PURVIS v. Blitz USA Inc et al

Filing 28

ORDER granting 24 Motion for Reconsideration and lifting the stay as to Defendant Wal-Mart. Stay against Defendant Blitz will remain. New discovery deadlines imposed as to Wal-Mart. Ordered by Judge Hugh Lawson on 2/28/2012. (nbp)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
VALDOSTA DIVISION
SHERRI PURVIS, for individually
and as next friend and natural
guardian JAMES C. PURVIS,

:
:
:
:
Plaintiff,
:
:
v.
:
:
BLITZ, U.S.A., INC., WAL-MART
:
STORES, INC., WAL-MART
:
STORES EAST, L.P., and WAL:
MART STORES EAST, INC.,
:
:
Defendants.
:
_______________________________ 

Case No. 7:11-cv-111 (HL)

ORDER
Currently pending before the Court is Plaintiff’s Motion for Reconsideration
(Doc. 24). After reconsidering the evidence and the supplemental authority
submitted to the Court in this case, the Motion for Reconsideration is granted and
the stay as to Defendant Wal-Mart is lifted.
I.

Background

Plaintiff Sherri Purvis filed this lawsuit on July 6, 2011 in the State Court of
Berrien County, Georgia, after her minor son, James C. Purvis, suffered severe
burns when a gas can manufactured by Blitz U.S.A., Inc. (“Blitz”) exploded.
Plaintiff alleges that the gas can was defective and unsafe for its intended
purpose. In addition to naming Blitz as a Defendant, Plaintiff has also named
Wal-Mart Stores, Inc., Wal-Mart Stores East, L.P., and Wal-Mart Stores East, Inc.

(collectively, “Wal-Mart”), the distributors of the gas can, as Defendants. The
case was removed to federal court on August 19, 2011.
On November 9, 2011, Blitz filed for bankruptcy under Chapter 11 of the
United States Bankruptcy Code. In accordance with 11 U.S.C. § 362(a), the case
was automatically stayed as to debtor Defendant Blitz. Now, Wal-Mart has
petitioned this Court to issue a discretionary stay as to Wal-Mart while Blitz
undergoes bankruptcy proceedings.
II.

Discussion

When a named defendant files for bankruptcy, 11 U.S.C. § 362(a) provides
for an automatic stay of the case as to that debtor defendant. However, the
protections of § 362 do not automatically apply to co-defendants. Wedgeworth v.
Fibreboard Corp., 706 F.2d 541, 545 (5th Cir. 1983). Thus, a party seeking to
stay a case as to a non-debtor defendant must appeal to the court’s discretionary
power to stay proceedings in the interest of justice. Id.
There are two reasons that courts typically find that justice requires a stay
as to a non-debtor defendant. Matter of Fernstrom Storage and Van Co., 938
F.2d 731, 736 (7th Cir. 1991). First, courts typically allow a stay when the debtor
defendant and non-debtor defendant share such a close identity that a judgment
against the non-debtor defendant would essentially be a judgment against the
debtor defendant. Id. (citing A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 999
(4th Cir. 1986)). Second, courts recognize that a stay may be appropriate when
pending litigation would cause irreparable harm to the debtor, bankruptcy estate,
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or the reorganization plan, even though the debtor is not named as a defendant.
Id. (citing In re Lomas Fin., 117 B.R. 64, 67 (S.D.N.Y. 1990), remanded, 932 F.2d
147 (2d Cir. 1991)).
If neither of the two aforementioned exceptions applies, the party seeking
the stay must demonstrate other good cause for the stay.
The suppliant for a stay must make out a clear case of hardship or
inequity in being required to go forward, if there is even a fair
possibility that the stay for which he prays will work damage to
someone else. Only in rare circumstances will a litigant in one
cause be compelled to stand aside while a litigant in another
settles the rule of law that will define the rights of both.
Landis v. North American Co., 299 U.S. 248, 254-55, 57 S. Ct. 163, 166 (1936).
To qualify as a rare circumstance meriting a stay, the non-debtor defendant must
demonstrate “something more than the mere fact that one of the parties to the
lawsuit has filed a Chapter 11 bankruptcy.” In re Colonial BancGroup, Inc. Secs.
Litig., 2010 WL 119290 at *1 (M.D. Ala. Jan. 7, 2010).
In this case, Wal-Mart argues that the first exception applies and a stay is
appropriate because there is a contractual indemnification clause between Blitz
and Wal-Mart that demonstrates a close identity meriting a stay as to both
defendants. Courts have held that absolute indemnity can justify a stay. See
Gulfmark Offshore, Inc. v. Bender Shipbuilding & Repair Co., Inc., 2009 WL
2413664 at *2 (S.D. Ala. Aug. 3, 2009); In re Stewart, 329 B.R. 910, 915 (Bankr.
M.D. Ga. 2005) (determining that a stay would be appropriate as to a non-debtor
defendant where a third party is entitled to indemnity from debtor for any
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judgment entered against him); N.L.R.B. v. McDermott, 300 B.R. 40, 43 n.7 (D.
Colo. 2003) (“The automatic stay may apply to a non-debtor in special
circumstances, such as where there is identity of interest between a debtor and a
third party so that a judgment against a non-debtor would be binding on a
debtor.”). However, the mere existence of an indemnity clause alone has never
been deemed sufficient to justify staying the case as to a non-debtor defendant.
In this case, there is no absolute indemnity and the indemnity clause between
Wal-Mart and Blitz is insufficient to demonstrate a “close identity” to qualify for a
stay as to both defendants.
Wal-Mart also argues that this case constitutes one of the rare
circumstances that justify the court using its broad discretionary powers to order
a stay. However, the Court does not find that this case demonstrates the unusual
circumstances that warrant a discretionary stay. In a strikingly similar case,1 the
District Court for the Central District of Illinois found that the indemnification
clause executed between Wal-Mart and Blitz did not constitute an unusual
circumstance that would support a stay as to both defendants. See Shickel v.
Blitz U.S.A., 3:11-cv-03380-JBM/JAG (C.D. Ill. Feb. 21, 2011). In that case, the
court acknowledged Bankruptcy Judge Peter J. Walsh’s denial of Wal-Mart’s
request for a stay, despite Wal-Mart’s argument that it would suffer hardship if
the case was allowed to proceed against it while Blitz was in bankruptcy. The

