Brock v. Morysville Body Works, Inc. 829 F.2d 383

OPINION OF THE COURT

BECKER, Circuit Judge.

This petition by the Secretary of Labor, seeking summary enforcement of an uncontested Occupational Safety and Health Administration citation against Morysville Body Works, Inc. (Morysville), a Chapter 11 debtor, presents three issues. We must first decide if we have jurisdiction over this petition, as against the contention that only the Bankruptcy Court (as surrogate for the District Court) has jurisdiction. We conclude both that we have concurrent jurisdiction with the Bankruptcy Court and that we should exercise that jurisdiction over the instant petition. Second, we must decide whether we have jurisdiction to determine issues concerning the applicability of the automatic bankruptcy stay. We also find that we share concurrent jurisdiction with the bankruptcy court over this issue and that we should decide it. Finally, we must determine the effect, if any, that the automatic bankruptcy stay has on the Secretary’s petition. We conclude that, although the stay prevents us from enforcing the petition with regard to the fine required by the citation, it does not extend to that portion of the citation that orders abatement of health and safety violations, and for that portion of the citation, we grant the Secretary’s petition for enforcement.

I. FACTS AND PROCEDURAL HISTORY

On August 3, 1984 Morysville filed for reorganization under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101, in the United States District Court for the Eastern District of Pennsylvania. During the reorganization, Morysville continued operating its truck body manufacturing plant in Boyertown, Pennsylvania. On September 17, 1985 a representative of the Secretary of Labor conducted a health and safety inspection of the Morysville work site. The inspection revealed that Morysville had failed to provide its employees with an eye wash, had not affixed point-of-operation guards on certain machinery, had failed to provide goggles or shields for employees, *385and had neglected to repair certain electrical equipment. The Secretary subsequently issued a citation charging Morysville with five violations of safety and health standards promulgated under the Occupational Safety and Health Act (OSHA), 29 U.S.C. § 654(a)(2). The citation required Morysville to abate the violations; it also assessed a penalty of $21,000 against the company.

Morysville did not contest the citation within fifteen working days after it was issued. Therefore, on March 4, 1986, the citation became a final order of the Occupational Safety and Health Review Commission that is not reviewable by any court or agency. 29 U.S.C. § 659(a). The Secretary petitioned this Court for summary enforcement of this final order pursuant to 29 U.S.C. § 660. We in essence denied summary enforcement by setting the matter down for oral argument, and we now consider the Secretary’s Petition for Enforcement in light of that argument and the written submissions of the parties.

II. JURISDICTION

Our jurisdiction over this case must be assessed in light of both OSHA and the Chapter 11 petition filed by Morysville. Putting aside for the moment the bankruptcy of Morysville, we look to an OSHA provision, 29 U.S.C. § 660, as the source of our jurisdiction. By its terms, section 660(b) grants us original and exclusive jurisdiction. It provides that the Secretary may obtain “enforcement of any final order of the Commission by filing a petition for such relief in the United States court of appeals for the circuit in which the alleged violations occurred or in which the employer has its principal office____” 29 U.S.C. § 660(b). Section 660(b) also specifically incorporates § 660(a), which provides that “[ujpon the filing of the record with it, the jurisdiction of the court [of appeals] shall be exclusive1

We must also account for Morysville’s bankruptcy, however, to which the jurisdictional grant of 28 U.S.C. § 1334(b) applies. Section 1334(b) provides:

Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.

This court has defined “related to” as follows:

The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy____ An action is related to bankruptcy if the outcome could alter the debtor’s rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.

Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984); In re Bobroff, 766 F.2d 797, 802 (3d Cir.1985).

In the current case, enforcement of the Commission’s citations against Morysville will undoubtedly alter its liabilities and have an impact on the administration of the debtor’s estate. Enforcement will affect the arrangement, standing, and priorities of Morysville’s creditors. Since the estate of the debtor has an interest in the enforcement of the Secretary’s petition, it is “related to” a case under title 11.

