HALL
v.
MASTERS
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A district court denied defendants' request to stay litigation based on an affiliated entity's Chapter 11 bankruptcy filing, holding that the automatic stay does not extend to non-debtor defendants and that the court lacked jurisdiction to impose a stay after the plaintiff filed a notice of appeal.
The court denied the defendants' request to stay the case on two independent grounds: (1) the automatic stay under 11 U.S.C. § 362(a)(1) generally applies only to debtors, not non-debtor defendants, and the bankruptcy court's order extending the stay applied only to lawsuits naming a debtor as a defendant—which was not the case here; and (2) the district court lacked jurisdiction to stay the case because the plaintiff's notice of appeal divested the district court of control over the aspects of the case involved in the appeal.
[1] A bankruptcy petition operates to stay litigation of all pre-petition claims against the debtor.
[2] The protections of the automatic stay generally extend to the debtor alone.
Previewing 2 of 4 headnotes on this case. FLexlaw’s editorially structured points of law — every proposition, pinpointed — are reserved for members.
Join FLexlaw to unlock all legal intelligence“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 the general rule that the automatic stay protects only the debtor, not non-debtor defendants.
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Join FLexlaw to unlock all legal intelligenceWellpath Holdings, Inc. and affiliated entities filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. The d…
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Before the Court is the defendants' Suggestion of Bankruptcy and Notice of Stay (Doc. 61). 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. Also, this Court lacks jurisdiction to stay the case because the plaintiff filed a notice of appeal. See Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982) (“The filing of a notice of appeal...confers jurisdiction on the court of appeal and divests the district court of its control over those aspects of the case involved in the appeal.”).
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
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