Lysyj et al v. Milner Distribution Alliance, Inc.

Filing 164

MINUTE ORDER granting 160 Plaintiffs' Motion for Leave to Proceed Against Individual Defendants Nancy Milner and Richard Milner, as set forth in the Order. The previous Order staying this case between Plaintiff and the Defendants Nancy Milner and Richard Milner is vacated. The § 362 stay remains in effect against Defendant Milner Distribution Alliance, Inc., d/b/a Maxx Sunglasses. By Magistrate Judge Michael J. Watanabe on 10/20/2014.(emill)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 13-cv-01930-RM-MJW
DANIEL LYSYJ,
DAVID RHOADS,
RICH AULICH,
SHANNON DOLCE,
LONNIE ENDERLE,
JASON JACOBS,
SARA KRUEGER,
ANDY MARTIN,
BRENT McDANIEL,
MARC MOHR,
JONATHAN PANURE,
BOGDAN PETRESCU, and
DEREK SMITH,
Plaintiffs,
v.
MILNER DISTRIBUTION ALLIANCE, INC., d/b/a Maxx Sunglasses,
a Colorado corporation,
Defendant.
MINUTE ORDER
Entered by Magistrate Judge Michael J. Watanabe
It is hereby ORDERED that Plaintiffs’ Motion for Leave to Proceed Against
Individual Defendants Nancy Milner and Richard Milner (docket no. 160) is GRANTED
for the reasons stated below. The previous ORDER staying this case between Plaintiff
and the Defendants Nancy Milner and Richard Milner (see docket no. 159) is
VACATED. The § 362 stay remains in effect against Defendant Milner Distribution
Alliance, Inc., d/b/a Maxx Sunglasses [hereinafter Maxx Sunglasses].
On September 23, 2014, Defendant Maxx Sunglasses, a Colorado corporation,
filed a Voluntary Petition in Bankruptcy in the U.S. Bankruptcy Court for the District of
Colorado Case No. 14-22962-SBB. See exhibit No. 1 attached to the subject motion
(docket no. 160). There is no evidence that the individual Co-Defendants Nancy Milner
and Richard Milner filed for bankruptcy. In Case no. 14-22962-SBB, the Bankruptcy
Court entered an automatic stay pursuant to 11 U.S.C. § 362(a)(1) as to Defendant
Maxx Sunglasses ONLY. The automatic stay applies only to Defendant Maxx

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Sunglasses since it is the only debtor listed in the bankruptcy petition. See Chung v.
New Silver Palace Rest., Inc., 246 F. Supp.2d 220, 226 (S.D.N.Y. 2002) (holding in a
FLSA case that “[t]he automatic stay imposed by section 362(a)(1) of the Bankruptcy
Code, 11 U.S.C. 362(a)(1) affects only The New Silver Palace, Inc.; it does not apply to
plaintiff’s claims against the restaurant’s non-debtor co-defendants.”).
Defendants Nancy Milner and Richard Milner individually argue that this court
should continue to stay this case against them for judicial economy reasons and
because an adversary proceeding is pending in the above bankruptcy case. On
October 8, 2014, Defendant Maxx Sunglasses filed its adversary complaint wherein it
seeks to enjoin Plaintiffs from proceeding with their claims against Nancy and Richard
Milner individually because Defendant Maxx Sunglasses has an unlimited and
unconditional contractual obligation, pursuant to its by-laws, to fully indemnify CoDefendants Nancy and Richard Milner as to claims against them in their capacities as
officers of Defendant Maxx Sunglasses. However, only the bankruptcy court, on
application from the debtor, may extend the stay to non-debtors, and the U.S. District
Court does not have the authority to extend the automatic stay. See Fratelli Cosulich
Unipessoal, S.A. v. Specialty Fuels Bunkering, LLC, 2014 WL 2611547, at * (S.D. Ala.
June 11, 2014) (explaining that a review of relevant case law found that the bankruptcy
court, rather than the district court, was the appropriate place for determining whether
‘unusual circumstances’ warranted extending the automatic stay to non-debtors.).
Accordingly, the automatic stay cannot be extended by this court, and the debtor (i.e.,
Maxx Sunglasses) needs to follow the proper procedure and seek such relief from the
U.S. Bankruptcy Court for the District of Colorado in Case No. 14-22962.
Date: October 20, 2014