Opinion
3:24-bk-01656-JAB Adv. 3:24-ap-00070-JAB
08-22-2024
IN RE: ONYX SITE SERVICES, LLC, Debtor. v. CATERPILLAR FINANCIAL SERVICES CORPORATION, LEWIS OIL CO., INC., CENTRAL FLORIDA TRANSPORT, LLC, LINDER INDUSTRIAL MACHINERY COMPANY, PALATKA TRUCK CENTER, LLC, RING POWER CORPORATION, RING INVESTMENTS, LLC U.S. SMALL BUSINESS ADMINISTRATION, ALTA CONSTRUCTION EQUIPMENT FLORIDA, LLC, LYNCH FUEL COMPANY, LLC, NAS INSURANCE SERVICES, LLC D/B/A TOKIO MARINE HCC, JOHN DEERE CONSTRUCTION & FORESTRY COMPANY, FORD MOTOR CREDIT COMPANY LLC, ALLY BANK CORP., OLD CASTLE INFRASTRUCTURE, INC., KUBOTA CREDIT CORPORATION, U.S.A., EQUIPMENTSHARE.COM, INC., THE QUIKRETE COMPANIES, LLC, AMERICAN CONTRACTORS INDEMINITY COMPANY, QUICK BRIDGE FUNDING, LLC, and SMYRNA READY MIX CONCRETE, LLC, Defendants. ONYX SITE SERVICES, LLC, Plaintiff,
CHAPTER 11
ORDER GRANTING MOTION FOR PRELIMINARY INJUNCTION
JACOB A. BROWN, UNITED STATES BANKRUPTCY JUDGE
This proceeding is before the Court on Plaintiff's Motion for Preliminary Injunction (the "Motion"). The Court conducted an evidentiary hearing on the Motion on August 19, 2024 (the "Hearing"). The following are the Court's findings of fact and conclusions of law with respect to the Motion.
Adv. Doc. 2.
The findings of fact and conclusions of law herein along with those on the record at the Hearing constitute the Court's findings of fact and conclusions of law as to the Motion in accordance with Fed.R.Bankr.P. 7052. Furthermore, the Court held an initial hearing on the Motion on July 16, 2024 (the "First Hearing"), after which the Court entered its Interim Order Granting the Motion for Preliminary Injunction (Adv. Doc. 22) (the "Interim Order").
Findings of Fact
Plaintiff, Onyx Site Services, LLC ("Onyx"), commenced its bankruptcy case (the "Main Case") on June 11, 2024 by filing a Chapter 11 Petition (the "Petition").On August 12, 2024, Onyx amended its Petition to elect to proceed under Subchapter V of the Bankruptcy Code and, on August 13, 2024, the Court entered an Order Prescribing Procedures in Chapter 11 Subchapter V Case.
Doc. 1.
Docs. 74 and 76.
Onyx commenced this Adversary Proceeding on July 1, 2024 by filing a Complaint against Defendants. On August 15, 2024, Onyx filed a Motion to Amend the Complaint to include additional Defendants (the "Amended Complaint").Through the Motion, Onyx seeks a temporary injunction barring collection efforts against its principals, Joseph A. Silas and Brynn M. Silas (collectively, the "Silases") by Defendants as Onyx attempts to reorganize through the underlying Subchapter V Chapter 11 case.
Adv. Doc. 1.
Adv. Doc. 56. The Defendants added through the Amended Complaint are: American Contractors Indemnity Company, Quick Bridge Funding, LLC, and Smyrna Ready Mix Concrete, LLC (collectively, the "Added Defendants").
Collectively, the twenty-two Defendants are at varied stages of debt collection on guarantees given by the Silases. Some have judgments against the Silases, while some have not begun collection efforts. Defendants also have differing positions as to the Motion with some opposing the Motion and others not opposing the Motion.
On July 16, 2024, Defendant Lewis Oil Co., Inc. filed its Affidavit in Opposition to the Preliminary Injunction (Adv. Doc. 14). On August 12, 2024, Defendant Lynch Fuel Company, LLC filed its Response to the Motion (Adv. Doc. 51). On August 18, 2024, Defendant American Contractors Indemnity Company filed its Preliminary Response to the Motion (Adv. Doc. 63).
As noted by the Court at the Hearing, the Main Case seems poised for a successful reorganization and confirmation of a forthcoming Subchapter V plan, and the Complaint appears well-pled. Further, at the Hearing, Mr. Silas testified credibly as to Onyx's financial condition, personal assets, and other related matters. Per Mr. Silas, Onyx continues to operate, has a number of prospective projects, and has approximately $1,900,000.00 of receivables. Mr. Silas further testified that he and Mrs. Silas devote substantial time and effort to Onyx's ongoing operations and reorganization, and they would be driven to file their own personal bankruptcy case if they are forced to spend their time and money defending state court litigation.
