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Hess Corp. v. Performance Texaco

November 19, 2008

HESS CORPORATION, F/K/A AMERADA HESS CORPORATION PLAINTIFF,
v.
PERFORMANCE TEXACO, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Judge Caputo

MEMORANDUM

Presently before the Court isPlaintiff Hess Corporation's Motion (Doc. 11) to lift the stay placed on the above-captioned case by this Court on September 16, 2008 (Doc. 10) with regard to Defendants Kimberly Nicholson Kessler, Robert Kessler, and Marilyn Kessler. For the reasons stated below, the Court will grant the motion and lift the stay of proceedings as to these Defendants.

BACKGROUND

On July 31, 2008, Plaintiff Hess Corporation ("Hess") filed a complaint in this Court against Defendants Performance Texaco, Inc., Scott Kessler, Kimberly Nicholson Kessler, Robert Kessler, and Marilyn Kessler, bringing claims for breach of contract, unjust enrichment, and promissory estoppel. (Doc. 1.) Hess alleges jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. § 1332. Prior to any responsive pleading, Hess filed an amended complaint on August 6, 2008, to correct its factual averments in order to properly allege diversity jurisdiction, but leaving its claims unchanged. (Doc. 3.)

The amended complaint alleges that Hess entered into a franchising agreement with Defendant Performance Texaco, Inc. ("Performance Texaco"), agreeing the latter would operate a business selling Hess' brand name motor fuels and products. (Am. Compl. ¶ 11, Doc. 3.) It further alleges that the individual defendants, Scott, Kimberly, Robert, and Marilyn Kessler, each personally guaranteed any debt owed by Performance Texaco to Hess. (Id. ¶ 23, Exs. D, E. ) The guaranty includes any sum under a Note executed by Performance Texaco in exchange for a three hundred thousand dollar ($300,000) "competitive allowance" from Hess that remained unamortized at the end of a period prescribed for amortization in the franchise agreement. (Id. ¶ 24. Exs. D, E.) In addition, Scott and Kimberly Kessler executed a mortgage on the franchise business' premises as security for payment of the Note. (Id. ¶ 18, Ex. C.)

The amended complaint brings claims for breach of contract and unjust enrichment against Performance Texaco. (Id. Counts I, II.) It brings claims for breach of contract and promissory estoppel against the individual Kessler defendants. (Id. Counts III, IV.)

On September 12, 2008, counsel for Hess filed a suggestion of bankruptcy, noting that Defendants Performance Texaco and Scott Kessler filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Middle District of Pennsylvania. (Doc. 7.) Consequently, this Court entered an Order on September 16, 2008, (Doc. 10), staying the entire action until further Order of the Bankruptcy Court for the Middle District of Pennsylvania, or until either party shows that the action is not subject to the Bankruptcy Code's automatic stay provision, found at 11 U.S.C. § 362(a).

On October 1, 2008, Hess filed the present motion to lift the stay as to Defendants Kimberly Nicholson Kessler, Robert Kessler, and Marilyn Kessler because they are non-bankrupt co-defendants not subject to the automatic stay under the Bankruptcy Code. (Doc. 11.) Kimberly Nicholson Kessler filed a brief on October 15, 2008 opposing the motion to lift the stay as it applies to her. (Doc. 14.) Robert and Marilyn Kessler have not responded to Hess' motion and the time for filing a brief in opposition has passed. See M.D. Pa. Local Rule 7.6. Plaintiff filed a reply to Kimberly Nicholson Kessler's brief in opposition on October 29, 2008. (Doc. 18.) This motion is now ripe for disposition.

DISCUSSION

Hess argues that the automatic stay of litigation afforded debtors by 11 U.S.C. § 362(a) does not apply to Defendants Kimberly, Robert, and Marilyn Kessler because they, as non-debtors, are not covered by its protection. Robert and Marilyn Kessler make no arguments in response. Kimberly Nicholson Kessler argues that "unusual circumstances" exist in her case warranting application of the automatic stay to a non-debtor party.

Section 362(a) of the Bankruptcy Code provides in relevant part:

[A] petition filed under... this title ... operates as a stay, applicable to all entities of --

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title ....

11 U.S.C. § 362(a) (2008). "Although the scope of the automatic stay is broad, the clear language of section 362(a) stays actions only against a 'debtor.'" McCartney v. Integra Nat'l Bank North, 106 F.3d 506, 509 (3d Cir. 1997); see also In re Exide Techs., 544 F.3d 196, 2008 U.S. App. LEXIS 20072, at *46 n. 10 (3d Cir. Sept. 19, 2008) (citing Collier on Bankruptcy for the proposition that when one defendant files a bankruptcy petition, the suit may proceed against non-debtor co-defendants). It is "universally acknowledged" that an automatic stay under § 362 may not be invoked by entities such as sureties, guarantors, co-obligors, or others with a similar legal or factual nexus to the debtor. McCartney, 106 F.3d at 509-510 (quoting Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1205 (3d Cir. 1991) (internal quotations omitted). This rule ...


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