CARMELLA C. MINELLI VS. HARRAH'S RESORT ATLANTIC CITY (L-1509-15, MERCER COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: May 19, 2020
• Docket: A-4431-18T1
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-4431-18T1

CARMELLA C. MINELLI and ANTHONY MINELLI, APPROVED FOR PUBLICATION Plaintiffs-Appellants, May 19, 2020

v. APPELLATE DIVISION

HARRAH'S RESORT ATLANTIC CITY, HARRAH'S OPERATING COMPANY, INC., CAESARS ENTERTAINMENT, and CAESARS ENTERTAINMENT OPERATING COMPANY, INC.,

Defendants-Respondents.

Submitted March 3, 2020 - Decided May 19, 2020

Before Judges Fisher, Accurso and Rose.

On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1509-15.

Dasti Murphy McGuckin Ulaky Koutsouris & Connors, PC, attorneys for appellants (Christopher K. Koutsouris, on the briefs).

Camacho Mauro Mulholland, LLP, attorneys for respondents (Reena Shah, on the brief).

The opinion of the court was delivered by ACCURSO, J.A.D.

Plaintiffs Carmella C. Minelli and her husband Anthony Minelli appeal

from the dismissal of their personal injury action against defendants Harrah's

Resort Atlantic City, Harrah's Operating Company, Inc., Caesars

Entertainment and Caesars Entertainment Operating Company, Inc. based on

the two-year statute of limitations, N.J.S.A. 2A:2-14. Because we conclude

that operation of Section 108(c)(2) of the Bankruptcy Code made plaintiffs'

claims timely filed, at least as to defendant Caesars Entertainment Operating

Company, we reverse.

Plaintiff Carmella Minelli contends she was injured in a slip and fall at

Harrah's Resort Atlantic City. Her complaint alleges that at the time of her

accident, Harrah's Operating Company, d/b/a Harrah's Resort Atlantic City, a

subsidiary of defendant Caesars Entertainment Operating Company, which in

turn was a subsidiary of defendant Caesars Entertainment, were indistinct

entities, "inadequately capitalized" and structured "to merely evade

responsibility." Her complaint asserts the court should accordingly "pierce the

corporate veil," disregarding defendants' corporate forms in assessing liability

for her injuries.

Plaintiff does not dispute that she filed her complaint more than two

years after her accident. She claims, however, that "Harrah's AC," as the

A-4431-18T1 2 Harrah's defendants referred to themselves in correspondence with her lawyer,

was aware of the claim, and that the bankruptcy of Caesars Entertainment

Operating Company, approximately six months before the limitations period

was set to expire, extended her time to sue.

Because the case was dismissed at the pleadings stage, the facts

presented to us are limited. There appears no dispute, however, at least for

purposes of the motion to dismiss, as to these few, key procedural facts.

Plaintiff's fall at Harrah's AC happened on June 2, 2013. On January 15, 2015,

Caesars Entertainment Operating Company, Inc., formerly known as Harrah's

Operating Company, Inc. or Harrah's Casino Hotel Reno, and 172 or more

affiliated entities, but not Harrah's AC, filed a voluntary Chapter 11 petition in

the United States Bankruptcy Court for the Northern District of Illinois,

triggering the automatic stay under Section 362 of the Bankruptcy Code, 11

U.S.C. §362(a).

Plaintiff filed her complaint on June 30, 2015. Defendants did not

answer but instead filed a Notice of Suggestion of Bankruptcy. Plaintiff

obtained relief from the bankruptcy court on January 28, 2019, by way of

consent order permitting plaintiff "to proceed against Caesars [Entertainment

Operating Company] as a nominal defendant only" in order to allow plaintiffs

to "establish liability against Caesars for the sole purpose of recovering from

A-4431-18T1 3 either (a) any non-Reorganized Debtor defendants, (b) any proceeds of

available insurance policies issued in the name of or for the benefit of the

Debtors . . . , or (c) any third-party insurance policies that may apply."

Defendants thereafter filed a motion to dismiss pursuant to Rule 4:6-

2(e), arguing plaintiffs' complaint was time-barred. Plaintiffs opposed the

motion, arguing 11 U.S.C. §108 made the filing timely. Defendants filed a

reply brief asserting, allegedly for the first time, that the Harrah's defendants

were not among the Caesars entities seeking protection in the bankruptcy

court.

After hearing argument, the Law Division dismissed the complaint with

prejudice. Relying on our opinion in Nativo v. Grand Union Co., 315 N.J.

Super. 185, 188 (App. Div. 1998), the court concluded that had plaintiffs filed

their complaint before the limitations period expired, "then the matter might

have been delayed until the automatic stay was lifted on January 28, 2019. But

because [p]laintiff did not file until after the two-year statute of limitations, the

filing was out of time and not subject to the automatic stay."

Plaintiffs moved for reconsideration, arguing Nativo was distinguishable

because the plaintiff in that case received stay relief before expiration of the

two-year limitations period but did not file her complaint until after the statute

A-4431-18T1 4 had run. See id. at 186-87. The court denied the motion for reconsideration.

