Court Opinion

ID: 8482605
Source: CourtListenerOpinion
Date Created: 2022-11-09 18:01:41.635061+00
Date Added: 2024-06-11T16:49:40.216806
License: Public Domain

SUPERIOR COURT
                                      OF THE
                                STATE OF DELAWARE
PAUL R. WALLACE                                             LEONARD L. WILLIAMS JUSTICE CENTER
     JUDGE                                                      500 N. KING STREET, SUITE 10400
                                                                 WILMINGTON, DELAWARE 19801
                                                                        (302) 255-0660

                           Date Submitted: November 4, 2022
                            Date Decided: November 9, 2022

Ryan P. Newell, Esquire                        Joanna J. Cline, Esquire
YOUNG CONAWAY STARGATT                         Emily L. Wheatley, Esquire
& TAYLOR, LLP                                  TROUTMAN PEPPER HAMILTON
100 North King Street                          SANDERS LLP
Wilmington, Delaware 19801                     1313 Market Street, P.O. Box 1709
                                               Wilmington, Delaware 19801-1709
Andrew P. Sherrod, Esquire
HIRSCHLER FLEISCHER, P.C.
P.O. Box 500
Richmond, Virginia 23218-0500

RE: Hub Group, Inc. d/b/a Unyson Logistics v. Southern States Cooperative, Inc.
    and Agway Farm & Home Supply, LLC
    C.A. No. N22C-04-131 PRW (CCLD)
    Plaintiff Hub Group Inc.’s Motion to Transfer Action to Active Docket

Dear Counsel:
       This Letter Order resolves Plaintiff Hub Group, Inc. d/b/a Unyson Logistics’

Motion to Transfer C.A. No. N22C-04-131 to the Active Docket.

       In April 2022, Plaintiff Hub Group, Inc. d/b/a/ Unyson Logistics (“Hub

Group”) brought an action for breach of contract against Defendant Southern States

Cooperative, Inc. (“SSCI”) and Agway Farm & Home Supply, LLC (“Agway”).1

1
    Compl. ¶¶ 28-35, Apr. 20, 2022 (D.I. 1).
Hub Group, Inc. d/b/a Unyson Logistics v. Southern States Cooperative, Inc. and
Agway Farm & Home Supply, LLC
C.A. No. N22C-04-131 PRW (CCLD)
November 9, 2022
Page 2 of 6

SSCI timely answered and filed a cross-claim against Agway for contractual

indemnification.2

       On July 5, 2022, Agway filed a voluntary petition for relief in the United

States Bankruptcy Court for the District of Delaware,3 and on August 18, 2022, the

Superior Court Prothonotary informed the parties the case was moved onto the

Bankruptcy Dormant Docket.4

       Hub Group has now moved to transfer the case back to the active docket—

but, as to SSCI only, not to Agway.5

       This Court’s Civil Rule 41(g) governs the procedures relating to the

bankruptcy dormant docket. The Rule provides:

       When the Court is advised that a party has filed a bankruptcy petition,
       the action shall be stayed. The Prothonotary shall remove the action
       from the active docket to the dormant docket. All parties for whom an
       appearance has been entered, either by counsel or pro se, shall be
       notified of the date of the transfer to the dormant docket. Twenty-four
       months after the transfer, the action shall be dismissed without further
       notice unless, prior to the expiration of the twenty-four month period, a
       party seeks to extend the period, for good cause shown.6

2
    Countercl. ¶¶ 7-9, May 26, 2022 (D.I. 5).
3
    See D.I. 14.
4
    D.I. 15.
5
    Pl.’s Mot. at 1. Sept. 23, 2022 (D.I. 18).
6
    Del. Super. Ct. Civ. R. 41(g).
Hub Group, Inc. d/b/a Unyson Logistics v. Southern States Cooperative, Inc. and
Agway Farm & Home Supply, LLC
C.A. No. N22C-04-131 PRW (CCLD)
November 9, 2022
Page 3 of 6

         Hub Group suggests that because the defendants are severally liable, complete

relief can be afforded if the case proceeds against SSCI only—i.e., without Agway.7

         Hub Group insists that Superior Court Civil Rule 41(g) is not “an immutable

stay as to all defendants involved in the litigation.”8 Hub Group relies on two cases

for that proposition: Kurten v. Johnson & Johnson9 and Nichols Nursery Inc. v.

Lobdell.10

         SSCI counters that moving the case back to the active docket would unduly

prejudice it, harm Agway’s bankruptcy estate, and violate the purpose behind the

bankruptcy stay.11 First, SSCI says that defending its case “may require significant

discovery of information and documents that are in Agway’s possession” and

because of the automatic stay it “is unable to seek this discovery from Agway.”12

Second, SSCI argues that because it has filed a cross-claim for indemnification, it

