Shultz v. Smith et al

Filing 56

MEMORANDUM OPINION & ORDER granting in part and denying in part [] Motion to Stay. Signed by Senior Judge Thomas B. Russell on 10/24/2015. cc: Counsel, defendants(KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CIVIL ACTION NO. 3:13-CV-00947-TBR

JOE SHULTZ

Plaintiff

v.
CLAYTON SMITH
DIAMOND SEAL, INC.

Defendants

MEMORANDUM OPINION AND ORDER

This matter comes before the Court on Defendants Clayton Smith and Diamond Seal, Inc.’s
Motion to Stay. (Docket No. 40.) Plaintiff Joe Shultz has filed a Response in Opposition to Defendants’
Motion to Stay. (Docket No. 41.) Defendants then filed a Motion to Supplement Request for Stay.
(Docket No. 43.) Plaintiff filed a Response to Defendants’ Motion, (Docket No. 45), and this Court
granted Defendants’ Motion to Supplement Request for Stay as to Clayton Smith, but denied the Motion
as to Diamond Seal, Inc., (Docket No. 55). As developed more fully below, Defendants’ Motion to Stay is
GRANTED as to Clayton Smith and is DENIED as to Diamond Seal, Inc.
“A petition filed for bankruptcy operates as a stay and is applicable to the continuation of a
judicial proceeding against the debtor.” Parry v. Mohawk Motors of Mich., Inc., 236 F.3d 299, 314 (6th
Cir. 2000) (citing 11 U.S.C. § 362(a)(1)). Furthermore, “[t]he court in which the judicial proceeding is
pending . . . has jurisdiction to decide whether the proceeding is subject to the stay.” Dominic's Rest. of
Dayton, Inc. v. Mantia, 683 F.3d 757, 760 (6th Cir. 2012) (citing NLRB v. Edward Cooper Painting, Inc.,
804 F.2d 934, 939 (6th Cir. 1986)). A court may only extend a stay “to nonbankrupt co-defendants . . . in
unusual circumstances.” Parry, 236 F.3d at 314 (emphasis added) (quoting In re Eagle–Picher Indus.,
Inc., 963 F.2d 855, 861 (6th Cir. 1992)) (internal quotation marks omitted). According to Sixth Circuit
precedent, “absent unusual circumstances the stay does not extend . . . to separate legal entities such as

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corporate affiliates, partners in debtor partnerships, or to codefendants in pending litigation.” Id. (citing
Patton v. Bearden, 8 F.3d 343, 349 (6th Cir. 1993)).
In this case, Defendant Clayton Smith filed under Chapter 13 for bankruptcy on February 16,
2015. (Docket No. 40 at 1). Therefore, a stay is appropriate as to Mr. Smith. However, Mr. Smith’s CoDefendant, Diamond Seal, Inc., has not filed for bankruptcy. (Docket Nos. 40 at 1; 43 at 1.) As a
nonbankrupt party, Diamond Seal, Inc. has failed to demonstrate that “unusual circumstances” require the
extension of the automatic stay beyond Mr. Smith. (See Docket Nos. 40 at 1; 43 at 1-2.) Diamond Seal,
Inc. provides no legal authority to extend the stay other than its conclusory statement: “There is definitely
an overlap involving Clayton Smith and Diamond Seal and the allegations of the Complaint. It is
inconceivable of any realistic means to segregate liability of Clayton Smith and Diamond Seal and for
either this court or the trier of fact to make a proper adjudication.” (Docket No. 43 at 1.) Therefore,
Diamond Seal, Inc.’s request for a stay must be denied.
IT IS HEREBY ORDERED that Defendants’ Motion to Stay is GRANTED as to Clayton Smith
and is DENIED as to Diamond Seal, Inc.
cc: Plaintiff’s Counsel AND
Clayton Smith
6105 Cedar Lane NW
Canton, OH 44708
Diamond Seal, Inc.
c/o Statutory Service of Process
1521 Concord Pike #303
Wilmington, DE 19803

October 24, 2015

David Mucklow, Esq.
919 E. Turkeyfoot Lake Road
Suite B
Akron, OH 44312

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