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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
(Martinsburg)
In re
PANTHERA ENTERPRISES, LLC,
BK No. 2:19-bk-00787
Chapter 11
Debtor.
MOTION OF DARRICK AND EMILY GUST FOR RELIEF FROM
AUTOMATIC STAY TO PURSUE INSURANCE WITH COMBINED REQUEST FOR
ALLOWANCE OF ADMINISTRATIVE EXPENSE CLAIM
Darrick and Emily Gust (“Movants”) hereby request that this Honorable Court grant the
within Motion Of Darrick And Emily Gust For Relief From Automatic Stay To Pursue Insurance
With Combined Request For Allowance Of Administrative Expense Claim (the “Motion”),
pursuant to 11 U.S.C. (the “Bankruptcy Code”) §§ 362 and 503(b)(1) and applicable authority. In
support of this Motion, Movants state as follows:
Introduction
Darrick Gust was severely injured when he lost his hand during a post-petition explosion
that occurred on real estate that the Debtor, Panthera Enterprises, LLC (“Debtor” or “Enterprises”)
leases to non-debtor Panthera Training, LLC as part of the Debtor’s post-petition operations.
Movants are informed and believe that there are one or more insurance policies, owned both by
the Debtor and also owned by Mr. Gust’s employer, Panthera Training, LLC, covering Movants’
claims against Debtor.1 Movants seek relief as follows: First, Movants seek allowance of a
contingent, unliquidated administrative expense claim against the Debtor for a post-petition injury;
Second, Movants seek relief from the automatic stay under 11 U.S.C. §362 for cause file a civil
1 Movants understand Panthera Training, LLC has obligations to indemnify the Debtor and to obtain
third-party insurance covering the Debtor.
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action in state court to fix their claims against the Debtor and to further seek recovery from
applicable insurance coverage. Third, and only in the event insurance covering Movants’ claims
against the Debtor (along with other non-debtor sources of recovery) is insufficient to satisfy any
judgment granted in Movants’ favor, Movants would seek to return to this Court to fix their
administrative expense claim and seek payment of the same from the Debtor’s estate.
Jurisdiction, Venue, and Statutory Predicates for Relief
1.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §1334.
2.
Venue is proper in this District pursuant to §§ 1408 and 1409(a) of the Bankruptcy
Code.
3.
This underlying Motion is a core proceeding pursuant to 28 U.S.C. §157(b)(2)(A)
and (B).2
4.
The statutory predicates for relief herein include §§ 362, 503(b)(1) and 105(a) of
the Bankruptcy Code.
Factual Background
5.
The Debtor filed its voluntary petition for protection under Chapter 11 of the United
States Bankruptcy Code on September 13, 2019 ("Petition Date"), initiating this bankruptcy case.
6.
The Debtor is operating its business and managing its properties as a debtor in
possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code.
7.
On September 29, 2019, Darrick Gust was severely injured when a flash bang
grenade exploded during a training exercise. At the time, Darrick Gust was employed by non-
2 The substantive tort claims are not a core proceeding and may not be heard by the Bankruptcy Court.
Movants do not submit to this Court’s equitable jurisdiction with respect to the underlying claims and do
not waive the right to a jury trial.
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debtor, Panthera Training, LLC, and the training exercises were conducted on real estate leased by
the Debtor to Panthera Training, LLC on a post-petition basis.
8.
Darrick Gust has claims for personal injury arising from the post-petition explosion
on the Debtor’s premises. Emily Gust has related claims, including but not limited to, loss of
consortium arising from Darrick Gust’s injuries.
9.
Movants are informed and believe that there are one or more insurance policies,
owned by the Debtors, and also owned by non-debtor Panthera Training, LLC, covering Movants’
claims against the Debtor.
Relief Requested
Relief from the Automatic Stay
10.
Cause for relief from the automatic stay exists because the Debtor has no interest
in any property at risk that is necessary for an effective reorganization.3 11 U.S.C. §362(d)(2). See
also State Bank v. Miller (In re Miller), 513 Fed. Appx. 566, 575, 2013 U.S. App. LEXIS 2582,
*24, 2013 FED App. 0134N (6th Cir.) (“The bankruptcy court may grant relief from the automatic
stay "for cause," which includes inadequate protection of the Bank's interest in collateral, or when
the debtor has no equity in the property and the property is unnecessary to reorganization”).
