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. ) ) Obj. Deadline: June 29, 4:00 p.m. EST ) Hearing Date: July 17, 9:30 a.m. EST ) MOTION OF CHRIS BOLING AND HOLLY BOLING FOR RELIEF FROM THE AUTOMATIC STAY PURSUANT TO SECTION 362(d) OF THE BANKRUPTCY CODE Chris Boling and Holly Boling (the Movants ), by and through their undersigned counsel, hereby move 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 liquidation of the Movants personal injury cause of action against debtordefendant BLITZ U.S.A., Inc. asserted in the Amended Complaint filed in the United States District Court, for the Western District of Kentucky, such case being styled as Christopher Boling and Holly Boling in their individual capacities v. Blitz USA, Inc., civil action number 1:09CV-67-M and (ii) to proceed to collect any judgment in the first instance against any available insurance proceeds under any applicable policy. In support of this Motion, the Movants respectfully show the Court as follows:

2 The Parties 1. On November 9, 2011 (the petition date ), the debtor-defendant 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. 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 in the Movants Complaint, they are residents of Kentucky. See Complaint, attached hereto as Exhibit A at 1. Movants case was set for mediation in Kentucky on November 16, 2011 in Bowling Green, Kentucky, and a jury trial to begin on March 5, Background 1 4. Prior to the petition date, on May 20, 2009, the Movants filed their federal court action against the debtor-defendant. The court action relates to an incident occurring on May 23, 2008 in Kentucky. The Plaintiff, Christopher Boling, was using a portable plastic gasoline storage container manufactured by debtor-defendant when the container exploded, spraying burning gasoline on Plaintiff which resulted in grievous bodily harm. See Exhibit A at Plaintiffs allege that debtor-defendant s gasoline container was sold in a defective condition unreasonably dangerous to its users and consumers, and that debtor-defendant was negligent in its design of the gasoline container at issue for failure to include a simple, well-known safety device. See Exhibit 1 The following is provided by way of general summary only. For further description of the incident, please see the Amended Complaint in the state court action attached hereto as Exhibit A. 2

3 A at By allegedly placing an unreasonably dangerous and defectively designed product into the stream of commerce, the debtor-defendant proximately caused Plaintiffs injuries. 5. On November 9, 2011, the debtor-defendant filed for bankruptcy and, on November 14, 2011, counsel for debtor-defendant in the federal court action filed on behalf of the debtor-defendant a Suggestion of Bankruptcy in the federal court action. See Exhibit B. As described in the Suggestion, the federal court proceedings have been stayed with respect to the debtor-defendants as a consequence of the automatic stay provisions of 11 U.S.C. 362(a). 6. Upon information and belief, the debtor-defendant is covered by insurance policies applicable to the Movants claims in the federal court action. 7. The Debtor has a commercial general liability policy for the claims period (as well as excess coverage for the same time period) which would apply to the claims of Chris Boling and Holly Boling. This coverage is subject to a self-insured retention of $1,000, Upon information and belief the debtor-defendant has already met its self-insured retention of $1,000, for Plaintiffs federal court action. Accordingly, the debtor-defendant s potential liability to the Movants are covered by insurance policies, in place during the relevant time period, for which no further selfinsured retention is due. 2 See Declaration of Rocky Flick in Support of Debtors Chapter 11 Petitions and First Day Motions, 20 (filed 11/09/2011; D.I. 13) ( Blitz s current commercial liability insurance coverage is subject to a retention amount of $1 million per claim. Over the past five years, Blitz s commercial liability insurance limits have raged from $37 million (for policy years ) to $63 million (for policy years ). During that same time period, Blitz s primary commercial liability policies have contained deductibles or self-insured retention amounts ranging from $25,000 to $1 million.) 3

4 Statement of Relief Requested 8. By this Motion the Movants seek relief from the automatic stay so that he may pursue their federal court action to judgment or other resolution and satisfy any judgment or other resolution they may obtain against the debtor-defendant from the proceeds of any applicable insurance policies in the first instance. Basis for the Relief Requested 9. The Bankruptcy Code provides: 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) which is that it is often appropriate to allow litigation to proceed in its initial forum, 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). 4

5 11. This 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 non-bankrupt 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 Movants favor on each of these three prongs. First, the debtor-defendant will not suffer prejudice should the stay be lifted because the Movants claim must eventually be liquidated before Movants can recover from the bankruptcy estate. Because Plaintiffs claims involve personal injury it 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, insurance exists to cover Movants claims and the debtordefendant has met its self-insured retention for this specific matter. Accordingly, to the extent that the debtor-defendant s liability to the Movants are covered by insurance policies, any recovery by Movants in their 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. 5

6 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). To the extent the Movants claims are not covered by the debtor-defendant s insurance, the Movants seek to liquidate, as opposed to collect, their claims via the 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 Movants will face substantial hardship if the stay is not lifted. Christopher and Holly Boling are residents of Kentucky and the events which form the basis for their Complaint occurred in Kentucky. Discovery has taken place and is essentially complete in the federal court action including the disclosure and review of two hundred thousand documents 3 and numerous depositions. In fact, the federal court action was scheduled and ready to be mediated on November 16, 2011, with a trial to begin on March 5, If Chris Boling and Holly Boling are forced to litigate their claims in Delaware, they 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 Movants claim to be liquidated in the forum where it is presently postured to be tried quickly. 3 All of which are physically located in Kentucky along with all physical evidence and virtually all of the fact witnesses. 6

