Opinion
CIVIL ACTION No: 01-2238-JWL
November 8, 2002
MEMORANDUM AND ORDER
This matter is before the Court on Plaintiff's Motion to Set Aside Stay (doc. 32). For the reasons set forth below, the Court will grant the motion.
I. Nature of the Matter Before the Court and Factual Background
This is a negligence action involving a motor vehicle accident. Defendant Nicholas Rosenberg was driving a motor vehicle that collided with Plaintiff's vehicle. Plaintiff alleges that Rosenberg was acting within the course and scope of his employment with Defendant Thomson BankWatch, Inc. ("Thomson BankWatch"). At the time of the accident, Rosenberg was driving a car leased from Alamo Rent-A-Car, L.L.C. ("Alamo") pursuant to a lease agreement between Alamo and Thomson BankWatch. The parties agree that, pursuant to this lease agreement, Alamo is obligated to provide a defense for Rosenberg and Thomson BankWatch and to indemnify them for any judgment entered against them in this case. Plaintiff has not sued Alamo.
On November 13, 2001, Alamo filed Chapter 11 bankruptcy proceedings. On November 16, 2001, Defendants filed a Notice of Automatic Stay (doc. 30) in this action. In their Notice, Defendants asserted that all of Plaintiff's claims against Defendants "are automatically stayed pursuant to 11 U.S.C.A. § 362."
Doc. 30 at p. 1.
Counsel for the parties and the undersigned Magistrate Judge discussed the Notice of Automatic Stay during a November 28, 2001, telephone scheduling conference. Plaintiff's counsel did not oppose the stay. Based on the Notice of Automatic Stay, the Court stayed all proceedings in this case. More than six months later, Plaintiff filed the instant motion to set aside the stay.
II. Analysis
Plaintiff argues that the automatic stay provision of 11 U.S.C. § 362 does not apply to this case because that provision only stays actions against the "debtor." Plaintiff asserts that the only debtor in this case is Alamo, who is not a defendant in the case. Thus, Plaintiff argues that the stay is inappropriate.
The automatic stay provision provides that the filing of a bankruptcy petition under Chapter 11 "operates as a stay, applicable to all entities, of — (1) the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor." The term "debtor" is defined as the "person or municipality concerning which a case under this title has been commenced." The term "person" includes individuals, partnerships, and corporations.
11 U.S.C. § 362(a) (emphasis added).
The debtor in this case is Alamo. Alamo is not a defendant in the lawsuit, and, thus, the Court agrees with Plaintiff that the automatic stay provision of section 362 should not be applied here.
Defendants do not cite any case law where section 362 has been applied to non — debtors such as Alamo. Rather, Defendants argue that Plaintiff should not be allowed to ask the Court to lift the stay now, when he did not oppose the imposition of the stay during the November 28, 2001 telephone conference.
The Court is not persuaded by Defendants' argument. The automatic stay is imposed as a matter of statute, and the statute either applies or it does not. The fact that a party fails to assert an objection to a proposed stay is not determinative of whether the stay should be imposed.
In sum, the Court agrees with Plaintiff that the automatic stay provision of 11 U.S.C. § 362 is not applicable to this case, and holds that the stay should be lifted. Although Defendants may have a right to be defended by Alamo and a right to be indemnified for any judgment they are required to pay in this case, those rights do not provide a legal basis under the Bankruptcy Code for this Court to stay the action.
Defendants argue that in the event the Court finds the action is not stayed pursuant to 11 U.S.C. § 362, the Court should stay the action pursuant to K.S.A. 40-3619 and K.S.A. 40-3627. Those statutes are contained within the Kansas Insurers Supervision, Rehabilitation and Liquidation Act (the "Act").
K.S.A. 40-3601, et seq.
K.S.A. 40-3619 provides in pertinent part:
Any court in this state before which any action or proceeding in which the insurer is a party, or is obligated to defend a party, is pending when a rehabilitation order against the insurer is entered shall stay the action or proceeding for 90 days and such additional time as is necessary for the rehabilitator to obtain proper representation and prepare for further proceedings. The rehabilitator shall take such action respecting the pending litigation as necessary in the interests of justice and for the protection of creditors, policyholders and the public.
The Court does not find this provision applicable here. Even assuming arguendo that Alamo would be deemed an "insurer" within the meaning of the Act and that this provision would apply in a diversity action filed in federal court, there is nothing in the record to indicate that a "rehabilitation order" has been entered against Alamo. Thus, the Court finds no basis to impose a stay pursuant to K.S.A. 40-3619.
According to K.S.A. 40-3616, the Kansas Insurance Commissioner may apply for the order to rehabilitate by filing a petition in the District Court of Shawnee County. An order to rehabilitate the business of an insurer appoints the Insurance Commissioner as the rehabilitator and directs the rehabilitator to take possession of the insurer's assets and to administer them under the general supervision of the Shawnee County District Court. K.S.A. 40-3617(a). Defendants have not asserted that such a rehabilitation order has been filed nor have they provided any evidence of such an order.
Nor does the Court find any basis to impose a stay pursuant to K.S.A. 40-3627. That statute provides in pertinent part:
Upon issuance of an order appointing a liquidator of a domestic insurer or of an alien insurer domiciled in this state, no action at law or equity or in arbitration shall be brought against the insurer or liquidator, whether in this state or outside this state, nor shall any such existing actions be maintained or further presented after issuance of such order.
Again, even assuming that Alamo is an "insurer " within the meaning of the Act and that this provision would apply in a diversity action, there is nothing in the record indicating that any such liquidation order has been entered as to Alamo. Thus, there is no basis to apply this stay provision here.
According to K.S.A. 40-3620(a), the Kansas Insurance Commissioner may petition the District Court of Shawnee County for an "order of liquidation." Such an order appoints the Commissioner as liquidator and directs the liquidator to take possession of the insurer's assets and to administer the assets under the general supervision of the Shawnee County Court. K.S.A. 40-3622(a). Again, Defendants have not provided any evidence of such an order.
III. Conclusion
The automatic stay provision of 11 U.S.C. § 362 does not apply to this case inasmuch as the debtor Alamo, i.e., the entity that has filed bankruptcy, is not a party to this action. The stay provisions of the Kansas Insurers Supervision, Rehabilitation and Liquidation Act also do not apply here, inasmuch as there is no evidence indicating that an order of rehabilitation or order of liquidation has been entered with respect to Alamo. The Court will therefore grant Plaintiff's Motion to Set Aside Stay (doc. 32). The Court will issue an order setting this case for a telephone scheduling conference and directing the parties to hold a planning meeting pursuant to Fed.R.Civ.P. 26(f).
IT IS THEREFORE ORDERED that Plaintiff's Motion to Set Aside Stay (doc. 32) is granted.
IT IS SO ORDERED.