Everest Reinsurance Company v. All State Equipment, LLC et al.

Background

Everest Reinsurance Company brought a breach-of-contract action alleging that the defendants violated an indemnity agreement by failing to pay costs Everest incurred on construction and performance bonds. The agreement was executed by All State Equipment, LLC, Jason McKeever, Jodi McKeever, and Matrix Environmental, Inc. Everest also claimed that Miller Environmental, Inc. was liable as Matrix’s successor because Miller purchased some of Matrix’s assets. Everest alleged that the indemnitors, including Miller, were jointly and severally liable for the losses and expenses connected to the bonds.

On June 17, 2026, Jason McKeever notified the court that he had filed a Chapter 11 bankruptcy petition. The bankruptcy filing automatically stayed the action as to McKeever under 11 U.S.C. § 362. The court then asked the other defendants—the “Remaining Defendants”—whether the case should also be stayed as to them. During a conference, Miller said it intended to amend its answer to assert crossclaims against McKeever, said it was listed as a co-debtor in McKeever’s bankruptcy proceeding, and said it was consulting bankruptcy counsel.

Reasoning

A bankruptcy filing generally stays proceedings against the debtor but does not automatically stay claims against non-debtor co-defendants. The court explained that an extension may be appropriate when litigation against the non-debtors is sufficiently likely to have a material effect on the debtor’s bankruptcy or reorganization.

The court found that standard satisfied here. Everest alleges joint and several liability, meaning each defendant may be responsible for the full amount of the obligation. As a result, a favorable resolution against the Remaining Defendants could impose corresponding liability on McKeever and have an immediate adverse economic effect on his bankruptcy estate. The court also found that the claims against McKeever and the Remaining Defendants were closely connected, including because Miller’s alleged liability depended on its alleged succession to Matrix and McKeever was Matrix’s president.

The court further found that proceeding without McKeever would be inefficient. Miller might need McKeever’s participation to present its defense and wanted to pursue indemnity, contribution, and allocation claims against him. Continuing against the Remaining Defendants could therefore interfere with Miller’s defense and create duplicative proceedings.

Ruling

The court stayed the action as to the Remaining Defendants. The stay will remain in effect until the United States Bankruptcy Court for the Middle District of Tennessee lifts the stay as to McKeever or the Remaining Defendants, or until this court otherwise orders. All scheduled dates and deadlines were adjourned, including Miller’s deadline to file its reply supporting its motion to dismiss and its amended answer. Miller’s motion to dismiss will be held in abeyance until the stay is lifted. The court also directed Everest to file a status update within ten days after the bankruptcy court lifts the stay, or by January 3, 2027, whichever comes first. The order separately directs the clerk to note the stay and terminate the motion pending at Dkt. No. 80.