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ruling that although a D O policy was property of the estate, the court was "not persuaded that the insurance policy proceeds . . . necessarily constitute `property' of the debtor policy-owner within the meaning of § 541 such that the present proceedings [against non-debtor co-defendants] must be stayed"
Summary of this case from In re First Central Financial Corp.Opinion
No. C-90-0242-DLJ
October 19, 1990
Automatic Stay — Non-Debtor Third Parties — Officers — Corporations — Securities Litigation — Insurance. — Since Section 362(a)(1) applies the automatic stay only to "debtors," it does not work to stay securities fraud litigation against the debtors' officers. The debtors were severed from the litigation after their bankruptcy filings. The "unusual circumstances" exception to this rule, applied in cases in which there is a virtual identity between the debtors and the defendant non-debtor third parties, for example in mass products liability litigation where the third parties' liability is derived from the debtors, did not apply here because the situation is more akin to those involving joint tortfeasors, which have independent liability for the wrongs committed. Further, in the leading cases where the stay was extended to non-debtor third parties, there were a massive number of suits nationwide. Here, all parties are before one court. In sum, "the securities laws allow for the independent liability of the officers or other parties involved, and proceedings like the present may go forward without the participation of the corporation."
See Sec. 362(a) at ¶ 8602.
Property of the Estate — Automatic Stay — Insurance — Securities Litigation — Indemnification — Non-Debtor Third Parties — Corporations — Officers. — Though Section 362(a)(1), barring actions against debtors, did not work to the benefit of the debtors' corporate officers trying to use the automatic stay in the companies bankruptcies to halt securities fraud litigation against themselves, a separate analysis was called for under Section 362(a)(3). The latter provision prohibits any acts to obtain property of the estate. The debtors' insurance policy providing indemnification for liability such as this was clearly property of the estate. However, against precedent in some other circuits, it was held here that the proceeds of the insurance policy covering the officers were not estate property. "[T]he Ninth Circuit and the courts of this District have failed to adopt the position that the automatic stay applies as a matter of course to proceedings which may give rise to a potential claim for indemnification under a debtor's insurance policy." Put differently, "an insurance policy indemnifying both a debtor and its non-debtor officers is not in and of itself a sufficient basis for staying proceedings against the latter." Finally, only if liability is found against the non-debtor third parties for fraudulently marketing and selling limited partnerships will the separate question arise of "whether any insurance policy proceeds are available to satisfy claims on the basis of indemnity. . . . [T]his Court does not find such future concerns to have a sufficient, direct impact on the present proceedings to compel that they be stayed."
See Sec. 362(a) at ¶ 8602 and Sec. 541(a)(1) at ¶ 9502.
This is a securities class action brought on behalf of purchasers or holders of certain real estate limited partnerships syndicated and managed by defendant Equitec Financial Group, Inc. ("Equitec"). Plaintiffs allege that defendants Equitec and some of its affiliates, several named individual officers and directors of those Equitec entities, and majority stockholder Pacificorp conspired to fraudulently induce plaintiffs to invest in the limited partneships sponsored by Equitec.
On September 12, 1990, a status conference in the above-captioned matter was held. Richard Harmon and David Gold appeared for plaintiffs. James Hughes and Robert Julian appeared for defendants Equitec Financial Group, Equitec Properties Company, and Equitec Securities Company. Barnes Ellis appeared for defendants Gleason and the Pacificorp affiliates. Robert A. Van Nest appeared for defendant Cason. Richard de Saint Phalle appeared for defendant Nitzberg. Joseph Spero and Virginia Crisp appeared for the Equitec partnerships.
I. BACKGROUND
On August 29, 1990, defendants Equitec Financial Group, Inc., Equitec Properties Company, and Equitec Securities Company (collectively, "the Equitec debtors") filed separate petitions under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Northern District of California. At the status conference on September 12, 1990, the primary focus was the effect of these bankruptcy filings on the present proceedings.
Defendants contend in this motion that the automatic stay imposed pursuant to 11 U.S.C. § 362 on proceedings involving a debtor or the property of a debtor's estate should be extended so as to encompass and stay the present proceedings against the Equitec debtors and certain non-bankrupt codefendants. These codefendants are named under an insurance policy, owned by Equitec, which indemnifies both the corporation and these non-debtor codefendants. Defendants argue that as the present action may result in claims for indemnification under the policy, then the securities action affects "property of the estate" within the meaning of § 362.
