MedPlus Urgent Clinic, LLC
The matters before the Court are the Motion for Relief from Stay Effective as of the Petition Date filed by MedPlus Urgent Clinic, LLC (“MedPlus“) [Case No. 24-11163-SDM, Dkt. #340] and the Motion for Relief from Stay Effective as of the Petition Date filed by MedEx, LLC (“MedEx“) [Case No. 24-11781-SDM, Dkt. #160] (collectively, the “Motions“). Karol B. Turner and M & K Equipment Rentals, LLC (collectively, the “Respondents“) filed responses in opposition in both cases [Case No. 24-11163-SDM, Dkt. #356; Case No. 24-11781-SDM, Dkt. #165]. The Court held a hearing on April 21, 2026, at which counsel for the Debtors, counsel for John and Samantha Logan, and counsel for the Respondents presented argument.
The Motions ask the Court to grant relief from the automatic stay effective as of the applicable petition dates, thereby retroactively validating a dismissal order entered by the
For the reasons set forth below, the Court concludes that the request for retroactive relief or annulment of the automatic stay should be denied. As a result, the Dismissal Order remains ineffective as to MedPlus and MedEx to the extent the order was entered through continuation of proceedings as to the Debtors during the pendency of the automatic stay. The Court further concludes, however, that cause exists to lift the automatic stay prospectively to allow the parties to proceed in the Lee County Chancery Court and any related appellate proceedings. Accordingly, the Motions are granted in part and denied in part.
I. JURISDICTION
The Court has jurisdiction pursuant to
II. BACKGROUND
These bankruptcy cases arise against the backdrop of several related state court disputes involving MedPlus, MedEx, John Logan, Samantha Logan, the Respondents, and other parties. The Court has already addressed portions of that broader litigation history in other orders and opinions. For purposes of the present Motions, the relevant dispute is the action pending in the Chancery Court of Lee County, Mississippi styled Turner, et al. v. Logan, et al., Cause No. CV2020-1413-41-M (the “Lee County Action“).
MedPlus filed its Chapter 11 petition on April 23, 2024. MedPlus filed a suggestion of bankruptcy in the Lee County Action on April 29, 2024, notifying the state court and the parties that the automatic stay had been triggered. MedEx filed its Chapter 11 petition on June 21, 2024. The Respondents assert that MedEx did not promptly file a separate suggestion of bankruptcy in the Lee County Action, although the bankruptcy cases and stay issues were later known to the parties. On May 15, 2024, after MedPlus filed its suggestion of bankruptcy, MedPlus, MedEx, and the other Lee County defendants filed a motion to dismiss the Lee County Action for failure to prosecute under Mississippi Rule of Civil Procedure 41(b). The Respondents opposed dismissal on May 28, 2024. The Lee County defendants filed a reply on June 4, 2024. The motion then remained pending for more than a year.
On July 8, 2025, the Lee County Chancery Clerk filed a notice or motion concerning dismissal for lack of prosecution. The Respondents opposed dismissal and requested entry of a scheduling order, arguing that pending motions, pending bankruptcies, and the implications of the automatic stay constituted good cause for allowing the action to remain pending. On December 30, 2025, the Lee County Chancery Court entered an Opinion and Order of Dismissal (the “Dismissal Order“). The Dismissal Order granted the defendants’ Rule 41(b) motion and granted
After entry of the Dismissal Order, the Respondents filed a Rule 60 motion in the Lee County Action, arguing that the Dismissal Order should be set aside because it was entered in violation of the automatic stay. The Respondents also filed a notice of appeal. The Debtors then filed the present Motions, asking this Court to grant relief from the automatic stay effective as of the petition dates so that the Dismissal Order may be given full force and effect.
At the hearing, the Debtors argued that if cause ever existed to lift the stay, it exists here because the parties need the related state court litigation to move forward. Counsel emphasized that Judge Mask issued a detailed decision dismissing the Lee County Action and argued that retroactive relief is necessary to give that order effect. Counsel also argued that the Debtors believed in good faith that they could seek dismissal of claims against them for the benefit of the bankruptcy estates and that preserving the dismissal would reduce litigation expense.
The Respondents argued that the Debtors cannot knowingly participate in dismissal efforts in a stayed action, obtain a favorable ruling, and then seek retroactive relief only after the fact. The Respondents characterized the requested relief as an improper attempt to use the automatic stay as both shield and sword. They also argued that the Debtors had other options available, including seeking stay relief before filing or pursuing the dismissal motion, requesting severance, or seeking a comfort order from this Court. The Court now turns to the applicable law.
