IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

Transcription

1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) In re: ) Chapter 11 ) BLITZ U.S.A., Inc., et al. ) Case No (PJW) ) Jointly Administered Debtors. ) ) Objection Deadline: Jan. 9, 2013 at 4:00 p.m. ) Hearing Date: Jan. 16, 2013 at 9:30 a.m. ) (Requested) MOTION OF KAREN GUENIOT-KORNEGAY, INDIVIDUALLY AND ON BEHALF OF ALL THE WRONGFUL DEATH BENEFICIARIES OF MATTHEW DYLAN KORNEGAY, FOR RELIEF FROM THE AUTOMATIC STAY PURSUANT TO SECTION 362(d) OF THE BANKRUPTCY CODE COMES NOW, KAREN GUENIOT-KORNEGAY, Individually and on Behalf of All of the Wrongful Death Beneficiaries of MATTHEW DYLAN KORNEGAY, (the Movant ), by and through her undersigned counsel, and hereby moves this Honorable Court (the Motion ), pursuant to section 362(d) of title 11 of the United States Code, 11 U.S.C (the Bankruptcy Code ), Federal Rule of Bankruptcy Procedure 4001, and Local Rule for an order lifting the automatic stay imposed by section 362(a) of the Bankruptcy Code for the purpose of (i) permitting Movant to prosecute her personal injury cause of action against Debtor BLITZ U.S.A., Inc. (the Debtors ) in order to pursue liquidation of such claim and (ii) to proceed to collect any resulting judgment in the first instance against any available insurance proceeds under any applicable policy. In support of this Motion, the Movant respectfully shows the Court as follows: The Parties 1. On November 9, 2011 (the Petition Date ), the Debtor filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code. On November 10, 2011, the Court entered an order jointly administering the Debtors cases for procedural purposes [D.I. 31].

2 2. An official committee of unsecured creditors has been appointed in this case [D.I. 63]. On information and belief, the Debtor continues to operate its business and remains in possession of its property. 3. As set forth below, the Movant is an interested party to this proceeding as she has claims against the Debtor based upon facts arising pre-petition; and as of the Petition Date, Movant had filed her Complaint in the United States District Court for the Southern District of Mississippi, Jackson Division, case number 3:10-cv TSL. See Exhibit A (Kornegay Petition). Background 4. Prior to the Petition Date, Matthew Kornegay, was injured and killed in an incident occurring on March, 5, 2010 in Canton, Mississippi. The Movant filed her complaint, which alleges that Debtor s gasoline container was sold in a defective condition unreasonably dangerous to its users and consumers, that Debtor was negligent in its design of the gasoline container at issue for failure to include a simple, well-known safety device, and that Debtor failed to warn users of the unreasonably dangerous condition of its container. By allegedly placing an unreasonably dangerous and defectively designed product into the stream of commerce, the Debtor proximately caused Movant s damages. Movant s claims are substantially similar to those currently pending against the Debtor in various venues. 5. On November 9, 2011, the Debtor filed for bankruptcy and various district court action proceedings have been stopped with respect to the Debtors as a consequence of the automatic stay provisions set forth in 11 U.S.C. Sec. 362 (a). This precluded Movant from prosecuting her lawsuit against Debtor. 6. Upon information and belief, the Debtor is covered by insurance policies applicable to the Movant s claims in her action. 2

3 7. The Debtor has a commercial general liability policy for the claims period at issue (as well as excess coverage for the same time period, which would apply to Movant s claims). Accordingly, the Debtor s potential liability to the Movant is covered by insurance policies, in place during the relevant time period. Statement of Relief Requested 8. By this Motion, the Movant seeks relief from the automatic stay so that she may prosecute her federal court action to judgment or other resolution and satisfy any judgment or other resolution she may obtain against the Debtor from the proceeds of any applicable insurance policies in the first instance. 9. The Bankruptcy Code provides: Basis for the Relief Requested On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay... for cause U.S.C. 362(d). The term cause is not defined in the Code, but rather must be determined on a case-by-case basis. In re Rexene Prods. Co., 141 B.R. 574, 576 (Bankr. D. Del. 1992) (internal citations and quotations omitted). Cause is a flexible concept and courts often... examin[e] the totality of the circumstances to determine whether sufficient cause exists to lift the stay. In re SCO Group, Inc., 395 B.R. 852, 856 (Bankr. D. Del. 2007). 10. Courts often follow the logic of the intent behind 362(d): that it is often appropriate to allow litigation to proceed, if no prejudice to the estate, in order to leave the parties to their chosen forum and to relieve the bankruptcy court from duties that may be handled elsewhere. In re Tribune Co., 418 B.R. 116, 126 (Bankr. D. Del. 2009) (quoting legislative history of 362(d)) (internal citations omitted). 3

