Tuy Xep v. De Hoop Corp.

Background

Francisco Tuy Xep brought the case on behalf of himself and others similarly situated against De Hoop Corp., doing business as Kaia Wine Bar, and Suzaan Hauptfleisch. He alleged violations of the Fair Labor Standards Act and New York Labor Law. His claims sought unpaid minimum wages, overtime wages, spread-of-hours wages, and statutory damages for allegedly inadequate wage notices and wage statements. A bench trial was scheduled for January 8, 2025.

On December 3, 2024, proposed counsel for De Hoop Corp. notified the court that the company had filed a Chapter 11 bankruptcy petition. Under the Bankruptcy Code, that filing automatically stayed, or paused, the case against De Hoop Corp.

Reasoning

The court explained that a bankruptcy stay usually applies only to the debtor—the person or company that filed for bankruptcy—not to the debtor’s co-defendants. But the court may extend the stay to a non-bankrupt co-defendant when continuing the case against that defendant is sufficiently likely to have a material adverse effect on the debtor’s reorganization.

The court found that standard met here. Xep had asserted all seven causes of action against both defendants collectively and based them on the same alleged conduct. The parties’ pretrial stipulation also treated the defendants as collectively liable and stipulated that both were Xep’s employers under the Fair Labor Standards Act and New York Labor Law. The court stated that this meant each defendant was jointly and severally liable for any damages awarded, so a damages award against Hauptfleisch could also impose liability on De Hoop Corp. The court also found that the claims against the two defendants were closely intertwined and that the stipulated facts did not distinguish their conduct.

Disposition

The court stayed the action as to Suzaan Hauptfleisch in addition to the existing stay as to De Hoop Corp. It postponed all scheduled dates and deadlines, including the January 8, 2025 bench trial, without setting a new date. The stay will remain in effect until the U.S. Bankruptcy Court for the Southern District of New York lifts the stay as to De Hoop Corp. or, as to Hauptfleisch, until this court otherwise orders. The parties were directed to file a status update no later than ten days after the bankruptcy court lifts the stay as to De Hoop Corp. or by May 3, 2025, whichever came first. Judge Gregory H. Woods also directed the clerk to note the stay on the docket and mail the order to Hauptfleisch.