in Pease and Detrano were the right to file for

bankruptcy, the right to the automatic stay, and the right to discharge debts—all of which are

embodied within the Bankruptcy Code. In this case, Singsong’s by-law does not bar Singsong

from filing for bankruptcy because Singsong always retains the right to amend its by-laws as it

deems necessary. The practical result is that before Singsong can file for bankruptcy, it must

amend its by-laws to give itself the corporate authority to do so. Thus, the only “right” that is

waived is Singsong’s ability to file for bankruptcy in one-step (filing bankruptcy), rather than

two (amending its by-laws then filing). However, the availability of a one-step process to file a

voluntary petition in bankruptcy is not a “right” that is embodied within the Bankruptcy Code.

Therefore, the provision in Singsong’s corporate documents prohibiting Singsong from

filing a petition in bankruptcy is enforceable because Singsong can unilaterally regain the

authority to file for bankruptcy and the provision does not waive a right embodied in the

Bankruptcy Code.

2. Bankruptcy law’s acceptance of certain limitations on bankruptcy rights favors enforcement of Singsong’s by-law.

This Court should enforce Singsong’s by-law amendment because enforcement is in

accord with bankruptcy law’s acceptance of limitations of bankruptcy rights. The modern trend

among the bankruptcy courts is to recognize limitations on bankruptcy rights as enforceable, but

subject their enforceability to the balancing of equitable considerations. Several bankruptcy

courts have found waivers of the automatic stay to be enforceable by conducting a four-factor

balancing test that basis enforceability upon a weighing of policy concerns. In addition, courts

have found terms within a loan agreement that effectively waive a corporations ability to

voluntarily file for bankruptcy—by imposing personally liability on the person that files on

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behalf of the corporation—to be enforceable. The provision in Singsong’s by-laws satisfies the

balancing test and does not effectively waive Singsong’s right to file bankruptcy. Therefore, the

provision at issue in this case should be enforced because its enforcement is in accord with the

modern trend amongst the bankruptcy courts.

Bankruptcy courts have found waivers of the automatic stay contained within agreements

between debtors and creditors to be enforceable. In re Atrium High Point Ltd., 189 B.R. 599,

607-8 (Bankr. M.D.N.C. 1995). The court in Atrium held that pre-petition waivers of the

automatic stay are enforceable in many cases and listed four factors that courts should use to

make this determination: (1) the sophistication of the party making the waiver; (2) the

consideration for the waiver; (3) whether other parties are affected; and (4) the feasibility of the

debtor’s plan. Id. By creating a balancing test that accounts for equitable considerations, the

court made it possible to determine the enforceability of a waiver on a case-by-case basis. Since

Atrium, five other districts of the U.S. Bankruptcy Court have utilized this four-factor balancing

test. In re Alexander SRP Apartments, LLC, No. 12-20272, 2012 WL 1910088, *7 (S.D. Ga.

Apr. 20, 2012) (unpublished decision); In re Bryan Rd., LLC, 382 B.R. 844, 848-49 (Bankr. S.D.

Fl. 2008); In re MBD, Inc., No. 208BK34347, 2008 WL 7404597, *15 (Bankr. E.D. Cal. Dec. 1,

2008); In re Frye, 320 B.R. 786, 791 (Bankr. D. Vt. 2005); In re Desai, 282 B.R. 527, 531

(Bankr. M.D. Ga. 2002).

In addition, courts have determined that terms within loan agreements that effectively

waive the right to file bankruptcy by shifting liability for debt are enforceable. FDIC v. Prince

George Corp., 58 F.3d 1041, 1046-47 (4th Cir. 1995). In FDIC v. Prince, the debtor created an

LLC for the specific purpose of undertaking a real estate venture. Id. at 1044. In an attempt to

lessen the risk of foreclosure by the LLC, the creditor included within the terms of the loan

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agreement that the debtor would become personally liable for loan in the event that the LLC filed

a voluntary petition in bankruptcy. Id. The court held that the terms making debtor personally

liable was valid and enforceable because the terms did not waive the LLC’s right to file a

voluntary petition. Id. at 1046-47. Although the terms did not technically waive the LLC’s right

to file for bankruptcy, their practical effect does just that because no rational individual will file a

petition on behalf of a company if doing so results in that person incurring personal liability for

the company’s debt.

In this case, this Court should enforce the provision in Singsong’s corporate documents

because its enforcement is in accord with bankruptcy law’s acceptance of limitations on

bankruptcy rights. Singsong, at Plum’s request, amended its by-laws to add the bankruptcy

provision in order to become Plum’s exclusive manufacturer. Because of the factors surrounding

Singsong’s by-law amendment, the bankruptcy provision satisfies Atrium’s four-factor balancing

test and thus, should be enforced.

First, both parties are sophisticated because Singsong and Plum are corporations.