Section 362 provides in pertinent part:
Except as provided in subsection (b) of this section, a petition filed under . . . this title . . . operates as a stay, applicable to all entities, of —
(1) the commencement or continuation, including the issuance or employment of 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;
. . .
. . .
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate. . . .11 U.S.C. § 362(a).
The particular codefendants who are also insureds under National Union Fire Insurance Company of Pittsburgh are:
Alfred M. Gleason; Marsden S. Cason; Kenneth E. Nitzberg; Equitec 79 Arizona Real Estate Investors; Equitec 80 Real Estate Investors; Equitec 81 Real Estate Investors; Equitec 82 Real Estate Investors; Equitec 83 Real Estate Investors; Equitec Real Estate Investors Fund XII; Equitec Real Estate Investors Fund XIII; Equitec Real Estate Investors Fund XIV; Equitec Real Estate Investors Fund XVI; Equitec Real Estate Investors Fund 17; and Equitec Real Estate Investors Fund 18.
Plaintiffs respond that such policy proceeds should not be construed as "property of the estate" under the statute. They contend that the Equitec debtors should be severed from the present proceedings and the action allowed to go forward against the remaining defendants.
Having read the papers submitted, this Court holds that the automatic stay under 11 U.S.C. § 362 should not be extended to the present proceedings against the non-debtor defendants. To this end defendants Equitec Financial Group, Inc., Equitec Properties Company, and Equitec Securities Company are hereby severed from the present proceedings, and the action is allowed to go forward against the remaining defendants.
II. JURISDICTION
This Court first notes that it continues to have jurisdiction over the action before it as the automatic stay provisions of 11 U.S.C. § 362 merely suspend applicable proceedings and do not divest the court of jurisdiction. In re Related Asbestos Cases, 23 B.R. 523, 526 (N.D. Cal. 1982) (Peckham, C.J.) (citing David v. Hooker, Ltd., 560 F.2d 412, 418 (9th Cir. 1977); Paden v. Union for Experimenting Colleges and Univs., 7 B.R. 289, 290-91 (Bankr. N.D. Ill. 1980)). Furthermore, as previously held in this District, this Court retains jurisdiction independent of the bankruptcy courts to construe the meaning and application of § 362. Related Asbestos Cases, 23 Bankr. at 526.
III. DISCUSSION
Section 362(a) is broken down into several subsections describing proceedings on which the automatic stay is properly imposed. Only two of these subsections — (a)(1) regarding proceedings against the debtor, and (a)(3) regarding actions affecting property of the debtor's estate — are pertinent to the present inquiry. Our analysis examines each of these subsections in turn.
A.
Proceedings against the debtor: § 362(a)(1).
The automatic stay imposed under § 362(a)(1) is generally available only to the bankrupt and not to non-debtor third parties or codefendants. A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 999 (4th Cir.), cert. denied, 479 U.S. 876 (1986); Wedgeworth v. Fibreboard Corp., 706 F.2d 541, 544 (5th Cir. 1983); Related Asbestos Cases, 23 Bankr. at 527. Indeed, the protections afforded by the Bankruptcy Act's automatic stay have never been construed as staying as a matter of course all actions touching upon the debtor:
Under the former Bankruptcy Act, it was well settled that bankruptcy proceedings under Chapter 11 did not require termination of every suit to which the bankruptor was a party[; and t]here seems to be no compelling reason for a different result to obtain under Chapter 11 of the New Bankruptcy Code.Royal Truck Trailer, Inc. v. Armadora Maritima Salvadorena, 10 B.R. 488, 491 (N.D. Ill. 1981) (citations omitted).
This District discussed the application of § 362(a)(1) to actions involving debtor and non-debtor codefendants in In re Related Asbestos Cases, 23 B.R. 523 (N.D. Cal. 1982) (Peckham, C.J.). There defendant asbestos manufacturers in numerous personal injury actions sought a stay of proceedings after the codefendants Unarco Industries, Inc., a Johns-Manville Corporation filed bankruptcy petitions. The plaintiffs in return sought to sever the proceedings against the debtors in order to pursue their claims against the non-debtor codefendants. The court held that the automatic stay did not apply to proceedings against the non-debtors, and that the proceedings against the debtors could be severed so as to permit the action to move forward against the non-debtor codefendants.
