Opinion
No. 02 Civ. 9058 (SHS)
February 19, 2003
OPINION AND ORDER
On December 9, 2002, defendant United Air Lines, Inc. filed a voluntary petition for reorganization in the United States Bankruptcy Court for the Northern District of Illinois. Accordingly, this action, which was commenced prior to the filing of United's petition, is stayed as against United pursuant to the automatic stay of 11 U.S.C. § 362(a). Defendants have now moved, pursuant to 11 U.S.C. § 362 and 105, to also stay this action as to defendant Grazzini. Because the "unusual circumstances" required by case law before a stay may be extended to a non-debtor are not present here, defendants' motion is denied.
I. Discussion
A. The Stay Contained in Section 362 is Limited to the Bankruptcy Debtor
11 U.S.C. § 362 provides, in pertinent part, that the filing of a petition in bankruptcy "operates as a stay, applicable to all entities, of the . . . continuation . . . of a judicial, administrative, or other action or proceeding against the debtor that was . . . commenced before the commencement of the case under [the Bankruptcy Code]." 11 U.S.C. § 362(a). "The automatic stay provision is `one of the fundamental debtor protections provided by the bankruptcy laws,' designed to relieve `the financial pressures that drove [debtors] into bankruptcy.'" Eastern Refractories Co. v. Forty Eight Insulations, Inc., 157 F.3d 169, 172 (2d Cir. 1998) (citation omitted). "It affords debtors a `breathing spell' from the collection process and enables them to attempt a repayment or reorganization plan to satisfy existing debt."Id. (quoting In re Siciliano, 13 F.3d 748, 750 (3d Cir. 1994)). As a result, this action is stayed as against United.
However, "[i]t is well established that stays pursuant to § 362(a) are limited to debtors and do not encompass non-bankrupt co-defendants." Teachers Ins. Annuity Ass'n v. Butler, 803 F.2d 61, 65 (2d Cir. 1986); see Gray v. Hirsch, 230 B.R. 239, 242 (S.D.N.Y. 1999); Thomson Kernaghan Co. v. Global Intellicom, Inc., 2000 WL 640653, at *14 (S.D.N.Y. May 17, 2000). Nonetheless, the United States Court of Appeals for the Second Circuit did provide non-debtors with some possibility of relief when it noted that "under specific circumstances non-debtors may be protected by the automatic stay . . . if it contributes to the debtor's efforts to achieve rehabilitation," Teachers Ins., 803 F.2d at 65; Kernaghan Co., 2000 WL 640653 at *14, although that court explicitly "decline[d] to define" the specific circumstances required.Id.
In A.H. Robins Co. v. Piccinin, 788 F.2d 994 (4th Cir. 1986), the Fourth Circuit extended a bankruptcy stay to a non-debtor in such "unusual circumstances" as when there is such identity between the debtor and [non-debtor] that the debtor may be said to be the real party defendant and that a judgment against the [non-debtor] will in effect be a judgment . . . against the debtor." 788 F.2d at 999. Courts in this district have cited the "unusual circumstances" language of A.H. Robins when deciding whether to extend stays to non-debtors. See, e.g., Gray, 230 BR. at 242 (collecting cases); Kernaghan Co., 2000 WL 640653 at *15; In re United Health Care Org., 210 BR. 228, 232 (S.D.N.Y. 1997);Variable-Parameter Fixture Development Corp. v. Morpheus Lights, Inc., 945 F. Supp. 603, 608 (S.D.N.Y. 1996).
B. Section 105 is Inapplicable
United and Grazzini request that this Court stay the proceedings as to Grazzini, pursuant to 11 U.S.C. § 105, because (1) application of the statutes pursuant to which plaintiff brings his claim leave defendants "inextricably interwoven" to the extent that defendants share a "singularity of identity" with each other and (2) United has agreed to bear the litigation costs of Grazzini; thus, any costs incurred would adversely impact United's bankruptcy estate. See Def. Reply at 1, 3. Section 105(a) provides bankruptcy and district courts with the ability to "issue any order, process or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code]." Neither of the circumstances cited by defendants justify staying this action as to Grazzini.
