O'CONNELL et al v. MARSHALLS, INC. et al

Filing 36

MEMORANDUM. SIGNED BY MAGISTRATE JUDGE ELIZABETH T. HEY ON 11/21/2017. 11/21/2017 ENTERED AND COPIES E-MAILED.(amas)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
VALERIE O’CONNELL & ALBERT
KLESCHIK, SR., h/w
v.
MARSHALLS, INC. & THE TJX COMPANIES,
INC.

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CIVIL ACTION

NO. 17-2438

MEMORANDUM AND ORDER
In this action, Plaintiffs Valerie O’Connell and Albert Kleschick, Sr., wife and
husband (“Plaintiffs”), seek damages from Marshall’s, Inc., and the TJX Companies, Inc.
(“Defendants”), for damages allegedly sustained when Ms. O’Connell slipped and fell in
a Marshall’s store. Presently before the court is Defendants’ motion for reconsideration
of my Order denying Defendants’ motion for summary judgment (Doc. 32), to which
Plaintiffs filed a response (Doc. 33) and Defendants filed a reply (Doc. 35). For the
reasons that follow, the reconsideration motion will be denied.
I.

LEGAL STANDARD
“The purpose of a motion for reconsideration . . . is to correct manifest errors of

law or fact or to present newly discovered evidence.” Howard Hess Dental Labs, Inc. v.
Dentsply Int’l. Inc., 602 F.3d 237, 251 (3d Cir. 2010) (quoting Max’s Seafood Café ex
rel. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) (quoting Harsco Corp.
v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985))). A motion for reconsideration “must rely
on one of three grounds: (1) an intervening change in controlling law; (2) the availability

of new evidence; or (3) the need to correct clear error of law or prevent manifest
injustice.” Wiest v. Lynch, 710 F.3d 121, 128 (3d Cir. 2013) (quoting Lazaridis v.
Wehmer, 591 F.3d 666, 669 (3d Cir. 2010) (internal quotation omitted)). “[M]otions for
. . . reconsideration should be granted sparingly and may not be used to rehash arguments
which have already been briefed by the parties and considered and decided by the Court.”
Taksir v. Vanguard Group, Inc., Civ. No. 16-5713, 2017 WL 3443497, at *2 (E.D. Pa.
Aug. 9, 2017) (Rufe, J.) (quoting Calhoun v. Mann, Civ. No. 08-458, 2009 WL 1321500,
at *1 (E.D. Pa. May 12, 2009) (citation and internal quotation marks omitted, alteration in
original)).
II.

DISCUSSION
The facts and procedural history are set forth in detail in the summary judgment

opinion. In summary, Plaintiffs filed a voluntary petition for bankruptcy under Chapter
13 on November 12, 2015. Plaintiffs allege that more than six months later, on May 30,
2016, Plaintiff Valerie O’Connell was injured in a slip and fall at Defendants’ store. Doc.
1. Plaintiffs commenced this action in the Philadelphia Court of Common Pleas on May
12, 2017, and Defendants timely removed it to this court on May 30, 2017. Id. On June
16, 2017, Defendants filed their Answer. Doc. 4.
Plaintiffs did not inform the bankruptcy court of their claims against Defendants
prior to initiating this lawsuit, nor did they do so in an Amended Schedule B filed in the
bankruptcy court on July 20, 2017. Doc. 17-6 (Exh. E). On August 18, 2017,
Defendants filed two related motions arising from Plaintiff’s failure to disclose the
lawsuit to the bankruptcy court -- first, a motion for leave to amend the Answer to assert
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the affirmative defenses of standing and judicial estoppel, and second, a motion for
summary judgment based on the same affirmative defenses. Docs. 17 & 18. On August
25, 2017, Plaintiffs filed a second Amended Schedule B with the bankruptcy court, for
the first time disclosing the present lawsuit. See second Amended Schedule B, Doc. 19
Exh. 2.
By Memorandum and Order dated October 11, 2017, the court granted
Defendants’ motion to amend the Answer, and denied the motion for summary judgment.
Docs. 29 & 30. After a review of case law addressing the issue of standing in the context
of a Chapter 13 bankruptcy petition, the court stated, “[t]he unmistakable conclusion of
these and many other cases is that a debtor’s failure to disclose a pending civil action to
the Bankruptcy Court deprives that debtor of standing to bring the civil action -- and,
logically, that a debtor will have standing if the civil action is disclosed.” Doc. 29 at 1213. Thus, the ruling was based principally on the fact that Plaintiffs disclosed, albeit
belatedly, the lawsuit to the bankruptcy court.
In the present motion for reconsideration, Defendants assert that the court made a
clear error of law when it denied summary judgment on the basis of standing, arguing
that standing is determined at the time a lawsuit is commenced. Doc. 32 at 3-5; Doc. 35
at 2-6. Defendants also argue, for the first time, that the court lacks jurisdiction because
Plaintiffs’ lawsuit was void ab initio by operation of the automatic stay in the bankruptcy
court. Doc. 32 at 6-7; Doc. 35 at 7-9. Plaintiffs counter that the court did not commit an
error of law on the question of standing, and that Defendant’s void ab initio argument is
waived and baseless. Doc. 33 at 5-10.
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A.