7 15. Moreover, if the Movants are not permitted to liquidate their claims in the forum of their choice, the litigation in Delaware will be before the United States District Court. 28 U.S.C. 157(b)(5). The United States District Court for the Western District of Kentucky is the more appropriate forum for a trial governed by Kentucky 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). ); see 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-defendant will not suffer any hardship if the federal court action is allowed to proceed. The federal court action is a products liability claim for personal injury which does not present factual or legal issues which will impact or distract the debtor-defendant from the reorganization process. The debtor-defendant has met its self-insured retention on Movants claim and no longer has a pecuniary interest in the insurance applicable to Movants claim. Moreover, debtor-defendant s local counsel had been involved with the case since it was filed in 2009 and was equally prepared to go forward in the federal court action. 17. Lastly, the likelihood of success on the merits prong is satisfied by 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 Movants favor. The last trial involving an exploding gasoline container against the debtor-defendant resulted in a plaintiff s verdict finding the product 7

8 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 Movants respectfully request the entry of an Order modifying the automatic stay imposed by section 362(a) of the Bankruptcy Code to allow the Movants (i) to prosecute the federal court action to judgment or other resolution, (ii) to liquidate the Movants claims against the debtor-defendant, and (iii) to seek satisfaction of any judgment (or other resolution) obtained against the debtor-defendant from the proceeds of the applicable insurance coverage available to debtor-defendant. Date: June 15, 2012 Wilmington, DE SULLIVAN HAZELTINE ALLINSON LLC /s/ William D. Sullivan William D. Sullivan (No. 2820) Seth S. Brostoff (No. 5312) 901 North Market Street, Suite 1300 Wilmington, DE Tel: (302) Fax: (302)

9 -- and -- S. Kirkpatrick Morgan, Jr. WALKER & MORGAN, LLC 135 East Main Street P O Box 949 Lexington, SC Attorneys for Chris Boling and Holly Boling 9

10 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. ) ) Response Deadline: June 29, 2012 at 4:00 p.m. ) Hearing Date: July 17, 2012 at 9:30 a.m. ) NOTICE OF MOTION PLEASE TAKE NOTICE that on June 15, 2012, Chris Boling and Holly Boling (the Movants ), filed the attached Motion of Chris Boling and Holly Boling for Relief from the Automatic Stay Pursuant to Section 362(d) of the Bankruptcy Code (the Motion ). PLEASE TAKE FURTHER NOTICE that any objections to the Motion must be made in writing, filed with the Bankruptcy Court, 824 Market Street, Wilmington, DE and served so as to actually be received by the undersigned counsel for the Movants on or before June 29, 2012 at 4:00 p.m. prevailing Eastern Time. PLEASE TAKE FURTHER NOTICE that a hearing on the Motion will be held on July 17, 2012 at 9:30 a.m. prevailing Eastern Time before the Honorable Peter J. Walsh, United States Bankruptcy Court, 824 Market Street, 6 th Floor, Courtroom 2, Wilmington, DE

11 PLEASE TAKE FURTHER NOTICE THAT IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF REQUESTED BY THE MOTION WITHOUT FURTHER NOTICE OR HEARING. Date: June 15, 2012 Wilmington, DE SULLIVAN HAZELTINE ALLINSON LLC /s/ William D. Sullivan William D. Sullivan (No. 2820) Seth S. Brostoff (No. 5312) 901 North Market Street, Suite 1300 Wilmington, DE Tel: (302) Fax: (302) and Daniel S. Haltiwanger, Esq. Richardson, Patrick, Westbrook & Brickman, L.L.C Barnwell 1730 Jackson Street Barnwell, SC Tel: (803) Fax: (803) Attorneys for Chris Boling and Holly Boling

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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) ) Debtors. ) Jointly Administered ) ) Related Docket Item ORDER GRANTING MOTION OF CHAD FUNCHESS FOR RELIEF FROM THE AUTOMATIC STAY PURSUANT TO 11 U.S.C. 362(d) AND NOW, this day of, 2012, this matter coming before the Court on the Motion of Chris Boling and Holly Boling ( Movants ) 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 liquidate his personal injury cause of action against the Debtors currently before the United States District Court for the Western District of Kentucky, 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 meanings ascribed to them in the Motion unless otherwise defined.

30 CERTIFICATE OF SERVICE I, William D. Sullivan, do hereby certify I am not less than 18 years of age and that on this 15 th day of June 2012, 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 via U.S. Mail, First Class, postage pre-paid Blitz USA Inc Attn: Rocky Flick th Avenue NW Miami, OK Bank of Oklahoma Paul Mesmer Bank of Oklahoma Tower Tulsa, OK Office of the United States Trustee Attn: Richard Schepacarter 844 King Street, Suite 2207 Lockbox 35 Wilmington, DE Frederic Dowart, Lawyers Samuel S. Ory Old City Hall 124 East Fourth Street Tulsa, OK Richards Layton & Finger PA Daniel J. DeFrancheschi Michael J. Merchant Julie A. Finocchiardo Amanda R. Steele One Rodney Square 920 North King Street Wilmington, DE Lowenstein Sandler PC Kenneth A. Rosen Sharon L. Levine Jeffrey D. Prol 65 Livingston Avenue Roseland, NJ Womble Carlyle Sandridge & Rice Francis A. Monaco, Jr. Kevin J. Mangan Thomas Horan 222 Delaware Avenue, Suite 1501 Wilmington, DE Klehr Harrison Harvey Branzburg LLP Margaret M. Manning 919 Market Street, Suite 1000 Wilmington, DE Under penalty of perjury, I declare that the foregoing is true and correct. June 15, 2012 Date /s/ William D. Sullivan William D. Sullivan