Because of this, there is no concern that a sophisticated company will take advantage of an

unsophisticated consumer. Thus, this factor weighs heavily in favor of the provision being

enforceable. Second, Singsong amended its by-laws in exchange for becoming the exclusive

manufacturer of Plum’s products. Because Singsong can re-amend its by-laws, not enforcing the

bankruptcy provision would be severely detrimental to Plum, while only having a slight burden

on Singsong. Thus, this factor weighs in favor of the provision being enforceable. Third, other

parties, especially unsecured creditors, will not be adversely affected because Plum is only

seeking an injunction, not damages from the estate. Thus, this factor also weighs in favor of

enforceability. Lastly, more facts are needed in order to determine the feasibility Singsong’s

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reorganization plan. While the details of Singsong’s plan is not known, the record indicates that

Singsong intends to continue its infringing conduct to facilitate reorganization. Thus, this factor

weighs in favor of enforceability.

Also, the provision is enforceable because it imposes a relatively small obstacle for

Singsong to overcome before it can file a voluntary petition in bankruptcy. Unlike the terms

imposing personal liability in FDIC v. Prince, the provision in Singsong’s corporate documents

does not have the practical effect of waiving Singsong’s right to file for bankruptcy. The

provision only requires that Singsong amend its by-laws to give itself authority to file for

bankruptcy before doing so. Conducting this amendment process does not impose personal

liability on those involved, nor any other substantial disincentives that would cause the

amendment not to take place. Thus, the provision is enforceable because it imposes substantially

less of an obstacle to filing for bankruptcy than a loan agreement term that has been deemed

enforceable. Therefore, this Court should enforce Singsong’s by-law because its enforcement is

in accord with the bankruptcy law’s acceptance of limitations on bankruptcy rights.

C. Singsong’s voluntary petition is invalid because Singsong’s Board and CEO lacked authority to file bankruptcy.

Singsong does not have authority to file a voluntary petition in bankruptcy because the

provision in its corporate documents prohibiting the filing of a voluntary petition in bankruptcy

is enforceable. A valid petition for a voluntary chapter eleven bankruptcy for a corporation

requires a voluntary act by one authorized to act on behalf of the corporation. 11 U.S.C. § 301

(2006); In re Arkco Props., Inc., 207 B.R. 624, 627 (Bankr. E.D. Ark. 1997) (“[C]orporations are

creatures of statute and cannot act for themselves. They act through their agents who are required

to act within their authority and in good faith.”). In bankruptcy, state law governs whether one

who purports to act on behalf of a corporation has valid authority. See Price, 324 U.S. at 106.

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If the court determines that one who filed a petition on behalf of a corporation was without

authority, “it has no alternative but to dismiss the petition.” Id. Dismissal is required even

where the unauthorized party could have obtained authority but failed to do so prior to filing the

petition. Id.; In re Autumn Press, Inc., 20 B.R. 60, 62 (Bankr. D. Mass. 1982) (holding that a

voluntary petition was invalid when the authority to file it came from a sole director of a

corporation whose bylaws and state law required there be at least three directors).

Absent a statute to the contrary, the power to authorize a voluntary bankruptcy petition

on behalf of a corporation rests with the board of directors, and for an authorization to be valid, it

must have sufficient approval by a board of directors with adequate authority. See, e.g., In re

Runaway II, Inc., 159 B.R. 537, 538 (Bankr. W.D. Mo. 1993) (“[I]t is clear that any corporate

resolution which authorizes the filing of a voluntary bankruptcy petition must originate at a

validly held meeting of directors and must be approved by the proper number of such

directors.”); In re Great Northwest Dev. Co., 28 B.R. 141, 143 (Bankr. E.D. Mich. 1983) (“[T]he

power to file a voluntary bankruptcy petition on behalf of a corporation rests in the board of

directors.”); Giggles, 103 B.R. at 553 (“[I]n the absence of restrictions, the power to file a

voluntary petition in bankruptcy on behalf of a corporation rests with the Board of Directors.”).

However, when directors of a corporation, whose bylaws prohibit filing bankruptcy, authorize

filing a voluntary petition, the petition is invalid. See In re DB Capital Holdings, LLC, No. 10-

23242, 2010 WL 4925811, *3 (B.A.P. 10th Cir. Dec. 6, 2010). Thus, an invalid petition can

result from either a petition filed without authorization from the debtor corporation’s board of

director or a petition filed with authorization from a board of directors whose bylaws prohibit

filing bankruptcy.

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In Giggles, the court held a resolution authorizing a petition for bankruptcy was “invalid

and [was] of no force and effect” where board meeting lacked quorum and a majority of the four-

director board did not authorize the bankruptcy filing. 103 B.R. at 554. Likewise, in DB

Capital, the authorization for bankruptcy filing was invalid where the LLC’s operating

agreement barred the company from filing bankruptcy. 2010 WL 4925811, at *2-3.

Moreover, some courts have held that subsequent ratification can save an otherwise

unauthorized petition. Hager v. Gibson, 108 F.3d 35, 39 (4th Cir. 1997). However, ratification

of an unauthorized petition can only occur by a party who had the authority to authorize the

petition in the first place. See Id. at 39-40 (“The unauthorized filing of a voluntary petition . . .

might be ratified in appropriate circumstances by ensuing conduct of persons with power to have

authorized it originally.”) (emphasis added); see also, Boyce v. Chem. Plastics, Inc., 175 F.2d

839, 843 (8th Cir. 1949) (“The validity and effect of the ratification in this case depends, then,

upon whether the board of directors . . . would have authority in the first instance to file a

petition in voluntary bankruptcy.”).