Although section 1334(b) alters the effect of the jurisdictional grant of section 660(b) by expressly rendering it non-exclusive, it does not divest us of our jurisdiction. Rather, the effect of 28 U.S.C. § 1334(b) is to grant the district court overseeing the bankruptcy concurrent original jurisdic*386tion.2 We thus share concurrent original jurisdiction with the district court overseeing the petitioner’s bankruptcy, and because the instant enforcement petition was first filed with us, we must decide if we should defer to the district court in this matter.3

The purpose of both sections 660(b) and 1334(b) is the expeditious resolution of the controversy at hand. The legislative history of OSHA details this purpose. If an employer wishes to contest a citation, he has numerous procedures which may be followed; when a citation is not contested and has become final, however, the order is uncontestable and is to be entered as “an automatic court enforcement order” of the Court of Appeals. See S.Rep. No. 1282, 91st Cong., 2d Sess., reprinted in 1970 U.S.Code Cong. & Admin.News 5177, 5191; see also id. at 5211; H.R.Conf.Rep. No. 1765, 91st Cong., 2d Sess., reprinted in 1970 U.S.Code Cong. & Admin.News 5228, 5235. Because of the importance of providing a safe workplace for employees, Congress provided summary enforcement to allow the Secretary to expeditiously rectify workplace hazards.

The jurisdictional grant of section 1334(b) similarly exists to allow the expeditious resolution of bankruptcy claims. Transferring controversies that are related to the petitioner’s bankruptcy permits the district court to expeditiously complete the bankruptcy proceedings without the necessity of awaiting the outcome of state or federal trials. As the Senate detailed in its report,

This broad grant of jurisdiction will enable the bankruptcy courts, which are created as adjuncts to the district court for the purpose of exercising the jurisdiction, to dispose of controversies that arise in bankruptcy cases or under the bankruptcy code. Actions that formerly had to be tried in State court or in the Federal district court, at great cost and delay to the estate, may now be tried in the bankruptcy court.

S.Rep. No. 989, 95th Cong., 2d Sess. 153 (1978) reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5939; see also H.R.Rep. No. 595, 95th Cong., 2d Sess. 445 (1977), reprinted in 1978 U.S.Code Cong. & Admin. News 5963, 6400 (using similar language).

Given the reasons for these bases of jurisdiction, no purpose would be served if we were to defer to the district court for it to exercise the original, non-exclusive jurisdiction it shares with us. Transferring this petition would work contrary to the stated purpose of section 660(b) of OSHA. Rather than providing for expeditious enforcement, it would hinder the intended summary process. Moreover, the transfer is not necessary to the expeditious administration of the bankruptcy, the encouragement of which underlies the jurisdictional grant over proceedings related to the bankruptcy. Because no trial is required for this summary process, which is intended to be “automatic,” no delay is created from our exercise of our original, non-exclusive jurisdiction. Indeed, transfer could only occasion delay.4

We are cognizant of the countervailing argument against the exercise of our concurrent jurisdiction. Any order we may *387find enforceable would certainly have financial consequences for the distressed debtor, and it is the bankruptcy court that is familiar with the debtor’s affairs. However, if the debtor were truly threatened by the exercise of our jurisdiction, it could have sought a stay of these proceedings under 11 U.S.C. § 105(a). As one court of appeals has noted, “[t]o the extent that the exercise of this jurisdiction threatens the assets of the debtor’s estate, the bankruptcy court may issue a stay of those proceedings. 11 U.S.C. § 105(A).” Securities and Exchange Comm’n v. First Financial Group of Texas, 645 F.2d 429 (5th Cir. Unit A 1981).5

III. THE AUTOMATIC STAY

Having determined that this Court has jurisdiction to enforce the final order of the Commission, the question becomes whether the enforcement petition is stayed by the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362. The general rule under this section is that all non-bankruptcy proceedings against a Chapter 11 petitioner are automatically stayed upon the filing of a Chapter 11 petition. Two issues must be addressed in dealing with the automatic stay provision. Does the court of appeals — as opposed to the bankruptcy court — have jurisdiction to determine the applicability of the provision? If so, does the provision apply to the instant action?

