Lentz v. MDOC et al

Filing 92

ORDER re 91 Suggestion of Bankruptcy, filed by Harold Obiakor, Wellpath Inc, Kim Faris, Aleksandra Wilanowski and ADMINISTRATIVELY STAYING Proceedings as to Defendant Wellpath Only. Signed by Magistrate Judge Kimberly G. Altman. (DJen)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
GARY LENTZ,
Plaintiff,

Case No. 2:24-cv-10198
District Judge Terrence G. Berg
Magistrate Judge Kimberly G. Altman

v.
MICHIGAN DEPARTMENT
OF CORRECTIONS, et al.,
Defendants.

_________________________________/
ORDER REGARDING SUGGESTION OF BANKRUPTCY (ECF No. 91)
AND
ADMINISTRATIVELY STAYING CASE AS TO DEFENDANT
WELLPATH LLC
AND
DECLINING TO STAY CASE AS TO OTHER WELLPATH
DEFENDANTS
I.

Introduction

This is a prisoner civil rights case. Plaintiff Gary Lentz (Lentz), proceeding
pro se, filed a complaint naming, proceeding pro se, filed a complaint naming the
following as defendants: Michigan Department of Corrections (MDOC), Heidi
Washington (Washington), Aleksandra Wilanowski (Wilanoski), Scott Webster
(Webster), Joshua Walendzik (Walendzik), Baily, Guass, Valenzik, Joni Maclean
(Maclean), Colleen Edgington (Edington), Rusch, Kim Farris (Farris), Spencer,
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Brunson, Hernandez, Cohill, Caporucho, Nguyen, Sanders, Napolitano, Miller,
White, Harold Obiakor (Obiakor), and Wellpath. (ECF No. 1). Lentz asserts
federal claims under § 1983, the Americans with Disabilities Act, as well as state
law claims for assault and battery, gross negligence, intentional infliction of
emotional distress, and medical malpractice. In broad terms, Lentz claims that he
is not receiving proper treatment for his mental health condition and has been
given medication which causes an allergic reaction. Under 28 U.S.C. § 636(b)(1),
all pretrial matters have been recently referred to the undersigned. (ECF No. 29)
The following motions are pending:
Defendants Wellpath, Wilanowski, Farris, and Obiakor (the “Wellpath
Defendants”) motion to dismiss and for summary judgment (ECF No. 60);
Defendants Edgington and Walendzik’s motion to dismiss (ECF No. 70);
Defendant Brunson’s motion to dismiss (ECF No. 74);
Lentz’s motions to compel (ECF Nos. 86, 87, 88)
On November 15, 2024, the Wellpath Defendants filed a “Suggestion of
Bankruptcy and Notice of Stay” (ECF No. 91), the purpose of which is to inform
the Court that Wellpath has filed a voluntary bankruptcy petition under Chapter 11
in the United States Bankruptcy Court for the Southern District of Texas. (ECF
No. 91-1).
II.

Background

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Attached to the Wellpath Defendants’ filing is an order from the bankruptcy
court titled “Amended Interim Order Enforcing the Automatic Stay.” (ECF No.
91-2). The amended order states in relevant part: “The Lawsuits are stayed in their
entirety, including the plaintiffs’ claims against the Non-Debtor Defendants, on an
interim basis pursuant to section 362 of the Bankruptcy Code.” (ECF No. 91-2,
PageID.849). “Lawsuits” are defined as “any lawsuits filed as of the Petition Date
in which a Debtor is named as one of the defendants therein.” (Id., PageID.848
n.3). For the reasons explained below, the Court finds that this order does not
require a stay of proceedings against Wilanowski, Farris, or Obiakor.
III.

