FOR PUBLICATION
SUPERIOR COURT OF THE VIRGIN ISLANDS
DIVISION OF ST CROIX
IN RE CASES UNDER BANKRLPTCY STAY
MICHAEL FELIX, Case No SX 2008 CV 00086
PLAINTIFF, ,
Action for Damages
v. 3
CARIBBEAN AUTO MART OF ST CROIX, INC Jury Trim Demanded
AND Luvs LANCAME,
DFFFNDANT
CARIBBEAN AUTO MART, \ Case No sx 2008 CV 00163
PFTITIONFR, 0n Review from the Virgin Islands
Department of Labor
v. f
, (re DOL App No 020 02 08)
GOVERNMENT OF THE VIRGIN ISLANDS,
DEPARTMENT OF LABOR (EX REL MICHAEL 1
Fun),
RESPONDENT
DEREK CAMBRIDGE
fl
' Case No SX 2009 CV 00385
PLAINTIFF, ‘
Action for Damages
V.
CARIBBEAN Aura MART OF ST CROIX, INC , Jury Trial Demanded
DEFENDANT
_i
i
CARIBBEAN ALTO MART OF ST CROIX, INC , Case No SX 2012 CV 00431
PETITIONER, ‘ 0n Review from the Virgin Islands
1 Department of Labor
V. 3
Re DOL Case No WD 001 2009 SX
U S VIRGIN ISLANDS DEPARTMENT OF 1
LABOR, GARY Mom OY, COMMISSIONER,
AND BERTHA DOME“ XAV [£12,
RESPONDENTS ‘
CARIBBEAN ALTO MART OF ST CROIX, INC , ’ Case No SX 2012 CV 00432
PFTITIONER, On Review from the Virgin Islands
Department of Labor
V.
Re DOI Case No WD 002 2009 SX
GARY MOLLOY, IN HIS CAPACITY AS
COMMISSIONER OF THE U S VIRGIN ISLANDS
DEPARTMFM OF LABOR; THE U S VIRGIN
ISLANDS DEPARTMENT OF LABOR, AND
DEREK CAMBRIDGE,
RESPONDENTS '
Cite as 2021 VI Super 41
Appearances
LEE J ROHN ESQ
Lee J Rohn and Associates
Christiansted V100820
For Michael Felzx and Derek Cambrzdge
SHELBY KING GADDY ESQ
Legal Services of the Virgin Islands Inc
Christiansted V100820
For Bertha Dormer Xawer
PAMELA R TEPPER ESQ
Solicitor General Virgin Islands Department of Justice
St Thomas V100802
For the Government of the Vtrgm Islands Department ofLabor (Case No SX 2008 CV 00163)
IAN S A CLEMENT ESQ
Assistant Attorney General Virgin Islands Department of Justice
St Thomas V100802
For U S Virgin Islands Department of Labor and Gar) M0110» Comnzlssmner (Case No SX 2012 CV
004 31)
MICHAEL R FRANCISCO ESQ
Assistant Attorney General Virgin Islands Department of Justice
St Thomas V100802
For Gar) M0110} 1n 1m capacity as Commisszoner of the U S Vtrgm Islandv Department of Labor and
the U S Vzrgm Islands Department ofLabor (Case No SX 2012 CV 00432)
MICOLL MORGAN ESQ
Ogletree Deakins Nash Smoak& Stewart PC
St Thomas V100802
For CaribbeanAuto MaltofSr Crow Inc (Case Nos SX 2008 CV 00086 5X 2009 CV 00385 5X 2012
CV 0043] and SX 2012 CV 004 ?2)
W MARK WILCZYNSKI ESQ
Law Office of W Mark Wilczynski PC
St Thomas V100804
For Caribbean Auto Mart ( Case No 5X 2008 CV 0016 3) andfor Laws Lam (1116
MEMORANDUM OPINION
WILLOCKS Presiding Judge
‘fil THESE MATTERS are before the Court following orders issued in each case directing the
solvent parties to show cause why the case should not be dismissed without prejudice due ongoing
bankruptcy proceedings See general!) Feltx v Carzbbean Auto Man of St Cram 2021 VI Super 9
Carzbbean Auto Man of St Cram [m t M0110)
2020 VI Super 78 Caribbean Auto Man of St Croix
(hereinafter Caribbean Auto Mart ) filed a Chapter 7 petition for bankruptcy in 2013 and the automatic
stay imposed by federal law see 11 U S C § 362 remains in effect some eight years later Having further
considered the question whether the cases under a bankruptcy stay must remain pending but stayed on
the [Superior] Court 5 docket or whether the [Superior] Court can implement another procedure[
]
M0110) 2020 VI Super 78 at ‘11 5 (quotation marks brackets and citation omitted) the Court concludes
In re Cases Ulldt’l Bankmptct Stat
2021 VI Super 41
Case Nos SX 2008 CV 00086/SX 2008 CV 0016? I 9X 2009 CV 00385 / 9X 2012 CV 00411 ISX 2012 CV 00412
MEMORANDUM OPINION
Page 4 0f 17
for the reason given below that the best approach is to dismiss without prejudice any case brought by or
against a bankrupt party and in one instance to dismiss a motion for rehef from judgment without
prejudice and with leave to move to reopen or refile the motion for relief if appropriate
I FACTUAL AND PROCEDURAL BACKGROUND
(112 The factual and procedural background of each case is not particularly relevant to the issues raised
here Three of the five cases were commenced by Caribbean Auto Matt but each began initially before
the Virgin Islands Department of Labor by former employees of Caribbean Auto Mart Michael Felix
(hereinafter Felix ) appealed an initial denial of unemployment compensation benefits and prevailed
Bertha Donnely Xavier (hereinafter Donnely Xavier )and Derek Cambridge (hereinafter Cambridge )
complained of wrongful discharge and prevailed Caribbean Auto Mart sought judicial review in the
Superior Court in all three cases The Other two cases filed by Felix and Cambridge respectively sought
damages from Calibbean Auto Mart allegedly for wrongful discharge Felix also sued Linus Lancane
(hereinafter Lancane ) a manager employed by Caribbean Auto Mart at the time All the cases except
the 2008judicial review of Felix s‘ unemployment benefits award Case No SX 2008 CV 00163 are still
pending The 2008 judicial review matter is still before the Court based on a motion filed by Caribbean
Auto Mart and unopposed by Felix for reconsideration of a February 8 2010 Order that denied as
untimely the amended petition for review Caribbean Auto Mart filed Technically the 2012 judicial
review proceeding involving Felix is closed as a final order issued in 2010 It is open only insofar as the
motion for reconsideration construed as a motion for relief from judgment remains pending
QB In March 2013 Caribbean Auto Mart notified the Court that it had commenced Chapter 7