4 11. This Honorable Court relies upon a three-pronged balancing test in determining whether cause exists for granting relief from the automatic stay to continue litigation: (1) Whether prejudice to either the bankrupt estate or the debtor will result from continuation of the civil suit; (2) Whether the hardship to the nonbankrupt party by maintenance of the stay outweighs the debtor s hardship; and (3) The creditor s probability of success on the merits. See In re Tribune Co., 418 B.R. 116, 126 (Bankr. D. Del. 2009). 12. Here, the facts weigh in Movant s favor on each of these three prongs. First, the Debtor will not suffer prejudice should the stay be lifted because the Movant s claims must eventually be liquidated before Movant can recover from the bankruptcy estate. Because Movant s claims involve personal injury, they must be liquidated in a forum outside the Bankruptcy Court. See 28 U.S.C. 157(b)(5) ( personal injury tort... claims shall be tried in the district court in which the bankruptcy case is pending, or in the district court in the district in which the claims arose.... ). 13. Moreover, to the extent that the Debtor s liability to the Movant is covered by insurance policies, any recovery by Movant in a state or federal court action will not affect the debtor s estate. See In re Memorial Corp., 382 B.R. 652, 687 (Bankr. D. Del. 2008), rev d on other grounds, 400 B.R. 420 (D. Del. 2009) ( when a payment by an insurer cannot inure to the debtor s pecuniary interest, then that payment should neither enhance nor decrease the bankruptcy estate (quoting In re Edgeworth, 993 F.2d 51, (5th Cir. 1993)); see also In re Allied Digital Tech Corp., 306 B.R. 505, 510 (Bankr. D. Del. 2004) (ownership by a bankruptcy estate is not necessarily determinative of the ownership of the proceeds of that policy). [W]hen the debtor has no legally cognizable claim to the insurance proceeds, those proceeds are not property of the estate. In re Edgeworth, 993 F.2d 51, (5th Cir. 1993). 4

5 To the extent the Movant s claims are not covered by the Debtor s insurance, the Movant seeks to liquidate, as opposed to collect, her claim via being permitted to prosecute her federal court action. See In re Tricare Rehabilitation Systems, Inc., 181 B.R. 569, 578 (Bankr. N.D. Ala. 1994) (lifting the stay to liquidate, as opposed to collect); In re Metzner, 167 B.R. 414, 416 (E.D. La. 1994) (same). 14. Second, the Movant will face substantial hardship if the stay is not lifted. The Movant is a resident of Mississippi and the events which form the basis of her claims occurred in Mississippi. If Movant is forced to litigate her claims in Delaware, she would incur the increased expense of bringing attorneys, witnesses, and physical evidence to Delaware. [O]ne of the primary purposes in granting relief from the stay to permit claim liquidation is to economize judicial resources. In re Peterson, 116 B.R. 247, 250 (D. Colo. 1990). Here judicial economy would be served by lifting the automatic stay and allowing Movant to prosecute her claim in order for it to be liquidated in the forum where Movant chose to file her lawsuit. 15. Moreover, if the Movant is not permitted to liquidate her claims in the forum of her choice, the litigation in Delaware will be before the United States District Court. 28 U.S.C. 157(b)(5). Mississippi state or federal court is the more appropriate forum for a trial governed by Mississippi products liability law. See In re The Conference of African Union First Colored Methodist Protestant Church, 184 B.R. 207, 218 (Bankr. D. Del. 1995) ( [T]he existence of a more appropriate forum than the bankruptcy court is cause for relief under Code 362(d)(1). ); In the Matter of Baker, 75 B.R. 120, 121 (Bankr. D. Del. 1987) (granting relief from stay to permit Family Court to determine issues with which it had expertise). 16. By contrast, the Debtor will not suffer any hardship if a future action is allowed to proceed. The Movant s action is based upon products liability claims for personal injury, 5