This appeal follows.

11 U.S.C. §108(c) provides in pertinent part:

Extension of time: [I]f applicable nonbankruptcy law . . . fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor, or against an individual with respect to which such individual is protected under section 1201 or 1301 of this title, and such period has not expired before the date of the filing of the petition, then such period does not expire until the later of (1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or (2) 30 days after notice of the termination or expiration of the [automatic] stay.

In Nativo, we interpreted this provision as extending the applicable two-year

statute of limitations thirty days beyond the termination of an automatic stay

under 11 U.S.C. §362(a), if the limitations period would otherwise have ended

while the stay remained in place. See Nativo, 315 N.J. Super. at 187-88.

Because the plaintiff in that case, however, received notice of stay relief forty-

two days before the statute of limitations expired but did not file her complaint

until seven days afterward, we found the defendant's bankruptcy proceeding

did not "add[] anything to the limitations period." Id. at 188.

This case is different. The statute of limitations on plaintiff's personal

injury claim expired while the bankruptcy stay, at least as to Caesars

A-4431-18T1 5 Entertainment Operating Company, 1 remained in place. Accordingly, Section

108(c)(2) of the Bankruptcy Code plainly permitted her to file an action

"against the debtor, or against an individual . . . protected under section 1201

or 1301 [stays of action against a codebtor]," up until "30 days after notice of

the termination or expiration of the stay under section 362," here, January 28,

2019. As plaintiffs filed their complaint well before that date, it would appear

timely filed under Section 108(c)(2) as to those defendants protected by the

automatic stay.

Defendants contend, however, that plaintiffs "are not entitled to relief

under 11 U.S.C. §108(c)" because they filed their complaint after expiration of

the limitations period but before the start of the thirty-day grace period.

Defendants reason that had plaintiffs "wanted the protection of 11 U.S.C.

§108(c), they would have waited to file their complaint until the bankruptcy

stay was terminated and they received the order modifying the injunction."

Putting aside defendants' tacit admission that plaintiffs' complaint would

have been timely under Section 108(c)(2) if filed within thirty days of January

28, 2019, more than three-and-one-half years after its actual filing in June

1 Defendant Caesars Entertainment Operating Company, not its parent, Caesars Entertainment, is the debtor. Defendants, however, have argued that plaintiffs are not entitled to the Section 108 "grace period" as to the Harrah's defendants only. Defendants have not explained why this distinction among the non-debtor defendants, and we cannot discern it from the limited record.

A-4431-18T1 6 2015, defendants cite no case or other authority in support of their argument.

We accordingly dismiss it as inadequately briefed. 2 See 700 Highway 33 LLC

v. Pollio, 421 N.J. Super. 231, 238 (App. Div. 2011); Weiss v. Cedar Park

Cemetery, 240 N.J. Super. 86, 102 (App. Div. 1990).

Defendants further argue that "[p]laintiffs are not entitled to a grace

period for their claims against Harrah's Resort Atlantic City and Harrah's

Operating Company since these entities were not subject to the automatic

stay." Specifically, defendants contend that although "some of the 174 entities

listed [in the bankruptcy filing] contain some iteration of Harrah's or Atlantic

City," the Harrah's defendants in this action were not among those entities

seeking bankruptcy protection.

2 Because the claim is not adequately briefed, we are not confident we fully understand the argument. To the extent defendants are arguing that plaintiffs' complaint is void because filed in violation of the automatic stay, we note the Third Circuit has held the power of the bankruptcy court under Section 362(d) to grant relief from the automatic stay, including by "annulling, . . . such stay," 11 U.S.C. §362(d), "indicates a legislative intent to apply certain types of relief retroactively and validate proceedings that would otherwise be void ab initio," In re Siciliano, 13 F.3d 748, 751 (3d Cir. 1994) (quoting In re Schwartz, 954 F.2d 569, 572 (9th Cir. 1992)); see also Bascom Corp. v. Chase Manhattan Bank, 363 N.J. Super. 334, 341 (App. Div. 2003) (same). The consent order signed by the bankruptcy judge in this matter expressly permits plaintiffs to "proceed against Caesars [Entertainment Operating Company]" in their action "pending in the Superior Court of New Jersey, Law Division, Mercer County" in accordance with the order's terms.

A-4431-18T1 7 Plaintiffs appear to concede the point, at least implicitly, in asserting the

automatic stay should extend to defendant Harrah's Resort Atlantic City, the

"alleged non-debtor" subsidiary of debtor Caesars Entertainment Operating

Company. In support of their argument, they rely on Judge Posner's opinion

for the Seventh Circuit in the bankruptcy action, remanding to the bankruptcy

judge the question of whether suits against the debtor's parent should be stayed

by the court. See Caesars Entm't Operating Co. v. BOKF, N.A. (In re Caesars

Entm't Operating Co.), 808 F.3d 1186, 1188 (7th Cir. 2015). Following the

remand, the bankruptcy court temporarily enjoined certain actions against

Caesars Entertainment, the non-debtor parent of debtor Caesars Entertainment

Operating Company. 3 Caesars Entm't Operating Co. v. BOKF, N.A., 561 B.R.