bankruptcy proceedings in the Bankruptcy Division of the District Court of the Virgin Islands All five
cases remain stayed as a result In late 2020 and early 2021 however this Court began questioning
whether the cases must remain stayed given the duration of the bankruptcy proceedings See generally
In re Cases Under Bankrupm 51m 2021 v1 Super 41
Case Nos SX 2008 CV 00086 I 8X 2008 CV 0016? ISX 2009 CV 00185 / 9X 2012 CV 00431 ISX 2012 CV 00432
MEMORANDUM OPINION
Page 5 01 17
e g Felm 2021 V1 Super 9 M01101 2020 VI Super 78 The Court ordered the solvent parties to show
cause why these cases should not be dismissed without prejudice Only Cambridge responded and only
to the Order issued in the 2012judicial review proceeding However the response he filed failed to address
the Court 3 concems namely whether this matter should be dismissed without prejudice {or} whether
the bankruptcy trustee can take over the prosecution of this matter M01101 2002 VI Super 78 at ‘][ 7 The
other individuals Felix and Donnely Xavier as well the Government parties and Lancane also did not
respond 1 Felix was ordered also to show cause why his claims against Lancane a co defendant of
Caribbean Auto Mart should remain stayed since claims against non bankrupt co defendants
[generally are not] stayed absent a showing that such claims are related to the defendant in bankruptcy
and the bankrupt estate Felzx
2021 VI Super 9 at ‘11 4 n 1 (quoting In re Refinen throcarbon Release
Ling Case No SX 15 CV 100 2017VI LEXIS 101 13(VI Super Ct July 10 2017)) Felix did not
respond to this question either
11 DISCUSSION
‘l[4 First before mining to the question at hand the Court must express its disappointment with Felix
Cambridge and Donnely Xavier not responding to the Court 5 orders Courts do not issue orders for the
sake of issuing orders What s more allowing [parties] to disregard court orders without consequence
may have a broader effect on the Court 3 docket if it sends a message to other litigants that compliance
with discovery obligations case schedules and court orders is optional Shanko 1 Lake Ct) No 14 CV
05543 JST(JCS) 2016U S Dist LEXIS 187668 5(N D Cal Feb 2 2016) AcordJJ v BA 68A 3d
721 724 (D C 2013) ( Compliance with a court order is not optional ) Hefty t Strtckhouser 752
N W 2d 820 825 (Wis 2008) ( We don t write scheduling orders for fun We don I write these for our
‘ Technically the Government parties and LanLane were not required to reply until after Felix and Donner Xavier responded
In 19 Cases Undel Bankruprm Sim 2021 VI Super 41
Case Nos SK 2008 CV 00086 / SK 2008 CV 0016? ISX 7009 CV 00885 I SX 2012 CV 00481 /SX 2012 CV
00432
MEMORANDUM OPINION
Page 6 0t 17
health We write these to be followed There s a slight trend that I ve noticed lately People don t follow
scheduling orders and basically their arguments are well nobody got hurt Well that s not the reason we
do it We do it for orderly administration of justice (brackets and citation omitted» If the
credibility of court orders and the integiity of our judicial system we to be maintained a litigant cannot
ignore court orders with impunity Ross 1 Rosen Rager 67 So 3d 29 38 (Ala 2010) (quoting [<th v
Pfefi'er 722 N E 2d 55 58 (N Y 1999))
(HS Recognizing the consequences of dismissal even of a dismissal without prejudice this Court
directed the solvent parties to address what impact if any such a dismissal might have on cases under a
bankruptcy stay See F6111? 2021 VI Super 9 at ‘l[ 5 ( [Blefore taking any szgmfzc an! ac Non sua sponte
the Court must fiist give the parties a chance to iespond (emphasis added) (quoting Mollo) 2020 V1
Super 78 at ‘|[ 7)) Ordering the solvent parties to brief these concerns was within the Court 5 discretion
Cf. Denms t A H Robms Co
860 F 2d 871 872 (8th Cir 1988) ( The court had the right to require
counsel to keep the court informed of the progress‘ of the bankruptcy even though its ordeis purported to
stay the proceeding until the bankruptcy proceeding was closed dismissed or discharge in bankruptcy
was granted ) Having failed to respond the Court could dismiss Felix s and Cambridge s actions on that
basis alone See 6 g 1d ( The need of a court to advance a crowded docket and to preserve respect for
the integrity of its internal procedure is certainly sufficient to justify the dismissal of a case ) The Coult
could also impose sanctions against their counsel See 1d ( Consequently counsel was required to comply
with the court 5 orders Because counsel consistently failed to follow the court 5 orders we think the court
was correct in applying some measure of sanction in the case )
(H6 In this instance however the Court declines to do so because it would only prolong these cases
and further consume scarcejudicial resources Nevertheless it cannot be emphasized strongly enough that
it is not the responsibility of the courts to anticipate all possible consequences of a proposed course of
In re Cases Under Bankruptm Stat
2021 VI Super 41
Case Nos SK 2008 CV 00086] SX 2008 CV 0016? I SK 2009 CV 00385 / SK 2012 CV 00411 /SX 2012 CV 00432
MEMORANDUM OPINION
Page 7 of 17
action It is for this reason that courts apprise the parties of their concerns beforehand and give them a
chance to weigh in Here for example it may appear at first glance that a dismissal without prejudice of
a case subject to a bankruptcy stay should be appropriate Cf. Mollm
2020 VI Super 78 at (H 7 ( [T1116
Virgin Islands Supreme Court has already agreed with these courts that dismissal without prejudice
represents the sounder method for achieving compliance with the federal mandate (brackets and ellipsis