Discussion

As to Wellpath, under 11 U.S.C. § 362, all proceedings against the debtor,
i.e., Wellpath, are automatically stayed. Therefore, the case will be
administratively stayed as to Wellpath.
As to the individual Wellpath Defendants—Wilanowski, Farris, and
Obiakor—the district court has “jurisdiction concurrent with the originating
bankruptcy court to determine the applicability of the bankruptcy court’s automatic
stay.” Baechel v. Republic Storage Sys., LLC, No. 5:16-CV-1403, 2018 WL
1243424, at *2 (N.D. Ohio Mar. 9, 2018). The Sixth Circuit itself has addressed
the issue of whether a bankruptcy court can stay proceedings against non-debtor
defendants under 11 U.S.C. § 362, finding that it cannot. Patton v. Beardon, 8
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F.3d 343 (6th Cir. 1993). The Patton court acknowledged that “[c]learly, section
362(a)(1) stays any actions against the debtor.” Id. at 349 (emphasis in original).
In other words,
[a]t the commencement of a case, a stay arises by operation of law
pursuant to 11 U.S.C. § 362(a). Its effect is to impose a wide-ranging
prohibition on all activity outside the bankruptcy forum to collect
prepetition debts from the debtor or to assert or enforce claims against
the debtor’s prepetition property or estate property. But, by its express
terms, the only entity to which the § 362 stay applies is the debtor. As
such, it may not be extended to third parties such as the [d]ebtor’s coguarantors.
In re Nat’l Staffing Servs., LLC, 338 B.R. 35, 36-37 (Bankr. N.D. Ohio 2005).
Earlier circuit court decisions are in line with this interpretation. See, e.g.,
Lynch v. Johns-Manville Sales Corp., 710 F.2d 1194, 1196-97 (6th Cir. 1983) (“It
is universally acknowledged that an automatic stay of proceeding accorded by §
362 may not be invoked by entities such as sureties, guarantors, co-obligors, or
others with a similar legal or factual nexus to the Chapter 11 debtor.”) (collecting
cases); GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711, 716 (5th Cir.
1985) (“By its terms the automatic stay applies only to the debtor, not to co-debtors
under Chapter 7 or Chapter 11 of the Bankruptcy Code nor to co-tortfeasors.”
(internal footnote omitted)).
“Some courts have held that the debtor’s stay may be extended to nonbankrupt parties in unusual circumstances.” Patton, 8 F.3d at 349 (cleaned up).
Examples of unusual circumstances “include when the debtor and the non4

bankrupt party are closely related or the stay contributes to the debtor’s
reorganization.” Id. But the Sixth Circuit has cautioned that “such extensions,
although referred to as extensions of the automatic stay, were in fact injunctions
issued by the bankruptcy court after hearing and the establishment of unusual need
to take this action to protect the administration of the bankruptcy estate.” Id.
(emphasis added). The Sixth Circuit explained that “[e]ven if we were to adopt the
unusual circumstances test, the bankruptcy court would first need to extend the
automatic stay under its equity jurisdiction pursuant to 11 U.S.C. § 105.” Id.; see
also In re Nat’l Staffing Servs., 338 B.R. at 37 (“The authority to take this action,
however, is found not in § 362; rather, it is derived from the bankruptcy court’s
equity jurisdiction as contained in 11 U.S.C. § 105(a).”).
The order from Wellpath’s bankruptcy proceeding does not cite 11 U.S.C. §
105(a) and does not set forth the preliminary-injunction factors or contain any
analysis on the subject. The phrase “preliminary injunction” is in fact nowhere to
be found. A court must consider four factors before granting a preliminary
injunction: (1) the likelihood of success on the merits, (2) the danger of irreparable
injury, (3) whether the potential irreparable injury outweighs the harm to the nondebtors, and (4) the public interest. See, e.g., In re Sahene Constr., LLC, No. 2310096, 2023 WL 3010073, at *3 (Bankr. M.D. La. Apr. 19, 2023) (analyzing the
four factors following a request to stay civil litigation as to non-debtor defendants);
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In re Nat. Century Fin. Enters., Inc., 423 F.3d 567, 579 (6th Cir. 2005) (explaining
that “when the bankruptcy court enjoins an action under § 105(a) [it] must it
consider the four preliminary injunction factors, and apply a standard of clear and
convincing evidence”).
In Gulf Coast Hotel-Motel Ass’n v. Mississippi Gulf Coast Golf Course
Ass’n, No. 108CV1430HSOJMR, 2010 WL 972248, at *2 (S.D. Miss. Mar. 12,
2010), a court found under similar circumstances that “[i]t does not appear from
the record in this case that such an [injunctive] order has been obtained from the
bankruptcy court before which Debtor Defendant’s bankruptcy is pending. The
party seeking the section 105 stay bears the burden of requesting it and the
persuasion on the merits.” The same is true here; no preliminary injunction has
been issued, and neither this Court nor the bankruptcy court can otherwise
“extend” the automatic stay to non-debtor defendants.
IV.

Conclusion

For the reasons stated above, this case is ADMINISTRATIVELY
STAYED as to Wellpath only. The case will proceed against all of the other
defendants, including Wilanowski, Farris, and Obiakor. The pending motions
noted above will be the subject of future reports and recommendations or orders, as
appropriate.
SO ORDERED.
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Dated: November 22, 2024
Detroit, Michigan

s/Kimberly G. Altman
KIMBERLY G. ALTMAN
United States Magistrate Judge

CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served upon
counsel of record and any unrepresented parties via the Court’s ECF System to
their respective email or First Class U.S. mail addresses disclosed on the Notice of
Electronic Filing on November 22, 2024.
s/Dru Jennings
DRU JENNINGS
Case Manager

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