Islam v. LX Avenue Bagels, Inc. et al

Filing 69

MEMO ENDORSEMENT on: with respect to 68 Motion to Stay. ENDORSEMENT: If Plaintiffs oppose Defendants' request to continue the automatic stay and intend to file a response, they shall do so no later than November 25, 2019. SO ORDERED. (Signed by Judge Ronnie Abrams on 11/19/2019) (ama)

Case 1:18-cv-04895-RA-RWL Document 68 Filed 11/18/19 Page 1 of 10

TRAVIS LAW PLLC
80 Maiden Lane, Suite 304

New York, New York 10038
Tel: [phone]

www.travislawnyc.com

November 18, 2019
VIAECF
Hon. Ronnie Abrams
United States District Court
Southern District of New York
40 Foley Square
New York, NY 10007
Re:

Islam v. LX Avenue Bagels, Inc., et al.
Case No.: 18-cv-04895-RA

USDC-SDNY
DOCL1MENT
FL ECTRO~ICALL y FILED
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Dear Judge Abrams:
Our firm represents the Defendants in the above-referenced action. We write to inform
Your Honor and Plaintiffs, that defendants LX Avenue Bagels, Inc., Amir Ram Bagels, Inc., and
Tal on 1st Inc. (the "Corporate Defendants" or "Debtors") have recently filed for bankruptcy in the
Eastern District ofNew York on November 8 and 9, 2019. Attached are the Notices of Bankruptcy
Case Filings for the Corporate Defendants. Accordingly, the individual defendants Mohammed
Kamal, Imanuel Halon, Amir Ram, and Hossam Zebib (the "Individual Defendants"), request to
extend the automatic stay effective in the chapter 11 cases of the Corporate Defendants to the
Individual Defendants. It should be noted that all relevant payroll records and other documents
are property only of the Debtors and are protected by the automatic stay.
Courts have joined suit against a non-debtor under the general premise that suit should not
be permitted when it threatens the possibility of successful reorganization. See In Re Lazarus
Burman Associates, 161 B.R. 891, 898 (E.D.N.Y. 1993); see also Galvez v. Kem Rest., Inc., et al.
(Case No. l 7-cv-1514 [JMF]); and Salazr, et al. v. 203 Lena Inc., et al. (Case No. 16-cv-07743
[RWS]). The standard for application of the automatic stay to non-debtor codefendants, like the
Individual Defendants, was established by the Second Circuit in Queenie, Ltd. v. Nygard lnt'l.,
321 F.3d 282 (2d Cir. 2003). The automatic stay pursuant to 11 U.S.C. § 362(a), invoked by virtue
of a bankruptcy filing, can be extended to non-debtors under certain circumstances.
Generally, "a suit against a codefendant is not automatically stayed by the debtor's
bankruptcy filing." Queenie, Ltd. v. Nygard Int 'l., 321 F .3d at 287 (internal quotation marks
omitted); accord Springer v. Code Rebel Corp., No. 16 Civ. 3492, 2017 WL 838197, at 3
(S.D.N.Y. Mar. 2, 2017). However, the automatic stay can apply to non-debtors when a claim
against the non-debtor "will have an immediate adverse economic consequence for the debtor's
estate," such as where "there is such identity between the debtor and the third-party defendant that