omitted) (quoting Brozullard t DLJ Mortg Capital Inc 60 V I 763 767 (2014) (per (urtam))
Moreover federal and state trial courts routine1y dismiss cases without prejudice solely because of the
automatically stay imposed by bankruptcy proceedings 7 In fact several state courts have promulgated
rules that provide for dismissal of cases and proceedings under a bankruptcy stay 1 A few courts even
’ Hig/ttmttlt t Clan slu C1 edit Carp 18 F 71d 434 435 (7th Cir 1994) ( After learning that the Highsmiths had retiled
their
Chapter 1? petition Chrysler dismissed its state Lourt aetion in order to comply with the automatic stay of l 1 U S C § 162
(I988) ) Inte Sn Sports Ctr int. Nos 09 2l982 10 1312 2011 Bankr LEXIg 3404 z<6(Bartkr ND Ohio Sep 6 201])
t On Deeember 20 2009 the debtor filed a voluntary hankruptey petition under Chapter I i On January 28 2010 the debtor
tiled a notiee to stay proteedings in the second state eourt case whieh pertained to Vanni and Kieem s aileged fraud and
eonspiraey On February I2 2010 the state eourt dismissed the seeond state court case without prejudiee ) In 1e Twang
Nos 03 4078? (NLW) 03 2681 2004 Bankr LEXIS 2546 *2 (Bankr DNJ Aug 27 2004)( Several months after the
State
Court Aetion was tiled on September 15 200% the Debtors tiled the instant Chapter 7 ease Because of the bankruptey an
order was entered in the State Court Aetion on September 2? 2003 whieh dismissed the State Court Aetion as to the Debtors
only and whieh provided a proeedure fur restoring the matter to the acme trial ealendar in the u ent reliet from the automatie
stay was obtained ) Sal man 1 Watson No B284969 2018 Cat App Unpub LEXIS 7609 at 1 n 2 (Now 9 2018)
( Thereafter Moll declared bankrupte) and tiled a notiee of stay in the malpraetice action The superior Lourt dismissed the
aetion without prejudiee after the parties failed to appear at an order to show eause hearing regarding dismissal pending relief
from the automatie stay ) [st Fm Bank USA I Como No MID L 878 19 2019 NJ Super Unpub LEXIS 4251 *1 (N J
Super Ct Apr 10 2019)( [This matter is hereby dismissed without prejudice subjeet to automatie reinstatement upon notiee
t0 the court if the bankruptcy proeeedings do not fuin dispose 01 the issues between the parties or it the automatic stay is
lifted ) Bandlei t Mellllo 128 A ?d 695 697 (NJ Super Ct App Div 2015)( On Apri121 2014 Jud e Littletield
issued an order stating that because Evelyn had tiled a bankruptcy petition plaintiff 5 claims against her in the colleetion action
were dismissed without prejudice until the conelusion 0f the bankruptcy proceedings or the entry of an order by the bankruptcy
court granting relief from the automatic stay under 11 U 9 C A § "56201) ) Nationstal Mortg LLC t Titlesher No
342 8
18 Wrcv 2018 Vt Quper LEXIS 228 *1 (Vt Super Ct Nov 2 2018)( This dismissal is WITHOUT PREJUDICE t0 the
Plaintiffs right to have this order vacated and the case reopened if Plaintitt demonstrates any oi the following events have
occurred 1 The Bankruptcy Court has dismissed the bankruptcy ease 2 Defendant has been denied a diSeharge 3 The
debt
has been determined to be non disehargeable 4 The bankruptcy eourt has granted relief from the automatie stay to pursue
this
claim 5 For any other reason Defendant 3 bankruptcy has not preeluded the possibility of Nationstar Mortgage LLC d/b/a
Mr
Cooper prevailing in this action (paragraph breaks omitted» see also MGTLQ Intestms L P t TENNIS No 224 5 17
Rdcv
2018 Vt Super LEXIS 413 l (Vt Super Ct July 6 2018)(same)
1‘ See Ariz Graham Cty Super Ct R 5 ( When a bankruptcy case is tiled in a civil matter a case should be placed on
aetive
calendar tor a duration of no longer than two years It nothing has been filed after two years then the case is placed on inactive
status and dismissed 60 days thereafter If during the two years a notice of discharge is filed and a judgment entered then
the
In M Cases Undel Bankruptcy Stat 2021 VI Super 41
Case Nos SX 2008 CV 00086/ SX 2008 CV 0016? I SX 2009 CV 00885 / SK 2012 CV 00431 [SK 2012 CV 00432
MEMORANDUM OPINION
Page 8 of 17
require that counsel serve and file a notice when bankruptcy proceedings commence as well as periodic
status reports thereafter punishing failure to comply with sanctions 4 And while the majority of courts
agree that a dismissal without prejudice may not violate the automatic stay ‘ there are still consequences
ease is dosed ) Mo 2lst Jud Cir R 75(1)(B) ( Upon the tiling of a notiee or suggestion of bankruptcy all aetion against
the debtor shall he stayed for 30 days unless otherwise ordered by the eourt The plaintiff shall file proof that the lavmuit
in
question is not suhjeet to bankruptey or that the plaintifl has sought relief from the automatie stay within 10 days of the filing
of the suggestion 01 bankruptey Failure to provide proof as stated in the sentence abme or to obtain reliel from the automatie
stay within a time set by the eourt shall result in a dismissal without prejudiee 01 the claim against the delendant who
filed
bankruptey ) Tenn 81h Jud Dist Cir Ct Loeal R 24 02(c) ( In any citil case where the Court has reeeiwed notice 01 filing
of bankruptey of a defendant the ease will be purged from the docket at the expiration 01 six (6) months 1mm the notice
of
tiling 01 bankruptcy with costs assessed to plaintitl ) Wis R App P Loeal ()7aukee Cty R 201 5 ( Any party who has
knowledge or notiee 01 a bankruptey proCeeding in whieh the bankruptey debtor is a party to a pending action or
matter shall
