Butler et al v. City of Chicago

Filing 24

MEMORANDUM Opinion and Order: The Bankruptcy Court's September 19, 2023 Ruling is affirmed in part and reversed in part. The Ruling is affirmed as to Appellants' Section 542 claim but reversed as to Butler's Section 362 claims. The case is remanded for proceedings consistent with this opinion. Civil case terminated. Signed by the Honorable Sharon Johnson Coleman on 5/24/2024. Mailed notice. (ym)

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re:
ADRIENNE L. BUTLER,

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Debtor.
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_________________________________________ )
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ADRIENNE L. BUTLER and
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JUAN J. JACKSON,
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Plaintiffs / Appellants,
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v.
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CITY OF CHICAGO,
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Defendant / Appellee.
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Bankruptcy No. 17 B 25014
Adv. No. 22 A 189
Judge David D. Cleary

Case No. 23-cv-14117
Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER
Before the Court is Appellants Adrienne Butler and Juan Jackson’s appeal of the Bankruptcy
Court’s September 19, 2023 Ruling dismissing their adversary proceeding against the City of Chicago
(the “City”). After reviewing the briefs and hearing both parties at oral argument, the Court affirms
in part and reverses in part the Bankruptcy Court’s ruling.
BACKGROUND
Appellants lived together in Chicago as boyfriend and girlfriend. At the beginning of the
bankruptcy proceedings, Jackson was the registered owner of a 2004 GMC Yukon XL (“Yukon”).
Jackson allowed Butler to drive the Yukon to school and work daily. The City cited the Yukon with
numerous parking tickets. 1 Eventually, the City impounded the Yukon based on the couple’s failure
to pay those parking tickets.
It is unclear whether Jackson, Butler, or both received the tickets. It is also unclear whether the City
considered the ticket debt owed by Jackson (the Yukon’s owner) or both parties. In any case, these
distinctions do not matter to this appeal. The Court will proceed as if the couple owed the debt together.

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The proceedings in the Bankruptcy Court began on March 31, 2017, when Jackson filed for
Chapter 13 bankruptcy relief (the “Jackson 2017 Case”). Jackson listed the Yukon on the Schedule
B to the Jackson 2017 Case. Jackson also informed the City of the Jackson 2017 Case filing. Even
so, on August 17, 2017, the City impounded the Yukon and claimed a possessory lien against it.
Jackson demanded the City release the Yukon the next day, but the City refused to return it until the
parking tickets were paid.
Four days after the City impounded the Yukon, on August 21, 2017, Butler filed her own
Chapter 13 bankruptcy case (the “Butler 2017 Case”). She did not list the Yukon on her Schedule B
but listed the City on Schedule F with a claim against her for $2,500 in “tickets.” After Butler’s
filing, she and Jackson both demanded the City release the Yukon. The City again refused to release
the Yukon until $2,600 2 in parking ticket debt was paid. The City did not seek approval from the
bankruptcy court for its refusal to release the Yukon, nor for its demand of payment. Two days
after filing the Butler 2017 Case, Butler moved to voluntarily dismiss it. The presiding court closed
the Butler 2017 Case on October 3, 2017.
After the City refused to release the Yukon the second time, Appellants paid the City $2,600
and the City turned over the vehicle. Appellants split the cost. Butler claims the City’s conduct
caused her to lose wages, and both Appellants vaguely claim it caused them other damages.
On April 4, 2018, the Trustee in the Jackson 2017 Case filed a motion to dismiss the case
based on a failure to make plan payments. The bankruptcy court granted the motion and ultimately
closed the case on June 26, 2018. Years later, on November 26, 2022, Butler and Jackson filed the
complaint that began this adversary proceeding. Appellants sought relief on four causes of action
brought under the following sections of the Bankruptcy Code: 11 U.S.C. §§ 362(a)(2), (a)(4), (a)(6),
and § 542. After Appellants amended their adversary-proceeding complaint, the City moved to
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Butler apparently listed the claim against her as $100 less than the City insisted the couple owed.