7
     Pl.’s Mot. ¶ 4.
8
     Id. ¶ 6.
9
   2020 WL 1888940, at *2 (Del. Super. Ct. Apr. 14, 2020) (“nothing suggests [Rule 41(g)] was
ever intended to be - an independent right of non-bankrupt co-defendants to enjoy the stay of the
bankrupt entity”).
10
    2017 WL 3051481, at *1 (Del. Super. Ct. July 19, 2017) (lifting stay after 90 days unless the
bankruptcy court determines the automatic stay should apply to the non-bankrupt individual co-
defendants).
11
     Def. SSCI’s Response at 2-6, Oct. 7, 2022 (D.I. 23).
12
     Id. at 3-4.
Hub Group, Inc. d/b/a Unyson Logistics v. Southern States Cooperative, Inc. and
Agway Farm & Home Supply, LLC
C.A. No. N22C-04-131 PRW (CCLD)
November 9, 2022
Page 4 of 6

will be forced to continue the action “without the ability to pursue its contractual

right to indemnification against Agway.”13 Last, SSCI posits that “Hub’s suit against

SSCI is in essence a suit against Agway” and in those instances the federal courts

have extended stays to non-bankrupt defendants.14

         In A.H. Robins Co., Inc. v. Piccinin, the United States Court of Appeals for

the Fourth Circuit recognized that while the bankruptcy code’s automatic stay

provision15 “is generally said to be available only to the debtor,” there could be

situations where the automatic stay should include a third party or co-defendant so

as to avoid an “unusual situation.”16 That situation could occur “when there is such

identity between the debtor and the 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.”17 The Court provided an

example of such a situation: “a suit against a third-party who is entitled to absolute

13
     Id.at 4.
14
     Id. at 5-6.
15
     11 U.S.C. § 362(a)(1) (2022).
16
   788 F.2d 994, 999 (4th Cir. 1986). As noted by SSCI, A.H. Robins Co., Inc. has been applied
by various circuits—including the Third Circuit. See McCartney v. Integra Nat’l Bank N., 106
F.3d 506, 510 (3d Cir. 1997).
17
     788 F.2d at 999.
Hub Group, Inc. d/b/a Unyson Logistics v. Southern States Cooperative, Inc. and
Agway Farm & Home Supply, LLC
C.A. No. N22C-04-131 PRW (CCLD)
November 9, 2022
Page 5 of 6

indemnity by the debtor on account of any judgment that might result against them

in the case.”18 According to the Fourth Circuit, “[t]o refuse application of the

statutory stay” in those types of situations “would defeat the very purpose and intent

of the statute.”19

           Ultimately, both parties are correct. Superior Court Civil Rule 41(g)20 is not

an automatic stay for non-bankrupt third parties or co-defendants.21 But because

SSCI has filed a cross-claim for contractual indemnification, partially activating the

case has the palpable potential of affecting Agway and thus serves counter to the

purpose of the bankruptcy code’s automatic stay and, by implication, Rule 41(g).22

18
     Id.
19
     Id.
20
   As recognized by this Court in Kurten v. Johnson & Johnson, “it appears there are virtually no
opinions written on the effect of the dormant docket of Rule 41.” 2020 WL 1888940, at *1 (Del.
Super. Ct. Apr. 14, 2020)
21
     Id. at *2; Nichols Nursery Inc., 2017 WL 3051481, at *1.
22
    The Court heard argument last week. D.I. 26. At argument, the parties referenced certain cases
not included in their briefing. So, the Court allowed the parties to supplement with those case
citations referenced. Id. Generally, the cases provided concerned whether a plaintiff should be
allowed to propound discovery against a non-bankrupt co-defendant, even when that discovery
might implicate the debtor. D.I. 27 at 1-2; D.I. 28 at 1-3.
The automatic stay “does not preclude generation of information regarding claims by or against a
non-debtor party, even where that information could eventually adversely affect the Debtor.” In re
Miller, 262 B.R. 499, 505 (B.A.P. 9th Cir. 2001). However, when “discovery requests would . . .
affect the property of the debtor” such as in the indemnity context, discovery too should be stayed.
In re Philadelphia Newspaper, LLC, 423 B.R. 98, 105 (E.D. Pa. 2010). There appears some
disagreement on whether the indemnification obligation needs to be absolute, or whether the
presence of an indemnification obligation is enough to stay discovery. Compare Stanford v.
Hub Group, Inc. d/b/a Unyson Logistics v. Southern States Cooperative, Inc. and
Agway Farm & Home Supply, LLC
C.A. No. N22C-04-131 PRW (CCLD)
November 9, 2022
Page 6 of 6

       For the foregoing reasons, Hub Group’s Motion to Transfer the Action to the

Active Docket is DENIED.

       IT IS SO ORDERED.

                                                              _______________________
                                                              Paul R. Wallace, Judge
cc: All Counsel via File and Serve

Foamex, L.P., 2009 WL 1033607, at *2 n.9 (E.D. Pa. Apr. 15, 2009) (“Foamex’s indemnification
obligations do not appear absolute, as required by courts extending the stay due to the existence of
indemnification agreements.” (citation omitted)); Hess Corp. v. Performance Texaco, 2008 WL
4960203, at *2 (M.D. Pa. Nov. 19, 2008), with in re Philadelphia Newspaper, LLC, 423 B.R. at
105. But the Court need not necessarily resolve that issue here as the ability or inability to engage
full discovery among the several parties is not dispositive to the Court’s resolution.
That said, the Court was not provided with the Contribution Agreement—which SSCI claims
contains an indemnification provision. But based on SSCI’s averments, it appears that the
indemnification obligation would apply to the sole claim (breach of contract) such that the action
should remain on the dormant bankruptcy docket and, under these circumstances, discovery should
not commence here.