In discussing the application of § 362(a)(1), the court concluded that the automatic stay did not apply to actions against non-debtor codefendants as the statute "clearly and repeatedly" referred to the debtor only. Id. at 527. Turning to the legislative history behind § 362, the court noted that the purpose behind the automatic stay was two-fold: to protect the creditors from "the injustice of a race for the debtor's assets" by providing for an orderly determination and satisfaction of creditors' claims, and to protect debtors by giving them a "`breathing spell'" from the collection efforts of creditors. Id. at 527-28 (quoting S. Rep. No. 95-989, 95th Cong., 2d Sess. 54-55 (1978), and citing H.R. Rep. No. 95-595, 95th Cong., 2d Sess. 340 (1978)). The court concluded that the sheer mass of litigation against the debtors nationwide, as well as the need to ensure the orderly resolution of claims against the debtors, mandated that such actions be centralized into a more manageable proceeding before the bankruptcy court. However, the court concluded that the protections afforded by the Bankruptcy Act were not available in actions against the non-debtor defendants which, once the debtors had been severed, would not directly affect the bankrupts' estates. Related Asbestos Cases, 23 Bankr. at 527.
Section 362(a)(1) reads:
[T]his title . . . operates as a stay, applicable to all entities, of —
(1) the commencement or continuation, including the issuance or employment of 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)(1) (emphasis added).
Other courts, however, have extended the stay to proceedings involving non-debtor third parties in" `unusual circumstances'":
This `unusual situation,' it would seem, arisec 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.A.H. Robins, Co., Inc. v. Piccinin, 788 F.2d 994, 999 (4th Cir.), cert. denied, 479 U.S. 876 (1986) (quoting in part Royal Truck Trailer v. Armadora Maritima Salvadorena, 10 B.R. 488, 491 (N.D. Ill. 1981). In Robins, the Fourth Circuit upheld the enjoining of multiple postpetition actions against non-debtor codefendants of the debtor manufacturer of the Dalkon Shield, an intrauterine contraceptive device. As in the present case, these particular codefendants were entitled to indemnification from the debtor. As other courts had reasoned in construing cases against the debtor asbestos manufacturer, Johns-Manville, see, e.g., In re Johns-Manville Corp., 33 B.R. 254, 264 (Bankr. S.D.N.Y. 1983); In re Related Asbestos Cases, 23 B.R. 523 (N.D. Cal. 1983), the Robins court consistently stressed the "avalanche of actions" filed nationally and internationally, Robins, 788 F.2d at 996, which compelled the staying of all proceedings in order to allow the reorganization processes to go forward in the bankruptcy court.
The Robins court also concluded that where the liability of the non-bankrupt is not independent of the debtor such that a judgment against the former would be binding on the latter, then the stay must be extended to encompass the non-debtor. Id. at 999 (citing In re Metal Center, 31 B.R. 458, 462 (Bankr. D. Conn. 1983)). Thus, in light of the claims involved in Robins, a successful action brought against an officer for injuries sustained through the use of the Dalkon Shield was the equivalent of an action against the corporation itself, as both actions ultimately sought compensation under the debtor's products liability policy. In short, the plaintiffs sought to reach through the officers to the debtor corporation by suing the officers in their official capacity.
The Robins-type "identification of the parties" exception has been found in cases where a non-bankrupt codefendant is entitled to absolute indemnification by the debtor. See, e.g., In re Family Health Servs., Inc., 105 B.R. 937 (Bankr. C.D. Cal. 1989). In those cases, the stay operates automatically to prevent creditors from proceeding with a lawsuit against a non-debtor codefendant, where the debtor is the "real party in interest either by way of indemnification or other immediate operation of law." In re Veliotis, 79 B.R. 846, 848 (Bankr. E.D. Mo. 1987); see also Family Health Servs., 105 Bankr. at 942; In re Ionosphere Clubs, Inc., 111 B.R. 423, 435 (Bankr. S.D.N.Y. 1990). But see In re All Seasons Resorts, Inc., 79 B.R. 901, 904 (Bankr. C.D. Cal. 1987) (even with right of indemnification, stay should not be automatically imposed absent "the magnitude of the harm imposed on the debtor" presented by the products liability actions).
