## Facts

- David Burgess operated a licensed brothel in Storey County, Nevada, since 1983.
- Burgess filed a voluntary Chapter 11 petition on July 30, 1997.
- On June 2, 1998, the Storey County Commission and Sheriff held a hearing concerning Burgess’s association with the Hell’s Angels and revoked his brothel license.
- Burgess ceased brothel operations and sought emergency relief, asserting the revocation violated the automatic stay under 11 U.S.C. § 362 and, alternatively, should be enjoined under 11 U.S.C. § 105.
- The bankruptcy court denied relief on June 17, 1998, reasoning the license was a personal privilege rather than estate property and that the revocation fell within the governmental/police power exception.
- In separate litigation, a federal district court preliminarily enjoined the County on July 7, 1998 from enforcing the revocation, and the brothel resumed operations.
- Burgess continued the bankruptcy appeal, asserting a potential claim for damages for the closure period from June 2 to July 7, 1998.

## Issues

1. Whether the appeal was moot because a separate injunction restored the license and allowed the business to reopen.
2. Whether the brothel license constituted “property of the estate” under 11 U.S.C. § 541(a), making the revocation subject to the automatic stay under 11 U.S.C. § 362(a).
3. Whether the County’s revocation was exempt from the stay under the governmental/police power exception in 11 U.S.C. § 362(b)(4).

## Decision

- The appeal was not moot because Burgess asserted a live claim for damages based on an alleged past violation of the automatic stay.
- The brothel license was property of the estate under § 541(a) because it had economic value and was central to the debtor’s ongoing business.
- Revoking the license during the Chapter 11 case constituted an act to exercise control over estate property in violation of § 362(a).
- The district court reversed the bankruptcy court’s order and remanded for further proceedings.

## Legal Principles

- A bankruptcy appeal is not moot where effective relief remains available, including damages for an alleged past violation of the automatic stay.
- “Property of the estate” under 11 U.S.C. § 541(a) is broadly defined and can include state-issued licenses with economic value to the debtor, even if state law labels them privileges.
- Under 11 U.S.C. § 362(a)(3), acts that revoke or materially interfere with an estate asset may constitute prohibited exercises of control over estate property.
- Government entities may exercise regulatory authority, but they remain constrained by the automatic stay when postpetition action alters or impairs estate property without bankruptcy-court authorization.

## Conclusion

The district court held the debtor’s brothel license was estate property and that the County’s postpetition revocation violated the automatic stay; the appeal remained live due to a damages claim for the temporary closure, so the denial of relief was reversed and the matter remanded.


In re Burgess, 234 B.R. 793 (D. Nev. 1999)