Here, the resolution directing Singsong’s CEO to file a voluntary petition on behalf of

Singsong was without authority and therefore Singsong’s chapter eleven petition was invalid.

Singsong is incorporated under the laws of the state of Moot, which adopted the Model Business

Corporation Act (“MBCA”). Under the MBCA, Singsong’s authority to file bankruptcy is solely

derived from its Articles of Incorporation and by-laws as the MBCA contains no statutory

provisions regarding a corporation’s power to file bankruptcy. Model Bus. Corp. Act §§ 2.05,

2.06 (2007). Further, the amendment to Singsong’s by-laws, which revoked Singsong’s

authority to file bankruptcy, the Board of Directors’ authority to pass a resolution authorizing

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bankruptcy, and any directors’ authority to sign a chapter eleven petition, is enforceable. See §

I(B), supra.

Therefore, the resolution passed by the Board of Directors was, like the resolutions in

Giggles, DB Capital, and Autumn Press, was “invalid and is of no force and effect.” Moreover,

the CEO was without authority the sign the voluntary petition. Since, the Board of Directors

never had authority for the original resolution, unlike Hager, neither its silence nor unanimous

resolution can ratify the unauthorized voluntary petition. Therefore, Singsong’s voluntary

petition was unauthorized and the bankruptcy court never acquired subject matter jurisdiction.

Consequently, under this Courts holding in Price, the Bankruptcy Court had no option but to

dismiss Singsong’s petition.

II. PLUM DID NOT VIOLATE THE AUTOMATIC STAY BECAUSE § 362(a) DOES NOT APPLY TO PLUM’S REQUEST AND § 959(a) OPERATES AS AN INDEPENDENT EXCEPTION.

Singsong’s bankruptcy petition did not eradicate Plum’s right to seek an injunction in the

Washington District Court to protect against Singsong’s continued violations of Plum’s patent.

Section 362’s automatic stay provisions do not apply to motions seeking to enjoin post-petition

conduct. Even when the case, in which the injunction is sought, was filed pre-petition and thus

subject to the automatic stay for all other purposes, injunctions for post-petition infringements

fall within a logical exception. Because each post-petition infringement forms an independent

cause of action, and those causes of action would be outside both the “was brought [pre-

petition]” or “could have been brought [pre-petition]” provisions of section 362(a)(1), it logically

follows that an injunction, applicable to conduct that would give rise to excepted causes of

action, is likewise excepted from the automatic stay.

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Moreover, the remedy sought—an injunction—by its very nature exempts Plum’s request

from section 362(a)(3)’s reach. Injunctions direct conduct not property. Any secondary effect

an injunction has on an individual’s use of property is merely incidental to and not the object of

an injunction. Further, any incidental effect on use of property does not bring an injunction

within the grasp of section 362(a)(3)’s “exercise control” provision. It is axiomatic that a

limitation on actions that control property, “in rem actions”, cannot logically limit an action that

controls conduct, “in personam actions.”

Lest there be any ambiguity in the proper application of section 362’s automatic stay

provisions, the logical exception to section 362(a)(1) and the inapplicability of section 362(a)(3)

is reinforced by section 959(a), which operates as an independent exception to the automatic

stay. That Plum’s injunction request simultaneously falls within the protection of section 959(a)

and also outside the stayed provisions of section 362(a) leaves but one conclusion; Plum did not

violate the automatic stay when it sought an injunction in the Washington District Court.

A. The automatic stay does not apply to Plum’s request for injunctive relief because the injunction only applies to pre-petition conduct and does not exercise control over property of the bankruptcy estate.

The automatic stay does not apply to Plum’s request for an injunction. Section 362(a)

lists eight different circumstances in which the automatic stay applies and of those, only sections

362(a)(1) and 362(a)(3) are relevant to the present case. Section 362(a)(1) only applies to cases

that were or could have been brought pre-petition. A logical and indeed necessary limitation to

section 362(a)(1) applies to an injunction that by its nature addresses conduct outside the scope

of the stay. The bankruptcy petition severed Singsong’s conduct into that which occurred before

and that which occurred after the filing of the petition. Conduct occurring before the petition is

subject to the stay; conduct after is not. Likewise, a remedy for conduct before the petition is

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subject to the stay; a remedy for conduct after is not. Since each post-petition infringement gives

rise to an independent cause of action that could not possibly be affected by the stay, it follows

that an injunction addressing the same should also be exempt from stay. Thus, Plum’s injunction

request is excepted from section 362(a)(1).

1. Plum’s request for injunctive relief is excepted from § 362(a)(1) because it only applies to post-petition conduct.

Section 362(a)(1) does not apply because Singsong’s pre- and post-petition infringement

can be bifurcated, and Plum’s injunction only concerns Singsong’s post-petition infringement.

Each act of infringement committed by Singsong gives rise to a separate and distinct cause of

action. Although Singsong’s infringement has occurred in one continuous stream of unlawful

acts, each post-petition infringement is necessarily separate and distinct from pre-petition

infringements. Thus, Singsong’s pre- and post-petition infringement can be bifurcated, thereby

rendering section 362(a)(1) inapplicable.

