Lockyer v. Mirant Corp.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BILL LOCKYER, Attorney General of 

the State of California; THE

STATE OF CALIFORNIA, ex rel,

Plaintiffs-Appellants,

and

DEPARTMENT OF WATER RESOURCES,

Plaintiff, No. 04-15024

v.  D.C. No.

CV-02-01787-VRW

MIRANT CORPORATION; MIRANT

AMERICAS, INC.; MIRANT OPINION

CALIFORNIA INVESTMENTS, INC.;

MIRANT CALIFORNIA, L.L.C.;

MIRANT AMERICAS ENERGY

MARKETING LP; MIRANT DELTA,

L.L.C.; MIRANT POTRERO, L.L.C.,

Defendants-Appellees.



Appeal from the United States District Court

for the Northern District of California

Vaughn R. Walker, District Judge, Presiding

Argued and Submitted

September 14, 2004—San Francisco, California

Filed February 10, 2005

Before: William A. Fletcher, Raymond C. Fisher,

Circuit Judges, and B. Lynn Winmill,* District Judge.

*The Honorable B. Lynn Winmill, Chief United States District Judge,

District of Idaho, sitting by designation.

1645

1646 LOCKYER v. MIRANT CORP.

Opinion by Judge William A. Fletcher

LOCKYER v. MIRANT CORP. 1649

COUNSEL

Harvey I. Saferstein and Nada I. Shamonki, Mintz, Levin,

Cohn, Ferris, Glovsky and Popeo, Santa Monica, California;

Damon M. Connolly, Thomas Greene, Catherine A. Jackson,

and Tamar Pachter (argued), Office of the California Attorney

General, San Francisco, California, for the plaintiffs-

appellants.

Bryan A. Merryman, Robert P. Pongetti, and John A. Stur-

geon, White & Case, Los Angeles, California; Robert B.

Pringle (argued), Thelen Reid & Priest, San Francisco, Cali-

fornia, for the defendants-appellees.

OPINION

W. FLETCHER, Circuit Judge:

The Attorney General of California, Bill Lockyer, sues

under section 16 of the Clayton Act, 15 U.S.C. § 26, seeking

1650 LOCKYER v. MIRANT CORP.

divestiture by the Mirant defendants (collectively, “Mirant”)

of three electrical generating plants. The district court granted

a stay pursuant to Landis v. North American Co., 299 U.S.

248 (1936), pending the resolution of Mirant’s Chapter 11

petitions in a bankruptcy court in Texas. We hold that the dis-

trict court had jurisdiction to determine whether the automatic

stay of the Texas bankruptcy court applied to the Attorney

General’s suit, and that the Attorney General’s suit comes

within the “police or regulatory power” exception of 11

U.S.C. § 362(b)(4) to the automatic stay. We further hold, in

the circumstances of this case, that a Landis stay is not justi-

fied. Accordingly, we vacate the stay and remand to allow the

Attorney General’s suit to proceed on the merits.

I. Background

In 1996, California passed Assembly Bill 1890, which

required large investor-owned utilities to divest certain elec-

trical generating plants as part of the state’s deregulation of its

electrical generation industry. Pursuant to this mandatory

divestiture, Pacific Gas & Electric in 1999 sold its Pittsburg

and Contra Costa Power Plants in Contra Costa County, as

well as its Potrero Power Plant in San Francisco, to Mirant

Delta, LLC and Mirant Potrero, LLC. The Attorney General

alleges that the combined generating capacity of these three

plants amounts to approximately 44 percent of the northern

California wholesale spot electricity market.

On April 15, 2002, the Attorney General sued Mirant in

federal district court, alleging that Mirant’s ownership of the

plants gives it the incentive and ability to exercise market

power in violation of section 7 of the Clayton Act. See 15

U.S.C. § 18. The Attorney General sought equitable relief and

damages under both the Clayton Act and California Business

& Professions Code § 17204. The district court dismissed the

claims for violation of California Business & Professions

Code § 17204 and for damages under the Clayton Act, but

found that the allegations in the complaint were sufficient to

LOCKYER v. MIRANT CORP. 1651

state a claim for injunctive relief under section 16 of the Clay-

ton Act. See 15 U.S.C. § 26.

On July 14 and July 15, 2003, Mirant filed voluntary peti-

tions to reorganize under Chapter 11 in the United States

Bankruptcy Court for the Northern District of Texas. Subse-

quently, Mirant moved in the bankruptcy court for an order

modifying the automatic stay to allow three suits, including

two brought by the Attorney General (both separate from this

suit), to proceed in the Ninth Circuit, where they were then

pending on appeal.1 The bankruptcy court granted the motion,

but did not determine whether the appeals were, in fact, sub-

ject to the automatic stay. Instead, it granted the motion and

modified the stay only “to the extent necessary and applica-

ble.”

On the same day that Mirant moved in the bankruptcy court

to allow the Ninth Circuit appeals to proceed, it also filed a

“Suggestion of Stay” in district court in this case, advising the

court to “take . . . notice that . . . actions taken in violation of

the [automatic] stay are void” and may result in the “imposi-

tion of sanctions by the Bankruptcy Court.” The “Suggestion

of Stay” did not explicitly argue that the Attorney General’s

Clayton Act suit was subject to the automatic stay, nor did it

request that the district court determine the automatic stay’s

applicability.

1

None of these suits was related to the present suit, although all

involved issues of energy regulation. The Attorney General’s two suits

concerned, respectively, Mirant’s sale of “ancillary services” (a type of

wholesale energy capacity), and the question of whether Mirant had prop-

erly filed its wholesale electricity rates with the Federal Energy Regula-

tory Commission. These cases were consolidated, and the Ninth Circuit

affirmed their dismissal on preemption grounds. See California v. Trans-

canada Power, 110 Fed. Appx. 839 (9th Cir. 2004) (unpublished disposi-

tion). The third lawsuit concerned allegations by the Public Utility District

of Snohomish County that Mirant and other entities manipulated whole-

sale energy markets. It was also dismissed. See Pub. Util. Dist. No. 1 v.

