United States District Court, S.D. West Virginia, Huntington Division
MEMORANDUM OPINION AND ORDER
C. CHAMBERS UNITED STATES DISTRICT JUDGE
pending before the Court is Plaintiff's Motion for
Determination as to whether the statutory stay implemented
for the benefit of Defendant McElliotts Trucking, LLC
(McElliotts) following its filing of a bankruptcy petition
(ECF No. 172) will apply to claims asserted against
non-debtor defendants Cardinal Transport, Inc.
(“Cardinal”) and Danny McGowan (ECF No. 171).
Cardinal and McGowan each filed a response to Plaintiff's
motion (ECF Nos. 173, 174) and Plaintiff subsequently filed a
timely reply (ECF No. 175). For reasons specified herein,
Plaintiff's motion for hearing is
DENIED. Additionally, the Court
ORDERS that all proceedings in this action
as against all three remaining defendants be
STAYED pending resolution of McElliotts'
February 26, 2016, Plaintiff filed the present Complaint
against McElliotts, Cardinal, McGowan, and Harold Midkiff
(ECF No. 1). The Complaint alleged twelve counts of
liability, including various claims of negligence against
each individual defendant, claims for vicarious liability
against McElliotts and Cardinal, and punitive damages (ECF
No. 1). Plaintiff later argued that his Complaint also
alleged a joint venture claim (ECF No. 121). Midkiff was
later dismissed as a defendant by stipulation (ECF No. 158).
Additionally, Plaintiff's joint venture claim was
dismissed pursuant to the Court's ruling on
Cardinal's Motion for Summary Judgment (ECF No. 121). All
other claims, however, survived dispositive motions and were
set to go to trial on Tuesday, October 17, 2017.
Final Settlement Conference held on Monday, October 16, 2017,
which did not result in settlement, McElliotts filed a
voluntary petition for relief in the United States Bankruptcy
Court for the Southern District of West Virginia (ECF No.
170). By statute, when a debtor files a petition in
Bankruptcy Court, all judicial and other proceedings against
him must be stayed pending resolution of the bankruptcy
petition. 11 U.S.C. § 362. Accordingly, the Court
ordered that the proceedings in this action be stayed as to
all parties' claims against McElliotts (ECF No. 172).
Though all matters were stayed as against McElliotts,
Plaintiff filed the present Motion for Determination as to
the status of his claims against non-debtor defendants
Cardinal and McGowan (ECF No. 171).
preliminary matter, the Court notes that it retains subject
matter jurisdiction over this case despite the ongoing
bankruptcy proceedings related hereto. Holland v. High
Power Energy, 248 B.R. 53, 56 (S.D.W.Va. 2000) (citing
David v. Hooker, Ltd., 560 F.2d 412, 418 (9th Cir.
1977)). Additionally, “while it is correct that the
bankruptcy court is the exclusive forum to consider a motion
for relief from the automatic stay, the district court
retains jurisdiction independent of the bankruptcy court to
determine whether a pending civil action is subject to the
automatic stay.” Holland, 248 B.R. at 56. As
such, this Court may properly decide Plaintiff's motion
to determine whether the automatic stay applies to the
non-debtor defendants in this case.
deciding whether claims asserted against a non-debtor
defendant should be stayed pending the resolution of a debtor
defendant's bankruptcy proceedings, the Court may
consider the question in the context of two different legal
mechanisms: (1) the statutory automatic stay prescribed by 11
U.S.C. § 362(a)(1), and (2) the Court's general
Statutory Stay as to Cardinal - Indemnification
U.S.C. § 362(a)(1) requires that, once a debtor files a
bankruptcy petition, an automatic stay be placed on any
action that was or could have been commenced against him
before the filing of the bankruptcy petition. The purpose of
the automatic stay is to protect the bankruptcy debtor.
A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 998
(4th Cir. 1986). As such, it is “generally said to be
available only to the debtor, not third party defendants or
co-defendants.” Id. at 999. Under the terms of
this general rule, McElliotts is the only defendant in this
case entitled to the protections of the automatic stay since
it is the only defendant who has filed for bankruptcy.
is an exception to this rule, however, for cases that involve
“unusual circumstances.” Id. Such
circumstances may be found “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.” Id.
The Fourth Circuit noted in its decision of Piccinin
that “an illustration of such a situation would be a
suit against a third-party who is entitled to absolute
indemnity by the debtor on account of any judgment that might
result against them in the case.” Id.
the Fourth Circuit's Piccinin decision continues
to be the leading authority regarding the “unusual
circumstances” exception today, district courts have
been unable to achieve any substantial clarity regarding
appropriate application of the exception. In 2000, 14 years
after Piccinin, Judge Copenhaver, sitting in this
District, declined to extend the § 362 stay even where
the non-debtor defendant requesting an extension of the
automatic stay had an indemnification agreement with the
debtor defendant. See Holland, 248 B.R. at 55. The
court noted that the defendants' interests were not
“closely intertwined” as required by
Piccinin simply by virtue of the indemnification
agreement and that, because the non-debtor defendant was a
potential joint tortfeasor in the action, the automatic stay
would not be extended to him. Id. at 59.
2008, though, Judge Hudson of the Eastern District of
Virginia extended the automatic stay to a non-debtor
defendant where the non-debtor and debtor defendants had an
agreement that “unambiguously state[d]” that the
debtor defendant would indemnify the non-debtor defendant.
Dunnam v. Sportsstuff, Inc., 2008 WL 200287, at *3
(E.D.Va. Jan. 23, 2008). The court in Dunnam noted
that, because of the indemnity agreement between the parties,
the case appeared to be “exactly like the paradigmatic
illustration provided by the Fourth Circuit as guidance in
Piccinin . . .” Id. The court found
that, if it declined to extend the automatic stay to the
non-debtor defendant, “any finding of liability on the
part of [the non-debtor defendant] would pass through to [the
debtor defendant].” Id. The court went on to
say, “In effect, the proceeding against [the non-debtor
defendant] would unavoidably become a de facto
proceeding against [the ...