Berd et al v. De Bastos et al
ORDER by Magistrate Judge Charles S. Miller, Jr. denying 35 Motion to Stay. (BG) Distributed on 3/8/2018 (cjs).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
Madjid Berd, et. al.,
Paul De Bastos and Paul Real Estate, Inc.,
Case No. 1:16-cv-339
Before the court is a pro se “Motion to Stay Pending Bankruptcy” filed by Defendant Paul
De Bastos (“De Bastos”) on November 27, 2017. For the reasons set forth below, the motion is
Plaintiffs filed this action in the wake of proceedings filed against North Dakota
Developments, LLC (“NDD”), Robert Gavin, Daniel Hogan, and relief Defendants by the United
States Securities and Exchange Commission, alleging that NDD, Gavin, and Hogan had fraudulently
raised more than $62 million from investors through the sale of interests in North Dakota man
camps. See Case No. 4:15-cv-053 (D.N.D. May 5, 2015). In their complaint, plaintiffs allege Paul
De Bastos and Paul Real Estate, Inc. (“Paul Real Estate”), acting as NDD’s sales agents, actively
assisted NDD in offering and selling unregistered, nonexempt, and fraudulent securities from May
2012 to April 2015. See Docket No. 1. Specifically, plaintiffs assert claims against Paul Real Estate
and De Bastos, by separate counts, for violations of Section 10(b)-5 of the Securities Exchange Act
of 1934 (15 U.S.C. § 78(j)) and SEC Rule 10b-5 (17 C.F.R. § 240.10b-5) in connection with the
offer or sale or NDD securities and for violations of N.D.C.C. § 10-04-17 by offering and selling
unregistered securities and selling securities as an unlicensed agent. De Bastos is president of Paul
Real Estate, a Florida corporation and alleged alter ego of De Bastos.
Paul Real Estate apparently filed for bankruptcy in the Southern District of Florida on or
about June 8, 2017. On November 27, 2017, De Bastos filed a motion to stay the above-entitled
action in its entirety pending Paul Real Estate’s bankruptcy, averring that his assets and those of
Paul Real Estate may be intertwined.
On November 29, 2017, plaintiffs filed a response in opposition to De Bastos’s motion.
They aver the circumstances of this case are no so unusual so as to warrant an extension of the
automatic stay to De Bastos.
Title 11 of the United States Code, section 362(a)(1) “provides that upon the filing of a
bankruptcy petition, all judicial and other proceedings are stayed.” Missouri v. U.S. Bankruptcy
Court for E.D. of Arkansas, 647 F.2d 768, 775 (8th Cir. 1981). The automatic generally applies to
bar actions against the debtor; it does not typically extend to solvent codefendants. C.H. Robinson
Co. v. Paris & Sons, Inc., 180 F. Supp.2d 1002, 1009-10 (N.D. Iowa 2001) (citing case law from
the 3d, 4th, 5th, 8th, and 10th Circuits). However, “the Eighth Circuit Court of Appeals has
recognized that, under ‘unusual circumstances,’ the automatic stay provision can embrace claims
against non-bankrupt codefendants.” Id.; see also Ritchie v. Capital Management, L.L.C. v.
Jeffries, 653 F.3d 755, 762 (8th Cir. 2011); Croyden Assoc. v. Alleco, Inc., 969 F.2d 675, 677 (8th
Cir. 1992) (citing A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986)).
“The unusual circumstances in which the bankruptcy court can stay cases against nondebtors are rare.” Ritchie, 653 F.3d at 762. “They typically arise where there is such identity
between the debtor and third-party defendant that the debtor may be said to be the real party
defendant and that a judgment against a third-party defendant will in effect be a judgement or
finding against the debtor.” Id. (internal quotation marks omitted). “In other words, the automatic
stay will apply to non-debtors only when a claim against the non-debtor will have an immediate
adverse economic consequence for the debtor’s estate.” Id. (internal quotation marks omitted).
Having reviewed the record, the court is not convinced this is one of the rare instances where
the stay may apply to De Bastos, a non-debtor. At this point De Bastos is merely speculating that
some of his assets may be intertwined with those of Paul Real Estate and the record is otherwise
devoid of any suggestion that there is a “formal tie,” “contractual indemnification,” or “joint
obligation” between De Bastos and Paul Real Estate that may be sufficient to create the necessary
“identity of interests.” See Catholic Order of Foresters v. U.S. Banccorp Piper Jaffray, Inc., 337
F. Supp. 2d 1148, (D. Iowa 2004).
De Bastos’s motion to stay this case as to him (Doc. No. 35) is at this point DENIED.
IT IS SO ORDERED.
Dated this 8th day of March, 2018.
/s/ Charles S. Miller, Jr.
Charles S. Miller, Jr., Magistrate Judge
United States District Court
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?