HALL
v.
MASTERS
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In this employment discrimination case, defendants requested a stay based on their employer's Chapter 11 bankruptcy filing. The court denied the stay, holding that the automatic bankruptcy stay protects only the debtor and does not extend to individual defendants unless the bankruptcy court explicitly enjoins suits against non-debtors, which it had not done here.
The automatic stay under 11 U.S.C. § 362(a)(1) protects only the debtor and does not extend to non-debtors unless the bankruptcy court explicitly enjoins suits against them. Because none of the named debtors in Wellpath's bankruptcy are defendants in this case, and the bankruptcy court did not extend the stay to these individual defendants, the stay does not apply and the case may proceed.
“A bankruptcy petition operates to stay litigation of all pre-petition claims against the debtor. 11 U.S.C. § 362(a)(1). The protections of this automatic stay generally extend to the debtor alone.”
Establishes that the automatic stay protects only the debtor, not non-debtors
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Join FLexlaw to unlock all legal intelligenceWellpath Holdings, Inc. and affiliated entities filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. The defen…
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Before the Court is the defendants' Suggestion of Bankruptcy and Notice of Stay (Doc. 63). Wellpath Holdings, Inc. and affiliated entities—one of which is presumably the defendants' employer-have declared Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of Texas, Case No. 24-90533. The defendants ask the Court to apply the automatic stay to this case.
A bankruptcy petition operates to stay litigation of all pre-petition claims against the debtor. 11 U.S.C. § 362(a)(1). The protections of this automatic stay generally extend to the debtor alone. In re Boginsky, 658 B.R. 209, 211 (Bankr. S.D. Fla. 2024); see also In re TXNB Internal Case, 483 F. 3d 292, 301 (5th Cir. 2007) (“Section 362(a)...does not apply, however, to actions not directed against the debtor or property of the debtor."). Although the automatic stay generally does not protect non-debtors, bankruptcy courts have the power to extend the stay to enjoin suits against non-debtors in certain situations. Id.
The court in Wellpath's bankruptcy case has extended the stay to "lawsuits filed as of the Petition Date in which a Debtor is named as one of the defendants therein.” Amended Interim Order Enforcing the Automatic Stay, entered Nov. 12, 2024, In re Wellpath Holdings, Inc. et al., No. 24-90533, at *1 n.3 (Bankr. S.D. Tex.). Rider 1 to Wellpath's bankruptcy petition lists the Debtors. None of those Debtors are named as a defendant in this case. Because the automatic stay does not protect the defendants and the bankruptcy court has not enjoined litigation of claims against them, this case may proceed. If the bankruptcy court extends the stay to the defendants, they shall promptly notify the Court and the plaintiff.
Accordingly, the defendants' request to stay this case is denied.
DONE and ORDERED in Fort Myers, Florida on November 21, 2024.
Sheri Poster Rappell
SHERI POLSTER CHAPPELL
UNITED STATES DISTRICT JUDGE
SA: FTMP-1 Copies: All Parties of Record
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