Although Family Health Services permitted the bankruptcy court to extend the automatic stay to proceedings against non-debtors entitled to absolute indemnity by the debtor, we find that case to be distinguished on its facts. There the debtor health maintenance organizations sought a preliminary injunction prohibiting non-contract health care providers from pursuing claims for reimbursement against the debtors' member subscribers or their employees for medical services rendered prior to the bankruptcy filings. As that case involved at least 100,000 known creditors nationwide, it posed the same administrative nightmare of pursuing the reorganization process in the face of mass litigation as did the Robins and Johns-Manville cases.
The Ninth Circuit, however, has yet to recognize the Robins "unusual circumstances" exception to the general proposition that the automatic stay under § 362(a) does not extend to actions against non-debtor third parties. See, e.g., Matter of Lockard, 884 F.2d 1171, 1170 (9th Cir. 1989). Moreover, we do not find such "identification between parties" in the present case. Rather, this Court finds that the circumstances of the present case are closer to those cases which have held that where a non-debtor codefendant may be held independently liable of the debtor, then there is no compelling basis by which a court must extend the automatic stay provisions of § 362 to the non-debtor codefendants. See, e.g., Related Asbestos Cases; see also In re Crazy Eddie Secs. Litig., 101 Bankr. at 584; cf. A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994 (4th Cir. 1986) ("`[W]here the debtor and another are joint tortfeasors or where the non-debtor's liability rests upon his own breach of duty,' an automatic stay `would clearly not extend to such non debtor.' ") (quoting In re Metal Center, 31 B.R. 458, 462 (Bankr. D. Conn. 1983)). In Related Asbestos Cases, this District anticipated this same conclusion when it noted that Federal Rule of Civil Procedure 19 allows for severance in actions like the one then before the court as joint tortfeasors are not indispensable parties under federal law. Related Asbestos Cases, 23 Bankr. at 530; see also Crazy Eddie, 104 B.R. 582, 584 (E.D.N.Y. 1989) (automatic stay not applied where liability of non-bankrupt codefendants was not automatically imputed to debtor). In such cases, severance of the debtor is clearly permissible in order to allow the proceedings to go forward against the non-debtor defendants.
Unlike a products liability action in which a suit against an officer is effectively one against the corporation itself, the present securities action seeks to attach liability for the specific fraudulent acts of named individuals. Thus the securities laws allow for the independent liability of the officers or other parties involved, and proceedings like the present may go forward without the participation of the corporation. To hold otherwise would allow the Bankruptcy Act to create a sizeable loophole through which malfeasant corporate officers and directors and their insurers could escape, at least temporarily, all civil prosecutions of their individual fraudulent acts by having the corporation file a bankruptcy petition. We cannot agree that the protections afforded by the Bankruptcy Act were intended to be so all-encompassing so as to shield such non-debtor third parties.
B.
Actions affecting property of the estate: § 362(a)(3).
Section 362(a)(3) also applies the automatic stay to any proceeding involving "any act to obtain possession of property of the estate or of property from the estate." 11 U.S.C. § 362(a)(3). Section 541(a)(1) broadly defines "property" in the bankruptcy context, providing that the "estate is comprised of all the following property, wherever located . . . all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1); see also In re Bialac, 712 F.2d 426, 430 (9th Cir. 1983) (section 541(a)'s definition of property "intended to be broad and all inclusive"). Insurance contracts clearly fall within this definition of property. See In re Minoco Group of Cos., 799 F.2d 517, 519 (9th Cir. 1986); see also A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 1001 (4th Cir. 1986). Furthermore, in light of the nature and number of potential suits against the debtor, such contracts can constitute the "most important asset of the estate." In re Johns-Manville Corp., 40 B.R. 219, 229 (Bankr. S.D.N.Y. 1984) (referring to the products liability policy owned by debtor asbestos manufacturer).