inform the eourt 01 that taet Exeept as otherwise prmided in the United States Bankruptey Code sueh action or matter
shall
be dismissed or stayed upon notiee t0 the eourt that a bankruptcy proeeeding has been filed in the United States Bankruptey
Court with the understanding that the case may be reopened or stay fitted upon notifieation that the bankruptey proeeeding has
been terminated or the stay lifted )
4 See eg Cal Rules of Ct lst App Dist R 21 (e)( 0n the first eourt days of Januaty April July and ()etober the
debtor
or other party tor whose benefit a stay of proeeedings in this case has been taken must serve and tile briel status
reports
informing the eourt oi the status 01 the bankruptey ) Tex Dist Ct El Paso Cty Loeal R ”1 10(A)( l )( Whenever any party
to
litigation in these eourts tiles for proteelion under the bankruptcy 1am; 01 the United Wales it shall be the responsibility
of that
party a eounsel in these eourts to prompt1y notify the alfeeted eourts b) immediately telephoning the eourt eoordinator and
within three days 01 any bankrupte} tiling to provide written notiee to the afleeted eourts and all eounsel that a bankruptey
tiling has oeeurred giying the name and loeation 01 the bankruptey mutt the bankruptey eause number and style the
date of
titing and the name and address of eounsel tor the bankrupt Compliance with this rule will enable the courts to pass mer
eases
atteeted by bankruptey and to try other eases on the doeket Failure to eomply with this rule may be punished by sanetioning
counsel and in appiopriate eases the party onee the bankruptcy is eoneluded (paragraph breaks omitted))
‘ See In re Refimr) Hidweaiban Release Ling 2017 V I LEXI8 10] at ’10 14 (colleeting eases) see also e g Chute 1
Mill?) Civ No 15 ex 2226 WYD CBS 2016 U 8 Dist LEXIS 33312 *2 3 (D Colo Mar 15 2016)( Although no ease
law from the Tenth Circuit was loeated that is direetly on point eourts in other jurisdietions hint. addressed this issue
In
general these eourts have he1d that the automatic stay under seetion 362(a) does not prevent a eourt from dismissing
a ease
against the debtor on motion of the plaintifl pursuant to Rufe 41 In contrast courts hate held that where an order of dismissal
against the debtor would require the eourt to eonsider issues related to the underlying ease the dismissal would eonstitute an
impermissible continuation oi the iudieial proeeeding and would be barred by the automatie stay (eitations and paragraph
break omitted)) Cf. Amuld t Garlack Inc 288 F 3d 234 2'56 (5th Cir 2002) Denms 860 F 2d at 872 ( The need ot a court
to advanee a crowded docket and to preserve respect for the integrity of its internal proeedure is certainly suffieient to justify
the dismissal of aease ) Settles t Comm 1 [?STC 372 377 (2012)( [A] dismissal ot the instantcases would not constitute
acontinuation of the judicial proceedings ) Gallagheri Sports Pub! g LLC No 07 CV 2025 2009 U S Dist LEXIS
7892
*6 (C D II! Feb 4 2009) ( This court further eoncludes that the dismissal 01 a bankruptey debtor from a lawsuit does
not
Violate the automatic bankruptey stay A Rule 41 dismissal does not violate the automatic stay because the purposes
of the
Bankruptcy Code are in no way inlrinoed by dismissal of the action against the bankrupt party without any additional
cost or
risk to the bankrupt party or its creditors (eitation omitted)) Cornell 1 Pirates Penman 3d othrs No 2006 100
2008
U 8 Dist LEXI§ 93369 *5 n '1 (D V I ()et 27 2008) ( The Court may therefore dismiss Equivest pursuant to Rule 4|(a)(2)
despite the automatie stay ) 51m 1 Liiing Ctrs E Inc 249 B R 807 807 (S D Ala 2000)( [A] Rule4l dismissal does
not
violate the automatie stay beeause the purposes of the Bankruptcy Code are in no way infringed by the dismissal by a plaintiff
of a case against the bankrupt without any additional cost or risk to the bankrupt or its creditors ’ (quoting Chase Manhattan
Bank NA 1 Celotet Corp 852 F Supp 226 228 (SDNY 1994)) Mtrada Eneigi LLCt Oaszs Petra Inc
614 SW3d
439 440 (Tex App 2020) ( Dismissal of a debtor 1mm a lawsuit does not violate the bankruptey stay (eiting Thuesen
t
In re Cases Under Bankruptct Std) 2021 VI Super 41
Case Nos SX 2008 CV 00086/ 8X 2008 CV 00161/SX 2009 CV 00185 / SK 2012 CV 004?! l8X 2012 CV 00432
MEMORANDUM OPINION
Pace 9 01 17
to such dismissals
‘17 Ministerial acts even if undertaken in a state judicial proceeding subsequent to a bankruptcy
filing do not fall within the proscription of the automatic stay In re Scares 107 F 3d 969 973 74 ( lst
Cir 1997) A ministerial act is one that is essentially clerical in nature Id at 974 Frequently routine
scrivening such as recordation or entry on the docket follows on the heels of a judicial decision Id
Thus if the dismissal was ordeied from the bench before bankruptcy proceedings commenced reducing
that iuling to writing would be ministerial Such actions are ministerial and consequently do not
themselves violate the automatic stay even if undertaken after an affected party files for bankruptcy Id
However acts undertaken in the course of carrying out the core judicial function are not ministerial and
if essayed after bankruptcy filing will be deemed to violate the automatic stay Id Depending on the
federal circuit that is
118 There [is] a split among the circuits as to the ensuing validity of actions in violation of an
automatic stay and there i§ confusion in the use of the terms used to characterize the subsequent force and
effect of these actions Bronson v Umted States 46 PM 1573 1577 (Fed Cir 1995) ( Consequent
