Nhi Reit of TX-IL, LLC v. Lasale Grp., Inc.

387 F. Supp. 3d 850
CourtDistrict Court, M.D. Tennessee
DecidedAugust 2, 2019
DocketNo. 3:19-cv-00117
StatusPublished
Cited by2 cases

This text of 387 F. Supp. 3d 850 (Nhi Reit of TX-IL, LLC v. Lasale Grp., Inc.) is published on Counsel Stack Legal Research, covering District Court, M.D. Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nhi Reit of TX-IL, LLC v. Lasale Grp., Inc., 387 F. Supp. 3d 850 (M.D. Tenn. 2019).

Opinion

WAVERLY D. CRENSHAW, JR., CHIEF UNITED STATES DISTRICT JUDGE

With The LaSalle Group, Inc. ("LaSalle") and certain of its affiliates having filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et seq., the parties in this case agree that any claims as to LaSalle are subject to the automatic stay provision of 11 U.S.C. § 362. That provision generally prohibits "the commencement or continuation, including the issuance or employment or process, of a judicial, administrative, or other proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title[.]" 11 U.S.C. § 362(a). The parties disagree, however, as to whether the stay should extend to the other Defendants, including the five Reit Tenant Defendants of whom LaSalle is the sole member. This dispute is crystallized in Plaintiff's Motion to Stay Litigation Against LaSalle Group, Inc. and to Proceed Against Remaining Defendants (Doc. No. 45), which Defendants oppose (Doc. No. 47).

"Clearly, section 362(a)(1) stays any actions against the debtor ." Patton v. Bearden, 8 F.3d 343, 348 (6th Cir. 1993) (emphasis in original). "Extending a stay to nonbankrupt co-defendants is justified only in 'unusual circumstances' " and this does not include " 'separate legal entities such as corporate affiliates, partners in debtor partnerships, or to codefendants in pending litigation.' " Parry v. Mohawk Motors of Michigan, Inc., 236 F.3d 299, 314 (6th Cir. 2000) (quoting Patton v. Bearden, 8 F.3d 343, 349 (6th Cir. 1993) ). Thus, "[i]n the absence of unusual circumstances, the automatic stay does not halt proceedings against solvent codefendants." In re Delta Air Lines, 310 F.3d 953, 956 (6th Cir. 2002).

"The pioneering decision regarding ...'unusual circumstances' indicates that said circumstances arise when 'there is such 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.' " In re MCSi, Inc., 371 B.R. 270, 271 (S.D. Ohio 2004)

*852(quoting A.H. Robins Company, Inc. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986) ). "Courts interpreting this directive have stayed actions against non-debtor co-defendants 'where they have found that the bankrupt estate would be adversely affected because the creditor's action would prevent the non-debtor from contributing funds to the reorganization, or would consume time and energy of the non-debtor that would otherwise be devoted to a reorganization effort.' " Id. at 271-72 (quoting Gray v. Hirsch, 230 B.R. 239, 243 (S.D.N.Y.1999) ); see also, Baechel v. Republic Storage Sys., LLC, No. 5:16-CV-1403, 2018 WL 1243424, at *2 (N.D. Ohio Mar. 9, 2018) (collecting cases) (factors to be considered in determining whether to extend a stay because of unusual circumstances includes "such identity between the debtor and the third-party defendant that the debtor may be said to be the real party defendant" or the "stay protection is essential to the debtor's efforts of reorganization"); USCO S.p.A. v. ValuePart, Inc., No. 2:14-CV-02590-JPM, 2015 WL 4601192, at *3 (W.D. Tenn. July 29, 2015) ("[U]nusual circumstances have been found (1) when an indemnification or contribution relationship creates an identity of interests between the debtor and the non-debtor defendant; (2) when the proceeding imposes a substantial burden of discovery on the debtor; or (3) when the proceeding would have a potential preclusive effect that forces the debtor to participate in the proceeding as if the debtor were a party.").

The burden of showing "unusual circumstances" to extend the automatic stay falls on the party seeking the extension. Luppino v. York, 562 B.R. 894, 898 (W.D. Tex. 2016) ; In re Union Tr. Philadelphia, LLC, 460 B.R. 644, 657-58 (E.D. Pa. 2011). Defendants in this action have not carried their burden. They cite no cases where being a sole member of another entity makes extension of the stay appropriate, let alone automatic. Further, their only real substantive argument is that "in order to adjudicate any of the claims involving the entities in which LaSalle is the sole member, this Court would be forced to adjudicate matters related to debts allegedly incurred prior to LaSalle's bankruptcy petition date, involving the liability of entities entirely owned by LaSalle suggest extension of the automatic stay." (Doc. No. 47 at 3). This is entirely conclusory and insufficient to support extension of the stay. See Chord Assocs. LLC v. Protech, 2003-D, LLC, No. 07-5138 JFB AKT, 2010 WL 1257874, at *12 (E.D.N.Y. Mar. 25, 2010) (rejecting extension of automatic stay where all "Defendants have asserted are conclusory statements regarding the generalized impact on corporate debtors who have an extensive portfolio of such real estate investments all over the country").

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
387 F. Supp. 3d 850, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nhi-reit-of-tx-il-llc-v-lasale-grp-inc-tnmd-2019.