In the present case, there is no disagreement that the indemnification policy benefitting both the Equitec debtors and their officers and directors is clearly the debtor's "property" within the meaning of the Bankruptcy Act. The question here is whether an action against a non-debtor third party that may result in a claim for indemnification under the Dolicy can be construed as affecting the property of the debtor's estate for purposes of § 362(a)(3).
The Fifth Circuit directly addressed this issue in In re Louisiana World Exposition, Inc., 832 F.2d 1391 (5th Cir. 1987). There a creditors' committee, in the name of the debtor corporation, sought to extend the automatic stay to halt payment of proceeds from directors' and officers' liability policies to the debtor corporation's directors and officers for legal expenses. The Fifth Circuit held that, while the policies themselves were deemed part of the debtor's estate, the debtor corporation had no ownership interest in the proceeds from policies that provided liability coverage only for its directors and officers. Id. at 1401; see also In re Technical Equities Corp., Case No. 3-86-00366, Adv. No. 3-89-0130 (Bankr. N.D. Cal., Jan. 26, 1989) (proceeds of debtor's directors' and officers' insurance policy not property of the bankrupt estate); cf. In re Titan Energy, Inc., 837 F.2d 325, 329 (8th Cir. 1988) (policies issued in the debtor's name qualified as "property of the estate" even though the policy proceeds would go directly to third-party claimants rather then the debtor). Instead, the Louisiana World Exposition court concluded that, for purposes of bankruptcy adjudication, such proceeds belonged more properly to the directors and officers themselves for whose sole benefit they were disbursed. Id. at 1400. Thus the request to extend the stay was properly denied.
The Fifth Circuit, however, expressly distinguished between a policy indemnifying directors only (as in the policy then before that court) and a policy indemnifying both the corporation and directors (as in the present case). Id. at 1399-1400. The court further commented that with respect to policies providing coverage of the bankrupt corporation itself, "the estate owns not only the policies, but also the proceeds designated to cover corporate losses or liability." Id. at 1400; see also Tringlai v. Hathaway Machinery Co., 796 F.2d 553, 560-61 (1st Cir. 1986); Holland America Insurance Co. v. Succession of Roy, 777 F.2d 992, 996 (5th Cir. 1985).
Despite this show of support from other circuits, this Court is not persuaded that the insurance policy proceeds potentially implicated in this case necessarily constitute "property" of the debtor policy-owner within the meaning of § 541(a)(1) such that the present proceedings must be stayed. Moreover, the Ninth Circuit and the courts of this District have failed to adopt the position that the automatic stay applies as a matter of course to proceedings which may give rise to a potential claim for indemnification under a debtor's insurance policy. For example, in In re Consolidated Capital Securities Litigation, C85-7332 (N.D. Cal. June 28, 1989), this District temporarily restrained a debtor real estate syndicate from moving the Bankruptcy Court in Texas to enjoin the Northern California securities class action. The debtor there contended that the action against non-debtor codefendant officers of the debtor was properly stayed under § 362(a)(3) by virtue of a liability policy insuring both the debtor and its codefendant officers.
Although the court in the Consolidated Capital case did not state the reasoning for its decision, its temporarily restraining the debtor from pursuing extension of the stay, as well as its order that the debtor be severed from the securities action before the court in order to allow the proceeding to go forward against the non-debtor defendants, demonstrates that an insurance policy indemnifying both a debtor and its non-debtor officers is not in and of itself a sufficient basis for staying proceedings against the latter.
Defendants contend that this District's recent decision in Greathouse v. Equitec Financial Group, Inc., 90-2064 (N.D. Cal. Oct. 10, 1990) compels a contrary conclusion. That case, involving several of the present defendants, held that the automatic stay of § 362(a)(3) extended to an action to enjoin debtor and non-debtor codefendants from consummating a proposed "roll-up" of real estate limited partnerships into a single master limited partnership. The court held that, despite the imposition of a condition precedent in the form of limited partner approval, the agreement to create a single master limited partnership constituted "property of the estate" within the meaning of § 362(a)(3). The court concluded that further proceedings against the non-debtor codefendants would exercise control over this property, and therefore the proceedings in the district court were properly stayed, giving the bankruptcy court jurisdiction over the action.
