June 9, 2020
In a recently decided appeal in the matter of Minelli v. Harrah’s Resort Atlantic City, A-4431-18T1, the Appellate Division reinstated a personal injury claim filed by a claimant more than two (2) years after the accident, but after one of the defendants had filed for Chapter 11 bankruptcy. In so doing, the Court explained the impact of the Bankruptcy Code and it’s “automatic stay” on the timeliness of actions filed against entities that have petitioned for bankruptcy relief.
The plaintiff in the action had fallen down at Harrah’s Resort Atlantic City, which was operated by Harrah’s Operating Company, on June 2, 2013, and claimed to have sustained injuries due to Harrah’s negligence. On January 15, 2015, Caesars Entertainment Operating Company – the parent company of Harrah’s Operating Company – filed a voluntary petition for bankruptcy relief and protection under Chapter 11. Attorneys for “Harrah’s AC” and the claimant had exchanged correspondence throughout the intervening time period, but Minelli’s attorneys did not file a lawsuit until June 30, 2015 – more than two (2) years after the happening of the accident. Rather than filing an answer, the various defendants filed a “Notice of Suggestion of Bankruptcy.” Thereafter, the plaintiff sought relief from the United States Bankruptcy Court, and on January 28, 2019, obtained a consent order permitting plaintiff “to proceed against Caesars [Entertainment Operating Company] as a nominal defendant only” in order to allow plaintiffs to establish liability for the purpose of recovering primarily from available insurance policies, or from “any non-Reorganized Debtor defendants.”
After Plaintiff obtained leave to pursue the action from the bankruptcy court, the defendants all moved to dismiss, arguing that the case was time-barred by New Jersey’s statute of limitations. The trial court dismissed the action, determining that because the complaint was filed after the statute had expired, then it was out of time, and not subject to the automatic stay.
On appeal, the court considered the impact of 11 U.S.C. § 108(c). This statute provides that:
if applicable nonbankruptcy law … fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor … and such period has not expired before the date of the filing of the petition [for bankruptcy], then such period does not expire until the later of (1) the end of such period, including any suspension of such period occurring on or after the commencement of the case, or (2) 30 days after notice of the termination or expiration of the stay.
The court ruled that, as to Caesars Entertainment Operating Company, the claim was filed while the stay remained in place. It was of no moment that the claim was filed after the two-year statute of limitations would normally have expired. Rather, pursuant to Section 108(c)(2), cited above, the court determined that the plaintiff had until 30 days after notice of the termination or expiration of the stay. In this case, that was not provided until January 28, 2019, and as such, the complaint was more than timely.
The court further discussed whether it had the jurisdiction to consider whether the automatic stay as to Caesars should have operated to the entirety of the litigation, and may have saved Plaintiff’s claims against other entities, including entities that were not filing for bankruptcy protection Finding an inadequate record on appeal to make that determination, the court deferred ruling on that issue. Bankruptcy petitions routinely throw wrenches into civil litigation, but New Jersey’s courts have now plainly spoken as to how these filings will impact the statute of limitations’ application.
For more information on this topic, please feel free to contact MKCI’s Tom Emala at temala@mkcilaw.us.com.