Conclusions of Law
Federal Rule of Civil Procedure 65, made applicable by Federal Rule of Bankruptcy Procedure 7065, authorizes the Court to enter a preliminary injunction. The factors for issuing a preliminary injunction have been well established. The moving party must demonstrate: (1) a substantial likelihood of success on the merits; (2) that irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest. A preliminary injunction is "an extraordinary and drastic remedy which may be granted only upon a clear and convincing showing that the movant has carried its heavy burden on each element." Yet, "the Court does not need to find that 'evidence positively guarantees a final verdict in plaintiff's favor.'"
Four Seasons Hotels & Resorts, B.V. v. Consorcio Barr, S.A., 320 F.3d 1205, 1210 (11th Cir. 2003); McDonald's Corp. v. Robertson, 147 F.3d 1301, 1306 (11th Cir. 1998).
Nelson v. General Electric Capital Corp., 140 B.R. 814, 816 (M.D. Fla. 1992) (citing In re Costa and Head Land Company, 68 B.R. 296, 304 (Bankr.N.D.Ala.1986) and In re Anje Jewelry Co., Inc., 47 B.R. 485, 487 (Bankr. E.D.N.Y. 1983)).
Allied World Specialty Ins. Co. v. Lawson Inv. Group, Inc, 2016 U.S. Dist. LEXIS 21136 at *7 (Bankr. M.D. Fla. Feb. 22, 2016) (quoting Levi Strauss & Co. v. Sunrise Int'l Trading Inc., 51 F.3d 982, 985 (11th Cir. 1995)).
In limited circumstances, preliminary injunctions may extend to non-debtor principals. "The Court may use its [11 U.S.C. § 105] power to temporarily protect non-debtors by way of an injunction against collection actions by creditors against non-debtors affiliated with a debtor entity." One of the limited circumstances supporting the imposition of a non-debtor stay is when a principal of the debtor, who himself is not a debtor, is key to the debtor's operation and success and, as such, should be temporarily protected against lawsuits so he can devote his full time and energy to the business. The Silases, as principals of Onyx who are key to its operation and success, fall into this category. Without their contributions, there is no Onyx entity and no hope for reorganization.
Minnelusa Co. v. Andrikopoulos (In re Minnelusa Co.), 169 B.R. 225, 226 (Bankr. M.D. Fla. 1994); see also Nelson, 140 B.R. at 816 (stating that there is "considerable case authority supporting the use of § 105(a) as a means of providing the protections to non-debtors such as individual guarantors and key officers of a debtor corporation" and citing cases); In re Kasual Kreation, Inc., 54 B.R. 915, 916 (S.D. Fla. 1985).
See Minnelusa, 169 B.R. at 226; see also In re Melbourne Beach, LLC, No. 6:17-BK-07975-KSJ, 2019 WL 10734362 (Bankr. M.D. Fla. Oct. 9, 2019) (denying injunctive relief where the movant was not essential to the debtor's operations and the debtor would not be irreparably harmed without his efforts).
Although opposing parties are afforded notice and hearing on a motion for preliminary injunction, an evidentiary hearing is not necessarily required in order for the issue to be considered heard. All that is required is a "'fair opportunity to oppose the application and to prepare for such opposition.'" Even though an evidentiary hearing is not necessarily required to issue a preliminary injunction, the Court allowed Onyx and Defendants to present evidence and have oral argument at the Hearing. As noted at the Hearing, the Court finds that Onyx satisfied its burden on each factor, and a preliminary injunction, with certain restrictions on the Silases, is appropriate based on the facts and circumstances presented in this Adversary Proceeding and the Main Case.
McDonald's Corp. v. Robertson, 147 F.3d at 1306.
Id. (quotibg Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423, 432 n.7, 39 L.Ed.2d 435, 94 S.Ct. 1113 (1974)).
(1) Substantial likelihood of success on the merits
Onyx has met its burden of proving that it has a substantial likelihood of success on the merits. "The likelihood of success on the merits is defined as the probability of a successful reorganization." In a Subchapter V case, if all other plan requirements under 11 U.S.C. §1191(a) are met, the plan can be confirmed over objection under 11 U.S.C. § 1191(b). Further, the Court does not find any evidence in the record to show that Onyx will not be able to successfully reorganize. As noted by Mr. Silas at the Hearing, there appears to be hope for profit in the future with new jobs and collection of outstanding receivables that can fund a confirmable plan.
Nelson, 140 B.R. at 816.
See In re St. Petersburg Harbourview Hotel Corp., 168 B.R. 770, 773 (M.D. Fla. 1994) ("The Debtor certainly should be given an opportunity to achieve reorganization and it is too early and premature to consider whether the Plan . . . is or is not feasible.").
