Interesting Automatic Stay Decision in FastBucks Chapter 11 Case


Readers might recall that back in November, I blogged about a case in which the unconscionability doctrine was used to invalidate one lender’s entire book of payday and installment loans. The post described how the court found that FastBucks employees encouraged borrows to not pay off loans, which loans were found to violate state law. We in New Mexico, where the case was brought, watched to see if the FaskBucks shops would close down, but they never did. Rather, Fastbucks filed some motions and an appeal in state court, then filed for Chapter 11 on December 10, 2012. Their largest creditor? The State of New Mexico.

FastBucks removed the New Mexico lawsuit to federal court, to be heard as part of its bankruptcy case. FastBucks also filed an adversary proceeding seeking to recover for violation of the stay and to enjoin the New Mexico Attorney General’s Office (the plaintiff in the suit) from:

1) issuing press releases or making public comments regarding FastBucks or their bankruptcy cases,
2) contacting FastBucks’ customers about the loans, seeking out information concerning their customers’ loans, or giving particular advice to the FastBucks’ customers or other members of the public that contact the AG’s office, and
3) attempting to enforce a New Mexico state court’s order finding FastBucks loans to be illegal.

In support of its
complaint, FastBucks claimed that allowing the AG’s office to issue any press releases in the case or even speak publicly about the case, could hurt FastBucks’ business. It also claimed that a prior press release by the AG’s office violated the automatic stay. The debtor claimed that the press release that motivated the motion, entitled AG: FastBucks Pulls Fast One on NM Consumers, was an attempt to collect a debt. The
court disagreed and refused to enjoin the New Mexico Attorney General’s office from issuing future press releases or talking about the case publicly, on First Amendment grounds. 

FastBucks also argued that the AG’s office’s attempts to enforce their state court judgment finding FastBucks loans to be unlawful, as well as their attempts to inform customers that they did not need to repay their loans, interfered with FastBucks’ business. The court also refused to enjoin these activities. How interesting!

 I will definitely be using this opinion in my automatic stay lesson next school year. Fastbucks’ complaint to enjoin the AG’s office was based on Sections 105, 362, and 541 of the Bankruptcy Code, so it is a great tool to show how those sections interrelate. 

Dow Jones reporter Katy Stech has been covering this bankruptcy case for a while and has written a great deal of interest on these topics. Check out her articles here
and here.