476 B.R. 540
Bankr. N.D. Ill.2012Background
- Involuntary chapter 11 petition filed against Sweports on April 9, 2012; no order for relief entered yet.
- Norwex had filed a prior action against Sweports in the Northern District of Texas seeking declaratory relief on patent infringement and validity.
- That Texas action was transferred to this district and docketed as Norwex USA, Inc. v. Sweports, No. 12 C 1933.
- Sweports moved for relief from the automatic stay to permit the Norwex action to proceed; Norwex opposed.
- Norwex argued a debtor cannot seek stay relief to vindicate others’ rights, and that an alleged debtor in an involuntary case has no right during the gap period to obtain stay relief.
- The court denied Sweports’ motion, holding the debtor cannot procure stay relief for Norwex’s action and cannot act during the involuntary gap period to bind the estate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a debtor can seek stay relief to advance third-party rights. | Sweports contends a party in interest may seek relief from the stay. | Norwex argues a debtor cannot seek stay relief to vindicate others’ rights. | Denied; debtor cannot seek relief to advance others’ rights. |
| Whether an alleged debtor in an involuntary case can obtain stay relief during the gap period. | Sweports seeks relief during the gap period. | Norwex contends no standing to obtain relief during the gap period. | Denied; gap-period relief unavailable. |
| Whether Sweports may seek stay relief for Norwex’s benefit or for its own defense in the Norwex action. | Sweports seeks to lift the stay to defend the Norwex action. | Norwex’s rights cannot be pursued by Sweports via stay relief. | Denied; rights to stay relief belong to Norwex, not Sweports. |
| Whether standing requirements bar Sweports from obtaining stay relief to defend Norwex’s action. | Sweports argues it has standing as a party in interest. | Norwex argues lack of standing to vindicate third-party rights. | Denied; Sweports lacks standing to vindicate Norwex’s rights. |
| Whether the patent-in-suit constitutes estate property permitting relief considerations under §303(f). | Sweports asserts patent is estate property and subject to §303(f) rights. | Norwex contends the stay should remain to protect estate interests. | Denied; even if property is estate property, Sweports cannot lift the stay for Norwex. |
Key Cases Cited
- In re Comcoach Corp., 698 F.2d 571 (2d Cir.1983) (creditors may obtain relief from the automatic stay; broader view rejected here)
- In re Miller, 666 F.3d 1255 (10th Cir.2012) (broad concept of party in interest under 362(d))
- In re Rice, 462 B.R. 651 (6th Cir. BAP 2011) (standing and who may seek relief under 362(d))
- In re Wilhelm, 407 B.R. 392 (Bankr.D.Idaho 2009) (standing constraints and third-party rights)
- In re Roxy Roller Rink Joint Venture, 73 B.R. 521 (Bankr.S.D.N.Y.1987) (limitations on who may seek relief on behalf of others)
- Mahurkar, 140 B.R. 969, 140 B.R. 969 (N.D.Ill.1992) (discussion of stay and involuntary gap period)
- Roslyn Savings Bank v. Comcoach Corp., 698 F.2d 571 (2d Cir.1983) (used to discuss scope of ‘party in interest’ under 362(d))