11.
Stay relief is mandatory where the Debtor has no equity in the property sought (i.e.
insurance proceeds). Elliott v. Hardison, 25 B.R. 305, 308 (E.D. Va. 1982). In Elliott, the movant,
a personal injury claimant, sought stay relief to seek recovery from an insurance policy insuring
the Debtor. The Court discussed the legislative history behind the provisions of 11 U.S.C. §362:
3 Because Movants presently seek only a contingent, unliquidated administrative expense claim and seek
recovery from available insurance and non-debtor sources, there is no present risk to property of the
estate.
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The legislative history to § 362 is abundantly clear on the point that Congress
intended the bankruptcy courts to be required to lift the stay in appropriate
circumstances. The Senate report states: Subsection (d) requires the court, upon
motion of a party in interest, to grant relief from the stay for cause, such as by
terminating, annulling, modifying, or conditioning the stay. The lack of adequate
protection of an interest in property is one cause for relief, but is not the only cause.
Other causes might include the lack of any connection with or interference with the
pending bankruptcy case. Generally, proceedings in which the debtor is a fiduciary
or involving postpetition activities of the debtor, need not be stayed because they
bear no relationship to the purpose of the automatic stay, which is protection of the
debtor and his estate from his creditors.
Upon the court's finding that the debtor has no equity in the property subject to the
stay and that the property is not necessary to an effective reorganization of the
debtor, the subsection requires the court grant relief from the stay . . . .S.Rep. No.
989, 95th Cong., 2d Sess. 50 (1978), reprinted in [1978] U.S.Code Cong. &
Ad.News 5787, 5838 (emphasis added). Matter of Holtkamp, supra, at 508.
Elliott v. Hardison, 25 B.R. 305, 308 (E.D. Va. 1982). This Court continued: “Not to allow Mr.
Elliott to proceed with his personal injury claim effectively would preclude him from any
possibility of recovering for his alleged injuries, and might allow the insurance company to escape
a risk which it has accepted . . . .” Id. at 310.
12.
Movants have been provided with insurance certificates for multiple insurance
policies that may cover all of Movants’ claims. The Debtor has no equity in any of the insurance
proceeds as they are not property of the estate and they cannot be necessary for an effective
reorganization. Accordingly, cause exists to grant relief from the automatic stay to allow Movants
to initiate a civil action in state court to fix and liquidate their claims against the Debtor (and any
applicable non-Debtor).
Administrative Expense Claim
13.
Movants are entitled to the allowance of an administrative expense claim pursuant
to §503(b)(1)(A) of the Bankruptcy Code, as well as pursuant to the doctrine set forth in Reading
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Co. v. Brown, 391 U.S. 471 (1968) holding that tort liabilities are ordinarily incident to the
operation of the business of the estate and, therefore, are allowable as actual and necessary costs.
See Reading Co. v. Brown, 391 U.S. 471, 485, 88 S. Ct. 1759, 20 L. Ed. 2d 751 (1968)).
14.
Section 503(b) of the Bankruptcy Code provides, in relevant part:
(b) After notice and a hearing, there shall be allowed administrative expenses,
other than claims allowed under section 502(f) of this title, including—
(1)(A) the actual, necessary costs and expenses of preserving the estate…
15.
Courts have recognized a narrowly tailored exception to the traditional test for
allowing an administrative expense by acknowledging that, under certain circumstances, a claim
may qualify as an administrative expense if it: (1) arises out of a post-petition transaction with the
debtor-in-possession or trustee; and (2) results in distinct, actual, post-petition harm to the
claimant. This line of cases stems from the Supreme Court’s opinion in Reading, supra. In
Reading, a receiver’s negligence in operating the debtor’s business resulted in a fire which not
only consumed the debtor’s property, but destroyed real and personal property of neighboring third
parties. The Supreme Court held:
At the moment when an arrangement is sought, the debtor is insolvent. Its existing
creditors hope that by partial or complete postponement of their claims they will,
through successful rehabilitation, eventually recover from the debtor either in full
or in larger proportion than they would in immediate bankruptcy. Hence the present
petitioner did not merely suffer injury at the hands of an insolvent business: it had
an insolvent business thrust upon it by operation of law.
