IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
|DO NOT PUBLISH
This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
PARKER ELECTRIC, INC., No. 95-12959
PARKER ELECTRIC, INC.,
v. A.P. No. 96-1037
STATE OF CALIFORNIA, et al.,
Memorandum of Decision
Parker Electric, Inc., is a Chapter 11 debtor in possession. It is a subcontractor on a jail
improvement project in Del Norte County, California. The general contractor is Mark
The general contract between Diversified and the county requires Diversified and its
subcontractors to pay prevailing union wages to their employees. Parker allegedly does not pay
such wages. Accordingly, after Parker filed its Chapter 11 petition and allegedly with knowledge
of the filing the California Department of Industrial Relations Division of Labor Standards issued
a Notice of Penalty Assessment and a Notice to Withhold to Del Norte County. The notice
directed the County to Withhold payments due to Diversified on account of penalties assessed
for failure of Parker to pay union wages. Parker was expressly named in the notice and served
by the State.
By this adversary proceeding, Parker seeks injunctive relief and damages for violation of the
automatic stay. Now before the court is its request for temporary injunctive relief against the
State and Diversified.
The State has violated the automatic stay by issuing its notices. Even if the notices were
directed only against the County or Diversified, an action against a third party which has a direct
and foreseeable adverse effect on a debtor is a violation of the automatic stay. In re 48th Street
, 835 F.2d 427 (2nd Cir.1987). Since Parker was named in the notices and
served, the violation is even clearer. There is no requirment in 11 U.S.C section 362(a)(1) that
the subject of any administrative or judicial action be property of the estate. The Notice of
Penalty Assessment and the Notice to Withhold are accordingly void. In re Schwartz
, 954 F.2d
569 (9th Cir.1992).
The court suspects, without so holding, that upon request the court will allow the State to
issue a valid Notice to Withhold; Parker probably has no enforceable right to the withheld funds.
See In re Pacific Marine Dredging and Const.
, 79 B.R. 924 (Bkrtcy. D.Ore.1987). The court
may well allow Diversified to set off its penalties against sums it owes Parker if it incurred the
penalties as a result of Parker's breach of contract. However, these issues are not now before the
court. The State and Diversified both have a simple, speedy method of obtaining relief from the
broad sweep of the automatic stay. They are not free to employ self-help and post hoc
justification. In re Computer Communications, Inc.
, 824 F.2d 725, 731 (9th Cir. 1987).
For the foregoing reasons, the court will issue a preliminary injunction barring the State from
enforcing its void notices and prohibiting it from issuing new ones without obtaining relief from
the automatic stay. Diversified will be enjoined from setoff without obtaining relief from the
Counsel for Parker shall submit an appropriate form of injunction.
Dated: March 11, 1996 _______________________