6 which does not present factual or legal issues that will impact or distract the Debtor from the liquidation process. 17. Lastly, the likelihood of success on the merits prong is satisfied because even a slight probability of success on the merits may be sufficient to support lifting an automatic stay. In re Continental Airlines, Inc., 152 B.R. 420, 426 (D. Del. 1993). This prong also weighs in Movant s favor. Movant s claims are substantially similar, if not identical, to the other interested personal injury claimants in this proceeding. See Exhibit A. The last trial involving an exploding gasoline container against the Debtor resulted in a plaintiff s verdict finding the product defective and unreasonably dangerous. No strong defenses appear to exist here. Only strong defenses to state court proceedings can prevent a bankruptcy court from granting relief from the stay in cases where... the decision-making process should be relegated to bodies other than [the bankruptcy] court. In re Fonseca v. Philadelphia Housing Authority, 110 B.R. 191, 196 (Bankr. E.D. Pa. 1990). 18. On these facts, cause exists to lift the stay. Cf. In re Drexel Burnham Lambert Group, Inc., 113 B.R. 830, 838 n.8 (Bankr. S.D.N.Y. 1990) ( cause utilized to permit litigation in another forum to liquidate personal injury claim); In re Rexene Products, Inc., 141 B.R. at 576 (legislative history indicates cause may be established by single factor including to permit action to proceed in another tribunal). Conclusion WHEREFORE, the Movant respectfully requests the entry of an Order, substantially in the form attached hereto as Exhibit B, modifying the automatic stay imposed by section 362(a) of the Bankruptcy Code to allow the Movant (i) to prosecute her federal court action to judgment or other resolution, (ii) to liquidate the Movant s claim against the Debtor, and (iii) to seek 6

7 satisfaction of any judgment (or other resolution) obtained against the Debtor from the proceeds of the applicable insurance coverage available to Debtor. Date: January 3, 2013 Wilmington, DE SULLIVAN HAZELTINE ALLINSON LLC /s/ William A. Hazeltine William D. Sullivan (No. 2820) William A. Hazeltine (No. 3294) Elihu E. Allinson, III (No. 3476) Seth S. Brostoff (No. 5312) 901 North Market Street, Suite 1300 Wilmington, DE Tel: (302) Fax: (302) and Diane Breneman, Esq. Stacey Dungan, Esq. Breneman Dungan 929 Walnut, #800 Kansas City, MO Tel: (816) Fax: (816) Attorneys for Karen Gueniot-Kornegay, individually and on behalf of all wrongful death beneficiaries of Matthew Dylan Kornegay 7

8 EXHIBIT A

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28 EXHIBIT B

29 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) In re: ) Chapter 11 ) BLITZ U.S.A., Inc., et al. ) Case No (PJW) ) Jointly Administered Debtors. ) ) Related D.I. ORDER GRANTING MOTION OF KAREN GUENIOT-KORNEGAY, INDIVIDUALLY AND ON BEHALF OF ALL OF THE WRONGFUL DEATH BENEFICIARIES OF MATTHEW DYLAN KORNEGAY, FOR RELIEF FROM THE AUTOMATICSTAY PURSUANT TO 11 U.S.C. 362(d) AND NOW, this day of, 2013, this matter coming before the Court on the Motion of Karen Gueniot-Kornegay, individually and on behalf of all wrongful death beneficiaries of Matthew Dylan Kornegay ( Movant ) 1 for relief from the Automatic Stay Pursuant to 11 U.S.C. 362 (d) (the Motion ); the Court having reviewed the Motion, any objections or responses to the Motion and all related pleadings; and the Court having determined that the legal and factual bases set forth in the Motion establish sufficient cause for the relief granted herein; IT IS HEREBY ORDERED as follows: 1. The Motion is granted as set forth herein. 2. The automatic stay imposed by 11 U.S.C. 362 (a) in the above-referenced Chapter 11 bankruptcy proceeding is lifted so as to allow Movants to prosecute and liquidate their personal injury claims against the Debtors, and to proceed to collect any judgment in the first instance against any available insurance proceeds. 3. This Court shall retain jurisdiction over all matters related to this Order and/or the implementation thereof. The Honorable Peter J. Walsh, Judge United States Bankruptcy Court 1 All capitalized terms in the Order shall have the same meaning ascribed to them in the Motion unless otherwise defined.

