Jones, Esq. v. Landry's, Inc.

Background

The court received Judge Willis’s report and recommendation concerning a pending motion to dismiss. It then reviewed the docket and noted that defendant Just One More Restaurant Corporation had not appeared in the action and had filed a suggestion of bankruptcy on August 7, 2024.

Bankruptcy stay

The court explained that section 362(a) of the Bankruptcy Code generally creates an automatic stay—a pause in legal actions—against a bankruptcy debtor. The stay applies to lawsuits that were or could have been brought against the debtor before the bankruptcy case began, and to efforts to recover claims that arose before that case.

The court further explained that the stay ordinarily does not extend automatically to nonbankrupt co-defendants. An exception may apply when a claim against a co-defendant would have an immediate adverse economic effect on the bankruptcy estate. The court identified examples including claims involving an obligation guaranteed by the debtor, claims against the debtor’s insurer, and situations in which the debtor is effectively the real defendant. The relevant question is whether continuing the action against the nondebtor is sufficiently likely to materially affect the debtor’s reorganization efforts.

Application to this case

The plaintiff asserts three of four claims against all co-defendants, including Just One More Restaurant Corporation. Based on that pleading, the court stated that it expected the parties to discuss whether continuing the claims against the other defendants could have an immediate adverse economic consequence for the bankruptcy estate.

Disposition

The court scheduled a conference for February 13, 2025, to discuss the report and recommendation, potential objections, and the effect of Just One More Restaurant Corporation’s bankruptcy proceeding on continuation of the case. The order did not decide the pending motion to dismiss and did not expressly order that the case be stayed. Judge Gregory H. Woods signed the order.