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dismiss. The Bankruptcy Court granted the City’s motion in a 12-page written decision and
dismissed the adversary proceeding. (Dkt. 1-5, the “Bankr. Op.”)
On December 8, 2022, after filing the adversary proceeding, Butler filed another case in
bankruptcy court (the “Butler 2022 Case”). The Butler 2022 Case is the only bankruptcy case that
remains open.
LEGAL STANDARD
Federal district courts have jurisdiction over appeals from final orders of bankruptcy courts
pursuant to 28 U.S.C. § 158(a)(1). “A final resolution of any adversary proceeding is appealable, as it
is equivalent to a stand-alone lawsuit.” Fifth Third Bank, Indiana v. Edgar Cnty. Bank & Tr., 482 F.3d
904, 905 (7th Cir. 2007) (citations omitted). Review of a bankruptcy court’s dismissal of an
adversary complaint is de novo. In re Consol. Indus., 360 F.3d 712, 716 (7th Cir. 2004).
DISCUSSION
1. Section 542
The Bankruptcy Court’s analysis of Appellants’ Section 542 claim is somewhat complicated.
Because Appellants’ request for recovery under Section 542 was “muddled,” the Bankruptcy Court
addressed two possible legal theories: (1) a request that the court order the City to turnover the
Yukon under Section 542 or hold the City in contempt for failing to do so (“Turnover Theory”);
and (2) a request for an accounting under Section 542 for the value of the loss caused by the City’s
actions, since the City had already turned over the Yukon at the time of the dispute (“Accounting
Theory”). 3 (See Bankr. Op. at 7–11.)
Both parties and the Bankruptcy Court seem to agree that an adversary proceeding would be
the proper procedure through which to prosecute an action for turnover of the Yukon itself under

The Court uses the terms “Turnover Theory” and “Accounting Theory” for ease of reference to the
Bankruptcy Court’s reasoning, but neither theory is limited to the relief its name suggests.