(2)Irreparable Injury
Onyx also met its burden of proving that it will suffer irreparable injury if the preliminary injunction is denied, and Defendants are permitted to proceed with their actions against the Silases in state court. Mr. Silas testified that, if he is required to exhaust his money and time defending himself and his wife in state court actions, Onyx will cease to operate. Without Onyx operating, there is no hope for profit and the ability to fund a confirmable plan.
(3)Injury to movant outweighs injury to opposing party
The injury Onyx would suffer if collection efforts against the Silases were permitted to continue far outweighs any injury Defendants may face by the issuance of a temporary injunction. Subchapter V cases are handled at a quicker pace and have shorter deadlines than regular Chapter 11 cases, resulting in little delay to creditors. Onyx's Confirmation Hearing is set for October 28, 2024, which is just over 60 days from the date of this Order. It is unlikely that this temporary injunction will have much, if any, effect on Defendants who wish to pursue collection from the Silases, but the injury to Onyx would likely mean the end of its operations and, ultimately, the end of pursuing this reorganization.
Further, Defendants may be more successful in recovering from Onyx if Onyx is successful in reorganizing. Mr. Silas testified that he does not have many personal assets that can be liquidated to pay off the many Defendants in this case. The best hope for collective recovery among Defendants will likely come from Onyx successfully reorganizing. Mr. Silas also made clear in his testimony that he and his wife would have to file a personal bankruptcy case if Defendants are not enjoined from going after their personal assets at this time. Forcing the Silases to file for personal bankruptcy relief would not leave Defendants in a better position than the one they are in currently.
(4) The injunction would not be adverse to public interest
The benefits of the Bankruptcy Code are intended for the honest but unfortunate debtor. The Court finds Onyx to be exactly that. Onyx seems to have filed the Main Case in good faith and with the hopes of achieving a successful reorganization. The Court finds that this preliminary injunction is not adverse to the public interest. Instead, preliminary injunctions like the one afforded here allow for a better chance of successfully reorganizing with little to no negative impact on creditors who have personal guarantees against the principals. As previously stated, Defendants will likely achieve a better recovery if Onyx is able to move forward and confirm a plan.
Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 659 (1991).
See In re Hillsborough Holdings Corp., 123 B.R. 1004, 1016 (M.D. Fla. 1990) (stating "The remedial features of the Bankruptcy Code, especially the provisions dealing with reorganization under Chapter 11, have been recognized repeatedly as serving a very strong public interest.").
For these reasons, the Court finds is appropriate to grant the Motion. It is therefore
ORDERED:
1. The Motion for Preliminary Injunction is GRANTED as set forth herein.
2. All cases, proceedings, and other efforts to enforce claims against the Silases by Defendants are stayed in all respects, and Defendants are enjoined from continuing litigation and pursuing claims against the Silases.
3. The preliminary injunction shall be effective through and including October 28, 2024 absent a further order of the Court.
4. As a condition for the entry of this preliminary injunction and until this preliminary injunction is terminated, the Silases shall not transfer, conceal, dissipate, or encumber their assets, as such assets existed on and were available to satisfy their potential obligations to personal creditors, outside the ordinary course of their personal, family, or household purposes or absent further order of the Court. The Silases may utilize assets to satisfy their necessary and appropriate personal, family, and household expenses.
5. As a further condition for the entry of this preliminary injunction and until this preliminary injunction is terminated, the Silases shall file a notice in the underlying bankruptcy case at least 7 (seven) days prior to the closing of any sale of any property in excess of $2,500 of value in which they have a direct or indirect interest. Such notice shall include details as to (i) the property being sold, (ii) the amount of the sale (iii) the time of closing of the sale, (iv) liens and other claims to be satisfied from sale proceeds, (v) estimated sale proceeds net of such claims and other claims, and (vi) a commitment that such net proceeds which the Silasas will receive are subject to Paragraph 4 of this Order.
6. This preliminary injunction applies to Defendants listed in both the Complaint and the Amended Complaint.
7. This Order is binding upon (i) Defendants and their respective officers, managers, employees, agents, attorneys, professionals, and any other person or entity acting on their behalf, (ii) the Silases, and (iii) any person or entity with knowledge of this Order.
8. This Order is entered without prejudice to Defendants' right to seek relief from this Order. Defendants may seek relief from this Order based upon information discovered after the date of this Order through appropriate motion accompanied by an affidavit detailing the basis upon which relief is sought. Notwithstanding the foregoing, if any of the Added Defendants in the Amended Complaint wish to seek relief from this preliminary injunction based on information available as of the date of this Order, they must file a written response detailing the basis for relief with fourteen (14) days of the date of this Order along with a supporting affidavit.
The Clerk's Office is directed to serve a copy of this Order on interested parties.