Gary Kadesh brought this action for employment discrimination pursuant to the New York State Human Rights Law ("NYSHRL"), as amended, New York Executive Law § 296 et seq.; and the New York City Human Rights Law ("NYCHRL"), as amended, New York City Administrative Code § 8-107 et seq. Federal jurisdiction is founded solely on diversity of citizenship. United and Grazzini contend that plaintiff's claims against Grazzini are "expressly founded upon the `aid and abet' provisions of the NYSHRL and NYCIHRL," and thus Grazzini cannot be held liable unless United is also held liable. Def. Memo at 1. Defendants also contend that each claim for relief "makes identical allegations against defendants collectively," thus proving that defendants are "inextricably interwoven." Def. Memo at 2-3. Kadesh responds that the complaint contains many independent allegations of wrongdoing by Grazzini. See Pl. Opp. at 2-3.
"[A] corporate employee . . . is not individually subject to suit to discrimination [under the NYCHRL] . . . if he is not shown to have any ownership interest or any power to do more than carry out personnel decisions made by others." See Patrowich v. Chemical Bank, 63 N.Y.2d 541, 542, 473 N.E.2d 11, 12, 483 N.Y.S.2d 659, 660 (1984) (per curiam). However, that plaintiff states his causes of action in the plural form — "defendants have discriminated against plaintiff" (see, e.g., Compl. ¶¶ 125, 128, 145) — does not mean that Grazzini could not be held liable for employment discrimination independent of any liability by United. For example, plaintiff has adequately alleged that Grazzini has the "power to do more than carry out personnel decisions made by others" by, among other things, "infect[ing] by input" plaintiff's termination. See Compl. ¶¶ 111, 112. Thus, "[w]here a defendant is independently liable, as when two parties are joint tortfeasors, if one party is a debtor to a bankruptcy proceeding, the automatic stay will not extend to the non-debtor." Elias v. Sitomer, 1992 WL 370419, at *3 (S.D.N.Y. Dec. 7, 1992) (citing A.H. Robins, 788 F.2d at 999) (denying automatic stay to non-debtor defendant where the plaintiff asserted claims pursuant to the Age Discrimination in Employment Act and the NYSHRL.). See also Baliva v. State Farm Mut. Ins. Co., 186 Misc.2d 254, 255, 718 N.Y.S.2d 144, 146 (Sup. 2000), aff'd 286 A.D.2d 953, 730 N.Y.S.2d 655 (4th Dep't 2001) (denying summary judgment where the court could not determine, as a matter of law, that the defendant was not "an `employer' in the sense that he had power to do more than carry out personal decisions made by others."). As plaintiff adequately sets forth independent claims against Grazzini, defendants' request for an extension of the automatic stay to Grazzini is not appropriate.
United also contends that since it has agreed to bear Grazzini's litigation costs, any costs incurred by it would adversely impact upon United's bankruptcy estate. See In re Eagle-Picher Indus., Inc., 963 F.2d 855, 860 (6th Cir. 1992) (granting extension of stay where, among other factors, debtor had to pay non-debtor defendant's litigation costs). However, "courts in this district have stayed actions against non-debtor officers and principals of debtor corporations, but only where the stayed actions would have posed a serious threat to the debtors' reorganization efforts." Gray, 230 B.R. at 243 (collecting cases);Kernaghan Co., 2000 WL 640653 at *15
Not only is there no indication in the complaint that Grazzini is a high ranking officer of United, but it is highly doubtful that an employment discrimination claim brought for compensatory damages by a single employee will "pose a serious threat" to the reorganization efforts of what all parties agree is a "leading passenger airline, doing business both domestically and internationally." Compl. ¶ 4; Answer ¶ 4.
II. Conclusion
Accordingly, IT IS HEREBY ORDERED that defendants' motion to stay this action as to Grazzini is denied. The last date for discovery in this action shall be May 23, 2003, and the parties shall appear in Courtroom 23A, U.S. Courthouse, 500 Pearl St., New York, New York on March 28, 2003, at 10 a.m. for a status conference.