Nuno Carrera v. DT Hospitality Group Inc.
- Ronnie Abrams
- 1:19-cv-04235
- U.S. District Court · Southern District of New York
- 3
In Nuno Carrera v. DT Hospitality, Judge Abrams signaled the bankruptcy stay may cover both defendants and invited plaintiffs’ response.
The order directly affected plaintiffs Patricio Nuno Carrera and Geraldo Marquez, defendants Kien Truong and DT Hospitality Group, and the plaintiffs’ pending default-judgment request against DT Hospitality Group. The court had not yet decided whether to extend the bankruptcy stay to the company.
What happened
In Nuno Carrera v. DT Hospitality Group, the plaintiffs told the court that defendant Kien Truong had filed for bankruptcy. They argued that the resulting bankruptcy protection should apply to Truong but not to DT Hospitality Group, which faced the plaintiffs’ request for a default judgment.
The court explained that bankruptcy protection ordinarily applies only to the person or company that filed for bankruptcy, but can sometimes extend to a co-defendant. One example is when the debtor owns and controls the co-defendant closely enough that a judgment against it could harm the bankruptcy estate.
Judge Ronnie Abrams said the court was inclined to extend the protection to DT Hospitality Group because the record suggested Truong owned and controlled that company. The court did not yet enter that stay; instead, it gave the plaintiffs until December 23, 2020, to file a letter explaining why the protection should not apply to DT Hospitality Group.
The detailed version
- Nuno Carrera v. DT Hospitality Group Inc. · No. 1:19-cv-04235
- Ronnie Abrams
- Dec. 9, 2020
Background
The plaintiffs reported that Kien Truong had filed a Chapter 7 bankruptcy petition. Section 362(a)(1) of the Bankruptcy Code generally creates an automatic stay, meaning that it pauses certain lawsuits and other actions against the bankruptcy debtor. The plaintiffs agreed that the stay applied to Truong but argued that it should not apply to his co-defendant, DT Hospitality Group, d/b/a Co Ba Restaurant. The plaintiffs had filed a motion seeking a default judgment against DT Hospitality Group.
Court’s analysis
The court explained that an automatic stay ordinarily applies only to the bankruptcy debtor, not to co-defendants. But the stay may extend to a non-debtor in certain circumstances, including when a claim against the non-debtor would immediately harm the debtor’s bankruptcy estate or when the debtor and the non-debtor are so closely identified that the debtor is effectively the real defendant.
The court relied on the Second Circuit’s decision in Queenie, which extended a stay to a corporation wholly owned by a bankruptcy debtor. The court noted that the record described DT Hospitality Group as Truong’s company and as a company owned by him. The record also suggested that Truong controlled and acted for the company: he had considered filing bankruptcy for it, had discussed whether he hired separate counsel for it, and had tried to answer the complaint for the corporation personally. The court had previously advised him that a corporation must appear through a lawyer.
Order
Judge Ronnie Abrams stated that the court was inclined to stay the action as to both Truong and DT Hospitality Group. The court did not yet impose that broader stay. Instead, it gave the plaintiffs until December 23, 2020, to file a letter of no more than five single-spaced pages explaining why the automatic stay should not apply to DT Hospitality Group. The Clerk was directed to mail the order to Truong at the updated address listed in the order.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.