actions have been characterized as void voidable or merely invalid A majority of the circuits have held
that actions taken in violation of the automatic stay are void Still other courts have concluded that
actions in violation of the automatic stay are void yet went on to recognize an equitable exception to the
operation of the stay (collecting cases in footnotes) (footnotes omitted» see also York Ctr Park Dzst
Amelmne Ins Co
487 SW 3d 291 297 (Tex Ct App 2016) Barr 1 Altman
20 SW 3d 802 807 (Tex Ct App 2000)
( The dismissal 01 a detendant/debtor from a lawsuit does not violate the bankruptcy stay (Lollecting cases» But of Dan
20 S W "1d at 807 n 5 (Lolleeting contrary cases) see also 9 g Pope t Mamzlle Fawn Prod? Cmp
778 F 2d 238 2'19 (5lh
Cir 1985 )( We recognize that the stay by its statutory words operates against the commencement or continuation 01 judicial
proceedings No specific reterence is made to dismissal of judicial proceedings Nevertheless it seems to us that ordinarily
the stay must be construed to apply to dismissal as well ) McGuire 1 Champion Fence & Cons!) Inc
104 P 3d 7127 330
(Colo App 2004) ( Thus we Lonclude as did the court in 8111: that the operation of the stay does not depend on the outcome
of the proceedings and acts that favor the debtor are still void it they violate the automatic stay (citing Ellis 1 Como! Diesel
Elec Corp
894 F 2d 371 (10th Cir 1990))
[1116‘ Cases Undel Bankrupm Sim 2021 V1 Super 41
Case Nos 8X 2008 CV 00086/SX 2008 CV 00163 I 8X 2009 CV 00385 / 8X 2012 CV 00431 /8X 2012 CV 00432
MEMORANDUM OPINION
Page 10 of 17
t KrlllCh 40 F 3d 205 207 (7th Cir 1994) (comparing E1113 1 Consolidated D1656] Electric Corp 894
F2d 371 372 (10th Cir 1990) (void) with In re Szczlzano 13 F 3d 748 (3d Cir 1994) (voidable) but
declining to decide the issue on other grounds) Thus where an order of dismissal against the debtor
would require the court to consider issues related to the underlying case the dismissal would constitute a
continuation of the judicial proceeding and is therefore barred by the automatic stay Settles 138 T C at
376 However where the court simply dismisses the case without considering the merits of the underlying
case the dismissal would not constitute a continuation It is for this reason that several courts have held
that making a voluntary nonsuit is the precise opposite of the continuation of an action against the debtor
It amounts to a discontinuance or termination of the action which is to the debtor s advantage Seattle
Fir?! Nat Bank 1 Wemwoa' Lumber Inc
796 P 2d 790 794 (Wash Ct App 1990), accord 0mm
[meat [m t Dummm & Assam [m
760 S W 2d 371 374 (Tex App 1988)( The automatic stay is
violated by the commencement 0r continuation of a suit against the debtor A non suit is a termination
of a case and does not violate the terms of the automatic stay (citation omitted» The purpose of the
automatic stay is to prevent a race to the courthouse to obtain the debtor s assets and the scope of the stay
should be construed no more broadly than necessary to effectuate the purpose of the stay Wyssbrod I
Wzttyen 798 So 2d 352 359 (Miss 2001) Consequently dismissing a case filed by or against a debtor
with leave to reinstate if appropriate would not encourage or facilitate a race to the courthouse to obtain
assets so long as that dismissal is without prejudice and without preclusive effect
‘l[9 To explain once a bankruptcy petition is filed it operates an automatic stay on the
commencement or continuation of an action to recover a claim against the debtor Hating v
Loner) 228 A 3d 1148 1159 (Md 2020) (citation omitted) The automatic stay takes effect it remains
in effect until proceedings end or until relief from the stay is granted on motion ("Elbe Bankruptcy Code
identifies three instances when by operation of law the automatic stay terminates in a bankruptcy case
In )9 Cases Undel Bankruptu Sim 2021 VI §uper 41
Case Nos SX 2008 CV 00086 / 9X 2008 CV 00162/SX 2009 CV 00385 / §X 2012 CV 0043] ISX 2012 CV 00412
MEMORANDUM OPINION
Page 11 0f 17
(l) the time the case is closed (2) the time the case is dismissed or (3) the time a discharge is granted
or denied in a case under Chapter 7 Id (quoting I 1 U S C § 362(c)(2)) Creditors may also petition
for relief from the automatic stay under 1 1 U S C § 362(d) Id Once a bankruptcy case is closed the
creditors recover from available funds at their level of priority while the debtor receives a discharge of
remaining debts and a fresh start Id at 1160 By contrast a bankruptcy can end unsuccessfully by a
dismissal of the action Id (citing I l U S C §§ 707(a) l l 12(b)(1) and l307(b)) see also Id ( Under
Chapter 7 the court may dismiss a case for cause including if the debtor causes unreasonable delay that
prejudices their creditors does not pay required fees or fails to file required information (citing 1]
U S C § 707(a)) If a bankruptcy case is dismissed the debtor does not receive a discharge Instead the
automatic stay is dissolved and dismissal restoxes the assets and the patties to their prepetition status as
if the case had never been filed Id (citation omitted) If discharge from banktuptcy is denied it is a
punishment See Id ( Denial of discharge is an extreme sanction it is akin to financial capital
punishment It is reserved for the most egregious misconduct by a debtor (quoting In 1e Tauber 349
B R 540 545 (Bankr ND Ind 2006))
(HID Perhaps the single most defining feature of federal bankruptcy law in the United States is the
ultimate discharge of a person s pre existing debts Id at I 150 This discharge of indebtedness embodies