Dynegy Power Mktg., Inc., 384 F.3d 756 (9th Cir. 2004).

1652 LOCKYER v. MIRANT CORP.

The district court invited a noticed motion in which the par-

ties could present their positions on whether the automatic

stay was applicable. The Attorney General moved for a deter-

mination that the suit was exempt from the automatic stay

because it sought to enforce California’s “police or regulatory

power” within the meaning of 11 U.S.C. § 362(b)(4). Without

taking a position on the applicability of § 362(b)(4), Mirant

urged the district court to exercise its discretionary power to

stay the action. The district court declined to decide whether

the Attorney General’s suit came within § 362(b)(4). Citing

Mediterranean Enterprises, Inc. v. Ssangyong Corp., 708

F.2d 1458 (9th Cir. 1983), it granted the discretionary stay

requested by Mirant.

The court relied on three factors in granting the stay. First,

it found that its jurisdiction to determine the scope of the “po-

lice or regulatory power” exception under § 362(b)(4), and

hence the applicability of the automatic stay, was doubtful

under Celotex Corp. v. Edwards, 514 U.S. 300 (1995), and In

re Gruntz, 202 F.3d 1074 (9th Cir. 2000) (en banc). Second,

it found that the applicability of § 362(b)(4) raised unsettled

questions of law. Third, it found that the stay was “efficient

for [its] docket,” and that it was “the fair and practical course

for the parties.” The Attorney General timely appealed. We

now vacate and remand.

II. Our Jurisdiction to Review the Stay

Before considering the merits, we must first decide whether

we have jurisdiction under 28 U.S.C. § 1291 to review the

district court’s stay. We hold that we have jurisdiction over

the appeal because the order puts the Attorney General “effec-

tively out of court” within the meaning of Moses H. Cone

Memorial Hospital v. Mercury Construction Corp., 460 U.S.

1, 9 (1983), and Idlewild Bon Voyage Liquor Corp. v. Epstein,

370 U.S. 713, 715 n.2 (1962), and because the stay is an

appealable collateral order under Cohen v. Beneficial Indus-

trial Loan Corp., 337 U.S. 541 (1949).

LOCKYER v. MIRANT CORP. 1653

A. “Effectively Out of Court”

We first hold that the stay order in the district court is final

under what has come to be known as the Moses H. Cone doc-

trine. In Moses H. Cone, a hospital had sued in state court

seeking a declaration that a contract to which it was a party

did not confer a right to arbitration. The other party to the

contract then filed suit in federal district court seeking an

order compelling arbitration. The hospital successfully moved

for a stay in federal court pending resolution of the arbitration

question in state court. Relying on its earlier decision in

Idlewild, the Supreme Court held that the district court’s stay

order was appealable under § 1291. As a result of the stay,

there would be “no further litigation in the federal forum” and

the state’s judgment on the arbitration issue would be res judi-

cata, leaving the contractor “effectively out of court.” Moses

H. Cone, 460 U.S. at 9-10.

In Idlewild, plaintiff Idlewild Liquor had sought a declara-

tory judgment in federal district court that the New York

Alcoholic Beverage Law was unconstitutional. Rather than

convene a three-judge district court, the one-judge court

stayed the action under Railroad Commission v. Pullman Co.,

312 U.S. 496 (1941), to give the New York state courts the

opportunity to address the issue. The Supreme Court held that

the stay order was appealable, even though it was entirely

possible that Idlewild Liquor would be able to return to fed-

eral district court after the state court dealt with state-law

questions. Moses H. Cone, 460 U.S. at 10. Even in that cir-

cumstance, where the case might well come back to federal

district court, Idlewild Liquor was “effectively out of court”

for purposes of appealability of the stay order. Idlewild, 370

U.S. at 715 n.2.

The stay in this case is much like the stay in Idlewild. In

dealing with Mirant’s Chapter 11 petitions, the bankruptcy

court may well order divestiture of the three power plants as

part of a reorganization plan under Chapter 11. If Mirant’s

1654 LOCKYER v. MIRANT CORP.

Chapter 11 proceeding in the bankruptcy court results in

divestiture of the plants, the Attorney General’s Clayton Act

case in the district court will be mooted, just as Idlewild’s fed-

eral constitutional claims in the district court would have been

mooted if the New York state courts had granted relief on

state-law grounds. See Terra Nova Ins. Co. v. 900 Bar, Inc.,

887 F.2d 1213, 1219-21 (3d Cir. 1989) (concluding that the

danger that a stay would render a claim moot was equivalent

to res judicata for the purposes of applying the Moses H. Cone

test).

Because the bankruptcy court has not yet determined

whether Mirant’s plants will be divested as a result of the

reorganization, we cannot say with certainty that the Attorney

General’s district court suit will be moot. However, as

Idlewild establishes, absolute certainty is not required in order

to put a party “effectively out of court” within the meaning of

the Moses H. Cone doctrine. See United States v. General

Dynamics Corp., 828 F.2d 1356, 1361-62 (9th Cir. 1987)

(where a possibility existed that application of the collateral

estoppel doctrine might result in dismissal, the stay was

appealable under Moses H. Cone). Although the mooting of

Attorney General Lockyer’s Clayton Act claim is not inevita-

ble, both parties and the district court appear to view it as a

substantial possibility. Indeed, the district court explicitly

anticipated the possibility of mootness, citing the potential

waste of “significant judicial and party resources” if the bank-

ruptcy proceedings mooted the plaintiff’s claims before the

district court rendered judgment. This case is thus distinguish-

able from situations in which the district court clearly foresees

and intends that proceedings will resume after the stay has

expired. See Cofab, Inc. v. Philadelphia Joint Bd., 141 F.3d

105, 109 (3d Cir. 1998) (Moses H. Cone did not apply where

district court had no intention to “ ‘deep six’ the suit”).