Reading, 391 U.S. at 478. The Reading Court, based on considerations of “fundamental fairness,”
ruled “that damages resulting from the negligence of a receiver acting within the scope of his
authority as receiver give rise to ‘actual and necessary costs’ of a Chapter XI arrangement.” Id. at
485. See also In re Resource Technology Corp., 662 F.3d 472, 476 (7th Cir. 2011)(citations
omitted).
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A tort victim . . . is a creditor, but not a creditor whose actions benefit his
debtor, the tortfeasor. Yet in Reading v. Brown, 391 U.S. 471, 88 S.Ct. 1759, 20
L.Ed.2d 751 (1968), the Supreme Court held that at least in a Chapter 11
bankruptcy, tort claims arising from the continued operation of the bankrupt
business should be treated as administrative claims, like other post-petition
expenses. . . . Tort liability is an expense of doing business, like labor or material
costs, and should be treated the same way. Businesses operating in bankruptcy that
were excused from tort liability would have an inefficient competitive advantage
over their solvent competitors—and deficient incentives to use due care in the
operation of the business.
Id. Movants assert that their claims fall within the Reading doctrine because the Movants’ claims
arose as a result of a debtor-in-possession operating its business post-petition as a lessor of the
premises where the injury occurred.
16.
By this Motion, Movants request the allowance of a contingent/unliquidated
administrative expense claim.4 Movants further seek the ability to liquidate their post-petition
administrative expense claim in state court in West Virginia as part of the effort to seek recovery
of insurance proceeds.5 Movants agree to first seek recovery from the following combined sources
available for payment of Movants’ claims: (i) insurance covering claims against the Debtor, (ii)
insurance covering claims against any non-debtor, and (iii) any direct recovery against any non-
debtor. Only in the event all sources listed above are insufficient to satisfy any judgment in
Movants’ favor, will Movants seek to fix and obtain payment of an administrative expense claim.
WHEREFORE, Movants respectfully requests that the Court enter an Order, in the form
attached hereto: (i) granting relief from the automatic stay under 11 U.S.C. §362 for cause to permit
Movants to proceed against the Debtor up to the limits of any insurance policies insuring the
4 Allowance of the claim would protect Movants against an administrative expense bar date that could run
during the pendency of the Debtor’s bankruptcy. Alternative, the Court could estimate or fix the claim
based upon the amount of any deductible or self-insured retention that may be applicable under one of the
applicable insurance policies.
5 Movants anticipate that defense costs will be borne by the applicable insurer(s), posing no cost or risk to
the Debtor’s estate in the fixing of Movants’ administrative expense claim.
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Debtor and covering Movants’ claims; (ii) allowing Movants a contingent, unliquidated
administrative expense claim pursuant to 11 U.S.C. § 503(b) (with the ability to later seek payment
of the same if there is a deficiency in other sources of recovery); and (iii) granting such other and
further relief as the Court deems just and proper.
Dated: May 28, 2020
Respectfully submitted,
DARRICK AND EMILY GUST
By Counsel:
/s/ Spencer D. Elliott
Spencer D. Elliott (WVSB 8064)
LEWIS GLASSER PLLC
P.O. Box 1746
Charleston, WV 25326
(304)345-2000 Tel
(304)343-7999 Fax
selliott@lewisglasser.com
CERTIFICATE OF SERVICE
I, Spencer D. Elliott, counsel for Movants, hereby certify that a true and correct copy of the
MOTION OF DARRICK AND EMILY GUST FOR RELIEF FROM AUTOMATIC STAY
TO PURSUE INSURANCE WITH COMBINED REQUEST FOR ALLOWANCE OF
ADMINISTRATIVE EXPENSE CLAIM has been served upon all parties designated to receive
service via the CM/ECF Electronic Notification System on May 28, 2020.
/s/ Spencer D. Elliott (WVSB 8064)
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