Each act of post-petition infringement gives rise to a separate and distinct cause of action

that courts can bifurcate from identical pre-petition infringement. Suits involving similar

conduct that occurs at different times “may frequently give rise to more than a single cause of

action.” Lawlor v. Nat’l Screen Serv. Corp., 349 U.S. 322, 327-28 (1955). “A substantially

single course of activity may continue through the . . . suit . . . [but] a new claim or cause of

action is created as the conduct continues.” Williams v. Gillette Co., 887 F. Supp. 181, 183

(N.D. Ill. 1995). “[E]ach act of patent infringement gives rise to a separate cause of action.”

Hazelquist v. Guchi Moochie Tackle Co., 437 F.3d 1178, 1180 (Fed. Cir. 2006).

In Lawlor, the Court was determining whether res judicata barred an action to recover

damages. 349 U.S. at 323. The petitioner initially brought an action to recover damages for

alleged violations of the federal antitrust laws, and the case was dismissed with prejudice. Id. at

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324. Six years later, the petitioner brought another action based upon violations that occurred

after, but were very similar to, the earlier case that the court dismissed. Id. Respondent filed a

motion to dismiss the second suit arguing that it was barred by res judicata. Id. The district

court granted the motion to dismiss finding “that both suits involved ‘essentially the same course

of wrongful conduct.’” Id. at 327. This Court overturned the district court’s decision, holding

that the antitrust violations that took place after the first suit were separate causes of action and

thus, not barred by res judicata. Id. at 328. This Court reasoned that the first suit precludes

claims arising prior to its decision, but “it cannot be given the effect of extinguishing claims

which did not even then exist and which could not possibly have been sued upon in the previous

case.” Id.

The decision in Lawlor has become known as the “Lawlor principle” and stands “for the

proposition that res judicata will not bar a subsequent suit based upon the same course of conduct

as a prior suit if the second suit alleges wrongful behavior occurring after judgment of the first

suit.” Williams, 887 F. Supp. at 183-85. In Williams, the district court faced a situation similar

to that in Lawlor where the respondent sought to have the petitioner’s suit barred by res judicata.

Id. at 182. Petitioner had sued respondent for damages caused by respondent’s patent

infringement—a claim identical to the one brought by petitioner in a previously decided case—

with the only difference being that the current suit was for damages that occurred after the

judgment in the previous case. Id. Citing the Supreme Court’s decision in Lawlor, the court

held that res judicata did not bar petitioner’s second suit because continued patent infringement

that occurs after the first judgment gives rise to a new separate and distinct cause of action. Id. at

184.

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In recent patent infringement cases dealing with the bifurcation of pre- and post-petition

conduct, courts have taken an approach that follows the reasoning in Lawlor and Williams. See

Hazelquist, 437 F.3d at 1178 (utilizing a Lawlor analysis to bifurcate identical pre- and post-

discharge patent infringement); see also Chamberlain Grp., Inc. v. Lear Corp., 758 F. Supp. 2d

542 (2010) (finding that each infringing sale constitute distinct acts of infringement and give

“rise to independent causes of action for patent infringement.”).

In Hazelquist, the court had to determine whether the pre- and post-discharge sale of

patent-infringing fishing lures could be bifurcated. 437 F.3d at 1180. The petitioner brought an

action against respondent for damages caused by respondent’s sale of patent-infringing fishing

lures. Id. Subsequently, respondent filed for bankruptcy and received discharge of his debts and

liabilities, and the lower court held that the discharge enjoined petitioner’s case pursuant to 11

U.S.C. § 524(a)(2). Id. Petitioner argued that section 524(a)(2) should not enjoin his case

because after the discharge, the respondent continued to sell the patent-infringing fishing lures.

Id. The court stated that “just as section 362[(a)(1)] only applies to causes of action that arose or

could have been commenced prior to filing bankruptcy, section 524 only applies to debts which

arose before the date of discharge.” Id.

The court held that section 524 did not enjoin petitioner’s suit because respondent’s post-

discharge conduct gave rise to new causes of action. Id. at 1181. The court reasoned that

because “each act of patent infringement gives rise to a separate cause of action,” each post-

discharge sale constituted a separate “cause of action that dates from the moment of infringement

. . . .” Id. at 1180-81. Thus, by definition, it is impossible for claims regarding post-discharge

infringements to be brought pre-petition. Therefore, pre- and post-discharge infringements can

be bifurcated.

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In this case, section 362(a)(1) does not apply because Singsong’s pre- and post-petition

infringements can be bifurcated, and Plum’s injunction is only targeted at Singsong’s post-

petition infringements. The lower court’s majority opinion asserts that Singsong’s post-petition

infringement “is merely the continuation during bankruptcy of conduct begun beforehand that

cannot logically be bifurcated between the pre- and post-periods.” However, in Lawlor, the

Supreme Court held that—with regard to res judicata—this exact task can be accomplished.

The doctrine of res judicata prohibits a party from litigating claims that were or could

have been raised in an earlier action. When compared to section 362(a)(1), which stays an

action that was or could have been commenced before the filing of the bankruptcy petition, it

becomes clear that the reasoning followed Lawlor is directly applicable to the instant case. In

both instances (res judicata and section 362(a)(1)) unlawful conduct is taking place, some form

of legal action is undergone, the same unlawful conduct is then resumed, and the court must

decide if the conduct arising after the legal action is separate and distinct from the conduct rising

before.