A. Scope and Purpose of the Automatic Stay
The filing of a bankruptcy petition operates as a stay, applicable to all entities, of “the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor” that was or could have been commenced before the bankruptcy case.
The automatic stay applies broadly. In Pope v. Manville Forest Products Corp., the Fifth Circuit held that, absent relief from stay, a district court lacked authority to dismiss a pending Title VII action against a debtor. 788 F.2d 238, 239 (5th Cir. 1985). The Fifth Circuit stated that the case was required to remain pending until the bankruptcy court granted relief from the stay or the stay otherwise terminated. Id. The Court recognizes that Pope expressly limited its holding to the facts before it. Id. Nevertheless, Pope remains instructive because it reflects the Fifth Circuit‘s recognition that courts should proceed cautiously before taking dispositive action in litigation against a debtor where the applicability of
The Fifth Circuit also applies a posture-at-inception rule to determine whether litigation is “against the debtor.” Freeman v. Commissioner, 799 F.2d 1091, 1092-93 (5th Cir. 1986). In Freeman, the Fifth Circuit explained that whether a proceeding is “against the debtor” is determined by the posture of the case at its inception rather than from later procedural developments. Id. Thus, the fact that a debtor later takes defensive or affirmative action within the litigation does not necessarily alter the proceeding‘s original character as one commenced against the debtor. See In re Edwin A. Epstein, Jr. Operating Co., 314 B.R. 591, 596-98 (Bankr. S.D. Tex. 2004) (rejecting debtor‘s attempt to treat its request for affirmative relief within an existing arbitration as outside the automatic stay).
The Lee County Action was filed against MedPlus and MedEx. It, therefore, was a proceeding against the Debtors for purposes of
B. Whether the Dismissal Activity Implicated the Stay
The next question is whether the postpetition pursuit and adjudication of the contested dismissal under Rule 41(b) of the Mississippi Rules of Civil Procedure constituted continuation of a judicial proceeding against the Debtors within the meaning of
The Court does not disagree that dismissal of claims against a debtor can benefit the bankruptcy estate. Nor does the Court suggest that a debtor is powerless to defend itself in all circumstances. The question here is narrower: whether the Debtors could affirmatively seek and obtain dispositive relief in a prepetition action against them while the automatic stay was in place, without first obtaining relief from the bankruptcy court.
The Debtors and interested parties point to authorities from other circuits recognizing a limited ability of courts to manage their dockets notwithstanding the stay. The Court has considered those cases but notes that they are not controlling here. In Dennis v. A.H. Robins Co., 860 F.2d 871, 872 (8th Cir. 1988), the Eighth Circuit held that a district court was not prevented by the stay from dismissing a case on its docket for failure to comply with court orders, reasoning that a bankruptcy court cannot prevent another court from handling its docket in a manner not inconsistent with the purposes of the stay. In O‘Donnell v. Vencor Inc., 466 F.3d 1104, 1110-11 (9th Cir. 2006), the Ninth Circuit held that a Rule 41(b) dismissal for failure to prosecute did not violate the stay where the dismissal was
Those cases identify an important and practical principle in that the automatic stay should not always prevent a court from taking purely administrative or ministerial docket-management actions. But those cases arose in materially different contexts involving court-driven procedural dismissals arising from failures to comply with court orders, deadlines, or other litigation obligations. Here, by contrast, the postpetition dismissal proceedings arose from a contested motion affirmatively pursued by the Debtors and their co-defendants after bankruptcy filings had already occurred and after at least one suggestion of bankruptcy had been filed in the Lee County Chancery Court. The Dismissal Order did not merely clear an inactive matter from the docket through administrative action. It expressly addressed the Debtors’ and co-defendants’ Rule 41(b) motion, analyzed the parties’ litigation history, and adjudicated the continued viability of claims pending against the Debtors. Moreover, unlike the authorities discussed above, neither Dennis nor O‘Donnell involved the particular posture presented here, where debtors in litigation originally commenced against them affirmatively sought contested dispositive relief and later requested retroactive validation of that relief after stay concerns were raised. Nor do these cases involve purely ministerial action taken independently by the state court clerk or court without substantive adjudication.
