Appeal from the United States District Court for the Eastern District of Pennsylvania. (Civil No. 90-04067)
Before: Mansmann, Nygaard and Seitz, Circuit Judges.
David A. Lampe (plaintiff) appeals the order of the district court granting the motion of Phillippe G. Woog (defendant) to dismiss his complaint for failure to state a claim. He also appeals that court's order dismissing his claim against defendant, Xouth, Inc. (Xouth, Inc.). This court has appellate jurisdiction pursuant to 28 U.S.C. § 1291.
Plaintiff, a Pennsylvania citizen, brought this diversity action against defendant, a citizen of Switzerland, with a residence in New York, and Xouth, Inc., a Delaware corporation. Defendant is the sole shareholder of Xouth, Inc. Plaintiff alleged a breach of contract based upon a letter executed by all three parties. He asserts that he was never compensated for services performed. Additionally, he seeks consequential damages for the alleged breach of the employment agreement.
Defendant moved under Federal Rule of Civil Procedure 12(b)(1) to dismiss the complaint against him for lack of subject matter jurisdiction because Xouth Inc.'s principal place of business was in Pennsylvania, thereby depriving the court of complete diversity jurisdiction. 28 U.S.C. § 1332 (c)(1). Defendant also moved to dismiss the claim for insufficiency of service of process and failure to state a claim. Fed.R.Civ.P. 12(b)(5) & (6).
The district court dismissed the claim against Xouth, Inc. because the complaint was filed against it while it was in bankruptcy and an automatic stay was in effect. It also dismissed the claim against defendant because plaintiff's complaint failed to state a claim. This appeal followed.
Our standard of review is plenary except with respect to the denial of the motion to enlarge time in which to effectuate service. Furthermore, because the issues presented here as to defendant and Xouth, Inc. are materially different, we will treat them separately.
A. DISMISSAL OF XOUTH, INC.
Plaintiff sued Xouth, Inc. unaware that it had previously filed a bankruptcy petition. Thus, that action was in violation of the automatic stay provision of the Bankruptcy Code. 11 U.S.C. § 362(a)(1) (1991). Plaintiff then requested the district court to sever the claims and refer his claim against Xouth, Inc. to the bankruptcy court as an adversary proceeding. Instead, the district court dismissed the action against Xouth, Inc. as being void from the inception because of the automatic stay.
The issue presented is whether, in light of 11 U.S.C. § 362(a)(1) of the Code, the district court had authority, at least in the posture of this case, to transfer the action against Xouth, Inc. to the bankruptcy court rather than to dismiss it.
Section 11 U.S.C. § 362(a)(1) provides:
(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title operates as a ...