SE Property Holdings, LLC v. Sweet Creams, LLC et al

Filing 22

ORDER 19 Motion to Stay isgranted in part, as to the prosecution of this action against defendants Marian C. Reynolds and Robert F. Reynolds, Jr. and denied in part as to defendant Sweet Creams LLC. It is FURTHER ORDERED that the hearing on plain tiff's motion for default judgment is RESET for 8/9/12 at 10:00 Courtrrom 3B. Signed by Magistrate Judge Katherine P. Nelson on 7/19/2012. copy mailed to Sweet Creams (srr) (Additional attachment(s) added on 7/20/2012: # 1 certified mail receipt) (srr).

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
SE PROPERTY HOLDINGS, LLC,
Plaintiff,
v.
SWEET CREAMS, LLC, ROBERT R.
REYNOLDS, JR., and MARIAN C.
REYNOLDS,
Defendants.

)
)
)
)
)
)
)
)
)
)
)

CIVIL ACTION NO. 12-0165-N

ORDER
Shortly after the court set a hearing on plaintiff’s Motion for Default Judgment (doc. 11),
defendants Marian C. Reynolds and Robert R. Reynolds, Jr. filed a notice of automatic stay and a
motion seeking a stay of proceedings in this action. Doc. 19. The movants filed a petition in
bankruptcy pursuant to Chapter 7, Case No. 12-01772. The court ordered the parties to address
whether the automatic stay should be deemed to apply to this case as it applies to the claims
against defendant Sweet Creams, LLC. Defendant responded with additional authority that the
individual bankruptcy of the principals of an LLC does not generally stay proceedings against
the LLC. No defendant has filed a Reply.
The bankruptcy petition was filed on behalf of Marian and Robert Reynolds, and does not
include the defendant LLC. Chapter 7 petitions provide bankruptcy to individuals. See 11
U.S.C. §§ 701 et seq. Upon review of the case law, it appears that bankruptcy filings by
individual members of an LLC have been held not to grant bankruptcy protection to the LLC, see
Kreisler v. Goldberg, 478 F.3d 209, 212 (4th Cir. 2007)(Parent LLC’s bankruptcy did not stay
proceedings against subsidiary LLC; rejecting argument that there was an “identity of interest”

which could give rise to “special circumstances” for extending stay); see also In re O'Brien, 2011
WL 6754095 (Bkrtcy.D.Conn.,2011) (LLC bankruptcy does not protect principals; cites prior
unreported decision in In re Kochman, Case No. 11–50111, Memorandum & Order at 4
(Bankr.D.Conn. Nov. 3, 2011) for proposition that bankruptcy of principals does not protect
LLC);

cf. Gulfmark Offshore, Inc. v. Bender Shipbuilding & Repair Co., Inc., 2009 WL

2413664 (S.D.Ala.)(indemnity provision was “unusual circumstance” allowing protection of
non-debtors by stay); In re Robert F. Youngblood Const. Co., 2012 WL 987751
(Bkrtcy.E.D.N.C., 2012)(automatic stay as to LLC in bankruptcy does not extend to principals);
In re Calhoun, 312 B.R. 380, 383 (Bankr.N.D. Iowa 2004) (denying the extension of the automatic
stay to a chapter 7 debtor's limited liability company).

No party has brought any fact to the attention of this court that would demonstrate that
further proceedings against Sweet Creams, LLC should be stayed. The defendant LLC has failed
to plead or otherwise defend this action. It appears that the plaintiff’s Motion for Default
Judgment may properly proceed against that entity despite the stay of proceedings against the
individual defendants.
Accordingly, it is hereby ORDERED that defendants Motion to Stay is GRANTED in
part, as to the prosecution of this action against defendants Marian C. Reynolds and Robert R.
Reynolds, Jr., and DENIED in part as to defendant Sweet Creams, LLC. It is further ORDERED
that the hearing on plaintiff’s Motion for Entry of Default Judgment, previously continued by
order (doc. 20) dated June 4, 2012, is RESET; the hearing shall be held before the undersigned
on Thursday August 9, 2012, at 10:00 a.m. in Courtroom 3-B.
DONE this the 19th day of July, 2012.

/s/ Katherine P. Nelson
UNITED STATES MAGISTRATE JUDGE