The Fifth Circuit‘s decision in Arnold v. Garlock Inc. also does not require a different result. In Arnold, 288 F.3d 234, 236-37 (5th Cir. 2002), the Fifth Circuit held that district courts could grant plaintiffs’ voluntary dismissals of bankrupt defendants under Rule 41(a), reasoning that such dismissals reduced litigation against the debtor, and were consistent with the automatic stay and effective docket management. Unlike Arnold, this case does not involve a plaintiff‘s unilateral
The distinction is important. A voluntary dismissal by a plaintiff can reduce litigation pressure on the debtor and may be consistent with the purposes of the stay. A debtor‘s postpetition motion asking a state court to adjudicate and dismiss claims asserted against it presents a different posture. Again, the Court need not hold that every defensive step taken by a debtor in a stayed case is prohibited. But under the facts here, the pursuit and entry of the Dismissal Order at minimum implicated substantial automatic stay concerns under
C. Effect of a Stay Violation in the Fifth Circuit: Void or Voidable
The parties also dispute the effect of any stay violation. This Court recently addressed the distinction between “void” and “voidable” in In re Hood, No. 16-14511-SDM, 2022 WL 1791063, at *10 (Bankr. N.D. Miss. June 1, 2022). There, this Court explained that, in the Fifth Circuit, actions taken in violation of the automatic stay are voidable, not void. Id. (citing, In re Dillon, 619 B.R. 357, 362 (Bankr. S.D. Miss. 2020) and Sikes v. Global Marine, Inc., 881 F.2d 176, 178 (5th Cir. 1989)).
The Fifth Circuit‘s decisions in Sikes, 881 F.2d at 178-79, and Picco v. Global Marine Drilling Co., 900 F.2d 846 (5th Cir. 1990), establish that principle. In Sikes, the Fifth Circuit held that acts taken in violation of the automatic stay are capable of discretionary cure because
The Court‘s Hood opinion explained the distinction this way: a void act is nugatory and cannot be cured, while a voidable act is invalid when taken but may later be validated by subsequent judicial action. Hood, 2022 WL 1791063, at *10 (citing Sikes, 881 F.2d at 178). Put another way, an act taken in violation of the stay is ineffective unless and until the bankruptcy court validates it through annulment. That is the proper lens here. Because the Court concludes that the Dismissal Order was entered through proceedings conducted in violation of the automatic stay as to MedPlus and MedEx, the Dismissal Order is ineffective as to those Debtors unless and until validated through retroactive relief under
D. Authority to Annul the Stay
Section 362(d) provides that, on request of a party in interest and after notice and a hearing, the Court may grant relief from the stay by “terminating, annulling, modifying, or conditioning” the stay.
Nevertheless, the existence of that power does not mean it should be exercised routinely or automatically whenever litigation activity occurs while stay questions remain unresolved. Annulment is an equitable remedy committed to the bankruptcy court‘s discretion. In re Cueva, 371 F.3d 232, 236 (5th Cir. 2004). The Fifth Circuit has repeatedly recognized that bankruptcy courts possess authority to grant retroactive stay relief where equity and cause warrant such relief.
Although the Fifth Circuit has not articulated a rigid multi-factor test governing annulment, bankruptcy courts within this Circuit have recognized that annulment under
In re Edwin A. Epstein, Jr. Operating Co., Inc., provides a more useful comparison. In that case, the bankruptcy court refused to annul the stay to validate an arbitration panel‘s postpetition action taken at the debtor‘s request. 314 B.R. 591, 602-03 (Bankr. S.D. Tex. 2004). The court emphasized that while stay violations may be voidable in the Fifth Circuit, no one has a right to rely on an act taken in violation of the stay unless and until it is validated by court action. Id. at 601. The court further concluded that retroactive relief would be inequitable where it would prejudice a party that had respected the stay. Id. at 602.
More recently, in McConathy v. Foundation Energy Fund IV-A, L.P., the Fifth Circuit reaffirmed that actions taken in violation of the stay are voidable rather than automatically void and that bankruptcy courts have power to retroactively validate stay violations where equity warrants. 111 F.4th 574, 585-86. The Fifth Circuit also emphasized the bankruptcy court‘s flexibility to modify or condition the stay as circumstances change and to allow litigation outside bankruptcy to proceed where doing so no longer threatens estate administration. Id. at 584. McConathy supports the Court‘s authority to fashion practical relief, but it does not compel retroactive annulment under the facts presented here.