[1] If the Attorney General’s Clayton Act claim comes

within the § 362(b)(4) exception to the automatic stay, no

legal barrier exists, apart from the district court’s stay order

LOCKYER v. MIRANT CORP. 1655

itself, to his pursuit of his suit in the district court in Califor-

nia. In such circumstances, the stay puts him “effectively out

of court,” and we have appellate jurisdiction to determine the

propriety of the stay.

B. Collateral Order

[2] Even if the stay did not constitute a final order under

Moses H. Cone, we would have jurisdiction under Cohen v.

Beneficial Industrial Loan Corp., 337 U.S. 541 (1949), under

which certain collateral orders of the district court may be

immediately appealed. To be included among “the small class

of decisions excepted from the final-judgment rule by

Cohen,” an order “must [1] conclusively determine the dis-

puted question, [2] resolve an important issue completely sep-

arate from the merits of the action, and [3] be effectively

unreviewable on appeal from a final judgment.” Coopers &

Lybrand v. Livesay, 437 U.S. 463, 468 (1978) (internal quota-

tion marks omitted; bracketed numbers added).

In Moses H. Cone, the Supreme Court held in the alterna-

tive that the district court’s stay was an appealable collateral

order under Cohen. 460 U.S. at 11-12. The Court concluded

that the first criterion was satisfied because, although the stay

was technically open to reconsideration, “there is no basis to

suppose that the District Judge contemplated any reconsidera-

tion of the decision to defer to the parallel state-court suit.” Id.

at 12-13. It also concluded that the second and third Cohen

criteria were met, since “[a]n order that amounts to a refusal

to adjudicate the merits plainly presents an important issue

separate from the merits” and, because of the possibility of res

judicata, “this order would be entirely unreviewable if not

appealed now.” Id. at 12. See also General Dynamics, 828

F.2d at 1360 n.4 (“Where a district court enters a stay that can

effectively end the litigation in that court, the court’s ability

to lift the stay if it chooses would seem to be irrelevant.”)

[3] We hold that the Cohen criteria are also satisfied here.

The first criterion is satisfied because, even though the stay

1656 LOCKYER v. MIRANT CORP.

order could theoretically be modified, the district court did not

impose a time limit on the stay or note circumstances that

might result in its modification. See Moses H. Cone, 460 U.S.

at 13 (stay order was conclusive where there was “no basis to

suppose that the District Judge contemplated any reconsidera-

tion of his decision to defer to the parallel . . . suit”); Burns

v. Watler, 931 F.2d 140, 144 (1st Cir. 1991) (even where stay

was nominally modifiable, there was “no indication in the

record” that the district court intended to take further action).

The second criterion is satisfied because the district court’s

central justification for issuing the stay was the desirability of

avoiding two analytically distinct determinations: the applica-

bility of the “police or regulatory power” exception to

§ 362(b)(4) and the legality of Mirant’s ownership of the three

power plants. Finally, the third criterion is satisfied. Either the

bankruptcy proceedings will moot the Clayton Act claim, in

which case the district court suit will be dismissed; or the

bankruptcy proceedings will not moot the Clayton Act claim,

in which case the district court will lift the stay on its own and

proceed with the suit. In either event, the propriety of the stay

will be unreviewable on appeal. See Marchetti v. Bitterolf,

968 F.2d 963, 966 (9th Cir. 1992) (unreviewability factor was

met where it was likely that case would be mooted). We

therefore conclude that the stay is reviewable under Cohen as

a collateral order.

C. Aggrieved by the Stay

Mirant argues that, even if the stay order is final under

Moses H. Cone or a reviewable collateral order under Cohen,

the Attorney General cannot appeal because he is not “ag-

grieved” by the stay. In Deposit Guaranty National Bank v.

Roper, 445 U.S. 326, 333 (1980), the Court held that “[a]

party who receives all that he has sought generally is not

aggrieved by the judgment affording the relief and cannot

appeal from it.” (Citations omitted.) Mirant contends that the

Attorney General is not aggrieved because either he will

receive the divestiture remedy he seeks from the bankruptcy

LOCKYER v. MIRANT CORP. 1657

court; or, if the bankruptcy court does not order divestiture

and the district court stay is lifted, he will be allowed to seek

divestiture in his Clayton Act litigation in the district court.

Mirant argues that the two outcomes — divestiture pursuant

to the bankruptcy proceedings and divestiture ordered by the

district court — are equivalent.

Mirant’s argument fails to recognize two things. First,

while it is possible that Mirant will eventually be ordered to

divest itself of the three power plants, the sequence of events

envisioned by Mirant may entail considerable delay. This is

particularly so if the bankruptcy court does not order divesti-

ture and the Attorney General must await the conclusion of

the bankruptcy proceedings before being allowed to resume

his Clayton Act suit in the district court. If Mirant’s owner-

ship of the three power plants in fact violates the Clayton Act,

northern California purchasers of electricity will have been

unnecessarily injured by the delay resulting from the stay.

