Page:United States Reports 502 OCT. TERM 1991.pdf/198

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BOARD OF GOVERNORS, FRS v. MCORP FINANCIAL, INC. Opinion of the Court

within § 362(b)(4), which expressly provides that the automatic stay will not reach proceedings to enforce a “governmental unit’s police or regulatory power.” 10 MCorp contends that in order for § 362(b)(4) to obtain, a court must first determine whether the proposed exercise of police or regulatory power is legitimate and that, therefore, in this litigation the lower courts did have the authority to examine the legitimacy of the Board’s actions and to enjoin those actions. We disagree. MCorp’s broad reading of the stay provisions would require bankruptcy courts to scrutinize the validity of every administrative or enforcement action brought against a bankrupt entity. Such a reading is problematic, both because it conflicts with the broad discretion Congress has expressly granted many administrative entities and because it is inconsistent with the limited authority Congress has vested in bankruptcy courts. We therefore reject MCorp’s reading of § 362(b)(4). MCorp also argues that it is protected by §§ 362(a)(3) and 362(a)(6) of the Bankruptcy Code. Those provisions stay “any act” to obtain possession of, or to exercise control over, property of the estate, or to recover claims against the debtor that arose prior to the filing of the bankruptcy petition. MCorp contends that the ultimate objective of the source of strength proceeding is to exercise control of corporate assets and that the § 23A proceeding seeks enforcement of a prepetition claim. We reject these characterizations of the ongoing administrative proceedings. At this point, the Board has only issued “Notices of Charges and of Hearing” and has expressed 10

Title 11 U. S. C. § 362(b)(4) provides: “(b) The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970 (15 U. S. C. 78eee(a)(3)), 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. . . .”