The Debtors argue that cause exists for retroactive relief because the Lee County Action had been pending since 2020, had experienced long periods of inactivity, and was dismissed by a state court familiar with the record. The Debtors further argue that the dismissal benefits the estates by reducing litigation expense and moving at least one piece of the parties’ broader disputes toward finality. At the hearing, counsel emphasized that the Debtors believed dismissal could be pursued in good faith for the benefit of the estates and that some relief is necessary to get the state court cases moving.
The Court acknowledges the force of these arguments. The Lee County Dismissal Order was not a perfunctory or purely ministerial order. It was a reasoned ruling addressing the state court‘s view that the case had gone stale. The Dismissal Order appears to rest significantly on prepetition inactivity and procedural history predating the bankruptcy filings. In other words, the state court may well have reached the same result had the parties first sought clarification regarding the stay or obtained prospective relief before pursuing dismissal. That point weighs in favor of annulment. The automatic stay should not be applied in an overly rigid or mechanical manner divorced from practical reality, and there is some force to the argument that retroactive relief here would avoid elevating form over substance.
Even so, the Court must consider more than the likely substantive outcome. The automatic stay is not merely a procedural technicality. It serves important functions in bankruptcy administration by pausing litigation against the debtor and requiring parties to obtain appropriate relief or clarification before proceeding in nonbankruptcy forums. See Sosebee v. Steadfast Ins. Co., 701 F.3d 1012, 1025 (5th Cir. 2012); and Pursue Energy Corp. v. Mississippi State Tax Comm‘n., 338 B.R. 283, 290-91 (S.D. Miss. 2005). The orderly administration purposes of the
At the same time, the procedural uncertainty surrounding the automatic stay was not created solely by the Debtors. The Respondents likewise did not seek stay relief or a determination from this Court before continuing to litigate in the Lee County Action, opposing dismissal on the merits, filing post-dismissal Rule 60 motions, and pursuing appellate relief. Nor does the record reflect that either side squarely presented the stay issue to the Lee County Chancery Court before entry of the Dismissal Order. The Court does not view this matter as involving one-sided disregard of the automatic stay. Even so, the present Motions seek affirmative retroactive validation of postpetition dismissal activity undertaken without prior stay relief or clarification. That procedural posture distinguishes the relief presently requested from the Respondents’ later defensive efforts to challenge the Dismissal Order after its entry.
The timing and posture of the request for retroactive relief also weighs against annulment. The Debtors did not seek stay relief before filing or pursuing the dismissal motion, nor did they seek a comfort order from this Court regarding whether the contemplated dismissal motion implicated the stay. Instead, the Debtors sought retroactive relief only after obtaining a favorable ruling and after the Respondents filed a Rule 60 motion and appeal challenging the Dismissal Order on stay grounds.
On balance, the Court concludes it would. Granting retroactive annulment here would validate contested litigation conduct undertaken with knowledge of the bankruptcy cases and without prior stay relief or clarification from the Court. It would also materially prejudice the Respondents by eliminating their stay-based challenge to the Dismissal Order after they raised that issue through Rule 60 and appeal. The Respondents may or may not ultimately prevail in state court, and this Court expresses no view regarding which party held the better interpretation of the stay prior to this ruling. But retroactive annulment here would effectively decide one of the Respondent‘s principal procedural arguments after the fact.
The availability of alternatives also weighs against annulment. The Debtors could have sought stay relief or clarification before pursuing dismissal. The parties could have asked this Court to determine whether the stay applied. The parties also could have requested severance of the debtor and non-debtor parties in the Lee County Action before dispositive relief was pursued, although the Court recognizes the parties dispute whether severance would have been practical given the intertwined nature of the claims and parties. Under the particular facts presented here, the Court concludes that retroactive relief is not warranted.
Although the Court denies retroactive relief, that conclusion does not end the matter. The denial of retroactive relief does not necessarily mean that continued prospective application of the stay remains appropriate. The question whether parties should have obtained stay relief or clarification before proceeding is distinct from the question whether continued enforcement of the stay now serves a meaningful bankruptcy purpose. Those issues must be evaluated based on the procedural posture of the Lee County Action.