a deeply held American ideal the notion that despite bad luck or bad judgment people deserve a second
chance to build a life for themselves and contribute to our great national experiment Id The discharge
operates as a permanent injunction against the commencement 0r continuation of an action to collect
recover 0r offset any such debt as a personal liability of the debtor Boyle v PMA Med Specialists LLC
754 F App x 93 95 (3d Cir 2019) (ellipsis and brackets omitted) (quoting l l U S C § 524(a)(2)) If the
person is a business and the owners determine that the business is no longer a going concern the
discharge can take the form of liquidation of assets under Chapter 7 to pay claims including claims
In re Cases Undel Bankruptm Stat 702] VI Super4l
Case Nos SK 2008 CV 00086/SX 2008 CV 0016? /SX 2009 CV 00385 / SK 2012 CV 0043] ISX 20l2 CV 00422
MEMORANDUM OPINION
Page 12 of [7
asserted in pending lawsuits
€111 Section 502(c) of Title i l of the United States Code provides for the estatmat[ing] [of] any
contingent or unliquidated claim the fixing or liquidation of which would unduly delay the
administration of the case 11 U S C § 502(c)(1) Pending lawsuits which have not resulted in a
judgment against the debtor are considered contingent or unliquidated claims Cf l 1 U S C § 101(S)(A)
( The term claim means right to payment whether or not such right is reduced to judgment liquidated
uniiquidated fixed contingent matured unmatured disputed undisputed legal equitable secured or
unsecured ) Claimants meaning those with a claim against the debtor including claims in pending
lawsuits are expected to file proof of their claim% in the bankruptcy proceeding The bankruptcy court
then estimates the contingent claims a process the Superior Court of New Jersey succinctly explained
The Bankruptcy Code and Rules weie designed to implement a speedy efficient and
economical method for the determination and allowance of claims Based on this policy it
is clear that Congress intended that contingent or unliquidated claims be estimated by the
bankruptcy judges under section 502(c) using whatever method is best suited to the
particular contingencies at issue The language of Section 502(c) is mandatory not
permissive and imposes upon the court an affirmative duty to estimate any unliquidated or
contingent claim where the actual liquidation of the claim would unduly delay the
administration of the case The bankruptcy court simply values and estimates the amount
of the claim for purposes of its allowance discounting its value to reflect the uncertainty of
the contingency in order to enable the holder to share in the distribution of the insohent
estate Matter 0fL1qmdanon of Integrzt) Ins Co 691 A 2d 898 902 03 (N 1 Super Ct
1996) (ellipsis and citations omitted)
With reference to Chapter 7 cases specifically which is the type of case Caribbean Auto Mart commended
the New Jersey Superior Court explained that
[i]n a Chapter 7 iiquidation case the courts do not have the luxury of an ongoing business
to pay contingent claims when finally liquidated as they do in a rehabilitation ease Thus
waiting for contingent claims to mature in liquidation cases would unduly delay the
administration of the case Consequently a bankruptcy court has to determine some basis
upon which to base an estimate of the amount of the claim This task must be accomplished
as it is mandated by the Code the goals of which are (l) to promote a fair distribution to
creditors through a realistic assessment of uncertain claims and (2) to avoid the need to
await the resolution of pending or future outside lawsuits to determine issues of liability or
In :6 Cases Undel Bank; 11pm Sim 2021 VI Super4l
Case Nos 9X 2008 CV 00086/ SK 2008 CV 0016? / SK 2009 CV 00185 / SX 2012 CV 00431 /SX 2012 CV 00432
MEMORANDUM OPINION
Page H 0f 17
amounts owed by means of antiCLpating and estimating the likely outcome of these actions
Id at 903
(1112 Although Caribbean Auto Mart commenced a Chapter 7 proceeding in 2013 approximately eight
years later it remains pending As a result the cases listed above in the caption, and at least eight other
matters remain pending but stayed in the St Croix District of the Superior Court of the Virgin Islands 6
The question the Court put to the solvent parties in these cases was essentially what harm is there in
dismissing each case without prejudice with leave to reopen if necessary If Felix Richardson and
Donnely Xavier had to file proof of their claims in the bankruptcy proceeding and if the bankruptcy court
was supposed to estimate those claims and if Caribbean Auto Mart s ultimate discharge from bankruptcy
proceedings will transform the automatic stay into a permanent injunction and preclude further
prosecution by Felix Richardson and Donnely Xavier then these cases may never be restored to active
status on the Superior Court 5 docket This was the concern the Court had
1113 In researching this question without the benefit of briefing from the parties the Court
uncovered only one instance where there may in fact be some harm broadly speaking from dismissing
a case under a bankruptcy stay Several courts have concluded that the dismissal of a pending case under
a bankruptcy stay deprived the claimant of standing when the dismissal was on the merits 7 Moreover
“ F1! 1m William“ Canbbetm Aura Mart St CI nit Inc et a] Case No SX 2006 CV 00295 (DAB) Canbbean
AutoMcut
SI Cram Inc 1 Fianna“) 0 Hassell Case No 9X 2006 CV 0057 (DAB) Annelle nghr er a] l Caubbean
Auto Man