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the Turnover Theory. (See, e.g., Bankr. Op. at 9 (citing Matter of Perkins, 902 F.2d 1254, 1258 (7th Cir.
1990) (“A turnover action is an adversary proceeding which must be commenced by a properly filed
and served complaint.”)).) But the Bankruptcy Court quickly and correctly disposed of that theory
because, as all agree, “the City has already given [Appellants] the Yukon.” (Id.)
The bankruptcy court construed the only possible remaining relief under the Turnover
Theory as a contempt proceeding. That is, if Appellants sought turnover of the Yukon itself but
had already received the Yukon, the Bankruptcy Court may be able to provide “relief [through] a
finding of contempt for the City’s failure to comply with § 542 and to turn over the Yukon
immediately.” (Id.) Under this form of the Turnover Theory, the bankruptcy court held that such a
claim must be brought by motion under Local Bankruptcy Rule 9020-1 rather than adversary
proceeding. (Id. at 8–10.)
Having disposed of the Turnover Theory, the Bankruptcy Court turned to the Accounting
Theory. Importantly, the Bankruptcy Court’s analysis on this theory did not turn on the distinction
between a contested motion and an adversary proceeding. Instead, the Bankruptcy Court dismissed
the Accounting Theory on the merits based on 11 U.S.C. § 349(b). It construed the Accounting
Theory as seeking at least the value of “delay in time between [Appellants’] demand for turnover and
the time the City returned the vehicle,” noting that the Supreme Court has recognized the
requirement that an entity account for the value of property that is damaged or lost. (Id. at 10 (citing
City of Chicago, Illinois v. Fulton, 592 U.S. 154, 141 S. Ct. 585, 591 (2021).) The court then agreed with
the City that “when the court dismissed [Appellants’] bankruptcy cases, § 349 ‘relieved the City of
any duty under § 542 that may have existed during the case.’” (Id. at 10 (citations omitted).)
Appellants confuse the Bankruptcy Court’s ruling on appeal. Even when pressed at oral
argument, Appellants were unclear about their requested relief; they seem to seek some value related
to the Yukon (though not the Yukon itself) and lost wages while it was impounded. Appellants
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unequivocally do not seek a contempt finding. In other words, Appellants confirm they seek relief
under the Accounting Theory. But Appellants did not challenge the Bankruptcy Court’s ruling that
their Accounting Theory failed on the merits. Instead, they challenge only the Bankruptcy Court’s
reasoning on the Turnover Theory, which is the relief that they disclaim.
This mismatch presents a problem for Appellants’ Section 542 appeal. Even if the Court
were to agree that the Bankruptcy Court’s analysis on the Turnover Theory was wrong, Appellants
would not obtain the remedy they seek, i.e., relief under the Accounting Theory, because the
Bankruptcy Court dismissed that theory on its merits. Appellants have thus waived a challenge to
the portion of the ruling dismissing the only relief they seek on appeal. See Edwards v. Obadina, 413
F. App’x 897, 898 (7th Cir. 2011) (finding waiver where appellant “raise[d] no argument challenging
the dismissal of his complaint for failure to state a claim”); Duncan v. State of Wis. Dep’t of Health &
Fam. Servs., 166 F.3d 930, 934 (7th Cir. 1999) (“a party must develop any arguments it wishes this
court to consider in its appellate brief, or they will be deemed waived or abandoned”). The Court
therefore affirms the Bankruptcy Court’s Section 542 ruling.
2. Section 362
The Bankruptcy Court held that Butler, the only appellant who seeks relief under 11 U.S.C.
§ 362, needed to bring her Section 362 claims by contested motion rather than adversary proceeding
and dismissed the claims as improperly before the court. This Court disagrees and reverses.
Section 362 provides that a petition filed under certain sections of the Bankruptcy Code
“operates as a stay, applicable to all entities,” barring various enumerated actions. 11 U.S.C.
§ 362(a). Butler alleges that the City violated three subsections of this “automatic stay” provision,
Sections 362(a)(2), (a)(4), and (a)(6). All those subsections are enforced through Section 362(k),
which provides that “an individual injured by any willful violation of a stay provided by this section
shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances,
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may recover punitive damages.” 11 U.S.C. § 362(k). The issue presented here is whether Butler may
prosecute these claims through adversary proceeding, as she attempted below, or only through a
contested motion in the bankruptcy court.
“All disputes in bankruptcy are either adversary proceedings or contested matters.” Matter of
American Reserve Corp., 840 F.2d 487, 488 (7th Cir. 1988). As the Bankruptcy Court noted, “adversary
proceedings [] are essentially lawsuits brought within a bankruptcy case,” Bankr. Op. at 5, and they
are limited to those ten enumerated proceedings identified in Fed. R. Bankr. P. 7001. 4 The
Bankruptcy Court first explained that “[a] request for an award of damages under § 362(k) is not one
of the ten enumerated matters that Rule 7001 requires to be brought by adversary proceeding.”
Bankr. Op. at 6. That interpretation, however, is not self-evident from the text of Rule 7001. For
example, another bankruptcy court in this circuit reached the opposite conclusion:

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Fed. R. Bankr. P. 7001’s ten enumerated proceedings are:

(1) a proceeding to recover money or property, other than a proceeding to compel the debtor to deliver
property to the trustee, or a proceeding under § 554(b) or § 725 of the Code, Rule 2017, or Rule 6002;
(2) a proceeding to determine the validity, priority, or extent of a lien or other interest in property, but not a
proceeding under Rule 3012 or Rule 4003(d);
(3) a proceeding to obtain approval under § 363(h) for the sale of both the interest of the estate and of a coowner in property;
(4) a proceeding to object to or revoke a discharge, other than an objection to discharge under §§ 727(a)(8),
(a)(9), or 1328(f);
(5) a proceeding to revoke an order of confirmation of a chapter 11, chapter 12, or chapter 13 plan;
(6) a proceeding to determine the dischargeability of a debt;
(7) a proceeding to obtain an injunction or other equitable relief, except when a chapter 9, chapter 11, chapter
12, or chapter 13 plan provides for the relief;
(8) a proceeding to subordinate any allowed claim or interest, except when a chapter 9, chapter 11, chapter 12,
or chapter 13 plan provides for subordination;
(9) a proceeding to obtain a declaratory judgment relating to any of the foregoing; or
(10) a proceeding to determine a claim or cause of action removed under 28 U.S.C. § 1452.