The current posture creates a symmetry problem. If the automatic stay barred the Debtors from pursuing dismissal of claims against MedPlus and MedEx, then the stay also likely affects the Respondents’ efforts to prosecute a Rule 60 motion and appeal concerning those same claims against the Debtors. The stay applies to the continuation of judicial proceedings against the Debtors.1 It does not apply only when the action is harmful to the debtor or only when the debtor invokes it. Courts interpreting
benefit the debtor); and In re Edwin A. Epstein, Jr. Operating Co., 314 B.R. 591, 597-98 (Bankr. S.D. Tex. 2004) (rejecting debtor‘s argument that stay did not apply because the proceedings allegedly could not negatively affect the estate).
Importantly, that procedural asymmetry cuts both ways. Just as the Debtors did not seek stay relief or clarification before pursuing dismissal, the Respondents likewise continued litigation in the Lee County Action without first obtaining relief or clarification regarding how the automatic stay affected the Rule 60 motion, appeal, and related litigation activity. The Court therefore declines to interpret
This issue was raised at the hearing. Counsel for the Debtors argued that, if the automatic stay remains in place, the Respondents’ Rule 60 motion and appeal are likewise problematic because they are efforts to continue litigation against the Debtors. The Respondents acknowledge that stay relief may be necessary to proceed with the Rule 60 motion, appeal, and related state court proceedings.
The Court agrees that prospective relief is appropriate. Unlike retroactive relief, prospective relief does not validate past conduct or resolve disputed stay issues after the fact. It simply permits the parties to proceed from this point forward in the proper forum. The Lee County Chancery Court and, if necessary, the Mississippi appellate courts are best positioned to determine the status and effect of the Dismissal Order considering this Court‘s opinion and order, as well as the Rule 60 motion, severance, and any appeal.
Cause also exists for prospective relief from the automatic stay. The Lee County Action involves primarily state law issues among multiple parties, including non-debtors. This Court has
McConathy v. Foundation Energy Fund IV-A, L.P., supports this practical approach. There, the Fifth Circuit emphasized that bankruptcy courts retain flexibility to modify or condition the stay as circumstances change and that relief from the stay may become appropriate when the factual or legal landscape materially changes. 111 F.4th at 581, 584 (5th Cir. 2024). The court further recognized that the automatic stay is not intended to operate as a permanent bar to litigation and approved the bankruptcy court‘s decision to allow related state court litigation to proceed once doing so no longer threatened the administration of the estate. Id. at 584-86.
That flexibility is important here. Prospective relief appropriately balances the competing interests implicated in this dispute. Refusing retroactive annulment preserves the principle that parties ordinarily should obtain relief from stay or clarification before proceeding with litigation activity implicating
The Court will, therefore, terminate and lift the automatic stay prospectively to permit the parties to proceed with the Lee County Action and any related appellate proceedings.
G. Effect of This Ruling
This ruling is intentionally narrow. The Court determines only the effect of the automatic stay under
The Court‘s ruling is limited to the effect of
The Court also does not decide whether any party is entitled to sanctions, damages, or other relief arising from an alleged violation of the automatic stay. No motion seeking such relief is presently before the Court in this contested matter. The issue here is limited to whether the stay should be annulled retroactively or modified/lifted prospectively under
The Court simply holds that retroactive annulment is not warranted based on the circumstances before it, but prospective relief is warranted to allow the state courts to proceed
IV. CONCLUSION
The automatic stay is one of the fundamental protections of the Bankruptcy Code. It is broad, immediate, and applies to all entities. At the same time, the Fifth Circuit treats actions taken in violation of the stay as voidable rather than void, meaning that a bankruptcy may grant retroactive relief under
This is not, however, an appropriate case for annulment. Under the circumstances presented here, retroactive validation of the dismissal activity would not appropriately serve the purposes underlying
Accordingly, it is hereby ORDERED:
- The Motions are GRANTED IN PART and DENIED IN PART.
- The Debtors’ request for relief from the automatic stay effective as of the petition date is DENIED.
- The automatic stay is terminated and lifted prospectively as of the date of entry of this Order to permit the parties to proceed with the Lee County Action and any related appellate proceedings.
Nothing in this Order shall be construed as a determination regarding the procedural or substantive validity of the Lee County Dismissal Order under Mississippi law or as to non-debtor parties. - Nothing in this Order shall be construed as a determination that any party has or has not committed a sanctionable violation of the automatic stay.
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Judge Selene D. Maddox
United States Bankruptcy Judge