Thus the court distinguished the agreement concerning the underlying property — which constituted property of the debtor's estate — from the underlying limited partnerships themselves. Id. at 7.
We find Greathouse to be distinguished from the present action as the former sought to determine the viability of an agreement which the court had concluded fell within the boundaries of § 362(a)(3). Hence any adverse judgment reached in that action would directly affect property of the debtor's estate. Thus,
[e]ven though the plaintiffs pursued their motion nominally against only non-debtor defendants, their success would nonetheless render the Agreement null. Maintaining the action against the non-debtor defendants would have the effect of evading § 362(a)(1); that is, maintaining this action would be as effective as proceeding against the debtor defendants.Id. at 9.
The present case, however, involves no such "direct action" against property of the estate. Rather, the present action seeks to determine the liability of individual defendants in the allegedly fraudulent marketing and selling of limited partnerships. Only if such liability attaches will there arise the separate issue of whether any insurance policy proceeds are available to satisfy claims on the basis of indemnity. Moreover, unlike the overwhelming number of suits filed nationwide against the defendant debtor corporations in Robins, Johns-Manville, and Family Health Services, the present action consolidates all pertinent securities claims into one forum, brought against all proper defendants. Thus, at this point in the litigation, interest in the debtor's insurance policy proceeds seems premature. Clearly enforcement of any judgment awarded in the present action which entailed an action against the Equitec debtors' property, including the insurance policy, would fall within the reach of § 362. However, this Court does not find such future concerns to have a sufficient, direct impact on the present proceedings to compel that they be stayed.
In this light, we find persuasive the decision of the Bankruptcy Court of the Northern District of Texas in In re Consolidated Capital Equities Corp., Case No. 388-37346-SAF-11, Adv. No. 389-3351 (Bankr. N.D. Tex, Sept. 11, 1989). That case concerned a debtor corporation's motion to enjoin the Northern California securities class action proceedings against its codefendant officers, which, as noted previously, were allowed to go forward against the non-debtor officers once the debtor had been severed. See In re Consolidated Capital Secs. Litig., C85-7332 (N.D. Cal., Sept. 11, 1989). The order denying the debtor's motion was based on the accompanying transcript of the hearing, in which the court discussed the issue of "policy proceeds" in light of Lousisiana World Exposition, 832 F.2d 1391 (5th Cir. 1987):
This Court will assume for purposes of this ruling that the Debtor has interest in some or all of these insurance policies, so that you have property of the estate. There is not, however, pending an action to obtain possession of any of that property of the estate under Section 362(a), (3), but the concern that any judgement coming out of the securities litigation against non-debtors may lead to an action to obtain possession of the Debtor's property. Interest in those insurance policies is premature. If it ripens, it can be addressed and may necessarily have to be addressed in a motion to lift the stay. This Court does not see that the insurance company's cost in defending the litigation against non-debtors implicates Section 36[2](a), (3).Consolidated Capital Equities, Transcript at 3-4.
Although the Fourth Circuit found such a conclusion to be a "shocking result" with respect to the Robins indemnitees, A.H. Robins, Co., Inc. v. Piccinin, 788 F.2d 994, 1000 (4th Cir.), cert. denied, 479 U.S. 876 (1986), this case does not present the massive tort litigation involved in the products liability suits against Robins and the asbestos manufacturers. Moreover, as noted earlier, a securities action for alleged fraud on the part of the non-debtor defendants who can be held liable wholly independent from the debtor does not approach the egregious impact on the bankruptcy process which was of concern to the Robins court. We cannot conclude that allowing the present proceeding to go forward against the non-debtor defendants will defeat or interfere with the reorganization processes of the Equitec debtors.
IV. CONCLUSION
For all of the foregoing reasons, the Court ORDERS that defendants Equitec Financial Group, Inc., Equitec Properties Company, and Equitec Securities Company be hereby severed from the present proceedings pursuant to Federal Rule of Civil Procedure 42(b). The action is thus allowed to proceed against the remaining non-debtor defendants.
A status conference in this matter is scheduled for Wednesday, November 28, 1990, at 9:00 a.m.
IT IS SO ORDERED.