Section 362 of title 11 of the United States Code (the “Bankruptcy Code”) provides for an automatic stay, i.e., a “statutory injunction against efforts outside [a] bankruptcy to collect debts from a debtor under the protections of the Bankruptcy Code.” However, pursuant to section 362(b)(4) of the Bankruptcy Code, a governmental agency may commence or continue an action against a debtor to enforce the agency’s police or regulatory power despite the automatic stay (hereinafter, the “§362(b)(4) Exception”). For the exception to apply, the action of the governmental agency must “protect the public health and safety” as opposed to “a pecuniary interest in property of the debtor.” An agency’s attempt to enforce a money judgment is generally stayed and not subject to the §362(b)(4) Exception. However, whether a governmental agency is permitted to litigate for entry of a money judgment on behalf of a specific individual, despite an automatic stay, remains unclear.
Government agencies will often try to evoke the §362(b)(4) Exception in connection with achieving their ultimate objectives. By way of illustration, the U.S. Equal Employment Opportunity Commission (“EEOC”) “is responsible for enforcing federal laws that make it illegal to discriminate against an . . . employee . . . because of the persons race, color, religion, sex . . . national origin, age . . . , disability or genetic information.” The EEOC retains the ability to file suit against employers who discriminate against employees and remedies include both compensatory and punitive damages depending on the specific facts of the case. To this end, the EEOC typically relies on the §362(b)(4) Exception.
This memorandum analyzes the issue in two parts. Part 1 addresses Congress’s intent when drafting the §362(b)(4) Exception as well as various court interpretations that followed. Part 2 contemplates the question of whether the EEOC acts within the scope of its regulatory power when litigating for monetary judgments on behalf of specific individuals.