Second, Mirant’s argument fails to recognize that a divesti-

ture order to cure a Clayton Act violation is different from a

divestiture order entered pursuant to a bankruptcy reorganiza-

tion. The Clayton Act could possibly be raised as an issue in

the Texas bankruptcy proceeding, for any confirmable reorga-

nization plan must have been “proposed in good faith and not

by any means forbidden by law.” 11 U.S.C. § 1129(a)(3). See

also Pacific Gas & Electric Co. v. California, 350 F.3d 932

(9th Cir. 2003) (addressing preemption of non-bankruptcy

laws under 11 U.S.C. §§ 1123(a)(5) and 1142(a)); In re Texas

Extrusion Corp., 844 F.2d 1142, 1157-58 (5th Cir. 1988)

(opponents to reorganization plan contended that the plan vio-

lated the federal antitrust laws; court declined to reach the

issue on the ground that the objection had been raised too

late). But there is no guarantee (or even likelihood) that the

bankruptcy court will consider the effect of the Clayton Act;

nor is there a guarantee, even if it does, that it will entertain

briefing or hold hearings, or that it will justify or explain the

reorganization plan in terms of the Clayton Act. If divestiture

1658 LOCKYER v. MIRANT CORP.

of the three power plants is ordered by the bankruptcy court

on some basis other than the Clayton Act, the Attorney Gen-

eral will not have received, in the relevant legal sense of the

term, “all that he has sought.” Roper, 445 U.S. at 333. That

the alleged Clayton Act violation by Mirant might inciden-

tally be cured in the course of the bankruptcy proceedings is

not equivalent to a binding legal determination by the district

court that Mirant violated the Clayton Act and a divestiture

order by that court. The difference is more than theoretical.

For example, without a binding decision on the merits of the

Attorney General’s Clayton Act claim, a single entity could

acquire the three plants from Mirant. The Attorney General

would then be required to bring another Clayton Act suit, now

against the new entity instead of Mirant.

[4] Regardless of how events ultimately transpire, the stay

order has deprived the Attorney General — at least temporar-

ily and perhaps permanently — of the legal remedy he seeks

against Mirant. He has thus been aggrieved within the mean-

ing of Roper, and we have jurisdiction over this appeal.

III. The District Court’s Landis Stay

We review a district court’s stay order for abuse of discre-

tion, but this standard is “somewhat less deferential” than the

abuse of discretion standard used in other contexts. Yong v.

INS, 208 F.3d 1116, 1119 (9th Cir. 2000); Intel Corp. v.

Advanced Micro Devices, Inc., 12 F.3d 908, 912 (9th Cir.

1993). A district court abuses its discretion if it “base[s] its

ruling on an erroneous view of the law or on a clearly errone-

ous assessment of the evidence.” Cooter & Gell v. Hartmarx

Corp., 496 U.S. 384, 405 (1990).

The district court gave three reasons for granting a Landis

stay. First, it believed that its jurisdiction to determine

whether the automatic stay applied to the suit before it was

questionable. Second, it believed that the “police or regulatory

power” exception to the automatic stay under 11 U.S.C.

LOCKYER v. MIRANT CORP. 1659

§ 362(b)(4) was also questionable. Third, in light of the fore-

going, it held that granting the stay was “efficient for [its]

docket and is the fair and practical course for the parties.” We

consider these reasons in turn.

A. Jurisdiction to Determine the Applicability

of the Automatic Stay

Relying on Celotex Corp. v. Edwards, 514 U.S. 300 (1995),

and In re Gruntz, 202 F.3d 1074 (9th Cir. 2000) (en banc), the

district court expressed concern that it did not have jurisdic-

tion to determine the applicability of the automatic stay. The

district court’s concern was unfounded.

In Celotex, the bankruptcy court issued a § 105 injunction

preventing plaintiffs who had won a district court suit against

the debtor from executing on a supersedeas bond that would

have satisfied their judgment. See 11 U.S.C. § 105(a). The

district court allowed plaintiffs to execute on the bond despite

the bankruptcy court’s § 105 injunction, on the ground that

the judgment had been affirmed on appeal and the bond had

become due before the bankruptcy filing. The decision of the

district court was appealed to the Fifth Circuit, which

affirmed. The Supreme Court reversed. Without deciding

whether the § 105 injunction was properly issued, the Court

held that the district court acted improperly in disregarding it.

If plaintiffs wanted relief from the injunction, wrote the

Court, they should have sought modification in the bank-

ruptcy court that issued the injunction. 514 U.S. at 313.

In Gruntz, Gruntz had twice been convicted in state court

of failure to pay child support. He filed for bankruptcy prior

to sentencing in the first criminal proceeding, and prior to the

institution of the second criminal proceeding. He brought an

adversary proceeding in bankruptcy court seeking a declara-

tion that the state criminal proceedings violated the automatic

stay. The bankruptcy court denied relief, holding that it was

collaterally estopped by the state court’s decision that the

1660 LOCKYER v. MIRANT CORP.

automatic stay did not apply. On appeal, we held that the state

court has the power to decide whether the automatic stay

applies to its proceedings. 202 F.3d at 1087 (“Thus, unless a

specific § 105 injunction applies, state trial courts need not

seek bankruptcy court approval before commencing criminal

proceedings.”). But a state court makes such a decision at its

peril, for the bankruptcy court is not precluded by the state

court’s decision. If the bankruptcy court later decides that the

state court was incorrect, the state court proceedings in viola-

tion of the stay are void. See, e.g., In re Schwartz, 954 F.2d

569 (9th Cir. 1992); In re Shamblin, 890 F.2d 123 (9th Cir.

1989). On the other hand, if the state court is correct in decid-

ing that the stay does not apply, the state court proceedings

are not void. Gruntz, 202 F.3d at 1087. We ultimately

affirmed the result reached by the bankruptcy court based on

our determination, independent of the state court’s decision,

that the state criminal proceedings were not within the scope

of the stay.

[5] Celotex and Gruntz both stand for familiar propositions

in bankruptcy law. Neither case casts doubt on a district

court’s ability to decide for itself whether proceedings pend-

ing before it are subject to an automatic stay. Celotex tells us

that a district court has no authority to modify or to disregard

a § 105 injunction. Only the bankruptcy court that issued the

injunction has the authority to modify the injunction, and until

the injunction is modified the district court is bound by it.

Gruntz tells us that a state court has the authority to decide

whether its proceeding is within the scope of the automatic

stay, but the state court’s holding is not entitled to preclusive

effect in the bankruptcy court.