~

Case 1:18-cv-04895-RA-RWL Document 68 Filed 11/18/19 Page 2 of 10

the debtor may be said to be the real party defendant." Queenie, 321 F.3d at 287-88 (internal
citations omitted).
Three examples of an adverse economic impact are (I) claims to establish an obligation
where the debtor is a guarantor, (2) a claim against the debtor's insurer, and (3) where there is an
identity between the party defendant and the debtor such that the debtor may be said to be the real
party defendant. Rentrak Corp. v. Ladieu (In re Ladieu), Case No. 07-10868, Adv. Pro. No. 081010 (Bankr. D. Vt. June 17,2011) citing Queenie.
Under appropriate circumstances, Bankruptcy Courts have also enjoined suit against a nondebtor pursuant to 11 U.S.C. § 105(a) under the general premise that suit should not be permitted
when it threatens the possibility of successful reorganizations. See In Re Lazarus Burman
Associates, 161 B.R. 891,898 (E.D.N.Y. 1993) (and citing numerous other cases enjoining third
party suits). The Bankruptcy Court found relevant that "[i]n many of the cases cited above, the
actions against principals were enjoined where their time and energy was important to the
rehabilitation of a debtor's business or to the formulation of a plan reorganization." Id.
The analysis that this Court should undertake is whether the Individual Defendants are
"absentee owners" or they are sufficiently involved with the day to day operations of the Corporate
Defendants playing a central role in their reorganization. See, e.g., In re United Health Care Org.,
210 B.R. 228 (S.D.N.Y. 1997) (staying actions against two non-debtor defendants where debtor
corporation's successful reorganization was contingent upon the contribution of defendants'
personal assets and efforts).
The facts of this case support the extension of the automatic stay to cover the non-debtor
individual codefendants. All discovery in connection with this case will be of the Debtors - not
the Individual Defendants in their individual capacities. The payroll records, time records, and all
typical FLSA evidence is with the Debtors not the individuals. Additionally, the Debtors are
reorganizing in chapter 11. See, for example, the Court in Uto v. Job Site Services, Inc., 444 B.R.
222 (E.D.N.Y.2011) declined to extend the automatic stay because the debtor was liquidating in
chapter 7.
The bankruptcies, filed on November 8 and 9, 2019, are in the early stages, and the
Corporate Defendants should be afforded a breathing spell to determine whether, in bankruptcy,
they can reorganize and propose a plan to pay creditors. All four individual defendants are
essential to the operations of the Corporate Defendants and work at the businesses. Removing the
services of any of them from the day to day operations would negatively impact the ability of the
Corporate Defendants to reorganize.
Finally, as a matter of judicial economy and to promote the due administration of this case
and each Bankruptcy Case, all matters should be dealt with by the Bankruptcy Court because,
practically speaking it makes no sense to have two different cases proceeding on two different
tracks.

Case 1:18-cv-04895-RA-RWL Document 68 Filed 11/18/19 Page 3 of 10

We therefore request that Your Honor continue the stay of this entire matter. This was the
reasoning in the order entered in Bernal v. Tres Amigos Corp., et al., which we have attached
hereto.
Respectfully submitted,

Isl
Christopher R. Travis

Enclosures
cc: All counsel of record (via ECF)

If Plaintiffs oppose Defendants' request to continue the automatic
stay and intend to file a response, they shall do :50 no later than
November 25, 2019.
/
SO ORDERED.

Hon. Ronnie,Abrams
11/19/2019

Case 1:18-cv-04895-RA-RWL Document 68 Filed 11/18/19 Page 4 of 10
United States Bankruptcy Court
Eastern District of New York

Notice of Bankruptcy Case Filing
A bankruptcy case concerning the debtor(s) listed below was
filed under Chapter 11 of the United States Bankruptcy
Code, entered on 11/09/2019 at 12:32 AM and filed on
11/09/2019.
Amir Ram Bagels Inc.
333 E 86th Street
New York, NY 10028
Tax ID/ EIN: 13-3608145

The case was filed by the debtor's attorney:
Lawrence Morrison
87 Walker Street Floor 2
New York, NY 10013
212-620-093 8

The case was assigned case number 1-19-46770-cec to Judge Carla E. Craig.
In most instances, the filing of the bankruptcy case automatically stays certain collection and other actions against
the debtor and the debtor's property. Under certain circumstances, the stay may be limited to 30 days or not exist at
all, although the debtor can request the court to extend or impose a stay. If you attempt to collect a debt or take
other action in violation of the Bankruptcy Code, you may be penalized. Consult a lawyer to determine your rights
in this case.
If you would like to view the bankruptcy petition and other documents filed by the debtor, they are available at our
Internet home page https://ecf.nyeb.uscourts.gov/ or at the Clerk's Office, 271-C Cadman Plaza East, Suite 1595,
Brooklyn, NY 11201-1800.

You may be a creditor of the debtor. If so, you will receive an additional notice from the court setting forth
important deadlines.