A. JURISDICTION TO DETERMINE APPLICABILITY OF AUTOMATIC STAY

We have no difficulty deciding that we may determine the applicability of the automatic stay. As the Second Circuit has said, “[wjhether the stay applies to litigation otherwise within the jurisdiction of a district court or court of appeals is an issue of law within the competence of both the court within which the litigation is pending ... and the bankruptcy court supervising the reorganization.” In re Baldwin-United Corporation Litigation, 765 F.2d 343, 347 (2d Cir.1985). The court in which the litigation claimed to be stayed is pending thus “has jurisdiction to determine not only its own jurisdiction but also the more precise question whether the proceeding pending before it is subject to the automatic stay.” Id.; see also NLRB v. Edward Cooper Painting, Inc., 804 F.2d 934, 936, 938-39 (6th Cir.1986) (court of appeals has jurisdiction to determine whether the automatic stay applied to NLRB proceeding pending before it); Hunt v. Bankers Trust Co., 799 F.2d 1060, 1069 (5th Cir.1986) (court has jurisdiction to determine automatic stay provision’s applicability to case pending in Texas district court). Cf. EEOC v. Hall’s Motor Transport Co., 789 F.2d 1011,1013 (3d Cir.1986) (filing of bankruptcy petition does not act as automatic stay of suit under Title VII). Finding that we have jurisdiction to determine the applicability of the automatic stay provision to the pending petition for enforcement, we turn to the question whether the automatic stay provision applies to the instant action.

B. APPLICATION OF THE AUTOMATIC STAY

11 U.S.C. § 362, the automatic bankruptcy stay provision, generally stays the commencement or continuation of judicial proceedings against the debtor upon the filing of a Chapter 11 petition, including the en*388forcement of judgments.6 The section contains certain exceptions:

(b) The filing of a petition under section 301, 302, or 303 of this title ... does not operate as a stay—

(4) under subsection (a)(1) of this section, of the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit’s police or regulatory power;

(5) under subsection (a)(2) of this section, the enforcement of judgment, other than a money judgment, obtained in an action or proceeding by a governmental unit to enforce such governmental unit’s police or regulatory power[.]

11 U.S.C. § 362(b)(4), (5).

Because the Secretary had not commenced the instant proceeding before Morysville filed its petition, only paragraph (4) is implicated. The legislative history explains that paragraph (4) provides an exception to the automatic stay “where a governmental unit is suing a debtor to stop violation of fraud, environmental protection, consumer protection, safety, or similar police or regulatory laws, or attempting to fix damages for violation of such a law.” H.R.Rep. No. 595, 95th Cong., 2nd Sess. 343, reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6299 (emphasis supplied); see also S.Rep. No. 989, 95th Cong., 2nd Sess. 52, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5838. This court has therefore found that paragraph (4), together with paragraph (5), exempts from the automatic stay equitable actions brought by state and federal agencies to correct violations of regulatory statutes enacted to promote health and safety. See United States v. Wheeling-Pittsburgh Steel, 818 F.2d 1077 (3d Cir.1987); Penn Terra, Ltd. v. Department of Environmental Resources, 733 F.2d 267 (3d Cir.1984); see also Midlantic National Bank v. New Jersey Department of Environmental Protection, 474 U.S. 494, 106 S.Ct. 755, 761, 88 L.Ed.2d 859 (1986) (one of the purposes of paragraph (5) is to protect public health and safety).

There are two components to the citation for which the Secretary seeks summary enforcement. The citation orders Morysville to abate its continuing violations of OSHA. It also orders the debtor in bankruptcy to pay a fine of $21,000. In light of the principles applicable to governmental enforcement actions against bankrupt entities, we examine each of these components in turn to determine the respective applicability of the automatic stay.

