Carroll v. Fortuna Auction LLC
1:23-cv-07410
| S.D.N.Y. | Apr 7, 2025Background
- Plaintiff Anissa Carroll filed a lawsuit against Fortuna Auction LLC and Herbert John Saxon alleging violations of the Fair Labor Standards Act and New York Labor Law.
- Fortuna Auction LLC filed for bankruptcy under Chapter 11 on April 1, 2025, and notified the court on April 2, 2025.
- Section 362(a) of the Bankruptcy Code imposes an automatic stay on actions against debtors when a bankruptcy petition is filed.
- Carroll asserts claims against both Fortuna and Saxon, seeking to hold them jointly and severally liable.
- The court examined whether the automatic stay should be extended to the non-debtor co-defendant, Saxon, given the possible economic impact on Fortuna’s bankruptcy estate.
- The court fully stayed the action as to both defendants pending developments in the bankruptcy proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the automatic bankruptcy stay apply to non-debtors? | Stay should not automatically extend to Saxon | Bankruptcy stay should extend due to joint/several liability | Court extends the automatic stay to apply to Saxon as well, due to potential economic impact on Fortuna. |
| Is Saxon jointly and severally liable with Fortuna? | Claims joint/several liability on most claims | Joint/several liability could impact Fortuna's estate | The joint/several liability means continued action against Saxon could harm Fortuna's bankruptcy estate. |
| Should litigation against Saxon proceed independently? | Yes, as non-debtors are typically not covered by stay | No, as this would have adverse economic effect on debtor | Court finds unique circumstances warrant stay extension due to identity of obligations. |
| Required case management during the stay | Seeks continued updates to court | Not specifically addressed | Plaintiff must file case updates every three months until the stay is lifted. |
Key Cases Cited
- Queenie, Ltd. v. Nygard Int’l, 321 F.3d 282 (2d Cir. 2003) (automatic stay can extend to non-debtor if immediate adverse economic effect on debtor’s estate)
- Teachers Ins. & Annuity Ass’n v. Butler, 803 F.2d 61 (2d Cir. 1986) (automatic stay under § 362(a) does not ordinarily cover non-bankrupt co-defendants)
- In re Fogarty, 39 F.4th 62 (2d Cir. 2022) (automatic stay protects bankruptcy estate from actions potentially dissipating assets)