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Full title: Motion for Relief from Stay (FEE) . Fee Amount $188. Filed by Katherine Clelland. Hearing scheduled for 5/25/2021 at 02:00 PM at US Bankruptcy Court, 824 Market St., 5th Fl., Courtroom #4, Wilmington, Delaware. Objections due by 5/4/2021. (Attachments: # 1 Exhibit A # 2 Exhibit B- Proposed Order # 3 Notice # 4 Certificate of Service) (Busenkell, Michael) (Entered: 04/20/2021)
Document posted on Apr 19, 2021 in the bankruptcy, 6 pages and 0 tables.
Bankrupt11 Summary (Automatically Generated)
Judicial Circuit in and for Broward County, Florida (the “State Court”) against the Debtor Defendant asserting claims for negligence styled Katherine Clelland v. YouFit Health Clubs, LLC and Jane Doe, the manager, Case No. CACE-20-007939 (the “State Court Action”).Upon information and belief, there may be available insurance coverage to coverthe claims of the Movant against the Debtor Defendant, and allowing the State Court Action to proceed against such insurance coverage would cause no harm to the Debtor Defendant or its bankruptcy estate.Thus, the other creditors in the bankruptcy will not be harmed by granting the motion because the Movant will not enforce any judgment directly against the Debtor Defendant, but only against available insurance coverage or non-debtor assets, or as a claim to the extent allowed with other creditors.In addition, this Court has broad jurisdiction to supervise the administration ofclaims, but claims arising from personal injury are expressly excluded.WHEREFORE, Movant hereby requests that this Court enter an Order, substantially in the form attached hereto as Exhibit B, granting relief from the automatic stay imposed by 11 U.S.C. §362 and permit the Movant to proceed in state court to conduct discovery, liquidate her claims and to proceed against any against assets of third parties, including but not limited to any available insurance coverage.
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Document ContentsIN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE IN RE: Chapter 11 Case No. 20-12841 (MFW) YOUFIT HEALTH CLUBS, LLC, et al.,1 (Jointly Administered) Debtors. Objection Deadline: May 4, 2021 at 4:00 p.m. Hearing Date: May 25, 2021 at 2:00 p.m. MOTION OF KATHERINE CLELLAND FOR RELIEF FROM AUTOMATIC STAY Katherine Clelland (the “Movant”), by and through her undersigned counsel, hereby moves pursuant to Bankruptcy Rule 4001(a) for relief from the automatic stay provided by Section 362 of the Bankruptcy Code, 11 U.S.C. § 362 (the “Motion”). In support of the Motion, the Movant respectfully represents as follows: I. BACKGROUND FACTS 1. The Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(G). Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409(a). The statutory basis for the relief requested in this motion is 11 U.S.C. § 362(d). 2. On November 9, 2020 (the “Petition Date”), the above-captioned debtors anddebtors-in-possession (collectively, the “Debtors”) each commenced with this Court a voluntary case under chapter 11 of the Bankruptcy Code (collectively, the “Chapter 11 Cases”). On November 10, 2020, the Court entered an order for the joint administration of the Chapter 11 Cases. The Debtors are authorized to operate their businesses and manage their properties as 1 The last four digits of YouFit Health Clubs, LLC’s tax identification number are 6607. Due to the large number of debtor entities in these chapter 11 cases, for which joint administration has been requested, a complete list of the debtor entities and the last four digits of their federal tax identification numbers is not provided herein. A complete list of such information may be obtained on the website of the proposed claims and noticing agent at www.donlinrecano.com/yfhc. The mailing address for the debtor entities for purposes of these chapter 11 cases is:
1debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. A creditors’ committee has been appointed by the Office of the United States Trustee for the District of Delaware. 3. On October 25, 2018, Movant sustained severe personal injury when she fell off atreadmill at a property owned and/or operated by Debtor YouFit Health Clubs, LLC (the “Debtor Defendant”) located 401 S. Federal Highway, Pompano Beach, Florida due to the treadmill malfunctioning and unexpectedly increasing its speed. On or about May 12, 2020, Movant filed a complaint (the “Complaint”) in the Circuit Court for the 17th Judicial Circuit in and for Broward County, Florida (the “State Court”) against the Debtor Defendant asserting claims for negligence styled Katherine Clelland v. YouFit Health Clubs, LLC and Jane Doe, the manager, Case No. CACE-20-007939 (the “State Court Action”). A copy of the Complaint is attached hereto as Exhibit A and incorporated herein by reference. 4. Upon information and belief, the Debtor Defendant has available insurancecoverage for any liability due to the claims referenced above through Great American Insurance Company of New York, Policy Number PAC 073-81-86. The Movant herein seeks to prosecute the State Court Action to establish and liquidate her claim and/or to recover against assets of third parties, including but not limited to any available insurance coverage. II. ARGUMENT 5. Upon information and belief, there may be available insurance coverage to coverthe claims of the Movant against the Debtor Defendant, and allowing the State Court Action to proceed against such insurance coverage would cause no harm to the Debtor Defendant or its bankruptcy estate. 6. Even in the event that insurance coverage was determined to be insufficient,courts have regarded a party’s opportunity to litigate the issue of liability “a significant right
2which cannot easily be set aside, even when prepetition causes of action are involved.” In re Todd Shipyards Corp., 92 B.R. 600, 603-04 (Bankr. D.N.J. 1988) (citing In re Continental Airlines, Inc., 61 B.R. 758, 779 (S.D. Tx. 1986); In re Bock Laundry Machine Co., 37 B.R. 564, 567 (Bankr. N.D. Ohio 1984)). Courts have noted: The automatic stay was never intended to preclude a determination of tort liability and the attendant damages. It was merely intended to prevent a prejudicial dissipation of the debtor’s assets. Id. (emphasis in original). 7. As the legislative history of § 362 shows "it will often be more appropriate topermit proceedings to continue in their place of origin, when no great prejudice to the bankruptcy estate would result, in order to leave the parties to their chosen forum and to relieve the bankruptcy court from any duties that may be handled elsewhere." Todd Shipyards, 92 B.R. at 603-04 (citing H.R. Rep. 95-595, 95th Cong. 1st Sess. 341 (1977); S. Rep. No. 95-989, 95thCong., 2d Sess. 50 (1978), U.S. Code Cong. & Admin. News 1978 pp. 5787, 5836, 6297). 8. In deciding whether there is sufficient cause to lift the stay, courts conduct abalancing test whereby the interests of the estate are weighed against the hardships that will be incurred by Movant. Todd Shipyards, 92 B.R. at 602 (citations omitted). There is no rigid test for determining whether sufficient cause exists to modify the automatic stay, but courts consider three factors: (1) the prejudice that would be suffered should the stay be lifted; (2) the balance of the hardships facing the parties; and (3) the probable success on the merits if the stay is lifted. Continental Airlines, Inc., 152 B.R. at 423 (citing Int’l Business Machines v. Fernstrom Storage & Van Co. (In re Fernstrom Storage & Van Co.), 938 F.2d 731, 734-37 (7th Cir. 1991)). 9. In this case, several of the factors are relevant and all weigh heavily in favor oflifting the stay so that the Movant can proceed with her claims in the State Court Action.