30 CERTIFICATE OF SERVICE I, William A. Hazeltine, do hereby certify I am not less than 18 years of age and that on this 3 rd day of January 2013, I caused copies of the within Motion for Relief from the Automatic Stay Pursuant to Section 362(d) of the Bankruptcy Code to be served upon the parties on the attached service list in the manner indicated. Under penalty of perjury, I declare that the foregoing is true and correct. January 3, 2013 Date /s/ William A. Hazeltine William A. Hazeltine

31 HAND DELIVERY Office of the United States Trustee Attn: Richard Schepacarter, Esq. 844 King Street, Suite 2207 Lockbox 35 Wilmington, DE FIRST CLASS MAIL & FACSIMILE Frederic Dowart, Lawyers Samuel S. Ory, Esq. Old City Hall 124 East Fourth Street Tulsa, OK (918) HAND DELIVERY Duane Morris LLP Richard W. Riley, Esq. 222 Delaware Avenue, Suite 1600 Wilmington, DE FIRST CLASS MAIL & FACSIMILE Duane Morris LLP Margery N. Reed, Esq. Wendy M. Simkulak, Esq. Catherine E. Beideman, Esq. 30 S. 17 th Street Philadelphia, PA (215) FIRST CLASS MAIL & FACSIMILE O Melveny & Myers LLP Tancred Schiavoni, Esq. Gary Svirsky, Esq. John B. McDonald, Esq. 7 Times Square New York, NY (212) HAND DELIVERY Potter, Anderson & Corroon, LLP Jeremy W. Ryan, Esq. Etta R. Mayers, Esq N. Market Street, 6 th Floor P.O. Box 957 Wilmington, DE HAND DELIVERY Richards Layton & Finger PA Daniel J. DeFrancheschi, Esq. Michael J. Merchant, Esq. Julie A. Finocchiardo, Esq. Amanda R. Steele, Esq. One Rodney Square 920 North King Street Wilmington, DE FIRST CLASS MAIL & FACSIMILE Lowenstein Sandler PC Kenneth A. Rosen, Esq. Sharon L. Levine, Esq. Jeffrey D. Prol, Esq. 65 Livingston Avenue Roseland, NJ (973) HAND DELIVERY Womble Carlyle Sandridge & Rice Francis A. Monaco, Jr., Esq. Kevin J. Mangan, Esq. Thomas Horan, Esq. 222 Delaware Avenue, Suite 1501 Wilmington, DE HAND DELIVERY Klehr Harrison Harvey Branzburg LLP Margaret M. Manning, Esq. 919 Market Street, Suite 1000 Wilmington, DE HAND DELIVERY Stevens & Lee, P.C. John D. Demmy, Esq North Market Street, Suite 700 Wilmington, DE FIRST CLASS MAIL & FACSIMILE Stevens & Lee, P.C. Leonard P. Goldberger, Esq. 620 Freedom Business Center, Suite 200 King of Prussia, PA (610)

32 HAND DELIVERY Landis Rath & Cobb LLP Adam G. Landis, Esq. Daniel B. Rath, Esq. Matthew B. McGuire, Esq. Jeffrey R. Drobish, Esq. 919 Market Street, Suite 1800 Wilmington, DE FIRST CLASS MAIL & FACSIMILE Freshfields Bruckhaus Deringer US LLP Timothy P. Harkness, Esq. Pamila Gudkov, Esq. 601 Lexington Avenue New York, NY (212) FIRST CLASS MAIL & FACSIMILE Stevens & Lee, P.C. John C. Kilgannon, Esq Market Street, 29 th Floor Philadelphia, PA (215) HAND DELIVERY White and Williams LLP James S. Yoder, Esq. 824 N. Market Street, Suite 902 P.O. Box 709 Wilmington, DE