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Bankruptcy Rule 7001 specifies the types of disputes that must be litigated as adversary
proceedings. Among them are proceedings to recover money or property and
proceedings to obtain injunctive or other equitable relief. Bankr. Rules 7001(1) & (7).
This is the type of relief that is almost always sought by proceedings seeking to remedy
a claimed violation of the automatic stay.
Matter of Rimsat, Ltd., 208 B.R. 910, 913 (Bankr. N.D. Ind. 1997). More recently, a court in this
district held that a claim for injunctive relief and damages under § 362 “must be brought by way of an
adversary proceeding” under Rule 7001. In re Collum, 649 B.R. 186, 196 (Bankr. N.D. Ill. 2023).
Beyond the statutory text, the Bankruptcy Court relied on Matter of Smith, 111 F.3d 133 (7th
Cir. 1997) (unpublished), and In re Sori, 513 B.R. 728, 732 n. 2 (Bankr. N.D. Ill. 2014), to support
that “a request made under § 362(k) must be brought by motion.” Bankr. Op. at 6. The City relies
on these same cases on appeal. Matter of Smith, however, cannot be read so broadly. Setting aside
that this opinion is unpublished and nearly 30 years old, the Seventh Circuit simply did not analyze
whether claims to recover damages and other relief under Section 362 could be brought by adversary
proceeding. Instead, and in the context of addressing personal jurisdiction, the court analyzed what
service of process was required to proceed with a motion for sanctions under § 362(h) (the previous
codification of § 362(k)). See Matter of Smith, 111 F.3d 133. The court explained that “[a] motion for
sanctions under § 362(h) is a contested matter that is governed by Bankruptcy Rule 9014,” id.
(emphasis added), but said nothing about whether a request for damages and other relief could be
brought as an adversary proceeding instead of a contested motion.
In re Sori likewise does not support the conclusion that actions under § 362(k) must be
brought by contested motion. The creditor in Sori “argue[d] that the relief requested by the Debtor
in [its Section 362 sanctions motion] cannot be granted because procedurally she should have filed
an adversary proceeding.” 513 B.R. at 732 n. 2. The court rejected that argument and “follow[ed]
the cases that hold that damages requested for a stay violation may be recovered by motion as a
contested matter.” Id. (emphasis added). But just because a debtor may seek relief under Section
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362 through a contested motion does not mean a debtor may not seek relief through an adversary
proceeding. It is true that “[a]ll disputes in bankruptcy are either adversary proceedings or contested
matters,” American Reserve Corp., 840 F.2d at 488, but it does not follow that relief under Section 362
can only be pursued through one procedure and not the other. It is equally plausible to read Rule
9014 as merely providing a default procedure for contested matters that are not brought under
another section of the Code. As explained below, courts have held that both avenues are open to
claims for relief under Section 362 depending on the circumstances.
Appellants, on the other hand, rely on Price v. Rochford, 947 F. 2d 829, 831 (7th Cir. Cir. 1991)
to support their position that “the debtor [can] proceed by complaint in the district court to seek
monetary damages for alleged violations of the automatic stay.” (Dkt. 11 at 7.) Proceeding by
complaint in the district court, though, is not necessarily the same as proceeding by adversary
proceeding in the bankruptcy court. The Price court did not answer the question of whether an
action for damages for violation of an automatic stay must be brought as a contested motion or
adversary proceeding—indeed, it opined on potential procedural issues in a footnote but noted that
“[n]one of the parties have questioned the propriety of bringing the case in the district court [] and
the defect is not jurisdictional.” Id. at 832 n. 1.
The parties otherwise cite no cases that are binding on this Court. Appellants’ cases, though
not binding, support their position. See, e.g., In re Dean, 359 B.R. 218, 222 (Bankr. C.D. Ill. 2006)
(holding that allegations of actual and punitive damages for violation of an automatic stay are
“sufficient to bring the claims within the purview of [an adversary proceeding under] Rule 7001(1)”);
Collum, 649 B.R. at 196 (same for claims for damages and injunctive relief). The City’s authority is