Robert A. Gavin, Jr.
Clerk, U.S. Bankruptcy Court

I

PACER Service Center

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Transaction Receipt

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11/11/2019 12:07:53
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Case 1:18-cv-04895-RA-RWL Document 68 Filed 11/18/19 Page 6 of 10
United States Bankruptcy Court
Eastern District of New York

Notice of Bankruptcy Case Filing
A bankruptcy case concerning the debtor(s) listed below was
filed under Chapter l l of the United States Bankruptcy
Code, entered on ll/09/2019 at 12:52 AM and filed on
11/09/20 I 9.
TAL ON 1ST INC.
357 1st Avenue
New York, NY 10010
Tax ID/ EIN: 46-4894986

The case was filed by the debtor's attorney:
Lawrence Morrison
87 Walker Street Floor 2
New York, NY 10013
212-620-093 8

The case was assigned case number 1-19-46771-nhl to Judge Nancy Hershey Lord.
In most instances, the filing of the bankruptcy case automatically stays certain collection and other actions against
the debtor and the debtor's property. Under certain circumstances, the stay may be limited to 30 days or not exist at
all, although the debtor can request the court to extend or impose a stay. If you attempt to collect a debt or take
other action in violation of the Bankruptcy Code, you may be penalized. Consult a lawyer to determine your rights
in this case.
If you would like to view the bankruptcy petition and other documents filed by the debtor, they are available at our
Internet home page https://ecf.nyeb.uscourts.gov/ or at the Clerk's Office, 271-C Cadman Plaza East, Suite 1595,
Brooklyn, NY 11201-1800.

You may be a creditor of the debtor. If so, you will receive an additional notice from the court setting forth
important deadlines.

Robert A. Gavin, Jr.
Clerk, U.S. Bankruptcy Court

I

I
I

I
I

PACER Service Center
Transaction Receipt

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11/11/2019 12:08:36
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Case 1:18-cv-04895-RA-RWL Document 68 Filed 11/18/19 Page 8 of 10
United States Bankruptcy Court
Eastern District of New York

Notice of Bankruptcy Case Filing
A bankruptcy case concerning the debtor(s) listed below was
filed under Chapter 11 of the United States Bankruptcy
Code, entered on 11/08/2019 at 6:09 PM and filed on
11/08/2019.
LX AVENUE BAGELS INC.
21-53 23RD STREET
ASTORIA, NY 11105
Tax ID/ EIN: 42-1537214

The case was filed by the debtor's attorney:
Lawrence Morrison
87 Walker Street Floor 2
New York, NY 10013
212-620-0938

The case was assigned case number 1-19-46769.
In most instances, the filing of the bankruptcy case automatically stays certain collection and other actions against
the debtor and the debtor's property. Under certain circumstances, the stay may be limited to 30 days or not exist at
all, although the debtor can request the court to extend or impose a stay. If you attempt to collect a debt or take
other action in violation of the Bankruptcy Code, you may be penalized. Consult a lawyer to determine your rights
in this case.
If you would like to view the bankruptcy petition and other documents filed by the debtor, they are available at our
Internet home page https://ecf.nyeb.uscourts.gov/ or at the Clerk's Office, 271-C Cadman Plaza East, Suite 1595,
Brooklyn, NY 11201-1800.

You may be a creditor of the debtor. If so, you will receive an additional notice from the court setting forth
important deadlines.

Robert A. Gavin, Jr.
Clerk, U.S. Bankruptcy Court

I

I
I

PACER Service Center

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Transaction Receipt

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11/08/2019 18:09:16

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Case 1:18-cv-04895-RA-RWL Document 68 Filed 11/18/19 Paqe 10 of 10
Case 1:18-cv-09567-ER Document 20 Filed 04/03/19 Page rot 1

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
CAMILO BERNAL,
Plaintiff,
-againstTRES AMIGOS CORP., dlbla La Pulperia, TRES
MOSQUETEROS CORP., dlbla La Pulperia,
CARLOS BARROZ, individually, VICTOR
MEDINA, individually, ATHONY MEA, JR.,
individually,

ORDER
18 Civ. 9567 (ER)

Defendants.
Ramos, D.J.:
For the reasons stated on the record at the hearing held on April 3, 2019, this matter is
STAYED with regard to all Defendants pending the resolution of the Chapter 11 bankruptcy
proceedings. The parties are ordered to notify the Court within forty-eight hours of each
bankmptcy proceedings' resolution.
It is SO ORDERED.

Dated:

April 3, 2019
New York, New York

Edgardo Ramos, U.S.D.J