Standing

Standing is “the threshold question in every federal case,” Warth v. Seldin, 422
U.S. 490, 498 (1975), and “[t]he existence of federal jurisdiction ordinarily depends on
the facts as they exist when the complaint is filed.” Newman Green, Inc. v. Alfonzo
Larrain, 490 U.S. 826, 830 (1989) (lower court erred in denying summary judgment for
lack of standing where party did not have sufficient injury). Because this lawsuit
constituted an asset of the bankruptcy estate which Plaintiffs failed to the disclose to the
bankruptcy court at the time they initiated suit, Defendants argue that Plaintiffs lacked
standing to bring this action, and that the court clearly erred in concluding that Plaintiffs
acquired standing when they subsequently disclosed the lawsuit to the bankruptcy court.
I disagree for several reasons.
First, Defendants do not cite a single case in support of the proposition that a
plaintiff who is a debtor in a previously-initiated Chapter 13 bankruptcy proceeding
lacks standing to bring a civil lawsuit for damages without first disclosing the damages
claim to the bankruptcy court, nor has research disclosed one. In the absence of any onpoint case, it cannot be said the court made a clear error of law.
Second, consistent with the court’s summary judgment opinion, the conclusion
that Plaintiffs acquired standing when they disclosed this lawsuit to the bankruptcy court
is supported by relevant case law. For example, in Nelson v. A-C Product Liability
Trust, the court noted that Plaintiff erred in failing to disclose his administratively
dismissed asbestos claims at the time he filed his Chapter 13 bankruptcy petition
because “these claims are nonetheless part of the bankruptcy estate as they were not only
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potential claims, but were realized claims technically held in abeyance by the Court, and
thus needed to be disclosed.” Civil Action No. 11-30555, 2015 U.S. Dist. LEXIS
148365, at * 19 (E.D. Pa. Oct. 26, 2015). However, the court explained that “[b]ecause
the bankruptcy was filed pursuant to Chapter 13 (rather than Chapter 7), it is the plaintiff
(and not the trustee) who is the real party in interest for such claims,” and thus the debtor
“is properly named as the plaintiff in the present action and has standing to pursue the
asbestos claims.” Id. at *19-20. In other words, although the plaintiff in Nelson failed
to disclose his asbestos-related personal injury claim to the bankruptcy court in
connection with his Chapter 13 proceeding, he nevertheless had standing for purposes of
the personal injury suit for damages. Likewise, in Thomas v. Indiana Oxygen Co., Inc.,
plaintiff in an employment discrimination case, who had previously filed a Chapter 13
petition, neglected for a month and a half to disclose the civil lawsuit to the bankruptcy
court. 32 F. Supp.3d 983, 987 (S.D. Ind. July 15, 2014). The district court held that
once the plaintiff disclosed the discrimination case to the bankruptcy court and sought
special counsel, “he fulfilled his duty to inform the Bankruptcy Court and his creditors
of his employment discrimination claims.” Id. at 987-88. The court further explained
that it rejected the plaintiff’s argument that he “always” had standing to pursue his
