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Costantino v. City of Atlantic City

United States District Court, D. New Jersey, Camden Vicinage Division

February 17, 2015



JOEL SCHNEIDER, Magistrate Judge.

This matter is before the Court on the letter application ("Def.'s App.") of the City of Atlantic City ("Atlantic City") requesting that the case be stayed because of the bankruptcy filing of co-defendant Caesar's Entertainment Corporation ("Caesar's"). [Doc. No. 121]. Having received notice that Caesar's filed a voluntary petition of bankruptcy, which triggered an automatic stay pursuant to 11 U.S.C. § 362(a), the Court administratively terminated Caesar's as a defendant without prejudice to the right of any party to argue the entire case should be stayed. See Jan. 26, 2015 Order [Doc. No. 120]. Plaintiff opposes Atlantic City's application ("Pl.'s Opp."). [Doc. No. 128]. The Court exercises its discretion not to hold oral argument. See Fed.R.Civ.P. 78; L. Civ. R. 78.1. For the reasons to be discussed, Atlantic City's application to stay the case is DENIED.


In sum and substance, plaintiff alleges that on July 21, 2012, she was assaulted by security personnel and Atlantic City police officers at the Dusk nightclub in Atlantic City, New Jersey. Although Dusk is physically located inside the Caesar's hotel/casino, Dusk and Caesar's are separate legal entities. Plaintiff alleges the incident at issue began when her brother and brother-in-law were escorted out of the Dusk nightclub and into an elevator leading to the casino level of Caesar's. Am. Compl. ¶ 23 [Doc. No. 90]. Plaintiff alleges the officers and/or security guards began to "manhandle" and assault the two men in the elevator. Am. Compl. ¶¶ 25, 28. In response, plaintiff began to record the incident on her cell phone. Am. Compl. ¶ 29. Plaintiff alleges that after she exited the elevator and entered the casino level of Caesar's, Atlantic City Police Officer Sterling Wheaten assaulted her and took her cell phone to destroy evidence of the incident. Am. Compl. ¶¶ 32-39. Plaintiff's cell phone has not been recovered.

Plaintiff alleges that Wheaten handcuffed her on the floor while her breasts were exposed and stated, "now you are going to jail, you f___ b___." Am. Compl. ¶ 41. After she was escorted to the police station and processed, plaintiff alleges Wheaten admitted he had "taken care of" her cell phone. Am. Compl. ¶ 43. Plaintiff alleges that even though she was suffering from injuries while incarcerated she was denied medical attention. Am. Compl. ¶ 44. Plaintiff alleges Wheaten and other Atlantic City Police Officers prepared false statements and complaints related to the incident which resulted in her being charged with several felony offenses. Am. Compl. ¶¶ 47-48. All charges against plaintiff were eventually dropped. Wheaten denies plaintiff's allegation.

On January 15, 2015, Caesar's filed a voluntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois. See Notice of Suggestion on Pendency of Bankruptcy [Doc. No. 110]. Pursuant to Section 362 of the Bankruptcy Code, all actions against Caesar's were automatically stayed. On January 26, 2015, the Court ordered Caesar's administratively terminated from the case without prejudice to the right of the other defendants to apply to stay the entire case. See Jan. 25, 2015 Order [Doc. No. 120].

Atlantic City requests that the entire case be stayed pending Caesar's bankruptcy because Caesar's role as a third-party defendant is "central" to the case. See Def.'s App. at 4. Plaintiff steadfastly denies that Caesar's has any material role in the case. In fact, plaintiff not only opposes Atlantic City's characterization of Caesar's role in the case, but before Caesar's filed for bankruptcy plaintiff agreed to dismiss Caesar's with no objection from Dusk. Pl.'s Opp. at 1.


1. The Automatic Stay Provision of Section 362

The parties do not dispute that the stay as to Caesar's is appropriate. The Bankruptcy Code contains a provision which imposes an automatic stay of actions by creditors following:

(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)(1). The automatic stay protects the debtor in several ways. It provides the debtor "a breathing spell from creditors by stopping all collection efforts, all harassment, and all foreclosure actions, " thus permitting the debtor an opportunity to create a repayment or reorganization plan, and prevents "creditors from acting unilaterally in self-interest to obtain payment from a debtor to the detriment of other creditors." Mar. Elec. Co. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d Cir. 1991).

Absent "unusual circumstances" Section 362(a)(1) stays actions against the debtor only and may not be invoked by solvent codefendants, even if they are in a similar legal or factual nexus with the debtor. Travelodge Hotels, Inc. v. Patel, C.A. No. 13-3719 (WHW), 2013 WL 4537906, at *5 (D.N.J. Aug. 27, 2013) (citing McCartney v. Integra Nat. Bank N., 106 F.3d 506, 509-10 (3d Cir. 1997)); see also Mar. Elec. Co., 959 F.2d at 1205. The Third Circuit has identified two "unusual circumstances" in which automatic stays may be extended to non-debtor parties such as Atlantic City: (1) where the debtor is the real party in interest such that a judgment against the third-party defendant will in effect be a judgment or finding against the debtor and (2) where stay protection is essential to the debtor's reorganization efforts. McCartney, 106 F.3d at 510. These two recognized exceptions accomplish the same goal as the automatic stay-protecting the debtor during pendent bankruptcy proceedings. Stanford v. Foamex L.P., C.A. No. 07-4225, 2009 WL 1033607, at *4 (E.D. Pa. Apr. 15, 2009) ("the unusual circumstances' exception is geared toward protecting the debtor during the pendency of the debtor's bankruptcy proceeding") (emphasis in original). Absent "unusual circumstances" "[m]ultiple claim and multiple party litigation must be disaggregated so that particular claims, counterclaims, crossclaims and third-party claims are treated independently when determining which of their respective proceedings are subject to the bankruptcy stay." Mar. Elec. Co., 959 F.2d at 1204-05.

Atlantic City does not argue that a stay would impact Caesar's reorganization or that Caesar's is the real party in interest. Because Atlantic City has not asserted that "unusual circumstances" exist as the term is used in the context of the bankruptcy statute, a stay is not warranted pursuant to the automatic stay provision of Section 362. See Travelodge Hotels, Inc. v. Patel, C.A. No. 13-3719 (WHW), 2013 WL 4537906, at *7 (D.N.J. Aug. 27, 2013) (denying stay application where "unusual ...

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