Like the respondents in Lawlor and Williams, Singsong has committed patent

infringement both before and after it filed the voluntary petition in bankruptcy. Each post-

petition act of infringement, like the continued antitrust violations in Lawlor or the continued

patent infringement in Williams, are individual infringements that constitute separate and distinct

causes of actions. As held in Lawlor and Williams, each of these causes of action are deemed to

have arisen at the time the infringement took place. Thus, because Singsong’s ongoing

infringements, by definition, occurred post-petition, they necessarily are not actions that “were or

could have been brought” pre-petition; and, like Lawlor and Williams, Singsong’s pre- and post-

petition infringements can be bifurcated.

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The court in Hazelquist used a Lawlor analysis, although not titled as such, in a case that

was virtually identical to this case. Like the respondent in Hazelquist, Singsong has engaged in

ongoing infringement that has occurred both before and after it filed for bankruptcy. In addition,

like petitioner in Hazelquist, Plum’s asserts that the injunction is only directed at Singsong’s

post-petition infringement. Both section 524(a)(2) and section 362(a)(1) enjoin claims or stay

actions that were or could have been brought pre-discharge or pre-petition. Just as the court in

Hazelquist found each post-discharge infringement to give rise to a separate and distinct cause of

action, this Court should find each of Singsong’s post-petition infringements to give rise to a

separate cause of action and bifurcate Singsong’s pre- and post-petition infringements.

Therefore, section 362(a)(1) does not apply to Plum’s action to enjoin Singsong’s post-petition

infringement because the Court can bifurcate Singsong’s pre- and post-petition infringement,

Plum’s injunction is directed at post-petition infringement, and section 362(a)(1) only applies to

pre-petition conduct.

2. § 362(a)(3) is inapplicable to Plum’s request for injunctive relief because an action enjoining tortious conduct does not constitute “exercising control over” property of the estate.

Section 362(a)(3) does not apply because enjoining the tortious use of estate property

does not constitute “exercising control over” property of the estate. The 100 million patent-

infringing Galactica phones are property of Singsong’s estate. However, courts have determined

that section 362(a)(3) only protects the property of the estate, not the tortious use of that

property. Plum’s action seeks to enjoin Singsong’s unlawful use of the Galactica phones. Thus,

section 362(a)(3) does not apply to Plum’s injunction because enjoining the unlawful use of the

Galactica phones does not constitute “exercising control over” the property of Singsong’s estate

for the purposes of section 362(a)(3).

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Enjoining post-petition tortious use of estate property does not constitute “exercising

control over” the property of the estate pursuant to 362(a)(3). “The automatic stay ‘protects

interests in a debtor’s property, not tortious uses of that property.’” Dominic’s Rest. of Dayton,

Inc. v. Mantia, 683 F.3d 757, 760 (6th Cir. 2012) (citing Larami Ltd. v. Yes! Entm’t Corp., 244

B.R. 56, 60 (D.N.J. 2000). The fact that a debtor owns the property does not make a creditor’s

effort to enjoin the debtor’s tortious use of that property an act to “exercise control over” the

property of the estate. Amplifier Research Corp. v. Hart, 144 B.R. 693, 695 (Bankr. E.D. Pa.

1992). Section 362(a)(3) does not apply to actions seeking to enjoin allegedly unlawful post-

petition conduct by the debtor. In re Colo. Altitude Training LLC, No. 10-21951, 2012 WL

993530, *2 (Bankr. D. Colo. Mar. 23, 2012).

Section 362(a)(3)’s automatic stay does not apply to an injunction seeking to prevent

post-petition trademark infringement. Dominic’s, 683 F.3d at 760. In Dominic’s, respondent

opened up a restaurant and, in the process, infringed up petitioner’s trademark. Id. at 758.

Petitioner brought an action against respondent for trademark infringement and trademark

dilution. Id. The court issued a temporary restraining order (“TRO”) that directed the

respondent to cease further infringement. Id. at 760. After filing for bankruptcy, the court found

respondent in contempt of the TRO. Id.

Respondent asserted that 362(a)(3) stayed the determination of the contempt motion

because forcing the restaurant to close would act as an “exercise of control over” the property of

the estate. Id. at 761. The court held that 362(a)(3) did not apply because “application of the

automatic stay would permit . . . [respondent] to continue to . . . [infringe upon petitioner’s

trademark rights, and respondent’s] commission of a tort is not protected by the Bankruptcy

Code.” Id.

Team P32

28

Similarly, an injunction attempting to prevent the post-petition sale of patent-infringing

products is not an attempt too directly exercise control over the property of the bankruptcy estate.

Larami, 244 B.R. at 59. In Larami, petitioner filed a patent infringement action against

respondent claiming that water guns sold by respondent “utilized the patented ‘expandable

bladder technology’ developed . . .” and patented by petitioner. Id. at 58. Respondent argued

that because he had previously filed for bankruptcy, section 362(a)(3) stayed petitioner’s action.

Id. at 59.

