Opinion
Civil Action No. 1:05-cv-2026-GET.
April 6, 2006.
ORDER
The above-styled matter is presently before the court on:
1) defendant Thomas E. Winter's motion to stay proceedings and for a protective order [docket no. 33];
2) Charles L. Davis' motion to withdraw as attorney for defendant Joel Construction Company [docket no. 45].
Plaintiffs filed the instant action on August 3, 2005, seeking damages sustained by defendants' alleged faulty construction of a home owned by plaintiffs. Plaintiffs purchased a partially constructed home from defendant Building Trends, Inc. ("BTI"), the general contractor who built the home and allegedly agreed to complete the construction. Defendant Thomas E. Winter ("Winter") is BTI's president and Chief Executive Officer ("CEO"). Defendant Joel Construction Company ("Joel") procured the building permit under which BTI built the home. Plaintiffs assert claims against BTI and Winter for breach of contract and unjust enrichment, asserting that they paid for the property and a fully constructed home but BTI and Winter abandoned the project before completion. Plaintiffs further assert claims against all defendants for negligent construction based on the work performed on the home, and a claim against Winter for fraud.
On October 24, 2005, BTI filed a third-party complaint against twelve sub-contractors who allegedly performed work on the home, seeking contribution and indemnity. Defendant Winter may intend to join in bringing the third party claims; he is listed in the heading of the third party complaint but not the body. Winter is hereby DIRECTED to clarify whether he joins in the third party complaint.
On December 2, 2005, third-party defendant Craftmaster Enterprises, Inc. ("Craftmaster") filed a counterclaim against BTI and Winter, and a cross-claim against third-party defendant Premier Euro Enterprises, Inc. d/b/a Stefan's Euro Co., Inc. ("Premier"). On February 9, 2006, Premier filed a cross-claim against Craftmaster and a counterclaim against BTI and Winter.
On November 3, 2005, BTI filed a notice of bankruptcy and suggestion of stay. On December 2, 2005, Winter filed a motion to stay proceedings and for protective order. On January 31, 2006, Charles L. Davis filed a motion to withdraw as attorney for Joel.
Motion to Stay and for Protective Order
Pursuant to 11 U.S.C. § 362(a), an automatic stay is imposed on any judicial action filed against the debtor on claims that arose before the debtor filed bankruptcy unless the case falls within certain exceptions contained in subpart(b). Accordingly, all actions against BTI were stayed as a result of its filing of bankruptcy and suggestion upon the record on November 3, 2005.
Winter requests the court to expand the stay to include the entire action against all parties until the conclusion of the bankruptcy proceedings. He also seeks a related protective order excusing him from answering other parties' discovery requests and/or participating in depositions. Winter offers several reasons in support of his request for the stay and protective order. First, Winter argues that BTI is an indispensable party to the proceedings as the general contractor on the home at issue. Secondly, Winter contends that the purpose behind the automatic stay, which is to the permit the bankrupt party to focus on re-organization, applies to him as President and CEO. See Jove Engineering, Inc, v. I.R.S., 92 F.3d 1539, 1550 (11th Cir. 1996). Thirdly, Winter argues that the claims should not proceed against the third party defendants because they are only liable if BTI is found liable, and there will be no finding of liability on behalf of BTI while the stay is pending. Finally, Winter argues that the arbitration proceedings between BTI and plaintiffs might resolve the instant matters through arbitration during the stay and dismiss the instant action. For these reasons, Winter argues that it is in the interests of judicial economy to stay the case against all defendants pending resolution of BTI's bankruptcy.
Both plaintiffs and defendant Joel object to the imposition of a stay. Plaintiffs contend that Winter's motion is an attempt to delay proceedings, and cites instances of BTI and Winter's allegedly dilatory tactics during the arbitration case to support the contention. Plaintiffs further argue that the motion was not timely filed pursuant to LR 7.1A(2) Finally, plaintiffs argue that Winter has offered no legal authority for extending the automatic stay past its limited application under the bankruptcy code to the debtor, not non-bankrupt defendants. In re Richard B. Vance and Co., 289 B.R. 692, 696-697 (Bankr. C.D. Ill. 2003). Plaintiffs assert that the proper way to obtain a stay of proceedings against non-bankrupt defendants is through adversary proceedings in the bankruptcy court. In re Goldberg, 221 B.R. 907, 909 (Bankr. M.D. Fla. 1998) (debtor's request to extend stay to non-debtors is by seeking injunctive relief in adversary proceeding).
Defendant Joel objects to the stay primarily because it does not wish a stay to interfere with the immediate disposition of its summary judgment motion. Further, Joel argues that an automatic stay is not available to non-bankrupt co-defendants of the debtor "even if they are in similar legal or factual nexus with debtor." In re Stewart, 329 B.R. 910, 914-915 (Bankr. M.D. Ga. 2005).
With regard to Winter's motion for protective order, both plaintiffs and noel dispute Winter's contention that complying with discovery requests will sufficiently detract from his participation in re-organizing BTI that a protective order is required. Both cite law supporting the position that discovery may proceed against employees of the debtor. See In re Hillsborough Holdings Corp., 130 B.R. 603, 605 (Bankr. M.D. Fla. 1991); In re Richard Vance and Co., 289 B.R. 692. Further, plaintiffs contend that many of the requests have already been produced in a related case before Judge Story.
Initially, the court notes that the automatic stay provision stays "the commencement or continuation. of a judicial, administrative, or other action proceeding against the debtor," which includes arbitration proceedings. 11 U.S.C. § 362(a); see In re Holywell Corp., 913 F.2d 873, 876 (1990) (bankruptcy court modified automatic stay to permit finalization of arbitration award when bankruptcy was filed during the arbitration). Accordingly, Winter's argument that a stay will provide time for disposition of the arbitration proceedings is incorrect. Although the stay may protect parties other than the debtor in rare cases when "the debtor and some third party have such a similarity of interests that failure to protect the third party will mean that the assets of the debtor itself will fall into jeopardy," Winter has not established such an identity of interest on behalf of all parties for whom he seeks a stay. In re Stewart, 329 B.R. at 915. After considering the parties' arguments, the court finds that Winter fails to present a legal or factual basis for imposing a stay beyond the usual bankrupt party to the entire case against all parties. Accordingly, Winter's motion for stay and for protective order [docket no. 33] is hereby DENIED.
Motion to Withdraw
Charles L. Davis filed a motion to withdraw as attorney for defendant Joel. Although the motion is not in strict accordance with Local Rule 83.1E, the motion notified defendant Joel and the other parties of Mr. Davis' intention to withdraw. Further, Mr. Davis informs the court and the parties that William Johnson, who is listed as co-counsel on the docket for Joel, will continue as counsel of record. Mr. Johnson has since filed motions with this court acting as Joel's counsel. As neither Mr. Davis' client, Joel, nor any other parties have filed objections to his withdrawal, the court finds the motion to be in substantial compliance with the local rule. Accordingly, and for all the aforementioned reasons, Charles L. Davis' motion to withdraw as attorney for Joel [docket no. 45] is hereby GRANTED.
Summary
1) Defendant Thomas E. Winter's motion to stay proceedings and for a protective order [docket no. 33] is DENIED;
2) Charles L. Davis' motion to withdraw as attorney for defendant Joel Construction Company [docket no. 45] is GRANTED.
3) Defendant Winter is DIRECTED to clarify whether he joins in the third party claims.
SO ORDERED.