more dubious. For instance, the City cites In re Ballard, 502 B.R. 311, 313 (Bankr. S.D. Ohio 2013),
for the “majority position” that “relief under § 362(k) must be pursued by motion and not adversary
proceeding.” (Dkt. 13 at 9.) But the City misstates Ballard’s holding.
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The City ignores essential language in the decision: “While the court finds that damages for
violation of the stay may be pursued through a motion as a contested matter, the court also finds it
acceptable to pursue such relief through an adversary proceeding if the debtor or other party seeking
such relief proceeds in that manner.” Id. at 323 n. 14. The City’s misstatement may have been
inadvertent, but the City spent two pages of its brief focused on the Ballard opinion. Contrary to
that argument, Ballard severely undermines the City’s case. Ballard is a well-reasoned and wellresearched opinion finding Appellants’ position “acceptable.” Ballard aligns with the City’s other
supposedly supportive cases that, when properly read, hold only that pursuing Section 362 claims by
contested motion is permissible, not necessarily mandatory.
Worse yet, the City declines to even address Collum, which is nearly identical to this case (and
which was litigated by the same attorneys litigating this case). In Collum, the Chapter 13 debtor
brought a Section 362 adversary proceeding to recover damages and injunctive relief after the City
impounded his car for unpaid parking tickets despite notice of his bankruptcy. 649 B.R. at 191. The
City argued that the debtor’s claim had to be pursued through contempt proceedings rather than
adversary proceedings. Id. at 195. The Court rejected that argument on numerous grounds. The
Court noted, as is the case here, “the Complaint does not rely on contempt. . . . Instead, the
Complaint asks for injunctive relief and damages for the actions it attributes to the City.” Id.
Applying Rule 7001, the court held that “such a request must be brought by way of an adversary
proceeding.” Id. at 196 (noting that “even where the Bankruptcy Rules appear to require a party to
act other than by an adversary proceeding, the Rules themselves both allow for optionality”).
This Court finds the reasoning in cases like In re Collum, In re Dean, and Matter of Rimsat
persuasive. There is no need to torture the language of the statutory provisions at issue, nor to
resort to arguments about legislative history and purpose. The plain language of Section 362 and
Rule 7001 is clear. Section 362 gives parties injured by a willful automatic stay violation a right to
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“recover actual damages,” costs, attorneys’ fees, and in some cases “punitive damages.” 11 U.S.C.
§ 362(k)(1). Section 362 itself operates as a sort of automatic injunction, because the mere filing of a
petition “operates as a stay” of certain actions against the debtor. 11 U.S.C. § 362(a). Rule 7001
provides that “a proceeding to recover money or property,” or to “obtain an injunction or other
equitable relief” is an “adversary proceeding.” Fed. R. Bankr. P. 7001(1), (7).
Butler seeks to recover money (in the form of damages) and “whatever additional relief is
just and proper”—that is, equitable relief—based on a violation of Section 362’s automatic
injunction against the City. She therefore properly sought to “recover money” or “other equitable
relief” through an adversary proceeding under Rule 7001. As the Ballard court explained, it was
“acceptable,” even if not mandatory, for Butler “to pursue such relief through an adversary
proceeding.” Id. at 323 n. 14. “The focus of the court with respect to the choice of procedure—
whether contested matter or adversary proceeding—should simply be to ensure that due process is
observed. As long as due process is observed, the procedural mechanism through which the relief is
sought may be left to the party seeking the relief.” Id. The Bankruptcy Court’s ruling dismissing
Butler’s Section 362 claims is therefore reversed.
CONCLUSION
For these reasons, the Bankruptcy Court’s September 19, 2023 Ruling is affirmed in part and
reversed in part. The Ruling is affirmed as to Appellants’ Section 542 claim but reversed as to
Butler’s Section 362 claims. The case is remanded for proceedings consistent with this opinion.
IT IS SO ORDERED.
Date: 5/24/2024

Entered:
_____________________________
SHARON JOHNSON COLEMAN
United States District Judge

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