discrimination claims, concluding that “[h]e acquired standing to pursue the claims on
behalf of the bankruptcy estate when he disclosed the claims in the bankruptcy
proceeding.” Id. at 988 n.4; cf. In re Henneghan, Adversary No. 05-1220, 2005 WL
2267185, at *7 (E.D. Va. June 22, 2005) (“[W]hile the debtor did not have standing to
bring suit [for damages arising from alleged violation of automatic stay] at the time the
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action was commenced . . . he acquired standing once the case converted to [C]hapter
13.”)
Defendants argue that reliance on these cases is misplaced. Specifically,
Defendants argue that Nelson, which arose in the context of this district’s multi-district
asbestos litigation, is unreported and non-precedential, that Thomas is distinguishable
insofar as the debtor obtained bankruptcy court-appointed special counsel to litigate the
previously undisclosed claim on behalf of the bankruptcy estate, and that it would be
improper to consider the language in Henneghan because it constitutes “dicta from [an]
unreported and non-binding case.” Doc. 35 at 4. While it is true that these cases are
neither on all fours nor binding, Defendants’ argument is ironic insofar as they do not
rely on a single case involving a debtor-plaintiff. In any event, these cases provide
persuasive support for the conclusion that Plaintiffs acquired standing when they
disclosed the present lawsuit to the bankruptcy court, and they are consistent with
previously cited decisions on the issue of a Chapter 13 debtor’s standing to bring a civil
action. See, e.g, Robertson v. Flowers Baking Co. of Lynchburg, LLC, Civ. No. 110013, 2012 WL 830097, at *4 (W.D. Va. Mar. 6, 2012) (Chapter 13 debtor lost standing
regarding undisclosed asset); Cowling v. Rolls Royce Corp., Civ. No. 11-0719, 2012
WL 4762143, at *4-5 (S.D. Ind. Oct. 5, 2012) (dismissing civil lawsuit for lack of
standing because plaintiff, whose claims arose after he filed for Chapter 13 protection,
did not dispute the fact that he never disclosed the civil lawsuit in his Chapter 13
bankruptcy proceeding, and stating that debtors who disclosed pending lawsuits would
have standing to pursue their lawsuits on behalf of the bankruptcy estate).
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It is also worth noting that, were this matter to be dismissed on the basis of
Defendants’ standing argument, Plaintiffs could simply file a new lawsuit against
Defendants and would have standing as the claim has now been disclosed to the
bankruptcy court. Because the incident giving rise to this action occurred on May 30,
2016, Plaintiffs would have until May 30, 2018, to bring any such new action within the
applicable statute of limitations. See 42 Pa. C.S.A. § 5524(2) (personal injury
negligence actions subject to two-year statute of limitations). Thus, dismissing the
present action would serve only to postpone the matter, increasing the cost to all parties
and wasting judicial resources.1 Additionally, the court notes that the Trustee in
Plaintiffs’ Chapter 13 bankruptcy proceeding has not thus far sought to intervene or
otherwise assert legal standing in this lawsuit.
For all of the aforementioned reasons, Defendants have failed to demonstrate that
the court made a clear error of law on the issue of standing.
B.

