IN RE CARLOTZ, INC. SECURITIES LITIGATION
- Subramanian
- 1:21-cv-05906
- U.S. District Court · Southern District of New York
- 2
In re CarLotz Securities Litigation: Judge Subramanian lifted the bankruptcy stay for individual defendants and set a January 3, 2024 reply deadline.
The ruling allowed the securities litigation to proceed against individual defendants Michael Bor, Thomas Stoltz, Rebecca Polak, Luis Ignacio Solorzano Aizpuru, Juan Carlos Torres Carretero, James Skinner, Dominico De Sole, and Teck Wong, while setting a reply-brief deadline for the defendants.
What happened
In In re CarLotz, Inc. Securities Litigation, CarLotz, Inc. told the court that it had filed for chapter 11 bankruptcy. The court had stayed the case under the Bankruptcy Code, and the plaintiffs later asked to continue the case against the individual defendants.
The individual defendants opposed lifting the stay. The court concluded that the bankruptcy stay did not apply to them because the claims would not immediately harm CarLotz’s bankruptcy estate. It also declined to impose a separate discretionary stay, noting that the case had already been pending for more than two years and discovery was already paused.
Judge Arun Subramanian directed the Clerk of Court to terminate the plaintiffs’ motion and lift the stay as to Michael Bor, Thomas Stoltz, Rebecca Polak, Luis Ignacio Solorzano Aizpuru, Juan Carlos Torres Carretero, James Skinner, Dominico De Sole, and Teck Wong. He gave the defendants until January 3, 2024, to file their reply brief on the motion to dismiss.
The detailed version
- IN RE CARLOTZ, INC. SECURITIES LITIGATION · No. 1:21-cv-05906
- Subramanian
- Dec. 14, 2023
Background
CarLotz, Inc. notified the court that it had filed a chapter 11 bankruptcy petition and suggested that the case was subject to the Bankruptcy Code’s automatic stay. The court previously endorsed that position and stayed the case under Section 362 of the Bankruptcy Code. The plaintiffs then moved to partially lift the stay so the case could proceed against the individual defendants. The individual defendants opposed the request.
Court’s Analysis
The court explained that an automatic bankruptcy stay can sometimes apply to people or entities that did not file for bankruptcy, but ordinarily only when a claim against those non-bankrupt parties would have an immediate adverse economic effect on the bankrupt estate. The defendants relied on indemnification provisions in the relevant contracts, but the court noted that those provisions might not be enforceable for the claims at issue. The court also stated that the mere possibility of a future indemnification claim was insufficient to extend the automatic stay.
The court separately declined to use its discretionary authority to stay the proceedings. The action had been pending for more than two years, discovery was already stayed under the Private Securities Litigation Reform Act, and half of the time for the defendants’ reply brief had elapsed when the court imposed the stay. The court concluded that continuing the motion-to-dismiss briefing would require only minor additional resources from the defendants.
Order
The court directed the Clerk of Court to terminate Docket 108 and lift the stay as to Michael Bor, Thomas Stoltz, Rebecca Polak, Luis Ignacio Solorzano Aizpuru, Juan Carlos Torres Carretero, James Skinner, Dominico De Sole, and Teck Wong. The defendants were given until January 3, 2024, to submit their reply brief. The opinion does not state a separate disposition verb such as “granted” for the plaintiffs’ motion; it states that the stay should be lifted and directs the Clerk to lift it as to the listed defendants.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.