Katz v. Liberty Power Corp.

ORDER ON MOTION TO STAY

DONALD L. CABELL, U.S.M.J.

The plaintiffs allege that Liberty Power Corp., LLC (LP Corporation) and Liberty Power Holdings, LLC (LP Holdings) placed telephone calls to them in violation of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. §§ 227 et seq. In April 2021, the case was automatically stayed under 11 U.S.C. § 362(a) as to LP Holdings after it filed for Chapter 11 bankruptcy in Florida. See In re Liberty Power Holdings, LLC, No. 21-13797-PDR (Bankr. S.D. Fla. filed Apr. 20, 2021) (Bankruptcy). LP Corporation did not declare bankruptcy but moves to stay proceedings against it as well under this court's

discretionary authority.^[1] (D. 340). For the reasons stated below, the motion will be allowed.

RELEVANT BACKGROUND

LP Corporation owns non-defendant Liberty Power Super Holdings, LCC (Super Holdings), which in turn owns LP Holdings, the entity for whom the case has been stayed.

LP Holdings purchases electricity wholesale from one of five organized wholesale energy markets and sells it retail to residential, commercial, and industrial clients in several states. LP Holdings does not really have its own workforce; rather, LP Corporation employed approximately 80 people to provide business services to LP Holdings, including managing customer accounts, dealing with regulatory matters, and performing business operation functions. In turn, LP Holdings would provide funds to LP Corporation on a weekly basis to cover business expenses such as salary and rent.

In alleging a violation of the TCPA, the operative complaint raises the same claims against each defendant, based on the same facts and theory of liability. (D. 109). In particular, the plaintiffs allege that the defendants are part

of a joint enterprise operating under common branding and a shared trademark in connection with their “common retail electric service business.” (Id. ¶ 7). They also allege that the arrangement by which LP Corporation secures telemarketers to work on LP Holdings' behalf “reflects how [LP Corporation's and LP Holding's] business and operations are generally intertwined and interrelated, ” and allege further that their operations are “so intertwined that it is often impossible to definitively attribute the acts of their personnel to Corp. or Holdings.” (Id. ¶ 11).

LP Holdings reportedly encountered financial problems when Texas experienced unprecedented and severe cold weather in February 2021. The wholesale energy price in the Texas market skyrocketed and LP Holdings consequently could not pay the wholesale charges or its subsequent debts.

On March 31, 2021, Boston Energy Trading and Marketing, LLC (BETM), which had a secured credit agreement with LP Holdings to provide credit assurances required by wholesale operators, issued LP Holdings a notice of default. On April 15, 2021, BETM took control of LP Holdings and reconstituted its Board of Directors. Three days later, LP Corporation terminated virtually all its employees. On April 20, 2021, LP Holdings filed for bankruptcy.

LP Holdings continues to operate under BETM's control. While LP Corporation ultimately retained a few employees, it instituted an action on May 19, 2021, in Florida state court to assign its assets to Philip Von Kahle under Fla. Stat. §§ 727.101-116, a law providing for an assignment for the benefit of creditors (ABC). Von Kahle v. Liberty Power Corp., LLC, No. CACE21010056 (Fla. 17th Jud. Cir. filed May 19, 2021) (Assignment).

On June 10, 2021, the plaintiffs filed a motion in the Florida action to undo LP Corporation's assignment of its assets, but the motion at present has not been decided or scheduled for a hearing. See Motion for Relief from the Assignment, Assignment (filed June 10, 2021). The plaintiffs also moved to stay LP Holdings' Chapter 11 bankruptcy proceeding but the motion was denied without prejudice on June 25, 2021. See Bankruptcy D. 159, 222.

DISCUSSION

A. Legal Framework

The First Circuit has recognized that in cases where an action has been stayed against a debtor defendant under 11 U.S.C. § 362, a discretionary stay may also be warranted as to a non-debtor co-defendant, under certain circumstances. See, e.g., Austin v. Unarco Indus., Inc., 705 F.2d 1, 5 (1st Cir.

1983). These circumstances exist where “(i) the non-debtor and debtor enjoy such an “identity of interests” that the suit of the non-debtor is essentially a suit against the debtor; or (ii) the third-party action will have an adverse impact on the debtor's ability to accomplish reorganization.” In re Slabicki, 466 B.R. 572, 580 (1st Cir. BAP 2012) (emphasis added); see also Bankhart v. Ho, 60 F.Supp.2d 242, 246 (D. Mass. 2014).

The party seeking the discretionary stay bears the burden of demonstrating that the stay is warranted. Bankart, 60 F.Supp.3d at 246-47. The First Circuit apparently has not determined the applicable legal standard for evaluating a request for a discretionary stay, and caselaw on this point is rather sparse, but one court in this session has indicated that the level of “‘proof required to extend the stay is not as rigorous as that normally required for injunctions, '” see Id. at 247 (quoting In re Adelphia Commc'ns, 298 B.R. 49, 54 (Bankr. S.D.N.Y. 2003)), while another has required the moving party to demonstrate its entitlement to a stay by clear and convincing evidence. See Raudonis as trustee for Walter J....