Void ab initio

Next, Defendants argue that the court lacks jurisdiction because Plaintiffs’ lawsuit
was void ab initio by operation of the automatic stay in the bankruptcy court. Doc. 32 at
6-7; Doc. 35 at 7-9. Plaintiffs first argue that the issue of whether the lawsuit was void ab
initio was not raised by Defendants in their original motion for summary judgment, and
that the issue is therefore waived in the context of this reconsideration motion. Doc. 33 at
10. While it is true that the issue is raised here for the first time, an action that is void ab
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While Defendants requested dismissal with prejudice in their initial motion, see
Doc. 18-1 (proposed order), they did not offer any argument as to why the dismissal
should be with, as opposed to without, prejudice.
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initio means that it never properly existed and is without legal effect. Because the courts
do not have jurisdiction over non-existent disputes -- and because questions of
jurisdiction may be raised at any time -- I will proceed to consider the issue.
Filing a petition under any chapter of the Bankruptcy Code triggers imposition of
an automatic stay by the bankruptcy court under section 362, which provides in relevant
part:
(a) Except as provided in subsection (b) of this section, a
petition filed under section 301, 302, or 303 of this title . .
. operates as a stay, applicable to all entities, of –
(1)
the commencement or continuation, including
the issuance or employment of process, of a judicial,
administrative or other action or proceeding against the
debtor that was or could have been commenced before
the commencement of the case under this title, or to
recover a claim against the debtor that arose before the
commencement of the case under this title . . . .
....
(3)
any act to obtain possession of property of the
estate or of property from the estate or to exercise
control over property of the estate[.]
11 U.S.C. § 362(a)(1), (3). Bankruptcy courts consistently state that the purpose of the
automatic stay provision is to afford the debtor a “breathing spell” by halting the
collection process. See, e.g., In re Philadelphia Newspapers, LLC, 407 B.R. 606, 615
(E.D. Pa. 2009) (citation omitted). The automatic stay enables the debtor to attempt a
repayment or reorganization plan with an aim toward satisfying existing debt. Maritime
Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d Cir. 1991). “While the
scope of the automatic stay is broad, it stays action only against the ‘debtor,’ and does not
extend to protect ‘sureties, guarantors, co-obligors, or others with a similar factual nexus
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to the . . . debtors.’” Philadelphia Newspapers, 407 B.R. at 616 (quoting Maritime Elec.,
959 F.2d at 1205).
As an initial matter, Defendants’ argument in this regard suffers from the same
flaw as their standing argument, namely, that they have failed to cite a single on-point
case. Defendants rely exclusively on cases which involve Chapter 7 and Chapter 11
bankruptcies, see Doc. 32 at 6-7, whereas Plaintiffs filed for bankruptcy under Chapter
13. And in the Chapter 13 context, actions found to be void ab initio by operation of the
automatic stay are easily distinguishable on their facts from this case. See, e.g., In re Izzi,
196 B.R. 727, 729 (E.D. Pa. 1996) (absent relief from automatic stay, judicial actions and
proceedings against debtor are void ab initio, even though debtor actively participates in
such void actions or proceedings); In re Young, 193 B.R. 620, 629 (E.D. Pa. 1996)
(denying defendant’s sanctions motion for creditor’s violation of automatic stay; “the
stay is intended only to prohibit post[-]petition acts by creditors and thus acts as a freeze
of the status quo” at the time of bankruptcy filing); Richard v. City of Chicago, 80 B.R.
451, 453 (N.D. Ill. 1987) (tax sale of Chapter 13 debtors’ property in violation of
automatic stay was void ab initio, regardless of whether creditor knew of bankruptcy
petition).
Moreover, I note that in each of the cases that considered the question of standing
where the plaintiff was also a debtor in a Chapter 13 proceeding, including all of those
cited in the court’s opinion denying summary judgment, the courts were not confronted
with the question whether the cases were void ab initio, and obviously the cases
proceeded and were not deemed to be legal nullities. Were it otherwise, logically one
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would expect automatic bankruptcy stays to have rendered these and many more cases
void ab initio. Instead, Defendants do not identify a single on-point case where a civil
action for damages was declared void ab initio by operation of a Chapter 13 automatic
stay.
Defendants invoke section 362(a)(3) to argue that the present lawsuit constitutes a
wrongful attempt by Plaintiffs to control property of the bankruptcy estate, rendering the
action void ab initio. Doc. 35 at 7-8. The court has previously found that the property
of a Chapter 13 bankruptcy estate includes both existing and potential causes of action at
the time the bankruptcy proceeding is commenced, as well as those which arise after the
bankruptcy proceeding has commenced and before it has been “closed, dismissed, or
converted,” see Doc. 29 at 11 (citing 11 U.S.C. §§ 541, 1306), and that Plaintiffs’
disclosure of this lawsuit to the bankruptcy court sufficed for purposes of standing. Id.
13. In the context of its discussion on whether to invoke the doctrine of judicial
estoppel, the court also previously declined to make a finding of bad faith based on
Plaintiffs’ belated disclosure of this lawsuit to the bankruptcy court. Id. at 18-19.
Therefore, to the extent Defendants seek to re-litigate those issues by invoking section
362(a)(3), the court declines to do so.
Lastly, as stated in the summary judgment memorandum, Plaintiffs’ disclosure of
this lawsuit to the bankruptcy court enables that court to take whatever action it sees fit.
See Doc. 29 at 19. For example, were this action to somehow violate the bankruptcy
court’s automatic stay, the bankruptcy court conceivably could take action it deems
appropriate as to the automatic stay. See In re Siciliano, 13 F.3d 748, 751 (3d Cir. 1994)
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(bankruptcy court has authority to annul automatic stay); see also Eastern Refractories
Co. v. Forty Eight Insulations, Inc., 157 F.3d 169, 171 (2d Cir. 1998) (“[B]ankruptcy
courts have the . . . power to modify or condition an automatic stay so as to fashion the
appropriate scope of relief.”).
An appropriate order follows.

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