Opinion
99-CV-827
October 18, 2000.
CARL F. GUY, ESQ., Syracuse, NY., Attorney for Plaintiff.
THOMAS S. GILL, ESQ., Buffalo, NY., Attorney for Defendants.
THOMAS A. DE SIMON, ESQ., Rochester, NY., Attorney for Defendant.
MEMORANDUM DECISION AND ORDER
Bennett Funding Group, Inc. ("BFG"), a business headquartered in Syracuse, New York, was primarily engaged in the acquisition and sale of office equipment leases. BFG procured lease contracts from manufacturers and dealers of office equipment at a discount from the total expected future payments to be made by the lessee and then resold the lease contracts to investors at a profit. BFG and Bennett Management Development Corp. ("BMDC"), an associated company, filed for bankruptcy protection on March 29, 1996. On April 18, 1996, the bankruptcy court approved the appointment of Richard C. Breeden as Chapter 11 trustee of the two corporations.
At the time the bankruptcy proceeding was instituted, the following Employee Retirement Income Security Act ("ERISA") benefit plans were extant, Bennett Funding Group, Inc. Profit Sharing Plan a/k/a Aloha Leasing Profit Sharing Plan, Aloha Pension Plan, and Bennett Funding Group, Inc. 401 Profit Sharing Plan. OnBank Trust Company ("OnBank") was appointed as trustee for these plans, but was replaced by Manufacturers Traders Trust Company as successor in interest by merger to OnBank.
Kathleen Bennett, the plaintiff in the instant case, was a BFG director and was BFG's president from its origination until she resigned on December 31, 1995. This action, brought pursuant to 29 U.S.C. § 1132(a)(1)(B), was commenced on May 26, 1999, and seeks the recovery of vested benefits allegedly owed to plaintiff under the aforementioned ERISA employee benefit plans, which she requested from the plans' trustee almost three years ago.
The trustee, defendant Manufacturers Traders Trust Company, claims that plaintiffs lawsuit violates the automatic stay the filing of a bankruptcy triggers under the Bankruptcy Code, 11 U.S.C. § 362, and any action concerning employee benefit plans should be heard in the bankruptcy court and not the federal district court.
On June 21, 2000, this court met with the parties to review the status of the case. The effect of the bankruptcy stay was discussed and at the conclusion of the meeting, the parties were directed to submit further briefs supporting their respective positions regarding the application of stay in this case. The requested briefs were thereafter submitted for the court's consideration and opinion.
The automatic stay is of great importance to the administration of the bankruptcy law. It "is designed to prevent a chaotic and uncontrolled scramble for the debtor's assets in a variety of uncoordinated proceedings in different courts. The stay insures that the debtor's affairs will be centralized initially, in a single forum in order to prevent conflicting judgments from different courts and in order to harmonize creditors' interests with one another." Fidelity Mortgage Investors v. Camelia Builders. Inc., 550 F.2d 47, 55 (2d Cir. 1976), cert. denied, 429 U.S. 1093, 97 S.Ct. 1107, 51 L.Ed.2d 540 (1977).
Before determining the reach and scope of the automatic stay in the case at bar, the court must first consider whether it even has jurisdiction to make such a decision. 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. Picco v. Global Marine Drilling Co., 900 F.2d 846, 850 (5th Cir. 1990)("[D]istrict courts retain jurisdiction to determine the applicability of the stay to litigation pending before them."); In re Baldwin-United Corp. Litigation, 765 F.2d 343, 347 (2d Cir. 1985)("The court in which the litigation claimed to be stayed is pending has jurisdiction to determine not only its own jurisdiction but also the more precise question whether the proceeding pending before it is subject to the automatic stay."); In re Singleton, 230 B.R. 533, 538-39 (6th Cir. BAP 1999)("That the bankruptcy court may be the exclusive forum to consider a motion for relief from the automatic stay does not preclude a nonbankruptcy court from determining whether a matter pending before it is stayed by a party's bankruptcy filing.") Based upon the foregoing, the court finds that the applicability of the automatic stay to this action is properly before the court.
Congress enacted ERISA as a comprehensive remedial statute, and a liberal construction is warranted to effect the statute's remedial purpose. The Act is designed to safeguard the interests of employees and their dependants whose widespread participation in employee benefit programs was seen as vitally important to successful industrial relations, employment stability, and the flow of interstate commerce. See 29 U.S.C. § 1104, 1106-09 (1976). Underscoring this governmental concern for ERISA funds security is the result in Patterson v. Shumate, 504 U.S. 753, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992), where the Supreme Court held that a debtor's interest in a ERISA-qualified plan is excluded from the bankruptcy estate per Bankruptcy Code, 11 U.S.C. § 541(c)(2). At the time the debtor's filed their bankruptcy petitions here, the funds in question were in ERISA-qualified plans and, therefore, excluded and subject to civil suits to redeem unpaid benefits due.
Without a showing that the pending action will inevitably have an adverse impact on the debtor's estate, the court finds that the automatic bankruptcy stay in this case does not apply here and should be lifted. The court finds that because ERISA permits civil causes of action by participants or beneficiaries seeking to recover benefits due them under the terms of their plans, 29 U.S.C. § 1132(B), and because plaintiff as a participant certainly falls within the specifically enumerated parties allowed to maintain this suit, there is no reason to prevent this action from proceeding to trial based upon the court's determination that the automatic stay is not in effect with respect to the pending litigation.
The parties are directed forthwith to contact the chambers of Magistrate Judge Gary L. Sharp regarding the scheduling of a Rule 16 Conference.
IT IS SO ORDERED