441, 443 (Bankr. N.D. Ill. 2016).

The Law Division did not reach plaintiffs' argument that the automatic

stay triggered by defendant Caesars Entertainment Operating Company's

Chapter 11 filing extended to the Harrah's defendants as non-debtor

subsidiaries, based on its conclusion that Section 108 afforded plaintiffs no

3 We note, however, that those cases did not involve application of the automatic stay under Section 362, but rather imposition of an injunction pursuant to the exercise of the bankruptcy court's equitable powers. See In re Caesars Entm't Operating Co., 808 F.3d at 1188. Plaintiffs do not explain how those cases support their argument that their claims against defendants Harrah's Resort Atlantic City and Harrah's Operating Company were timely filed pursuant to Section 108, and the point is not obvious to us.

A-4431-18T1 8 relief whatsoever. Although federal bankruptcy law holds the automatic stay

of Section 362(a)(1) is generally limited to the debtor, it appears likewise well -

established that a bankruptcy court may extend the stay under that section to

"non-bankrupt co-defendants" when there is such identity between the debtor

and the co-defendant "that the debtor may be said to be the real party

defendant and that a judgment against the [co-]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); see also Queenie, Ltd. v. Nygard Int'l, 321 F.3d

282, 287-88 (2d Cir. 2003) (applying the automatic stay to debtor's wholly

owned corporation because adjudication of a claim against the non-debtor

corporation would have an immediate adverse economic impact on the debtor).

We note here that the only question for our courts is whether the

automatic stay was extended by the bankruptcy court to the non-debtor

defendants. Whether the stay should extend beyond the debtor is a question

reserved to the exclusive jurisdiction of the federal courts. See 28 U.S.C.

1334(a) and (d); Union Cty. Sav. Bank v. Johnson, 210 N.J. Super. 589, 597

(Ch. Div. 1986).

In other words, a state trial court must decide its own jurisdiction to hear

the case before it, including, specifically, whether that case is stayed by

operation of Section 362. See In re Baldwin-United Corp. Litig., 765 F.2d

A-4431-18T1 9 343, 347 (2d Cir. 1985) (holding "[t]he court in which the litigation claimed to

be stayed is pending has jurisdiction to determine not only its own jurisdiction

but also the more precise question whether the proceeding pending before it is

subject to the automatic stay"); accord Citizens First Nat'l Bank of N.J. v.

Marcus, 253 N.J. Super. 1, 6 (App. Div. 1991). But as the Supreme Court of

Connecticut has recently explained, that state courts necessarily have

jurisdiction to determine whether the automatic stay provision, "by its own

terms," applies to a proceeding in state court, does not confer "jurisdiction to

modify the application of the automatic stay provision pursuant to 11 U.S.C. §

105 (a) or 11 U.S.C. § 362 (d) by extending its application to proceedings to

which it does not, by its own terms, automatically apply." U.S. Bank Nat'l

Ass'n v. Crawford, 219 A.3d 744, 758 (Conn. 2019).4

Because the parties have not presented us with any information as to

whether the bankruptcy court extended the automatic stay to the non-debtor

4 Although beyond the scope of the issues to be decided here, we note a state court's exercise of jurisdiction to decide issues relating to the automatic stay can raise complicated questions of federal collateral review of state court judgments, notwithstanding the Rooker-Feldman doctrine. See Gruntz v. County of Los Angeles (In re Gruntz), 202 F.3d 1074, 1079, 1084 (9th Cir. 2000) (en banc) (explaining that "modifying the automatic stay is not the act of a state court merely interpreting federal law; it is an intervention in the operation of an ongoing federal bankruptcy case, the administration of which is vested exclusively in the bankruptcy court"); In re Phila. Entm’t & Dev. Partners, 879 F.3d 492, 498-99 (3d Cir. 2018); In re Knapper, 407 F.3d 573, 583 n.22 (3d Cir. 2005).

A-4431-18T1 10 defendants and, if so, whether plaintiffs sought stay relief to proceed against

them, and the trial court did not consider the issue, it is inappropriate for us to

do so in the first instance, see Selective Ins. Co. of Am. v. Rothman, 208 N.J.

580, 586 (2012); Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).

We only vacate the dismissal as to Caesars Entertainment and the Harrah's

defendants based as it was on the erroneous conclusion that Section 108

afforded plaintiffs no relief even as to Caesars Entertainment Operating

Company, an entity clearly protected by the automatic stay.

To recap, we reverse the Law Division's dismissal of plaintiffs'

complaint as to Caesars Entertainment Operating Company, vacate the

dismissal as to Caesars Entertainment and the Harrah's defendants and remand

for further proceedings not inconsistent with this opinion. We do not retain

jurisdiction.

Reversed in part, vacated in part, and remanded.

A-4431-18T1 11