In re Lengacher, 485 B.R. 380

Debtors own Manor House Assisted Living and Essen House Restaurant LLCs; Richland Bank sued both entities in state court before bankruptcy.
After filing, Manor House sought a stay suggestion in its case and debtors in the other case, and the state court stayed both actions in their entirety.
Bank sought relief from the automatic stay in this court to (1) proceed against Manor House in the first action, (2) proceed against non-debtor defendants in the second, and (3) obtain limited discovery from the debtors.
Bank argues § 362(a) does not apply to these actions and they are not stayed.
Debtors urge an expansive interpretation of § 362(a), but court adopts a narrow reading and defers extension of the stay to non-debtors; court also notes the proper vehicle for extending stay would be an injunction under § 105 and potentially an adversary proceeding.
Court finds the only stay that prevents the bank’s proposed actions is the state-court stay, not § 362(a); relief from stay is moot and must be sought in Ohio; an appropriate order will be entered.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does §362(a) stay actions against non-debtor co-defendants extend to Manor House and Essen House?	Richland Bank argues §362(a) does not extend to non-debtors.	Debtors argue for an expansive stay to include debtors’ entities.	No; §362(a) does not stay actions against non-debtors.
Should the court extend the stay to non-debtors via §105 injunction?	Bank contends for extension to protect reorganization.	Debtors argue no basis for broad injunction in this proceeding.	Extension via §105 not warranted here; injunction would require adversary proceeding.
Is relief from stay proper where the stay does not cover the actions?	Bank seeks relief from a stay that may not exist for these actions.	Debtors rely on the plain language of §362(a).	Relief from stay moot; must seek relief in Ohio state court.
Can the bank obtain discovery from debtors in the non-debtor actions?	Discovery from debtors is allowed in non-debtor actions.		Discovery is not itself barred to non-debtors; scope limited by §362(a).

Fernstrom Storage & Van Co. v. Co., 938 F.2d 731 (7th Cir. 1991) (stay limits and non-debtor liability distinctions)
Patton v. Bearden, 8 F.3d 343 (6th Cir. 1993) (non-debtor co-obligors and scope of stay)
Pitts v. Unarco Industries, Inc., 698 F.2d 313 (7th Cir. 1983) (non-debtor entities and automatic stay boundaries)
Maritime Electric Co. Inc. v. United Jersey Bank, 959 F.2d 1194 (3rd Cir. 1991) (not all proceedings in a case are stayed; identities matter)
Winer, 158 B.R. 736 (N.D. Ill. 1993) (stay cannot be invoked to halt effects on a debtor’s stock value)
Mahurkar Double Lumen Hemodialysis Catheter Patent Litigation, 140 B.R. 969 (N.D. Ill. 1992) (no equitable extension of the stay beyond its plain language)
In re Gruntz, 202 F.3d 1074 (7th Cir. 2000) (plain-language interpretation of §362(a) limitations)
Pettibone Corp. v. Easley, 935 F.2d 120 (7th Cir. 1991) (courts decide the effect of stay across jurisdictions; bright-line rules)