[6] There is no reason why a federal court should have less

power than a state court to decide whether its proceeding

comes within the scope of the automatic stay. Indeed, there

are a number of cases, in this circuit and elsewhere, in which

a federal court has decided whether the automatic stay applies

to a proceeding pending before it. See, e.g., NLRB v. Conti-

LOCKYER v. MIRANT CORP. 1661

nental Hagen Corp., 932 F.2d 828 (9th Cir. 1991) (NLRB

enforcement proceeding in the court of appeals comes within

the § 362(b)(4) exception to the automatic stay); NLRB v.

Twin Cities Elec., 907 F.2d 108 (9th Cir. 1990) (same); Com-

modity Futures Trading Comm’n v. Co Petro Marketing

Group, Inc., 700 F.2d 1279 (9th Cir. 1983) (Commodities

Exchange Act proceeding in the district court comes within

the § 362(b)(5) exception to the automatic stay); Chao v. Hos-

pital Staffing Servs., Inc., 270 F.3d 374, 384-85 (6th Cir.

2001) (suit under the federal Fair Labor Standards Act in the

district court does not come within the § 362(b)(4) exception

to the automatic stay, but the district court has authority to

decide the applicability of the exception); NLRB v. Edward

Cooper Painting, Inc., 804 F.2d 934 (6th Cir. 1986) (NLRB

enforcement proceeding in the court of appeals comes within

the § 362(b)(4) exception to the automatic stay); Hunt v.

Bankers Trust Co., 799 F.2d 1060, 1069 (5th Cir. 1986)

(“ ‘Whether the stay applies to litigation otherwise within the

jurisdiction of a district court or court of appeals is an issue

of law within the competence of both the court within which

the litigation is pending . . . and the bankruptcy court.’ ” (cita-

tion omitted)); In re Baldwin-United Corp., 765 F.2d 343, 347

(2d Cir. 1985) (“The court in which the litigation claimed to

be stayed is pending has jurisdiction to determine not only its

own jurisdiction but also the more precise question whether

the proceeding pending before it is subject to the automatic

stay.”); SEC v. First Fin. Group of Texas, 645 F.2d 429 (5th

Cir. 1981) (civil enforcement action under the federal securi-

ties laws in the district court comes within the § 362(b)(4)

exception to the automatic stay). We are aware of no case

holding to the contrary.

[7] We therefore hold, in accordance with established law,

that a district court has jurisdiction to decide whether the

automatic stay applies to a proceeding pending before it, over

which it would otherwise have jurisdiction. Specifically, as

applied to this case, we hold that the district court has juris-

diction to decide whether the Attorney General’s section 16

1662 LOCKYER v. MIRANT CORP.

Clayton Act suit comes within the exception to the automatic

stay for “police or regulatory power” under § 362(b)(4).

B. Exception from the Automatic Stay under § 362(b)(4)

The applicability of the automatic stay, and the extent of

the “police or regulatory power” exception under § 362(b)(4),

are questions of law that we consider de novo. In re Hines,

198 B.R. 769 (9th Cir. BAP 1996), rev’d on other grounds by

147 F.3d 1185 (9th Cir. 1998) (whether an act falls within

statutory exception to the stay is reviewed de novo). The

record is sufficiently complete that we may decide the ques-

tion even though the district court did not. Chang v. United

States, 327 F.3d 911, 928 (9th Cir. 2003).

[8] Section 362(b)(4) provides that the filing of a bank-

ruptcy petition does not operate as an automatic stay “of the

commencement or continuation of an action or proceeding by

a governmental unit . . . to enforce such governmental unit’s

. . . police or regulatory power.” 11 U.S.C. § 362(b)(4). A

government unit need not affirmatively seek relief from the

automatic stay to initiate or continue an action subject to the

exemption. Edward Cooper Painting, 804 F.2d at 939. The

theory of the exception is that bankruptcy should not be “ ‘a

haven for wrongdoers.’ ” Universal Life Church, Inc. v.

United States (In re Universal Life Church), 128 F.3d 1294,

1297 (9th Cir. 1997) (citations omitted).

The “police or regulatory power” exception allows the

enforcement of laws affecting health, welfare, morals, and

safety despite the pendency of the bankruptcy proceeding.

The exception applies, for example, to suits to determine a

federal income tax exemption, see id.; to enforce federal labor

laws, see Twin Cities Electric, 907 F.2d at 109; to enforce

state bar disciplinary rules, see Wade v. State Bar of Arizona,

948 F.2d 1122 (9th Cir. 1991); to enforce federal employment

discrimination laws, see EEOC v. Hall’s Motor Transit Co.,

789 F.2d 1011 (3rd Cir. 1986); and to enforce state consumer

LOCKYER v. MIRANT CORP. 1663

protection laws, see In re First Alliance Mortgage, 263 B.R.

99 (B.A.P. 9th Cir. 2001).

Mirant did not argue in the district court that the Attorney

General’s Clayton Act suit fell outside the § 362(b)(4) excep-

tion. In its initial briefing before us, Mirant similarly did not

argue that the suit fell outside the exception, even though the

Attorney General had briefed the question. After oral argu-

ment, we asked the parties to submit supplemental briefing in

order to be sure that Mirant had been given a full opportunity

to address the question.

Mirant now makes two arguments to us. First, it argues that

the § 362(b)(4) exception does not apply because the statutory

reference to “such government unit’s police or regulatory

power” means that the government in question must be suing

in furtherance of its own police and regulatory power. Mirant

contends that the state Attorney General is not doing so in this

case because his only remaining claim is for injunctive relief

under section 16 of the federal Clayton Act, which authorizes

“[a]ny person, firm, corporation, or association” to seek

injunctive relief “against threatened loss or damage by a vio-

lation of the antitrust laws.” 15 U.S.C. § 26.