3A. LIFTING THE STAY WILL NOT PREJUDICE THE BANKRUPTCY ESTATE 10. The Movant seeks to conduct discovery and prosecute her claims in BrowardCounty, Florida in order to liquidate her claims and recover under any applicable insurance policies. 11. First, there will be no prejudice to the Debtors, their bankruptcy estates, or thirdparties. As Movant is seeking a recovery under the Debtors’ insurance policies and is not attempting to execute directly on assets of the Debtors’ estates, the Debtors’ assets will remain available for distribution in accordance with a plan or otherwise under the Bankruptcy Code. Moreover, to the extent that Movant is otherwise entitled to assert a claim against the Debtors’ estates on account of her claims, granting relief from the automatic stay will simply facilitate a determination of the validity and amount of it. The claim needs to be liquidated somewhere, in some forum, and, given the procedural posture of this case now on appeal, allowing the State Court Action to proceed would be preferable to litigating the case anew in the Bankruptcy Court. 12. Suspending the stay will not impair the Debtors’ ability to formulate a planof reorganization or otherwise do the Debtors “irreparable harm,” where insurance could cover any liability. Fernstrom Storage & Van Co., 938 F.2d at 737. B. LIFTING THE STAY WILL NOT PREJUDICE OTHER CREDITORS 13. Another factor that supports granting the motion to lift the stay is that the StateCourt Action will not prejudice the interests of other creditors. Movant would seek to collect any judgment against the Debtor solely from applicable insurance proceeds and/or other non-debtor sources, and otherwise would file a claim in these proceedings as allowed. Thus, the other creditors in the bankruptcy will not be harmed by granting the motion because the Movant will not enforce any judgment directly against the Debtor Defendant, but only against available insurance coverage or non-debtor assets, or as a claim to the extent allowed with other creditors.
4C. CONTINUING THE AUTOMATIC STAY WILL IMPOSE SUBSTANTIAL HARDSHIPS ON THE MOVANT THAT FAR OUTWEIGH ANY HARDSHIPS ON THE DEBTORS 14. The Movant will be harmed by delaying the State Court Action. The Movantmaintains an unliquidated claim for negligence claims. Courts have found that making a plaintiff wait to prosecute a claim puts them at a considerable disadvantage due to the preservation of evidence and loss of witnesses, as well as the length of time to receive a final award. Id. Therefore, courts should lift the stay under § 362(d). Id. 15. In addition, this Court has broad jurisdiction to supervise the administration ofclaims, but claims arising from personal injury are expressly excluded. 28 U.S.C. § 157(b)(5). Therefore, the usual purpose of providing a “central forum to adjudicate claims against the Debtors,” see, e.g., 15375 Memorial Corp. v. Bepco, LP (In re 15375 Memorial Corp.), 589 F. 3d 605, 622 (3rd Cir. 2009), does not apply to Movant’s claims. III. CONCLUSION 16. The bankruptcy court has discretion to permit liquidation of a claim in state courtabsent prejudice to the bankrupt. “It is obvious, however, that the bankruptcy court will save considerable time, effort, and money” by permitting the proceedings to determine liability to proceed and not duplicating such efforts in the bankruptcy or district court. In re Brown, 951 F.2d 564, 570 (3rd Cir. 1991) (citing In re Olmstead, 608 F.2d 1365, 1367-68 (10th Cir. 1979)). Further, the lifting of the stay is in “complete harmony with the Code’s policy of quickly and efficiently formulating plans for repayment and reorganization. The purpose of the automatic stay is to preserve what remains of the debtor’s insolvent estate and to provide a systematic equitable liquidation procedure for all creditors, secured as well as unsecured[.]” Matter of Holtkamp, 669 F. 2d at 508 (citations omitted). 17. The Movant therefore believes the interest of judicial economy will be served by
5lifting the stay to permit discovery in the civil court personal injury case to commence, and, if successful, to proceed accordingly against any available insurance or non-debtor assets for an award of damages or to file a claim, if any liability remains unresolved. For the reasons stated above, the Movant herein request that this Court grant the Motion. WHEREFORE, Movant hereby requests that this Court enter an Order, substantially in the form attached hereto as Exhibit B, granting relief from the automatic stay imposed by 11 U.S.C. §362 and permit the Movant to proceed in state court to conduct discovery, liquidate her claims and to proceed against any against assets of third parties, including but not limited to any available insurance coverage. Dated: April 20, 2021 Respectfully submitted, GELLERT SCALI BUSENKELL & BROWN, LLC /s/ Michael Busenkell Michael Busenkell (DE 3933) 1201 N. Orange Street, Suite 300 Wilmington, DE 19801 Telephone: (302) 425-5812 Facsimile: (302) 425-5814 Email: email@example.com Attorneys for Katherine Clelland