The court held that section 362(a)(3) did not stay the action because enjoining the

unlawful production or sale of property of the estate does not constitute “exercising control over”

property of that estate within the meaning of 362(a)(3). Id. at 60. The court recognized that the

petitioner was only attempting to prevent allegedly unlawful conduct, respondent would remain

in possession of existing inventory, and respondent was free modify the existing water guns in

order to avoid future infringement. Id. at 59. Not allowing section 362(a)(3) to stay an action

seeking to enjoin unlawful use of estate property has been echoed by other courts as well. See

Amplifier, 144 B.R. at 695 (holding the fact that the corporation owned the documents that it

used for defamation does not make an action enjoining their illegal use an act to “exercise

control over” property of the estate for purposes 362(a)(3)).

In this case, section 362(a)(3) does not apply because Plum’s injunction does not

constitute an “exercise of control over” the property of Singsong’s estate. Like the petitioner in

Larami, Plum is not attempting to gain possession of the Galactica phones, receive any profits

from their sale, or prevent any legal use of them. In fact, Plum’s only request is that Singsong

remove the patent-infringing software from the Galactica phones prior to further use of them.

Team P32

29

Furthermore, the fact that Singsong’s estate has a property interest in the Galactica

phones does not mean that enjoining Singsong from selling them constitutes an “exercise of

control over” the property its estate. In Larami, Dominic’s, and Amplifier, all of the respondents

owned the property the courts enjoined them from using. In all three cases, the courts found that

enjoining the respondents continued tortious use of estate property did not constitute an “exercise

of control over” the property of the estate. Similarly, Plum’s attempt to prevent Singsong from

committing further infringement does not constitute an “exercise of control over” the property of

Singsong’s estate. As stated by the court in Amplifier, 362(a)(3)’s automatic stay “protects

interests in a debtor’s property, not tortious uses of that property by the debtor.” Therefore,

section 362(a)(3) does not apply because enjoining Singsong’s ongoing post-petition

infringement does not constitute an “exercise of control over” the property of Singsong’s estate.

B. § 959(a) permits Plum’s request for injunctive relief and operates as an independent exception to § 362’s automatic stay.

The automatic stay does not apply to Plum’s injunction because section 959(a) operates

as an exception to the automatic stay and the facts of this case satisfy the elements of section

959(a). The legislative history demonstrates that Congress intended for section 959(a) to control

when a debtor in possession conducts the post-petition business of the estate in a tortious

manner. Singsong is actively engaged in post-petition patent infringement, thus Congress

intended for section 959(a) to control, and, therefore, acts as an exception to the automatic stay

in this case. Section 959(a) applies when an action concerns a post-petition act that occurred in

the carrying on of business and it does not embarrass the reorganization of the estate. Plum is

seeking an injunction, not damages, and is not attempting to gain possession of the Galactica

phones. Thus, Plum’s action will not embarrass the reorganization of Singsong’s estate.

Team P32

30

Therefore, the automatic stay does not apply to Plum’s injunction because section 959(a)

operates as an exception to the automatic stay, and section 959(a)’s conditions are satisfied.

1. Congress intended § 959(a) to operate as an independent exception to the automatic stay.

Section 959(a) operates as an exception to the automatic stay. Legislative history

demonstrates that Congress enacted section 959(a) to create a statutory exception to this Court’s

decision in Barton. The exception was designed to correct an issue created by Barton that

allowed debtors to conduct post-petition business in a tortious manner while experiencing

temporary immunity from liability for their actions. In this case, Plum is attempting to enjoin

Singsong from engaging in tortious post-petition conduct. Thus, Congress intended for section

959(a) to supersede the automatic stay and control in this case.

Section 959(a) operates as an exception to section 362 when the automatic stay would

provide a debtor in possession temporary immunity from liability for tortious use of estate

property because Congress intended for section 959(a) to that exact issue. Congress enacted

section 959(a) in response to the Barton doctrine. The Barton doctrine made it possible for

receivers (debtors in possession) to unlawfully conduct estate business with temporary immunity

from liability. Barton v. Barbour, 104 U.S. 126, 137-38 (1881) (Miller, J., dissenting).

Congress intended for section 959(a) to eliminate the ability of a debtor in bankruptcy to

continue to conduct the business of the company in a tortious manner, immune from liability,

while the individual seeking to enjoin such conduct waited upon leave of the bankruptcy court.

In re VistaCare Grp., LLC, 678 F.3d 218, 224 (3d Cir. 2012).

In Barton, the Supreme Court ruled that before a suit can be brought against a receiver,

leave of the court that appointed the receiver must be obtained. Barton, 104 U.S. at 128.

Numerous courts still apply this principle today and require parties to obtain leave of the

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31

bankruptcy court prior to bringing an action in another forum against a debtor in possession.

VistaCare, 678 F.3d at 224 (citing seven other circuits that follow the Barton doctrine). In his

dissent in Barton, Justice Miller stated that the Barton doctrine made it possible for receivers to

manage operational businesses in a manner contrary to state and local laws while temporarily

being shielded from liability by the jurisdiction that had appointed them. Barton, 104 U.S. at

137-38. Six years after Barton, Congress essentially codified Justice Miller’s concerns by

enacting 28 U.S.C. § 959(a), which courts have recognized as an exception to the Barton

doctrine. VistaCare, 678 F.3d at 226-27; see, e.g., In re Crown Vantage, Inc., 421 F.3d 963, 971

(9th Cir. 2005); In re DeLorean Motor Co., 991 F.2d 1236, 1240-41 (6th Cir. 1993).