1. Abatement Orders. In this case, the Secretary seeks enforcement of a final order that in part compels Morysville to abate certain safety violations by requiring the company to install an eye wash, affix point-of-operation guards on machinery, provide goggles or shields for employees, and repair certain electrical equipment. Remedying the stated violations will undoubtedly require Morysville to spend money, perhaps considerable sums, thereby significantly affecting the finances of the distressed corporation. The Secretary’s order, however, was meant to prevent future harm to employees and to restore the work site to a safe condition. This portion of the order is therefore fully prospective, see Penn Terra, 733 F.2d at 274-78; ITT Grinnell Corp. v. Donovan, 744 F.2d 344, 350 (3d Cir.1984), and we shall grant the petition insofar as it orders abatement of violations of the Occupational Safety and Health Act. Cf Wheeling-Pittsburgh, 818 F.2d at 1086-87 (3d Cir.1987); (bankruptcy no bar to prospective enforcement of Clean Air Act); In re: Commonwealth Oil Re*389fining Co., 805 F.2d 1175 (5th Cir.1986), cert, denied, — U.S.-, 107 S.Ct. 3228, 97 L.Ed.2d 734 (1987) (same; Resource Conservation and Recovery Act); Cournoyer v. Town of Lincoln, 790 F.2d 971 (1st Cir.1986) (same; zoning ordinance); Penn Terra, 733 F.2d at 274-78 (same; state environmental laws).

We are mindful of the position in which this conclusion may place financially distressed businesses. Although protected by the automatic stay from enforcement of direct money judgments, see infra, companies that have sought bankruptcy protection are not automatically insulated from orders to abate, which may have as great or greater financial consequences than direct money judgments. Nevertheless, an entity that operates in a regulated sphere is obliged to comply with the relevant regulations; otherwise, it must exit the field. As we have specifically found in the OSHA field, “Congress did contemplate that the Secretary’s rule making would put out of business some businesses so marginally efficient or productive as to be unable to follow standards otherwise universally feasible.” AFL-CIO v. Brennan, 530 F.2d 109,123 (3d Cir.1975). “It would appear to be consistent with the purposes of the [OSH] Act to envisage the economic demise of an employer who has lagged behind the rest of the industry in protecting the health and safety of employees and is consequently financially unable to comply with new standards as quickly as other employers.” American Iron & Steel Institute v. OSHA, 577 F.2d 825, 835 (3d Cir.1978) (quoting Industrial Union Dept. v. Hodgson, 499 F.2d 467, 478 (D.C.Cir.1974)); see also Arkansas-Best Freight Systems, Inc. v. OSHRC, 529 F.2d 649, 654 n. 6 (8th Cir. 1976) (same); cf. Forging Industry Ass’n. v. Secretary of Labor, 773 F.2d 1436, 1453 (4th Cir.1985) (en banc) (finding OSHA safety standard valid “even if it does portend disaster for some marginal firms”).

2. Money Judgment. In addition to enforcement of the abatement order, the Secretary also seeks entry of a money judgment for $21,000. Although Congress was clear in exempting abatement actions from the automatic stay, it plainly drew the line at enforcement of money judgments.

Since the assets of the debtor are in the possession and control of the bankruptcy court, and since they constitute a fund out of which all creditors are entitled to share, enforcement by a governmental unit of money judgment would give it preferential treatment to the detriment of all other creditors.

H.R.Rep. No. 595, 95th Cong., 2nd Sess. 343, reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6299. Thus, although the stay does not operate against actions or proceedings by governmental units “attempting to fix damages for violation of such a [health and safety] law,” id. at 343, 1978 U.S.Code Cong. & Ad.News at 6299; see also S.Rep. No. 989, 95th Cong., 2nd Sess. 52, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5838, it does prevent a governmental unit from enforcing a money judgment. The Secretary is not before us to fix the amount of damages owed by Morysville; under 29 U.S.C. § 659(a), a final determination of that issue has been made. Rather, he in part seeks summary enforcement of a money judgment pursuant to 29 U.S.C. § 660. The automatic stay clearly prevents us from enforcing this portion of the citation. As punishment for past violations, it is not a fully prospective order, which, despite the financial consequences to the distressed corporation, we may enforce to protect workers from the hazards of an unsafe work.

