Somar v. Solar Mosaic, LLC

Background

Solar Mosaic informed the court that it had filed a voluntary Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for the Southern District of Texas. Bankruptcy Code § 362(a)(1) generally pauses the start or continuation of lawsuits against the bankruptcy debtor.

The court asked Rennie Somar whether he opposed extending that pause to the other defendants, NYS Essential Power Inc. (NYS Power) and Matthew Dratel. Somar opposed the extension, stating that he had direct claims for liability and damages against the non-bankrupt defendants that were separate from his claims against Solar Mosaic. Dratel was in default and had not appeared. NYS Power argued that the claims and cross-claims were intertwined and that it would otherwise have to litigate the same issues twice. The court noted, however, that NYS Power’s assertion that Solar Mosaic had brought cross-claims against it was factually inaccurate: NYS Power had asserted cross-claims against Dratel, while Solar Mosaic had asserted no cross-claims in its answer.

Claims in the Case

The amended complaint alleges that Solar Mosaic provided Somar a loan for solar panels, NYS Power installed the panels, and Dratel was a salesperson working for Solar Mosaic and NYS Power. The complaint asserts six counts: a Truth in Lending Act claim against Solar Mosaic; a New York General Business Law § 349 claim against all defendants; a New York General Business Law § 770 claim against NYS Power; fraudulent-concealment claims against all defendants; Credit Repair Organization Act claims against NYS Power and Dratel; and Fair Credit Reporting Act claims against all defendants.

Court’s Analysis

The court explained that the bankruptcy pause can sometimes extend to non-bankrupt defendants when a claim against them would have an immediate adverse economic effect on the bankruptcy estate. Examples include claims involving an obligation guaranteed by the debtor, the debtor’s insurer, or circumstances in which the debtor is effectively the real defendant because a judgment against the non-debtor would operate as a judgment against the debtor.

The court held that the party seeking an extension must provide real evidence of an actual effect on, or threat to, the debtor’s reorganization. Although the claims involved facts concerning the conduct of all defendants, Somar asserted five claims against NYS Power, including two claims not asserted against Solar Mosaic. The court found that NYS Power had not met its burden and had not explained why continuing the case would affect Solar Mosaic’s reorganization.

Order

The stay applies only to Solar Mosaic and does not extend to NYS Power or Dratel. The case against NYS Power and Dratel will proceed with discovery. The court also scheduled an Initial Pretrial Conference for August 15, 2025, and required the parties’ joint letter and proposed case-management plan by August 7, 2025. Judge Valerie Caproni did not decide the underlying claims in this order.