Restructuring

Contributed by Elisa Lemmer
Thanksgiving is the quintessential American holiday. Many go to great lengths to ensure that their Thanksgiving dinner table is replete with all of the traditional Thanksgiving fare: turkey, stuffing, yams covered in marshmallow, and cranberry sauce. While some folks are perfectly happy to buy a pre-made Thanksgiving meal, others must make all of their Thanksgiving fare themselves. If you are someone who likes to grow your own cranberries before serving them on your Thanksgiving table, let the Western District of Washington’s decision earlier this year in In re Kelly remind you that if the cranberries you seek to harvest are located on a debtor’s farm, your attempt to take them will be a violation of the automatic stay.
Secured Creditor Is “Bogged” Down with Cranberry Woes
In 2012, Northwest Farm Credit Services, FLCA (a secured creditor in the debtor’s bankruptcy case) filed a motion pursuant to which it asked the court, among other thing, to find James O’Hagan and his “agents” in contempt for their ongoing violations of the automatic stay and to enjoin them from taking any further action against the debtor’s cranberry farm. It appeared that James O’Hagan had been, to put it mildly, trying to access and gain control of the cranberry farm.
In the motion, Northwest Farm alleged that O’Hagan believed there was a “massive criminal conspiracy against him” by “federal judges, numerous attorneys, the deceased debtor, and anyone else who might stand in the way of the Kelley Cranberry Farm.” Northwest Farm asserted a senior lien on the property and, more importantly, noted that the farm was property of a debtor whose bankruptcy case was pending. The motion detailed O’Hagan’s penchant for litigation in violation of the automatic stay and stated that “O’Hagan, along with his agents…are hell bent on continuing to interfere with the administration of the assets of this estate most principally the Kelley Cranberry Farm.” The motion was served on James O’Hagan, who (coincidentally) happened to reside on Cranberry Road. You can’t make this stuff up!
Bankruptcy Court Finds Motion “Berry” Compelling
The bankruptcy court held a hearing on the motion and found that the Kelley Cranberry Farm, along with its crops, fixtures, contract rights and the proceeds thereof were property of the debtor’s estate, subject to the automatic stay provisions of section 362 of the Bankruptcy Code. It also found that O’Hagan and his agent had violated the automatic stay through the actions they had taken on the farm. Although the bankruptcy court did not specifically say so, it implied that O’Hagan’s violation of the automatic stay had to do with his efforts to harvest the cranberries located on the debtor’s property and ordered O’Hagan, among other things, to remove the harvesting equipment placed on the farm. It also ordered O’Hagan and his agents to show cause as to why sanctions for contempt should not be awarded to Northwest Farm and the chapter 7 trustee in the case. On November 1, 2012, the bankruptcy court entered an order of contempt against O’Hagan and his agents, and O’Hagan appealed the bankruptcy court’s decision to the district court.
District Court “Berries” the Hatchet…Sort Of
On appeal, the district court reviewed the bankruptcy court’s contempt order for abuse of discretion and found that the court had not abused its discretion. The district court noted that O’Hagan and his agents had willfully violated the automatic stay when they took control of the farm and attempted to harvest cranberries on the property. Consequently, the court affirmed the bankruptcy court’s decision and dismissed the appeal.
Conclusion
We will never know whether the bankruptcy court’s order prevented O’Hagan from serving home-grown cranberries at his Thanksgiving table in 2012. Perhaps that year, he was forced to serve the canned kind. What we do know is that, after reading about the Kelly decision, you’ll be looking at the cranberries on your Thanksgiving table tomorrow in a “berry” different light. We wish you and your families a happy and healthy holiday. We’ll be back on Monday!