Bkr. Case No. 08-32072 Chapter 7
Hon. Norman A. Mordue, Chief U.S. District Judge
MEMORANDUM-DECISION AND ORDER
Robert V. Case ("appellant"), the debtor in the underlying Chapter 7 bankruptcy case, appeals from an Order of United States Bankruptcy Judge Margaret Cangilos-Ruiz granting the motion of the United States to modify the automatic stay to allow tax-related actions in district court to proceed. As set forth below, this Court denies the appeal and affirms the order.
Appellant filed his Chapter 7 bankruptcy petition on August 11, 2008. Pursuant to 11 U.S.C. § 362(a) this filing automatically operated to stay the United States's continued prosecution of three proceedings against appellant in the Northern District of New York: a civil action to reduce unpaid internal revenue tax liabilities to judgment, United States of America v. Robert V. Case, No. 06-CV-570 (N.D.N.Y.); and two proceedings to enforce Internal Revenue Service summonses, United States v. Case., No. 1:05-MC-76, and United States v. Case, No 1:05- MC-80.
On November 21, 2008, the United States moved the bankruptcy court for an order modifying the automatic stay to permit it to continue with its prosecution of these three proceedings and for related relief. On December 18, 2008, after a hearing, Judge Cangilos-Ruiz granted the motion and entered the order now on appeal.
The filing of a Chapter 7 bankruptcy petition operates to stay, inter alia, the commencement or continuation of actions and proceedings against the debtor. See 11 U.S.C. § 362(a). On motion, after notice and a hearing, the bankruptcy court may grant relief from the stay "for cause." 11 U.S.C. § 362(d)(1). The decision of whether to grant such relief is committed to the discretion of the bankruptcy judge. See In re Sonnax Industries, Inc., 907 F.2d 1280, 1286.
Thus, this Court may overturn a ruling on a motion to lift the automatic stay only upon a showing of abuse of discretion. Id.
The Sonnax court listed the factors to be weighed in deciding whether to grant relief from the stay "for cause" under 11 U.S.C. § 362(d)(1) as follows.
These are (1) whether relief would result in a partial or complete resolution of the issues; (2) lack of any connection with or interference with the bankruptcy case; (3) whether the other proceeding involves the debtor as a fiduciary; (4) whether a specialized tribunal with the necessary expertise has been established to hear the cause of action; (5) whether the debtor's insurer has assumed full responsibility for defending it; (6) whether the action primarily involves third parties; (7) whether litigation in another forum would prejudice the interests of other creditors; (8) whether the judgment claim arising from the other action is subject to equitable subordination; (9) whether movant's success in the other proceeding would result in a judicial lien avoidable by the debtor; (10) the interests of judicial economy and the expeditious and economical resolution of litigation; (11) whether the parties are ready for trial in the other proceeding; and (12) impact of the stay on the parties and the balance of harms.
Id. The initial burden to show cause to modify the stay is on the movant; if movant meets this burden, the burden then shifts to the debtor to establish he is entitled to continued protection.
THE BANKRUPTCY COURT ORDER
At the December 18, 2008 hearing on the government's motion to modify the stay, Judge Cangilos-Ruiz placed on the record her consideration of each of the 12 Sonnax factors. Judge Cangilos-Ruiz found that factors 1 and 2 did not weigh against modifying the stay, and factor 3 was inapplicable. Factor 4, she found, weighed in favor of modifying the stay. In this respect, she noted that, although there was no specialized tribunal to hear the matters currently pending in district court, allowing the matters to proceed in district court was advantageous because "one of these [district court] actions was commenced in 2006," "there's some history [in district ...