UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
ANDREW JAMES LECKIE
DEBTOR CASE NO. 91-70467
This matter is before the Court on the Motion for Relief from Automatic Stay filed herein by C.T.C. Minemet, Inc., a creditor of the debtor. The movant seeks relief from the automatic stay in order to proceed with its fraud claims against the debtor, asserted as third-party claims in the United States District Court for the Northern District of New York, Case No. 89-CV-1092.
The movant has stated that its fraud claims against the debtor are part of a larger suit which has been pending in the Northern District of New York ("the N.D.N.Y. suit") since September 1989. Therein the movant was sued as a defendant and, as a defendant and third-party plaintiff, asserted the debtor's alleged fraud as the basis of certain defenses and of certain of its third-party claims against the debtor. The movant further states that the remaining claims in that action will be ready for trial by the summer or fall of this year.
The movant contends that it should be granted relief from the automatic stay because there will be no demonstrable harm to the debtor, because completion of its fraud-based defenses and third-party claims together in the N.D.N.Y. suit is the most efficient way to liquidate the unliquidated portion of the debt claimed to be
due it from the debtor, and because the movant will be prejudiced if the stay is not lifted. In any event, the decision whether to grant relief from the stay under such circumstances is within the discretion of the bankruptcy court.
In the case cited by the debtor in its response to the Motion, In re Stahl, 59 B.R. 2 (Bkrtcy.W.D.La. 1986), the court denied the creditor's motion for relief from the automatic stay to pursue a state court action alleging fraud and breach of contract. The court devoted most of its opinion to a discussion of the proper forum for the trial of a dischargeability issue. In exercising its discretion concerning the motion for relief, the court went on to state that it did not believe that "...considerations of judicial economy outweigh the real practical effect of forcing this bankrupt Louisiana resident to continue to proceed in Texas State Court." At page 3. The court did not elaborate upon this conclusion.
The movant has cited In re Murray Industries, Inc., 121 B.R. 635 (Bkrtcy.M.D.Fla. 1990), and In re Parkinson, 102 B.R. 141 (Bkrtcy.C.D.Ill. 1988), in support of its position. In the Murray case the state court suits had been pending for two and one-half years when the bankruptcy petition was filed. Therein the court found that the petitioning creditor was entitled to have the stay lifted even though this action would cause some hardship for the debtors. The court stated: "In balancing the equities involved...this Court is of the opinion that to begin this litigation anew in this bankruptcy court would result in more of a hardship to the Movant and would certainly result in a waste of judicial resources." At page 637.
In Parkinson, the court pointed out that in making a determination of cause for granting relief from the stay, "...courts have employed a balancing test--weighing the interest of the estate against the hardships that will be incurred by the creditor-plaintiff." At page 142. The factors to be considered are whether "great" prejudice to the bankruptcy estate or the debtor will result if the civil suit continues, hardship to the plaintiff outweighs hardship to the debtor, and the plaintiff will probably prevail on the merits. Id.
Taking all of these factors into account, this Court is of the opinion that the automatic stay should be modified to allow the movant to proceed with the N.D.N.Y. suit. C.T.C. Minemet, Inc.'s Motion will be sustained by separate order.
BY THE COURT
Frank J. Shannon, III, Esq.
Leslie Rosenbaum, Esq.
David M. Cantor, Esq.