1

As of February 2012, there were thirty-six cases in twenty-seven different
courts pending against Blitz, all alleging injuries sustained as a result of an
exploding gas can.
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Illinois district court determined that Judge Walsh “found no basis in bankruptcy
law for encompassing Wal-Mart within the automatic stay,” and therefore, the
district court adopted the finding of the bankruptcy judge finding no unusual
circumstances meriting a stay. In a similar fashion, this Court finds a lack of
unusual circumstances that justify the need for a stay as to Wal-Mart.
Wal-Mart argues that without a stay, it will suffer severe hardship and
judicial resources will be wasted. However, this argument must fail. If anyone
stands to suffer in this case, it would be the Plaintiff if this case were delayed
indefinitely as Blitz progressed through its bankruptcy proceedings. The Plaintiff’s
allegations deserve to be addressed in a timely fashion, and staying the case
would only delay Plaintiff’s opportunity for potential recovery. Further, denying a
stay in this case would not be a waste of judicial resources. The Plaintiff’s case
against Wal-Mart can proceed and Blitz can rejoin the suit when its bankruptcy
proceedings are complete.
In sum, the protections of § 362 do not require a stay as to Wal-Mart in this
case, and there are no other compelling considerations that persuade this Court
to extend a stay to Wal-Mart. Therefore, Plaintiff’s Motion for Reconsideration is
granted and the stay in this case is lifted as to Defendant Wal-Mart. The stay
against Blitz will remain in place while Blitz proceeds through the bankruptcy
process. The deadlines for the case against Wal-Mart shall be extended by a
period of four weeks, which was the amount of time that has elapsed since the
stay was issued as to Wal-Mart. Thus, the amended deadlines are as follows:
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Plaintiff must disclose the identity of any expert witnesses on or before
April 13, 2012.
Defendants must disclose the identity of any expert witnesses on or before
May 14, 2012.
Any supplemental expert reports must be provided by June 13, 2012.
The time for discovery in this case shall expire on September 13, 2012.
All motions to join other parties or otherwise amend the pleadings shall be
filed on or before October 15, 2012.
All Daubert motions shall be filed on or before October 15, 2012.
All dispositive motions shall be filed on or before October 31, 2012.
SO ORDERED, this 28th day of February, 2012.

s/Hugh Lawson
HUGH LAWSON, SENIOR JUDGE

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