After holding a hearing to show cause, the bankruptcy court held that Armstrong had violated the bankruptcy automatic stay provision, § 362, by filing his adversary proceeding without the court's permission. The bankruptcy court held him in contempt, awarded the trustee attorney's fees and punitive damages, and dismissed the adversary proceeding with prejudice. The review of the dismissal with prejudice for the alleged violation of the automatic stay was reviewed de novo . The factual determinations of the bankruptcy court as to the awarding of fees and damages were reviewed under an abuse of discretion standard. The district court ruled that the bankruptcy court properly dismissed Armstrong's action with prejudice for violating the stay and that it was acting within its discretion in awarding compensatory damages to a corporation. The district court determined that the punitive damage award is an abuse of discretion and that Armstrong's procedural defect does not merit the awarding of punitive damages based upon criminal contempt. The punitive damages award is reversed and the contempt charges are set aside.

The bankruptcy court awarded summary judgment in favor of the chapter 7 trustee and against the Nickersons for $2ll,237.50, plus interest, as initial transferees under 11 U.S.C. § 550. The bankruptcy court ruled that the Nickersons must return to debtor's estate the amounts they received from debtor as profits from a Ponzi scheme that debtor operated. The district court affirmed the bankruptcy court's decision in its entirety.

The bankruptcy court held that Big Sky received a $300,000 preferential transfer from debtor, which the trustee was entitled to avoid and recover from Big Sky, which was the initial transferee. The district court held that the bankruptcy court correctly determined that the trustee could avoid the $300,000 transfer to Big Sky under 11 U.S.C. § 547(b) and recover the money from Big Sky under 11 U.S.C. § 550(a)(1).

Debtor's motion for authorization to implement a employee retention program is before the court. In view of the objection by the United Steelworkers of America, the court finds that to propose this retention program without first having discussed its provisions with the Steelworkers is not an example of good business judgment, especially when the continued existence of the business is in question. Granting the motion may jeopardize the continuing support of the Steelworkers in the reorganization process. To be acceptable to this court, the severance plan must contain a mitigation provision that reduces the amount payable in the event the executive obtains other employment during the six or nine month reimbursement period. The severance plan is unacceptable because of the adverse impact the provision could have on the administration of the case in chapter 7. Further, the court will construe the payment of the emergence bonus only in the event that a plan of reorganization is confirmed and not an chapter 11 liquidating plan. The motion is denied without prejudice. The debtor is granted leave to set a hearing on ten days notice for approval of a retention program consistent with this order.