[9] Mirant suggests in its argument that a suit by a Califor-

nia official to enforce the federal Clayton Act would not be

a suit within its own authority, and that only a suit by the

United States Attorney to enforce the Clayton Act would

come within § 362(b)(4). This suggestion is without founda-

tion in the case law. A number of cases make clear that the

§ 362(b)(4) exception extends to a government’s enforcement

of laws enacted by other governments. See, e.g., City of New

York v. Exxon Corp., 932 F.2d 1020, 1024-25 (2d Cir. 1991)

(municipality enforcing federal environmental law); In re

Commonwealth Oil Refining Co., 805 F.2d 1175, 1186, 1188

& n. 5 (5th Cir. 1986) (United States enforcing Puerto Rico

law); New York v. Mirant New York, Inc., 300 B.R. 174, 178-

79 (S.D.N.Y. 2003) (state enforcing federal environmental

1664 LOCKYER v. MIRANT CORP.

law); Herman v. Brown, 160 B.R. 780, 781 (E.D. La. 1993)

(state enforcing federal racketeering law); People of the State

of Illinois v. Electrical Utilities, 41 B.R. 874, 876-77 (N.D.

Ill. 1984) (state enforcing federal environmental law); In re

Canarico Quarries, Inc., 466 F. Supp. 1333, 1334 (D. Puerto

Rico 1979) (commonwealth enforcing federal Clean Air Act);

In re Pincombe, 256 B.R. 774, 781-83 & n.3 (Bankr. N.D. Ill.

2000) (state enforcing federal employment discrimination

law); In re New York Trap Rock Corp., 153 B.R. 642, 643

(Bankr. S.D.N.Y. 1993) (county enforcing federal environ-

mental law).

Mirant argues explicitly that because section 16 of the

Clayton Act authorizes suits by private parties, a government

unit suing to enforce that section cannot be acting as a gov-

ernment within the meaning of § 362(b)(4). This argument is

also without foundation. While section 16 does authorize suits

by private entities, it also authorizes suits by state govern-

ments. See California v. Am. Stores Co., 495 U.S. 271, 275-

76 (1990) (upholding injunctive relief awarded to state in suit

brought under section 16 of the Clayton Act). When the

Attorney General seeks to enforce this law on behalf of the

citizens of California, he is acting within the police power of

the California government. His suit is authorized by the state,

is in furtherance of the state’s authority, and uses state

resources. We are aware of no authority, and Mirant cites

none, holding that a government suit that would otherwise be

within the “police or regulatory power” exception of

§ 362(b)(4) ceases to come within that exception whenever

the provision of law under which the government sues also

authorizes suits by private entities.

[10] Second, Mirant argues that the Attorney General’s suit

does not satisfy either of the two established tests for the “po-

lice or regulatory powers” exception of § 362(b)(4). The two

tests are the related, and somewhat overlapping, “pecuniary

purpose” and “public purpose” tests. A suit comes within the

exception of § 362(b)(4) if it satisfies either test. See Univer-

LOCKYER v. MIRANT CORP. 1665

sal Life Church, 128 F.3d at 1297 (“The question in this case

is whether [the government action] meets either test.”)

(emphasis added). We hold that the Attorney General’s Clay-

ton Act suit satisfies both tests.

[11] Under the “pecuniary purpose” test, “the court deter-

mines whether the [government] action relates primarily to

the protection of the government’s pecuniary interest in the

debtors’ property or to matters of public safety and health.”

Continental Hagen, 932 F.2d at 828 (internal quotation marks

and modifications omitted). See also Edward Cooper Paint-

ing, 804 F.2d at 942; In re State of Missouri, 647 F.2d 768,

776 (8th Cir. 1981). If the suit seeks to protect the govern-

ment’s pecuniary interest, the § 362(b)(4) exception does not

apply. On the other hand, if the suit seeks to protect public

safety and welfare, the exception does apply. The purpose of

the “pecuniary purpose” test is to prevent suits that would

allow a governmental unit to obtain an advantage over credi-

tors or potential creditors in the bankruptcy proceeding.

[12] The Attorney General’s section 16 Clayton Act suit

clearly satisfies the “pecuniary purpose” test. After having

been trimmed down by the district court, the suit now seeks

only divestiture. The Attorney General does not seek a mone-

tary recovery, and asserts no interest of the state in the three

power plants that are the subject of his suit. Rather, the Attor-

ney General seeks only an injunction that would require

Mirant to divest itself of the plants. There is nothing in this

relief that would allow the Attorney General to gain an advan-

tage over creditors in the bankruptcy proceeding. If granted,

the only effect of the remedy would be to require that the

plants be sold, with the entire proceeds going to the bank-

ruptcy estate. Further, it is clear that the suit seeks to protect

the welfare of electricity consumers in northern California by

protecting them from the excessive charges that might result

from an undue concentration of market power.

[13] Under the “public purpose” test, the court determines

whether the government seeks to “effectuate public policy” or

1666 LOCKYER v. MIRANT CORP.

to adjudicate “private rights.” NLRB v. Continental Hagen,

932 F.2d at 833. If the government seeks the former, the

exception applies; if the government seeks the latter, it does

not. Id.; see also In re State of Missouri, 647 F.2d at 776. A

suit does not satisfy the “public purpose” test if it is brought

primarily to advantage discrete and identifiable individuals or

entities rather than some broader segment of the public. See,

e.g., Chao, 270 F.3d 378 (suit to recover unpaid wages under

the Fair Labor Standard Act does not come within

§ 362(b)(4)). The Attorney General’s suit clearly satisfies the

“public interest” test, for it is brought to protect the interest

of all electricity consumers in northern California.

[14] We therefore hold that the Attorney General’s section

16 Clayton Act suit comes within the “police or regulatory

power” exception under § 362(b)(4), and that the automatic

stay does not apply.