ofSt Crow Int er a] Case No SX 2008 CV 00280 (DAB) Aslzeem Clank; 6! (41 l Caubbean Auto Mart
of Sr Cram
[m e! a] Case No 9X 2008 CV 0046? Ram 5 Auto Repmr 1 Caribbean Auto Mart of 31 Crow 1m Case No SK
2009
CV OOSSHJM) LeonA Richardson III I Clmsler Dodge JeepofSt Crop: Case No 9X 2010 CV 0038? (HWLW)
Leon
Richardson \ Callbbean Auto Mart 0fSt Czatx Int 6! al Case No SX 201 1 CV 00256 (HWLW) and Seterm
Dam 1
Cartbbecm Auto Group d/b/a Cmtbbean Auto MaIrSr Crow Case No 9X 2011 CV 00261 (DAB)
7368 eg In re Ernst No CC 04 1052 McBMa 2005 Bankr LEXIS 3422 *19 20(B A P 9th Cir Nov
21 2005)(voluntary
dismissal with prejudice in state court precluded adversary proceeding in bankruptcy court and deprived creditor
01 standing
to object to debtor s discharge) ( {T]he appellant 5 claim is no longer subject to any dispute The appellant
8 claim does not
exist It has been dismissed null prejudice and therefore adjudicated 0n the merits The appellant n0 Ionger
has a right to
payment and hence has no claim that could be, affected should the appellee s discharge be denied Without his creditor
status
the appellant does not have standing to challenge the appellee s discharge under section 727 (emphasis added»,
In 1e
Anthem 239 F 3d 708 712 n 23 (5th Cir 2001) ( [A] creditor has no standing to pursue adversary claims in bankruptcy
when
the creditor s only basis for doing so was her ownership of a claim that was earlier dismissed in state court Dismissal
of a
In re Cases Under Bankmptct Stat 2021 VI Super 41
Case Nos 8X 2008 CV 00086/ 8X 2008 CV 0016? I 8X 2009 CV 00385 / 8X 2012 CV 00431 ISX 2012 CV 00412
MEMORANDUM OPINION
Page 14 01 17
even though a dismissal may be without prejudice it can be dispositive and thus be on the merits if it
is the second dismissal of the same claim See V I R Civ P 41(a)(l)(B) ( [Hf the plaintiff previously
dismissed any federal or Virgin Islands court action based on or including the same claim a notice of
dismissal operates as an adjudication 0n the merits ) ace 0rd Fed R Civ P 41(a)(1)(B) (same) Thus if
the claimant previously flied and voluntarily dismissed the same claim or if the plaintiff voluntarily agrees
to dismiss with prejudice claims that are under an automatic stay then that dismissal could preclude him
from recovering in the bankruptcy proceeding because he may then be deprived of creditor standing
tfll4 Taking judicial notice of the Superior Court 5 own files see Goodnm 1 Fawkes 67 V I 104 107
n 2 (Super Ct 2016) the Court finds no harm here in dismissing the above captioned cases without
prejudice or similarly in dismissing Caribbean Auto Mart s reconsideration motion without prejudice
Neither Felix nor Cambridge filed a civil action against Caribbean Auto Mart that was dismissed
Assuming that the two dismissal rule could apply to petitions for judicial review but cf. Sparks Nugget
Inc 1 Scott
583 F Supp 78 80 n 2 (D Net 1984) no pievious‘ case was filed by Caribbean Auto Mart
to seek review of the award to Felix of unemployment benefits or the determination that Cambridge and
Llaim precludes any possibility 01 collectino any money ), In re Vahlsmg
829 F 2d 565 568 (5th Cir 1987) ( A1th0ugh
Stanley was correctly listed as a contingent LrLdiIOI‘ in Vahlsing s bankruptcy petition once the New Jersey Qurrogate Court
dismissed her claim Stanley 10st creditor status Not being a ereditor Stanley did not have the riaht under 1 l U S C 9‘ 727(c)(1)
to oppose Vahlsing sdis‘charge ), In 1e Tomzsend N0 11001671313 2015 Bankr LEXIS 3353 “”11 (Bankr S D Miss
Set)
'10 2015) (dismissal order and judgment entered in pending lawsuit) ( At the time Townsend filed her voluntary petition
under
Chapter 7 01 the Bankruptcy Code on January 18 201 1 she was a named defendant in the pending lawsuit which New
some
had filed in the USDC At that time Newsomt, was asserting a claim against Townsend as defined by 1 I U S C § 101(5)
and
was a creditor of Townsend However when Newsome 3 claim against Tow mend was dismissed by the USDC on October 2‘1
2013 Newsome was no longeracreditor ofTownsend ) In re Green 133 B R 185 187 (E D Va 1991)( Appe1lanl 5 claim
to creditor status cannot be based on a lone counterclaim that has been finally dismissed ) Bur cf. In re Clark No
CC 1 I
1322 KiMkH 2012 Bankr LEXIS 2379 *16(B A P 9th Cir May 25 2012)( Strands voluntary dismissal without prejudice
fails to satisfy one 0fthe requirements 01 both preclusion doctrines a final judgment on the merits As a result neither doctrine
prevented Strands 1mm bringing their claims in the bankruptcy court or the state court ) In 1e Truong Nos 03 40283 (NLW)
03 2681 2004 Bankr LEXIS 2546 *12 13 (Bankr D N J Aug 27 2004) (rejecting assertion that state courtdismissal
barred
federal prosecution 01 creditor claims) ( The Superior Court entered the dismissal order solely because Truong filed a petition
in bankruptcy and the automatic stay prevented the State Court Action from going forward Accordingly there was no
final
substantive ruling which this Court has rendered ineffectual by permitting amendment of the complaint )
In re Caves Under Bankruptcy Sim 2021 VI Super4l
Case Nos 9X 2008 CV 00086 / 9X 2008 CV 0016? / 9X 2009 CV 00385 I 5X 2012 CV 0043] /§X 2012 CV 00412
MEMORANDUM OPINION
Page 15 of 17
Donner Xavier were wrongfully discharged 3 More importantly however the two dismissal rule
generally applies only when the dismissal is done voluntarily by the plaintiff and not involuntarily by the
court Cf. ASX 1m Com t Newton 183 PM 1265 1268(llth Cir 1999) Thus dismissingthese cases