Similarly, the Supreme Court in Ohio v. Kovacs, 469 U.S. 274, 105 S.Ct. 705, 83 L.Ed.2d 649 (1985), distinguished orders requiring the abatement of regulatory violations from the entry of a money judgment. In Kovacs, a receiver was appointed pursuant to state environmental laws to implement compliance with those laws, including the cleanup of discharged pollution. Before the receiver completed the cleanup, however, Kovacs filed for bankruptcy protection. The receiver sought money from the bankrupt estate to effectuate the required environmental cleanup, but the bankruptcy court, the district court, and the court of appeals all found that Ohio was impermissibly attempting to collect *390from Kovacs a monetary payment. See id. at 707-08; In re Kovacs, 681 F.2d 454 (6th Cir.1982); In re Kovacs, 29 B.R. 816 (Bkrtcy.S.D.Ohio 1982). The Supreme Court affirmed, holding that the enforcement of such a money judgment was contrary to the automatic stay. In a footnote, however, the court explicitly distinguished the prospective enforcement of health and safety regulations at issue in Penn Terra on the basis that it was “an effort to enforce the police power statutes of the State, not a suit to enforce a money judgment.” Kovacs, 105 S.Ct. at 711, n. 11. “The automatic stay provision does not apply to suits to enforce the regulatory statutes of the State,” recognized the Court, “but enforcement of such a judgment by seeking money from the bankrupt ... is another matter.” Id.

We find no feature of federal health and safety regulations that would alter the application of the Supreme Court’s analysis, which concerned only state health and safety laws. Cf. Wheeling-Pittsburgh, 818 F.2d at 1086-87 (applying Penn Terra to Clean Air Act); In re: Commonwealth Oil Refining Co., 805 F.2d 1175 (5th Cir.1986), petition for cert, filed, 55 U.S.L.W. 3622 (Feb. 23, 1987) (No. 86-1400) (Resource Conservation and Recovery Act). We must therefore deny the petition insofar as it seeks entry of a $21,000 judgment.

IV. CONCLUSION

We will grant the Secretary’s petition insofar as it seeks to enforce that portion of the citation that orders Morysville to abate its continuing violations of the Occupational Safety and Health Act. We will deny the Secretary’s petition insofar as it seeks to enforce the payment of a $21,000 penalty.

WEIS, Circuit Judge,

dissenting.

The court is confronted with the necessity of choosing between two statutes, each of which grants jurisdiction to a different court.

Because the petition was filed in this court, consideration of our jurisdiction may be the appropriate first step. As the majority points out, the petition for enforcement here rests on 29 U.S.C. § 660(b). The subsection provides that in the instance of a noncontested citation, the Secretary may file a petition for enforcement that shall be entered by the clerk of the court of appeals. Any contempt proceeding arising from that order is to be conducted by the court of appeals.

Subsection (b) of § 660 contains no language granting jurisdiction, but does state “the provisions of subsection (a) ... shall govern such proceedings to the extent applicable.” Subsection (a), in turn, provides that “any person adversely affected or aggrieved” may petition the court of appeals for review of the merits of a commission order.” After the petition is filed, the commission must forward the record to the court of appeals. The statute specifies that “[ujpon such filing, the court shall have jurisdiction of the proceeding.” If the court had remanded the matter to the commission for additional evidentiary findings, and the case returns to the court, “upon the filing of the record with it, the jurisdiction of the court shall be exclusive.”

A close reading of the statute reveals that it does not specifically grant “exclusive” jurisdiction to the court of appeals to enforce a noncontested citation. Subsection (b) refers back generally to subsection (a) “to the extent applicable.” But subsection (a) confers “exclusive" jurisdiction only in cases where the record has been returned to the court after remand. The word “exclusive” is conspicuously absent when the statute refers to jurisdiction on the initial filing of the record.

