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The governmental unit exception of 11 U.S.C.S. § 362(b)(4) permits the entry of a money judgment against a debtor so long as the proceeding in which such a judgment is entered is one to enforce the governmental unit's police or regulatory power. However, anything beyond the mere entry of a money judgment against a debtor is prohibited by the automatic stay.
Plaintiff Securities and Exchange Commission (SEC) successfully sued defendant broker-dealer, Robert E. Brennan, for defrauding its customers. The district court ordered Brennan to disgorge approximately $ 75 million in ill-gotten gains. Brennan filed for bankruptcy protection. During trial, Brennan had established an offshore asset protection trust. The SEC found out about the trust and sought a court order requiring Brennan to repatriate the trust assets. The district court ordered repatriation. On appeal, Brennan argued the repatriation order violated the automatic stay provision of the bankruptcy code. The SEC argued that the repatriation order came within an exception to the automatic stay provision for an action by a governmental unit to enforce its regulatory power.
Did an order obtained by the SEC from the United States District Court for the Southern District of New York, requiring Brennan, a debtor in bankruptcy, to repatriate the assets of an offshore asset protection trust violate the automatic stay provision?
The court rejected the SEC's argument and vacated the repatriation order. The court held that the SEC was attempting to enforce a money judgment and therefore its enforcement efforts came within the money judgment enforcement exception to the "government unit" exception contained in 11 U.S.C.S. § 362(b)(4).