shou1d not deprive the claimants 0f creditor standing in the bankruptcy court
({[15 The only remaining question is how to proceed with regard to Felix s pending claims against
Lancane The automatic stay does not stay the entire proceeding where the debtor is one of several
defendants The stay generally does not protect persons other than the debtor such as principals and
officers and does not protect non bankruptcy co defendants of the debtor Wyssbrod v Wzttjen 798 So
2d 352 359 (Miss 2001) (citation omitted) Instead the debtor must ask the bankruptcy court to extend
the stay to any co defendants Neither Caribbean Auto Mart nor Lancane have informed this Court that
the Bankruptcy Court had extended the automatic stay to Felix s claims against Lancane Furthermore
Felix did not respond when the Court ordered him to show cause why his claims against Lancane should
not proceed separately Thus Felix 3 Claims against Lancane could dismissed for failure to prosecute
since the bankruptcy stay does not apply to Lancane and for failing to respond to the Court 9 Order See
V I R Civ P 41(b) ( If the plaintiff fails to prosecute 0) to comply mt]: a court order a defendant
may move to dismiss the action or any claim against it (emphasis added» In this instance however the
Court will instead sever and dismiss Felix 5 claim against Caribbean Auto Mart without prejudice so his
claims against Lancane can proceed Cf. In re Refinen Hydrocarbon Release Lttzg 2017 V I LEXIS
101 at >“l4 ( [I}n some courts it is common practice to sever the action as to the debtor and to proceed
3 There is some authority holding that proceedings before quasi administralixe ageneies such as departments 01 labor or
workers compensation boards including presumably appeals or judicial reviews of such decisions might not he stayed
automatically see e g In re Mansfield Tue & Rubber Co 660F 2d [[08 (6th Cir l981)(w0rkers compensation)' Ra orback
Vacuum l Dzr Ark Empl Sec Dept 865 S W 2d 649 (Ark Ct App I993) partieularly where any payment would not come
lrom the debtor itself but rather from a gOVernment run fund Aamd Feltx
2021 VI Super 9 at ‘11 4 n 2 Since the parties failed
to address this issue the Court assumes for purposes of this Opinion that the judicial review proceedings commenced by
Caribbean Auto Mart are stayed
In re Cases Under Bankruprct Sun
2021 VI Super 41
Case Nos 9X 2008 CV 00086 / 9X 2008 CV 00163 I SX 2009 CV 00385 / 9X 2012 CV 00431 fSX 2012 CV
00432
MEMORANDUM OPINION
Page 16 01 17
against the solvent codefendants (ellipsis and citation omitted)
III CONCLUSION
(El 16 [Skate [and territorial] courts have jurisdiction to interpret the provisions of the bankruptcy code
and orders of the bankruptcy court to determine whether under their plain terms the automatic stay
plovision applies to a state [or territorial} court proceeding U S Bank Nat [Ass n 1 Crawford 219
A 3d 744 760 (Conn 2019) However territorial and state courts do not have jurisdiction to change the
status quo by modifying the reach of the automatic stay provision either by extending the stay to
proceedings to which it does not automatically apply or by granting relief from the stay in proceedings to
which it does automatically apply Id Rather any modification of the stay must be sought in bankruptcy
court Id Here neither the solvent n01 the insolvent parties sought modification of the automatic stay
from the bankruptcy court As a result all five cases remain stayed and pending for approximately eight
years after bankruptcy proceedings commenced
‘1117 Since [tlhe bankruptcy court does not have the power to preclude another court from dismissing
a case on its docket or to affect the handling of a case in a manner not inconsistent with the purpose of the
automatic stay[ 1 Felzx 2021 VI Super 9 at ‘11 5 (quoting Demm
860 F 2d at 872) and since [skate and
territorial courts have found that the need of a court to advance a crowded docket is certainly sufficient
to justify the dismissal of a case[ ] Mollm
2020 VI Super 78 at ‘i{ 7 (quoting In re Refinery throcarbon
Release ng 2017 V I LEXIS 10] at *1 1) this Court concludes that the best policy for the Superior
Court concerning cases stayed as a result of bankruptcy proceedings is to dismiss without prejudice so
long as the dismissa1 is not dispositive and with leave to move to reopen the case None of the claims at
issue here were previously dismissed Thus a dismissal without prejudice should not have preclusive
effect Moreover since Felix Donnely Xavier and Cambridge had to file proof of their tort claims and
possibly their unemployment benefits in the bankruptcy proceedings those claims eventually should be
In re Cases Under Bank! 11pm Stat
202] VI Super 41
Case Nos SX 2008 CV 00086/SX 2008 CV 00161/9X 2009 CV 00385 /SX 20]” CV 0043! /SX
2012 CV 00432
MEMORANDUM OPINION
Pa e 17 of I?
resolved by the Bankruptcy Court Accordingly for the reasons stated above the Court will dismiss
the
reconsideration motion Caribbean Auto Mart filed in the judicial review proceeding concerning Felix
dismiss the other two judicial review proceedings as well as Cambrzdge In Fehx because Felix 9 claims
against Lancane a non bankrupt co defendant are still pending the Court will instead dismiss the claims
against Caribbean Auto Mart without prejudice so Felix can proceed against Lancane separately
Appropriate orders follow in each case
DONE this 52 day of April 2021
P x 3 «j ‘
HAROLD W L WILLOCKS
ATTEST Presiding Judge of the Superior Court
Tamara Charles
Clerk of the Count
By W
Court CI rk i f
Dated 5/ 2t '20 2/