4.
position to evaluate the effect on the bankruptcy estate, if any,
of litigation against a nondebtor co-defendant. And the request
should be filed by the debtor because it is the debtor’s interests,
not those of the nondebtor co-defendants, that are intended to be
protected by an extension of the stay.

Accordingly, Currey’s motion for a stay of the proceedings

is denied.

DATE: September 15, 2004

von SV AECL

John (f° United States bistrict( af ge



3-
third-party defendant that the debtor may be said to be the real
party defendant and that a judgment against the third-party
defendant will in effect be a judgment or finding against the

debtor.” Id. (quoting A.H. Robins, 788 F.2d at 999). The second

exception operates when “the pending litigation, though not brought
against the debtor, would cause the debtor, the bankruptcy estate,
or the reorganization plan irreparable harm.” Id. (citations and
internal quotations omitted).

Currey focuses his attention on the “identity of interest”
exception. Currey submits that RCN is obligated under its Articles
of Incorporation to indemnify him and that RCN in fact has been
paying for his defense in the present action. These facts, which
appear uncontroverted, make out a colorable claim for extension of
the stay under the “identity of interest” exception. See In r
Kmart Corp., 285 B.R. 679, 688 (Bankr. N.D. Ill. 2002). Simply, a
judgment against Currey may in effect constitute a judgment against
RCN. But Currey has another problem. The weight of authority
holds that a request to extend a § 362 stay is to be filed in the
court where the bankruptcy action is pending, and further, that the

request is to be filed by the debtor. See, e.g., In re. Richard B.

Vance & Co., 289 B.R. 692, 697 (Bankr. C.D. Ill. 2003); In_re.
Lennington, 286 B.R. 672, 674 (Bankr. C.D. Ill. 2001); C.H

Robinson Co. v. Paris & Sons, Inc., 180 F.Supp.2d 1002, 1015 (N.D.

Iowa 2001). This makes sense. The bankruptcy court is in the best


Minato Order osm (06297)

United States District Court, Northern District of HMlinois

Name of Assigned Judge John F. Grady Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 03 C 5866 DATE 9/15/2004
CASE Stephen M. Lee vs. RCN Corporation et al
TITLE

[In the following box (a) indicate the paryy filing the motion, e.g. plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.)

MOTION:
“DOCKET ENTRY:
(ly QO Filed motion of [ use listing in “Motion” box above.]
(2) o Brief in support of motion due
(3) o Answer brief to motion due___. Reply to answer brief due
(4) im Ruling/Hearingon set for__ at
(5) oO Status hearing[held/continued to] [set for/re-set for]on______setfor__—_ at.
(6) o Pretrial conference[held/continued to] {set for/re-set for]on___—_—setfor__—at__—
(7) im Trial{set for/re-set for]on at.
(8) oO (Bench/Jury trial] [Hearing] held/continued to at.
(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

COFRCP4(m) OlLocal Rule 41.1. OFRCP41(a)(1) CO FRCP41(a)(2).

(10) # — [Other docket entry] Status hearing held and continued to 11/3/04 at 10:30 a.m. Defendant Robert
Curry’s motion to stay proceedings is denied; the case is stayed however until 10/15/04 to permit
defendant to petition the bankruptcy court for relief. If no petition is filed by 10/15/04, the stay will be
lifted with discovery to proceed. ENTER MEMORANDUM OPINION.

ql) oOo [For further detail see order (on reverse side of/attached to) the original minute order.]

Document
Number

V

No notices required. advised in open court.

tice ired,
No notices required, number of notices

Uv | Notices mailed by judge's staff. SEP 20 204

Notified counsel by telephone

date docketed

xn

docketing depuly initials

Docketing to mail notices.

Mail AO 450 form.

Copy to judge/magisteate judge,

on sraoo4
dae nailed ratice
courtroom vhs
AMM deputy's AMMG

initials esos .
Date/time Tedeivedtin
central Clerk's Office nailing deputy initiats

rg



03-5866.041-TCM September 15, 2004

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

STEPHEN LEE,
Plaintiff,
Vv.

No. 03 C 5866 soll

RCN CORPORATION and ROBERT CURREY, ’ xn
& 4

Defendants.

MEMORANDUM OPINION

Before the court is defendant Currey’s motion to stay

proceedings. For the reasons that follow, the motion is denied.
DISCUSSION

Lee filed this action against RCN and Robert Currey
alleging that he was unlawfully deprived of stock at the time of a
merger between RCN and other related entities. Currey was an
officer of one of these related entities at the time of the merger,
and became an officer of RCN after the merger.

On May 27, 2004, RCN filed a voluntary petition for Chapter
11 bankruptcy protection in the Bankruptcy Court for the Southern
District of New York. On August 11, 2004, Currey filed the instant
motion to stay the proceedings arguing that the automatic stay
applicable to RCN pursuant to 11 U.S.C. § 362 should be extended to
him as well.

The purpose of the automatic stay is to “protect the debtor



2.

from an uncontrollable scramble for its assets in a number of
uncoordinated proceedings in different courts, to preclude one
creditor from pursuing a remedy to the disadvantage of the other

creditors. . . .” Fox Valley Constr, Workers v. Pride of the Fox

Masonry & Expert Restorations, 140 F.3d 661, 666 (7th Cir. 1998)

(quoting A.H. Robins Co. v. Piccinin, 788 F.2d 994, 998 (4th Cir.

1986)). It is clear from a plain reading of § 362(a) that the
automatic stay applies only to Chapter 11 debtors. 11 U.S.C. §
362(a) (1); see also Fox Valley, 140 F.3d at 666; Pitts v. Unarco
Indus., Inc., 698 F.2d 313, 314 (7th Cir.), cert. denied, 464 U.S.
1003 (1983). Adopting a literal reading of § 362(a) comports with
the overall purpose of the statute - the section was intended to
protect the assets of the debtor for the benefit of creditors, and
was “not designed to afford collateral benefits to non-debtor
parties involved in litigation with the debtor as party defendants
or as co-defendants. The debtor is not stayed from pursuing claims
in its favor and plaintiffs are free to pursue the debtor’s
codefendants.” In re. Koop, 2002 WL 1046700, at *3 (Bankr. N.D.
Ill. May 23, 2002) (emphasis added).

In certain unusual circumstances, however, an automatic stay
under § 362 may be extended to nondebtor co-defendants. See In re.
Fernstrom Storage & Van Co., 938 F.2d 731, 736 (7th Cir. 1991)
The first exception, known as the “identity of interest” exception,

applies when “there is such identity between the debtor and the