To some extent, therefore, the statute is ambiguous and does not clearly state that the court of appeals’ jurisdiction is exclusive in the circumstances presented here. Although the majority’s conclusion that the statute gives us exclusive jurisdiction is a permissible one, it is not compelled by the language itself.

The bankruptcy statute, however, is more definitive. Title 28 U.S.C. § 1334(b) states that “[notwithstanding any Act of Congress that confers exclusive jurisdiction *391on a court or courts other than the district courts, the district court shall have original but not exclusive jurisdiction of all civil proceedings ... related to cases under title 11.” I agree with the majority and the concession of the Secretary that this case is related to the bankruptcy, and therefore the bankruptcy court, at least, has concurrent original jurisdiction.

The question then becomes which court should assume original jurisdiction. The majority admits that enforcement of the citation will undoubtedly alter the debtor’s liabilities and have an impact on the administration of the bankruptcy estate. That concession recognizes only the minor effects and assumes that enforcement will be simple and easily accomplished. Little imagination is required, however, to visualize complications arising from the debt- or’s status under the bankruptcy laws. In this case, for example, it may be that to comply with the commission’s order some machines could be modified to remove a dangerous condition on either a short or long term basis. Obviously, the method chosen might hinge on the likelihood of a plan of reorganization, the assets available in the estate, and the interests of the creditors. At that point, too, the commission might have to be consulted before the matter is resolved after a hearing and factual findings.

Other reasonably anticipated developments requiring further proceedings that take into account the various and sometimes conflicting interests need not be explored at length here. The point is that, compared to an appellate tribunal, a bankruptcy court has far more familiarity with the debtor’s estate and better facilities for developing relevant facts when questions on enforcement arise.

As we said in Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984), Congress intended, through this legislation, “to grant comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate.” The majority’s action here frustrates that aim.

When a case presents a realistic possibility that hearings and fact findings might be necessary and jurisdiction is present in both the trial and appellate courts, sound judicial administration dictates that the trial court address the matter in the first instance. Appellate procedures by their collegial nature are cumbersome and not readily adaptable to trials and fact finding.

The majority concludes that deferring to the bankruptcy court in these circumstances would result in delay. I believe that any delay would be minimal and of no consequence here. It would be surpassed, in any event, by the delay encountered if contempt proceedings are instituted in this court and referral to the bankruptcy court then becomes necessary.

No special need to invoke the competence of an appellate tribunal is present here. Were we faced with a petition for review challenging the merits of the commission’s findings, I would agree with the majority that we should proceed with the case. Appellate review, after all, is our primary mission. However, in the absence of need for that function, the bankruptcy court, in my view, is in a better position to afford prompt and effective enforcement.

This proceeding presents an appropriate occasion to question the wisdom of the general policy of requiring courts of appeals to enforce noncontested administrative agency orders. Congress chose that method in an era when courts of appeals were not as besieged as they are today with the unprecedented volume of cases. It is time to reconsider the policy.

A collegial body cannot simply expand by adding members without impairing its efficiency and encountering the law of diminishing returns. Enlarging a committee will seldom, if ever, increase its output proportionately.

In a district court, the situation is different because to a great extent each judge functions individually and independently of the others. Increasing the number of judges in that forum has a far greater impact on total case-handling capacity than in an appellate body. A district court consequently may more easily expand to absorb additional work. This fundamental difference between the courts suggests that matters not requiring the special treat*392ment of multi-judge review should be docketed in the first instance in the district courts.

Transferring jurisdiction over enforcement of nonreviewable orders to district courts would relieve the courts of appeals of an assignment which, although not a major factor in their workload, nevertheless consumes time better allocated to the essential role of appellate review. At a time when overworked courts of appeals are struggling with ever-increasing caseloads, even a slight reduction in the matters assigned to them can help.1

Clearly a solution lies in legislative changes. However, in the meantime, courts of appeals should not forego the opportunity for legitimate self-help when the occasion arises. I believe this case is an example of a situation when this court should take that course. The public interest would best be served by referring this petition to the bankruptcy court. I dissent from the majority’s decision not to do so.