Jim's Maintenance & Sons Inc. v. Target Corp. (In re Jim's Maintenance & Sons Inc.)
- Summarized by Scottie Kleypas , Scottie S. Kleypas Law, LLC
- 13 years 9 months ago
- Citation:
- No. 10-6052 & No. 10-6053 (consoldidated), (10th Cir. Apr. 1, 2011)
- Tag(s):
-
- Ruling:
- Affirmed. Bankruptcy court's orders granting motions to lift automatic stay to allow creditor to pursue its crossclaims in two separate federal district courts in Texas and to file a counterclaim in federal district court in Oklahoma. The Court held that the bankruptcy court's decision to lift the automatic stay was not an abuse of discretion because the bankruptcy court's analysis was appropriately tailored to the debtors' limited argument regarding prejudice.
- Procedural context:
- Motion for Relief from Automatic Stay
- Facts:
- Target Corporation entered into contracts with Debtors wherein Debtors agreed to provide cleaning services for certain stores. In May 2006 Target terminated the contact with Debtors. Former employees of Debtors filed two separate lawsuits for failure to pay overtime and minimum wage under the Fair Labor Standards Act against Debtor as well as Target. In those lawsuits brought in two separate federal districts in Texas, Target brought crossclaims against Debtors for breach of contract as well as other claims. The litigation proceeded and in one case Target had moved for summary judgment and the Debtors' filed its response to the summary judgment motion in January 2008. Prior to a decision on that motion for summary judgment, Debtors filed bankruptcy. Subsequent to filing for bankruptcy protection, Debtors filed a civil action against Target in state court in Oklahoma which was removed to federal court in the Western District of Oklahoma. Target filed its motions for relief from the automatic stay to allow it to continue litigation its crossclaims in the Texas cases and to allow it to file counterclaims in the Oklahoma litigation. The bankruptcy court lifted the automatic stay in February 2009; the debtors appealed the bankruptcy court's decision to the district court. In January 2010, the district court affirmed the bankruptcy court's decision to lift the automatic stay. Debtor appealed the district court's decision to this court. The bankruptcy court's decision to lift the automatic stay is reviewed for abuse of discretion. The Tenth Circuit recognized that relief from the automatic stay may be granted for cause, 11 U.S.C. §362(d) (1).
Bankruptcy courts have discretion to determine whether cause exists to lift the stay. Using the factors identified in In re Curtis, 40 B.R. 795, 799-800 (Bankr. D. Utah 1984) the Tenth Circuit found that the bankruptcy court's determination that cause existed to lift the stay in order for Target to protect its right of offset by pursuing its crossclaims in the Texas cases and to file its counterclaims in the Oklahoma litigation was not clear error of judgment nor did it exceed the bounds of permissible choice in the circumstances. Debtors’ objections were limited to the geographical location of the claims. Debtors objected to the litigation continuing in the Texas cases but not in the Oklahoma case which the Court found as a concession the estate would not be harmed by allowing litigation to proceed against it in non-bankruptcy forum.
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