Section 959(a) does not require leave of the court in order to sue debtors in possession of

property “with respect to any acts or transactions in connection to carrying on the business of

that property.” 28 U.S.C. § 959(a) (2006). Congress clearly intended to prevent debtors in

possession of property from enjoying temporary immunity from liability for their tortious use of

that property while the injured party sought leave of the court. In addition, when Congress

enacted the Bankruptcy Code, it did not amend section 959(a), although it did amend subsection

(b) of section 959. VistaCare, 678 F.3d at 227. “[W]hen Congress amends the bankruptcy laws,

it does not write ‘on a clean slate.’” Id. (citing Dewsnup v. Timm, 502 U.S. 410, 419 (1992)).

Thus, rather than an oversight, not amending section 959(a) demonstrates that Congress intended

for section 959(a) to stay in force and prevent debtors in possession of property from receiving

temporary immunity from their tortious uses of that property.

This Court should apply section 959(a) as Congress intended and not allow section 362’s

automatic stay too temporarily shield Singsong from liability for its ongoing infringement. The

legislative history demonstrates that when the Bankruptcy Code was enacted, Congress intended

Team P32

32

for section 959(a) to continue to prevent debtors from enjoying temporary immunity from

liability for their tortious post-petition conduct. Allowing section 362(a) to supersede section

959(a) when a debtor in possession is using the property of the estate in a tortious manner

essentially re-creates the Barton issue—which is what Congress originally enacted section

959(a) to address. This result is both illogical and manifestly contrary to congressional intent.

In this case, Plum is seeking to enjoin Singsong from continuing its unlawful infringing

use of the Galactica phones. If section 362 automatically stays Plum’s injunction, Singsong will

be able to engage in infringing conduct—without liability—until Plum is able to obtain leave

from the Bankruptcy Court. The lower court’s majority opinion professes a “harmonizing”

approach of reconciling section 959(a) and section 362, the effect of which “is merely to require

that Plum first seek bankruptcy court permission before filing its motion.” What the majority

opinion fails to recognize is that while Plum is “merely” waiting on the Bankruptcy Court’s

permission to file its motion, Singsong is able to infringe upon Plum’s rights without incurring

liability for its tortious conduct. This is the exact issue Justice Miller expressed concern of over

130 years ago in his dissent in Barton, and the exact result Congress intended section 959(a) to

prevent. Thus, implementing sections 362(a) and 959(a) in such a manner is directly contrary to

congressional intent. Therefore, automatic stay does not apply to Plum’s injunction because

Singsong is engaged in post-petition tortious use of estate property and Congress intended

section 959(a) to operate as an exception to the automatic stay in this exact situation.

2. Plum’s request for injunctive relief satisfies § 959(a)’s requirements because the injunction relates to Singsong’s post-petition tortious acts and does not embarrass the reorganization proceedings.

Section 959(a) contains two elements that must be satisfied: (1) the action must be based

upon an act of the debtor of possession that occurred in the carrying on of the business connected

Team P32

33

with the property of the estate; and (2) the action must not embarrass the reorganization of the

estate. Plum’s injunction is based on Singsong’s ongoing post-petition infringement involving

the Galactica phones, which are property of Singsong’s estate. None of the facts used to satisfy

the first element are at issue in this case. Thus, element one will be treated as satisfied and not

analyzed further. With regard to element two, Plum is not seeking an award of damages to be

paid from Singsong’s estate, nor attempting to gain possession of property owned by Singsong’s

estate, nor trying to prohibit any legal uses of such property. Thus, Plum’s action does not

embarrass the reorganization of Singsong’s estate. Therefore, the facts of this case satisfy

section 959(a).

The second sentence of section 959(a) allows the court to use its general equity power to

dismiss an action brought under section 959(a) if the court determines that the “ends of justice”

require it to be dismissed. § 959(a). For a court to dismiss an action pursuant to the “ends of

justice”, the action must “embarrass, burden, delay, or otherwise impede the reorganization

proceedings.” In re Television Studio Sch. of N.Y., 77 B.R. 411, 412 (Bankr. S.D.N.Y. 1987).

These factors are satisfied, and reorganization is “frustrated”, when the potential detriment to the

debtor greatly outweighs the potential benefit to the plaintiff. See Id. (finding action to frustrate

reorganization because detriment to debtor was significant and benefit to plaintiff was minimal);

In re Telegroup, Inc., 237 B.R. 87, 92-3 (Bankr. D.N.J. 1999) (same).

In Television Studio, the plaintiff sought to commence an action for an injunction as well

as damages based upon alleged copyright infringement. 77 B.R. at 412. The debtor requested

that the court exercise its equitable power and stay the plaintiff’s action pursuant 28 U.S.C. §

959(a). Id. at 412. The court held that it would stay plaintiff’s action because the action would

frustrate the reorganization of the debtor’s estate. Id. at 413. In reaching its holding, the court

Team P32

34

observed that the potential detriment to the debtor was significant because the debtor’s

reorganization plan included two related debtors that may also be harmed, and the estate “would

be forced to incur the expense of special counsel at a time when it can ill afford to.” Id.

