In re Danzik

549 B.R. 804, 2016 Bankr. LEXIS 1116, 2016 WL 1458321
CourtUnited States Bankruptcy Court, D. Wyoming
DecidedApril 7, 2016
DocketCase No. 16-20002
StatusPublished
Cited by1 cases

This text of 549 B.R. 804 (In re Danzik) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Wyoming primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Danzik, 549 B.R. 804, 2016 Bankr. LEXIS 1116, 2016 WL 1458321 (Wyo. 2016).

Opinion

MEMORANDUM OPINION

Honorable Cathleen D. Parker, United States Bankruptcy Judge

This matter comes before the Court upon the motion of Sigma Opportunity Fund II, LLC (Movant) to modify the automatic stay provided in 11 U.S.C. § 362(a)1 in order to allow a pending action to continue in the New York state court. A complete review of the record, and weighing all of the relevant factors, indicates that relief from the stay should be granted.

This Court has jurisdiction to hear the Motion for Stay Relief (Motion) pursuant to 28 U.S.C. §§ 157 and 1334. Venue to hear the Motion in this district is proper in accordance with 28 U.S.C. §§ 1408 and 1409. The Motion is a core proceeding under 28 U.S.C. § 157(b)(2)(G).

FACTUAL AND PROCEDURAL BACKGROUND

Movant is a plaintiff in a pending action in the Supreme Court of the State of New York, County of New York, captioned Sigma Opportunity Fund II, LLC v. Dennis M. Danzik, New York Sup.Ct. Index No. 652883/2015 (New York Action). Movant’s claim involves a personal guarantee for a loan made by Movant to RDX Technologies Corporation (RDX).

Debtor filed his Chapter 11 bankruptcy petition on January 4, 2016. The New York Court entered a summary judgment order awarding Movant a money judgment against Debtor on January 12, 2016. The Court entered its order the same day that Debtor filed its suggestion of bankruptcy with the New York Court. The Court has not “entered” the judgment due to the automatic stay. Movant filed the Motion for Stay Relief to complete the New York [807]*807Action in order to liquidate its claims against the Debtor and Debtor’s estate.

DISCUSSION

The Court, in determining whether to grant relief from stay, relies upon: (1) the Bankruptcy Code’s provision that provides relief from the automatic stay for cause; and, (2) the applicable factors to determine whether to modify the stay to permit litigation against Debtor in another forum.

1. Section 361(d)(1)

Relief from the automatic stay “for cause,” other than lack of adequate protection under § 362(d)(1) of the Bankruptcy Code, governs Movant’s request for relief and provides:

(d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay—
(1) for cause____

Because the Bankruptcy Code does not define “cause,” relief from stay for cause is a discretionary determination courts make on a case-by-case basis.2 The bankruptcy court has the power to modify or vacate the stay based on “the particular circumstances of the case and is to be guided by considerations that under the law make for the ascertainment of what is just to the claimants, the debtor, and the estate.”3

The automatic stay is one of the fundamental debtor protections provided under the Bankruptcy Code.4 The automatic stay fulfills two goals: 1) to prevent the diminution or dissipation of the assets of the debtor’s estate during the pendency of the bankruptcy case; and, 2) to enable a debtor to avoid the multiplicity of claims against the estate arising in different forums.5 In regards to lawsuits, the policy of the automatic stay is to protect the debtor’s estate from “the chaos and wasteful depletion resulting from multifold, uncoordinated and possibly conflicting litigation.”6

2. Factors applicable to determining whether to modify the stay to permit litigation against the debtor in another forum

Congress recognized some circumstances would constitute “cause” to modify the automatic stay to permit an action to proceed before another tribunal:

“[I]t will often be more appropriate to permit proceedings to continue in their place of origin, when no great prejudice to bankruptcy estate would result, in order to leave the parties to their chosen forum and to relieve the bankruptcy court from many duties that may be handled elsewhere.”7

[808]*808The Utah Bankruptcy Court interpreted the Report’s suggestions and reviewed case law around the United States to develop a twelve-factor list (Curtis factors) to determine whether litigation should continue in another tribunal.8 Bankruptcy courts use the Curtis factors in their determination of whether they should grant stay relief. The Curtis factors are:

(1) whether the relief will result in a partial or complete resolution of the issues;
(2) the lack of any connection with or interference with the bankruptcy case;
(3) whether the foreign proceeding involves the debtor as a fiduciary;
(4) whether a specialized tribunal has been established to hear the particular cause of action and that tribunal has the expertise to hear such cases;
(5) whether the debtor’s insurance carrier has assumed full financial responsibility for defending the litigation;
(6) whether the action essentially involves third parties, and the debtor functions only as a bailee or conduit for the goods or proceeds in question;
(7) whether litigation in another forum would prejudice the interests of other creditors, the creditors’ committee and other interested parties;
(8) whether the judgment claim arising from the foreign action is subject to equitable subordination under Section 510(c);
(9) whether movant’s success in the foreign proceeding would result in a judicial lien avoidable by the debtor under Section 522(f);
(10) the interest of judicial economy and the expeditious and economical determination of litigation for the parties;
(11) whether the foreign proceedings have progressed to the point where the parties are prepared for trial; and,
(12) the impact of the stay on the parties and the “balance of hurt.9

One who seeks relief from the automatic stay to continue litigation in a different tribunal must first establish cause, for such relief. The burden then shifts to Debtor to establish he is entitled to the stay.10

ANALYSIS

In applying the Curtis factors, the Court finds that Movant made a prima facie case for granting relief from the automatic stay “for cause.”

1. Resolution of the Issues.

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Paul Rose
D. Kansas, 2022

Cite This Page — Counsel Stack

Bluebook (online)
549 B.R. 804, 2016 Bankr. LEXIS 1116, 2016 WL 1458321, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-danzik-wyb-2016.