United States District Court, W.D. Virginia, Roanoke Division
RACHAEL L. COOK, Plaintiff,
JOHN RICHARD BLAZER, SCOTT MCQUATE, and THE OHIO COMPANY. Defendants.
Michael F. Urbanski United States District Judge
matter, plaintiff Rachael L. Cook filed an amended complaint
alleging a variety of claims against defendants John Richard
Blazer, Scott McQuate, and The Ohio Company. ECF No. 16. In
light of the pending bankruptcy proceeding related to Blazer
(U.S. Bankruptcy Court, N.D. Ohio, Case No. 16-31463), the
court stayed all further proceedings against him. ECF No. 44.
It then ordered the . remaining parties to file briefs
addressing whether Cook's claims against McQuate and The
Ohio Company (collectively the "non-debtor
defendants") should also be stayed. The court heard
argument on June 16, 2016, and this matter is now ripe for
bankruptcy stays are generally available only to the debtor,
a court may extend the stay to non-debtor codefendants in
"unusual circumstances." Kreisler v.
Goldberg. 478 F.3d 209, 213 (4th Cir. 2007). For
example, the Fourth Circuit has explained that an
"unusual situation . . . arises when there is such an
identity between the debtor and the third-party defendant
that the debtor may be said to be the real-party defendant
and that a judgment against the third-party defendant will in
effect be a judgment or finding against the debtor."
A.H. Robins Co. v. Piccinin. 788 F.2d 994, 999 (4th
Cir. 1986). "An illustration of such a situation would
be a suit against a third-party who is entitled to absolute
indemnity by the debtor on account of any judgment that might
result against them in the case." Id.
their joint brief, the non-debtor defendants urge the court
to stay the entire case pending resolution of Blazer's
bankruptcy proceeding. They note that Cook alleges various
claims against all three defendants, and seeks joint and
several liability for her damages. Moreover, they claim the
state law governing Cook's action provides a statutory
right of contribution for any damages awarded. See
Ohio Rev. Code § 2307.25(A). Finally, they argue
allowing this action to proceed would pressure Blazer to
remain involved in the Utigation and saddle him with the
burden of third-party discovery. In light of this, the
non-debtor defendants believe unusual circumstances support
extension of the bankruptcy stay.
court disagrees. The non-debtor defendants offer no evidence
they are entitled to the type of absolute indemnity described
in Piccinin. The mere fact that they may be entitled
to contribution from Blazer is insufficient. Credit
Alliance Corp. v. Williams, 851 F.2d 119, 120-21 (4th
Cir. 1988) (refusing to extend bankruptcy stay to guarantor
of note executed by bankrupt corporation, despite evidence
that the guarantor was entitled to bring claims for
contribution through the bankruptcy proceeding); CresCom
Bank v. Terry, 499 B.R. 494, 496 (D.S.C. 2013)
("[A] statutory right to bring an action for
indemnification is not sufficient to justify extension of the
automatic stay.").' Doyle v. Fleetwood Homes of
Virginia. Inc.. No. 2:08-CV-1442, 2009 WL 1210697, at *2
(S.D. W.Va. Apr. 30, 2009) (refusing to extend bankruptcy
stay despite evidence that the non-debtor defendants were
entitled to contribution from bankrupt codefendant). Nor can
the stay be extended "solely because of an apprehended
later use against the debtor of offensive collateral estoppel
or the precedential effect of an adverse decision."
Queenie. Ltd. v. Nygard Int'l. 321 F.3d 282, 288
(2d Cir. 2003). Indeed, such a broad understanding of
"unusual circumstances" would cause a "vast
and unwarranted interference with creditors' enforcement
of their rights against non-debtor co-defendants."
Id. Finally, it is unclear at this early stage if
Cook's action will require substantial discovery from
Blazer such that he will be prevented from successfully
pursuing his ongoing bankruptcy proceeding. See,
e.g.. In re Residential Capital. LLC. 480 B.R.
529, 540 (Bankr. S.D.N.Y. 2012) (collecting cases that extend
the automatic stay to non-debtors only where the discovery
burden interferes with the debtor's pending bankruptcy
proceeding). Thus, the court is not persuaded that this case
presents "unusual circumstances" justifying
extension of the bankruptcy stay.
the court will not exercise its discretion to stay this
proceeding "in the interests of justice and in control
of [its] docket." Nat'l Oilwell Varco. L.P. v.
Mud King Products. Inc.. No. 4:12-CV-3120, 2013 WL
1948766, at *3 (S.D. Tex. May 9; 2013) (citing Wedgeworth
v. Fibreboard Corp., 706 F.2d 541, 545 (5th Cir. 1983)).
Though Cook initially conceded that a stay was necessary, she
reversed course during argument. Cook now wishes to pursue
her claims against the non-debtor defendants. Denial of the
stay will also best serve judicial efficiency. Accordingly,
the non-debtor ...