C. Landis Stay

[15] A district court has discretionary power to stay pro-

ceedings in its own court under Landis v. North American

Co., 299 U.S. 248, 254 (1936). In Landis, two holding compa-

nies sued the Securities and Exchange Commission (“SEC”)

in the District Court for the District of Columbia to enjoin

enforcement of the Public Utility Holding Company Act of

1935 on the ground that it was unconstitutional. Numerous

similar suits were filed, in the District of Columbia and else-

where, against the SEC. The SEC filed a complaint in the dis-

trict court for the Southern District of New York to compel

other holding companies to comply with the terms of the Act.

The District of Columbia district court stayed its suit, indicat-

ing that the stay would last until the New York district court

suit was decided on appeal by the Supreme Court or was oth-

erwise finally resolved.

[16] The Supreme Court reversed:

LOCKYER v. MIRANT CORP. 1667

[A party seeking] a stay must make out a clear case

of hardship or inequity in being required to go for-

ward, if there is even a fair possibility that the stay

for which he prays will work damage to some one

else. Only in rare circumstances will a litigant in one

cause be compelled to stand aside while a litigant in

another settles the rule of law that will define the

rights of both.

Id. at 255. The Court noted that resolution of the New York

district court suit could help narrow the issues considerably:

True, a decision in the cause then pending in New

York may not settle every question of fact and law

in suits by other companies, but in all likelihood it

will settle many and simplify them all.

Id. at 256. Nonetheless, the Court held that a stay lasting until

the New York district court suit was finally resolved exceeded

“the limits of a fair discretion.” Id. It then held that, in the cir-

cumstances now confronting it, where the New York district

court had already had its case for a year, a stay lasting only

until the New York district court decided the case might be

appropriate. Id. at 256-57. It therefore remanded to the Dis-

trict of Columbia district court to consider whether to grant a

stay of what was now likely to be fairly short duration. Id. at

259.

We have sustained, or authorized in principle, Landis stays

on several occasions. In CMAX, Inc. v. Hall, 300 F.2d 265

(9th Cir. 1962), CMAX, a common carrier by air, sued Dre-

wry, a shipper, in federal district court to recover $12,696.00,

contending that Drewry had not paid the full amount of the

government-approved tariff. At least a dozen other suits were

later filed in the same district court, in which CMAX sued

shippers on the same ground. The Civil Aeronautics Board

(“CAB”) then instituted an administrative enforcement pro-

ceeding against CMAX, contending that CMAX had charged

1668 LOCKYER v. MIRANT CORP.

numerous shippers, including Drewry, more than the

approved tariff. The district court stayed CMAX’s suit against

Drewry. CMAX sought mandamus.

Citing Landis, we set out the following framework:

Where it is proposed that a pending proceeding be

stayed, the competing interests which will be

affected by the granting or refusal to grant a stay

must be weighed. Among those competing interests

are the possible damage which may result from the

granting of a stay, the hardship or inequity which a

party may suffer in being required to go forward, and

the orderly course of justice measured in terms of the

simplifying or complicating of issues, proof, and

questions of law which could be expected to result

from a stay.

Id. at 268. We denied mandamus. Applying the framework,

we noted that CMAX sought only damages. It alleged no con-

tinuing harm and sought no injunctive or declaratory relief.

Delay of CMAX’s suit would result, at worst, in a delay in its

monetary recovery, with possible (though by no means cer-

tain) loss of prejudgment interest. Further, we noted that the

CAB proceeding would provide considerable assistance in

resolving CMAX’s suit against Drewry, as well as CMAX’s

other suits in the district court:

[A]t the very least, the [CAB] proceeding will pro-

vide a means of developing comprehensive evidence

bearing upon the highly technical tariff questions

which are likely to arise in the district court case.

Moreover, if that proceeding should result in a revo-

cation of CMAX’s operating authority, the district

court will be enabled to explore the effect thereof on

that carrier’s standing to collect past undercharges.

...

LOCKYER v. MIRANT CORP. 1669

To these considerations must be added the fact

that several other similar cases are now pending in

the same district court, and more are likely to be

filed in the near future. In the interests of uniform

treatment of like suits there is much to be said for

delaying the frontrunner.

Id. at 269.

In Leyva v. Certified Grocers of California, Ltd., 593 F.2d

857 (9th Cir. 1979), truck drivers sued their employer for

unpaid wages under the federal Fair Labor Standards Act

(“FLSA”) (count I), and under their collective bargaining

agreement (count II). The district court stayed both counts

under the Federal Arbitration Act. On appeal, we held that the

collective bargaining count was subject to arbitration, but that

the FLSA count was not. We nonetheless held that a stay of

the FLSA count might be justified under Landis and related

cases:

[S]ound reasons may exist . . . to support the dis-

trict court’s determination to stay the action under

the powers to control its own docket and to provide

for the prompt and efficient determination of the

cases pending before it.

***

A trial court may, with propriety, find it is effi-

cient for its own docket and the fairest course for the

parties to enter a stay of an action before it, pending

resolution of independent proceedings which bear

upon the case. This rule applies whether the separate

proceedings are judicial, administrative, or arbitral in

character, and does not require that the issues in such

proceedings are necessarily controlling of the action

before the court.

1670 LOCKYER v. MIRANT CORP.

Id. at 863-64.

We noted that the resolution of the collective bargaining

count in arbitration had the potential to advance significantly

the resolution of the FLSA count:

[T]he arbitrator would no doubt make findings as to

what contract documents are controlling, the hours

and work pattern of the claimants, and the amount of

wages paid to them. . . . These findings, as well as

the documents and testimony produced during the

arbitration hearing, may be of valuable assistance to

the court in resolving the Fair Labor Standards Act

claims presented in count I of the complaint, even

under the assumption that the court is not bound and

controlled by the arbitrator’s conclusions, a point we

decline to address.

