Opinion Of Interest – When The Automatic Stay Is No Shield – Pennsylvania Court Holds That Government's Unfair Labor Claims Are Subject To Police Power Exception - Insolvency/Bankruptcy/Re-structuring
Breaking with a Sixth Circuit decision to the contrary, in a March 2021 decision in Stewart v. Holland, the District Court for the Western District of Pennsylvania held that unfair labor claims brought by the Department of Labor against a debtor under the Fair Labor Standards Act ("FLSA") were not barred by the automatic stay but could instead proceed under the "police powers exception." A debtor's bankruptcy filing triggers the "automatic stay," which immediately enjoins, among other things, the commencement and continuation of most litigation against the debtor. 2 The purpose of the automa...