However, the court found the potential benefit to the plaintiff to be minimal because the

immediate commencement of an infringement action was not essential and any prejudice

experienced by the plaintiff resulting from a delay in obtaining an injunction would be small and

easily redressed by an award of damages. Id.

Similarly, a court will find an action to frustrate reorganization if there is no future risk of

patent infringement, and initiation of the action would delay reorganization for an indefinite

period of time. Telegroup, 237 B.R. at 92-3. In Telegroup, plaintiff brought an action seeking to

enjoin debtor’s post-petition patent infringement pursuant to section 959(a). Id. at 88. The court

held that the action frustrated reorganization because the benefit to the plaintiff was minimal and

was significantly outweighed by the potential detriment to the debtor’s estate. Id. at 96. The

court reasoned that the benefit to the plaintiff was minimal because the equipment the debtor

used to commit the infringement was sold—thus, no risk of future infringement. In addition, the

potential detriment to the debtor’s estate was significant because the estate was in liquidation and

the action would forestall the distribution of assets for a potentially indefinite period of time. Id.

at 90.

In this case, Plum’s action to enjoin Singsong from post-petition infringement does not

embarrass reorganization because its benefit to Plum is not substantially outweighed by its

detriment to Singsong. The common thread running through Television Studio and Telegroup is

that the actual benefit to the person or company that commenced the action was relatively

minimal. Specifically, in Telegroup “the injunction was not necessary because there was no

Team P32

35

future risk of patent infringement,” and in Television Studio the “immediate commencement of

the action was not necessary because any prejudice caused by delay would be small.” Unlike

these cases, the action’s benefit to Plum is substantial because without this injunction, Singsong

will actively continue to infringe upon Plum’s patent rights, and due to the nature of patent

infringement, the injury to Plum caused by delay would be irreparable. Thus, the benefit Plum

will receive by the action is very substantial.

Furthermore, the detriment to Singsong is minimal in comparison to Television Studio

and Telegroup. Unlike Television Studio, Plum’s action only seeks an injunction, rather than an

injunction and damages, which will significantly reduce the time and costs associated with

defending the suit. Also, unlike the debtor in Telegroup, Singsong is not a liquidating Chapter

11, thus Plum’s action will not harm Singsong’s estate or other creditors by indefinitely

forestalling the distribution of assets. Thus, the action does not frustrate reorganization because

the minimal potential detriment to Singsong does not substantially outweigh the significant

benefit to Plum. Therefore, Plum’s action satisfies the elements of section 959(a) because the

action concerns Singsong’s unlawful uses of estate property, and the action does not frustrate the

reorganization of Singsong’s estate.

CONCLUSION

THEREFORE, this Court should reverse the decision of the Thirteenth Circuit Court of

Appeals.

/s/ Team P32 , Counsel for Petitioner, PLUM, INC.

Team P32

I

APPENDIX A 11 U.S.C. § 101. Definitions

(10) The term “creditor” means—

(A) entity that has a claim against the debtor that arose at the time of or before

the order for relief concerning the debtor;

Team P32

II

APPENDIX B 11 U.S.C. § 301. Voluntary cases (a) A voluntary case under a chapter of this title is commenced by the filing with the

bankruptcy court of a petition under such chapter by an entity that may be a debtor under such chapter.

Team P32

III

APPENDIX C 11 U.S.C. § 362. Automatic stay (a) Except as provided in subsection (b) of this section, a petition filed under section

301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of-- (1) the commencement or continuation, including the issuance or employment

of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

. . .

(3) any act to obtain possession of property of the estate or of property from

the estate or to exercise control over property of the estate; . . . (f) Upon request of a party in interest, the court, with or without a hearing, shall grant

such relief from the stay provided under subsection (a) of this section as is necessary to prevent irreparable damage to the interest of an entity in property, if such interest will suffer such damage before there is an opportunity for notice and a hearing under subsection (d) or (e) of this section.

Team P32

IV

APPENDIX D 11 U.S.C. § 365. Executory contracts and unexpired leases (a) Except as provided in sections 765 and 766 of this title and in subsections (b), (c),

and (d) of this section, the trustee, subject to the court's approval, may assume or reject any executory contract or unexpired lease of the debtor.

. . . (f) (1) Except as provided in subsections (b) and (c) of this section, notwithstanding a

provision in an executory contract or unexpired lease of the debtor, or in applicable law, that prohibits, restricts, or conditions the assignment of such contract or lease, the trustee may assign such contract or lease under paragraph (2) of this subsection.

(2) The trustee may assign an executory contract or unexpired lease of the debtor only if--

(A) the trustee assumes such contract or lease in accordance with the

provisions of this section; and (B) adequate assurance of future performance by the assignee of such contract

or lease is provided, whether or not there has been a default in such contract or lease.

Team P32

V

APPENDIX E 11 U.S.C. § 524. Effect of discharge (a) A discharge in a case under this title-- . . .

(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived; and

Team P32

VI

APPENDIX F 28 U.S.C. § 959. Trustees and receivers suable; management; State laws (a) Trustees, receivers or managers of any property, including debtors in possession,

may be sued, without leave of the court appointing them, with respect to any of their acts or transactions in carrying on business connected with such property. Such actions shall be subject to the general equity power of such court so far as the same may be necessary to the ends of justice, but this shall not deprive a litigant of his right to trial by jury.