Id. at 863. We remanded to allow the district court to deter-

mine whether the stay of the FLSA count was proper. In so

doing, however, we instructed the district court to take into

account “the urgent nature of the statutory right to minimum

compensation” under the FLSA, and suggested that a stay

might be appropriately conditioned on assurance that the arbi-

tration proceedings was going forward “with diligence and

efficiency.” Id. at 864. We wrote, “A stay should not be

granted unless it appears likely the other proceedings will be

concluded within a reasonable time in relation to the urgency

of the claims presented to the court.” Id.

Finally, in Mediterranean Enterprises, Inc. v. Ssangyong

Corp., 708 F.2d 1458 (9th Cir. 1983), Mediterranean sued to

enforce a contract forming a joint venture with Ssangyong.

The contract contained an arbitration clause. The district court

held that the clause applied to some but not all of the counts

in Mediterranean’s complaint. It stayed the entire suit pending

arbitration, not limited to the counts subject to arbitration. The

arbitrable and non-arbitrable counts in the complaint over-

LOCKYER v. MIRANT CORP. 1671

lapped a great deal both factually and legally. Citing Landis

and Leyva, we sustained the stay of the entire proceeding as

within the discretion of the district court. Id. at 1465.

In the case now before us, the district court stayed proceed-

ings based in substantial part on its belief that its jurisdiction

to decide the scope of the automatic stay was in doubt, and

that the applicability of the § 362(b)(4) exception to the stay

was also in doubt. We have now resolved both of these ques-

tions, holding that the district court does have jurisdiction to

decide the scope of the stay and that the § 362(b)(4) exception

applies. If we believed, after resolving these questions, that a

Landis stay might still be appropriate, we would remand to

allow the district court to exercise its discretion. However, we

conclude that a Landis stay cannot be justified and therefore

vacate the stay.

[17] On the facts of this case, neither the balance of hard-

ships between the parties, nor the prospect of narrowing the

factual and legal issues in the other proceeding, justifies a

stay. Unlike the plaintiffs in CMAX and Leyva, who sought

only damages for past harm, the Attorney General seeks

injunctive relief against ongoing and future harm. Landis cau-

tions that “if there is even a fair possibility that the stay . . .

will work damage to some one else,” the party seeking the

stay “must make out a clear case of hardship or inequity.” 299

U.S. at 255. There is more than just a “fair possibility” of

harm to the Attorney General, and to the interests of the elec-

tricity consumers of northern California whose interest he

seeks to protect. If the Attorney General’s Clayton Act claim

has merit, Mirant’s ownership of the three power plants is an

ongoing illegal concentration of market power that threatens

economic harm to electricity consumers. For its part, Mirant

has not made out a “clear case of hardship or inequity.” To

be sure, if the stay is vacated Mirant must proceed toward trial

in the suit in the district court, but being required to defend

a suit, without more, does not constitute a “clear case of hard-

ship or inequity” within the meaning of Landis.

1672 LOCKYER v. MIRANT CORP.

Further, it is highly doubtful that the bankruptcy court in

Texas will provide a legal resolution to the Attorney Gener-

al’s Clayton Act claim. First, we note that neither the Attor-

ney General nor Mirant has instituted an adversary action in

the bankruptcy court seeking a determination whether the

ownership of the plants by a single entity, such as Mirant,

constitutes a Clayton Act violation. Second, the bankruptcy

court is unlikely to consider, as part of its approval or disap-

proval of a Chapter 11 reorganization plan, whether owner-

ship of the plants by a single entity is legal under the Clayton

Act. Indeed, it may well approve a reorganization plan per-

mitting Mirant to sell off the three power plants to a single

entity, on the rationale that the plants are worth more when

owned by a single entity.

We are aware of no case, other than this one, in which a

district court has entered a Landis stay of a suit falling within

the “police or regulatory power” exception to the automatic

stay, and counsel has cited none. The very terms of the excep-

tion provide that the suit be brought by a governmental unit

in furtherance of its “police or regulatory power,” thereby

indicating that a suit qualifying under the exception will be

brought to protect an important governmental interest. Fur-

ther, the “pecuniary interest” and “public interest” tests under

which the exception is allowed are designed to ensure that a

suit qualifying under § 362(b)(4) does not interfere with the

ongoing bankruptcy proceeding. Because a suit permitted

under § 362(b)(4) is thus distinct from the bankruptcy pro-

ceeding, it is relatively unlikely that resolution of the bank-

ruptcy proceeding will significantly assist the district court in

the decision of the factual and legal issues before it.

[18] We recognize the importance of the district court hav-

ing the ability to control its own docket, particularly in this

time of scarce judicial resources and crowded dockets. We do

not intend that this opinion be read to restrict unduly the abil-

ity of the district court, in appropriate cases, to issue Landis

stays, or to issue stays under other doctrines, such as Colo-

LOCKYER v. MIRANT CORP. 1673

rado River Water Conservation District v. United States, 424

U.S. 800 (1976). We hold only that a Landis stay is improper

in the circumstances of this case — where the power of the

district court to decide whether the automatic stay applies is

clear, where the inapplicability of the automatic stay is also

clear, and where the proceeding in the bankruptcy court is

unlikely to decide, or to contribute to the decision of, the fac-

tual and legal issues before the district court.

Conclusion

We hold that the district court has jurisdiction to decide

whether the suit before it is stayed by the automatic stay of

the bankruptcy court. We hold, further, that the suit qualifies

under the exception to the automatic stay for “police or regu-

latory power” under 11 U.S.C. § 362(b)(4). Finally, we hold

that a Landis stay is not justified under the circumstances of

this case. We therefore VACATE the stay and REMAND to

allow the Attorney General’s suit to go forward on the merits

of his Clayton Act claim.

VACATED and REMANDED.