540 B.R. 637
Bankr. N.D. Ill.2015Background
- Caesars parent CEOC and several subsidiaries filed Chapter 11; an involuntary petition against CEOC preceded voluntary filings by CEOC and many affiliates.
- The National Retirement Fund (NRF) sponsors multiemployer pension plans; it expelled five Caesars employers from the plan on Jan. 12, 2015, and later sent a withdrawal-liability notice/demand on Feb. 13, 2015 to non-debtor affiliates CEC and CERP.
- The expulsion notice and the Feb. demand expressly targeted non-debtors and stated they should not be deemed to violate any automatic stay in the then-pending involuntary case.
- Debtors (CEOC and subsidiaries) moved to enforce the automatic stay under 11 U.S.C. § 362(a), arguing the NRF’s expulsion and the demand were effectively directed at debtors because ERISA treats controlled-group members as jointly liable for withdrawal liability.
- NRF argued it directed its actions only at non-debtors, and the automatic stay protects only debtors, estate property, and property of the estate; NRF had filed a proof of claim but had not sued or demanded payment from the debtors.
- The bankruptcy court found no factual disputes and denied the motions to enforce the stay, concluding the NRF’s actions were directed at non-debtors and did not violate § 362(a).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NRF's expulsion of non-debtor controlled-group employers violated the automatic stay because it triggered withdrawal liability as to debtors | Expulsion of employers caused CEOC and other debtors to incur withdrawal liability as controlled-group members, so the expulsion was effectively directed at debtors and violated § 362(a) | Expulsion was directed at non-debtors; the stay protects only debtors and estate property, not independent non-debtors | Denied — expulsion targeted non-debtors; § 362(a) does not bar actions against non-debtors |
| Whether NRF’s Feb. 13 notice/demand to non-debtor affiliates violated the automatic stay because ERISA imputed notice to all controlled-group members (including debtors) | Notice to CEC/CERP constituted notice to all controlled-group members (including debtors), so it violated the stay and is void as to debtors | Notice was expressly addressed only to non-debtors; the stay does not prevent plan from collecting from non-debtor controlled-group members | Denied — notice/demand aimed at non-debtors; plan may pursue non-debtor affiliates despite a debtor in the group |
Key Cases Cited
- Johnson v. Smith, 575 F.3d 1079 (10th Cir.) (motion to enforce automatic stay is a core bankruptcy proceeding)
- Reedsburg Util. Comm’n v. Grede Foundries, Inc., 651 F.3d 786 (7th Cir.) (automatic stay is a fundamental debtor protection)
- Fox Valley Constr. Workers Fringe Benefit Funds v. Pride of the Fox Masonry & Expert Restorations, 140 F.3d 661 (7th Cir.) (automatic stay does not apply to non-debtors)
- Central States, Se. & Sw. Areas Pension Fund v. Slotky, 956 F.2d 1369 (7th Cir.) (withdrawal-liability demand may be ineffective as to a debtor but remains effective against nonbankrupt controlled-group members)
- Central States, Se. & Sw. Areas Pension Fund v. CLP Venture, LLC, 760 F.3d 745 (7th Cir.) (controlled-group members are jointly and severally liable for withdrawal liability)