Court Opinion

ID: 4551231
Source: CourtListenerOpinion
Date Created: 2020-07-27 14:08:17.631019+00
Date Added: 2024-06-11T09:23:28.113420
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-3869-18T1

BAY HARBOR PLAZA, LLC,

          Plaintiff-Respondent,

v.

SHAILI MANAGEMENT
CORPORATION and
BHUPEN PATEL,

     Defendants-Appellants.
__________________________

                   Submitted July 14, 2020 – Decided July 27, 2020

                   Before Judges Sabatino and Susswein.

                   On appeal from the Superior Court of New Jersey, Law
                   Division, Morris County, Docket No. L-2449-17.

                   Howard R. Rabin, attorney for appellants.

                   Genova Burns LLC, attorneys for respondents (Michael
                   C. McQueeny and Gerard D. Pizzillo, of counsel and
                   on the brief).

PER CURIAM
      Defendants, Bhupen Patel and his company Shaili Management Corp.

("Shaili"), appeal the trial court's March 29, 2019 order confirming a monetary

award an arbitrator issued against them jointly and severally.        The award

resulted from a courthouse arbitration conducted pursuant to Rule 4:21A-6, at

which defendants and their counsel failed to timely appear.

      As we will explain in more detail, defense counsel unsuccessfully

submitted an after-hours, last-minute request to adjourn the arbitration the night

before it was scheduled. In addition, defense counsel did not go immediately to

the courthouse when he was notified the following morning that the adjournment

request had been denied, but instead delayed his departure from his office in

order to attend to another client. Moreover, defendants failed after their non-

appearance to move for relief from the arbitrator's award within the twenty-day

deadline prescribed by Rule 4:21A-4(f).

      Given these and other missteps by the defense, the trial court rejected the

request to set aside the award, which the arbitrator had entered after duly

considering plaintiff's unopposed evidence.

      Defendants now appeal, arguing that the trial court misapplied its

authority. Among other things, they contend the court should have adjourned

the arbitration because Shaili had filed a Chapter 7 bankruptcy petition a few

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days before the arbitration and therefore was protected by an automatic stay. In

addition, defendants argue they established good cause for setting aside the

award under the circumstances presented. They note that plaintiff's counsel had

not opposed the adjournment request, had similarly presumed the request would

be granted, and likewise arrived late to the courthouse that day after being

notified the adjournment had been denied.

      For the reasons that follow, we are compelled to vacate the judgment as

against Shaili because of the legal effect of the automatic bankruptcy stay

imposed by federal law under 11 U.S.C. § 362(a). The stay, which is fully

documented in the record and uncontroverted, clearly voids this monetary

liability against that debtor, absent relief from the stay issued by the bankruptcy

court. However, we affirm the trial court's order with respect to co-defendant

Patel, who is not covered by the bankruptcy stay. The trial court reasonably

enforced the Rules of Court governing arbitrations, and it did not abuse its

discretion in declining to set aside the award as against Patel.

                                        I.

      The parties' underlying dispute concerns payments due to a landlord under

a commercial lease. In April 2014, plaintiff, Bay Harbor Plaza, LLC ("Bay

Harbor") entered into a ten-year lease agreement with Shaili.           The lease

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                                        3
agreement contemplated that Shaili would operate a fast food restaurant at the

premises in Brick Township. Patel, a principal of Shaili, signed the lease and

personally guaranteed payment of the rent due.        As it turned out, various

building permits needed for the restaurant were not obtained by defendants, and

they did not take occupancy of the premises or pay rent to Bay Harbor.

      Consequently, Bay Harbor filed suit against Shaili and Patel in the Law

Division, seeking amounts it claimed were due under the lease. Represented by

a common attorney, Shaili and Patel filed an answer denying liability and

asserting, among other things, that the lease was unenforceable.

      The Discovery End Date ("DED") in the case expired on November 13,

2018. None of the parties moved to extend discovery, although the docket

entries do reflect that defendants' answer was stricken by the court because of

their failure to provide discovery.

      Once the DED had passed, the case was assigned to court-annexed

mandatory arbitration as a commercial matter pursuant to Rule 4:21A-1(a)(3).

On November 13, 2018, the court duly notified the parties of the arbitration date,

which was scheduled for about two months later on January 24, 2019.

      The matter was to be heard by a single arbitrator, who would be paid for

his time by the court under the terms of the arbitration program.          As is

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customary, the arbitrator was scheduled to hear several cases that day at the

courthouse. Although plaintiff supplied in advance of the arbitration (albeit not

within the ten days called for under Rule 4:21A-4(a)) its statement of issues and

supporting documents, defendants apparently did not reciprocally provide their

own arbitration package to plaintiff.

      On January 17, seven days before the scheduled arbitration, defense

counsel1 filed on behalf of Shaili a Chapter 7 bankruptcy petition in the District

of New Jersey.     The associated bankruptcy filings listed Bay Harbor as a

creditor. No bankruptcy petition was filed on behalf of Patel individually.

      Defense counsel then contacted plaintiff's counsel to seek his consent to

adjourn the pending arbitration. Although the parties disagree over whether

plaintiff's counsel affirmatively consented unconditionally to the adjournment,

the record shows that he lodged no objection to the request.

      At 4:39 p.m. on January 23, after the court's closing time, defense counsel

electronically filed a letter with the court requesting an adjournment of the

arbitration the following morning. The letter read as follows:

      Dear Sir/Madam:

1
  The same attorney who has been representing defendants in this litigation filed
the bankruptcy documents.
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                                        5
                  This office represents Defendants Shaili
            Management and Bhupen Patel, in the above-captioned
            matter. This matter is scheduled for Arbitration on
            January 24, 2019, at 9:30am.

                  This office has requested, and Plaintiffs' counsel
            consent, to the adjournment of this Arbitration to a
            future date at the Court's convenience. This is our first
            request for an adjournment. The parties have exchanged
            substantial discovery but request additional time to
            complete factual discovery and settle or otherwise
            dispose of the matter. Shaili Management has filed for
            Bankruptcy protection and that portion of the case may
            be stayed by Judge[.]

                  Please contact me at [phone number deleted] if
            an appearance is required. Thank you.

      One minute later, at 4:40 p.m., defense counsel sent an e-mail

confirmation to plaintiff's counsel that simply read "thank you." Later that

evening, at 5:48 p.m., plaintiff's counsel responded to defense counsel with an

e-mail saying, "Thanks . . . I will be available tomorrow if the Court would like

to speak. Please let me know. Thanks."

      When the after-hours letter was reviewed by the court the following

morning, the court staff reached out to both counsel and advised each of them

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                                       6
that the adjournment request had been denied. 2 At 10:53 a.m. on the day of the

scheduled arbitration, defense counsel e-mailed plaintiff's counsel from his cell

phone the following: "Are you in court? I got the message the adjournment

request is denied." Within a minute, plaintiff's attorney replied by e-mail, "I'm

on my way there I got the same message."

      Despite this urgent situation, defense counsel did not leave immediately

for the courthouse. Over an hour later, at 12:14 p.m., he e-mailed plaintiff's

attorney, "I am in my office waiting for a client. 3 I can be there around 3pm

[sic]. Sorry, I don't understand how we can go forward with the Bankruptcy

pending." There is no indication that defense counsel contacted the court or the

arbitrator to seek permission to arrive as late as 3:00 p.m.

2
  The record does not indicate whether the staff notified counsel by telephone,
or some other means. In any event, it is undisputed that the denial was
communicated to them that morning and that they received it.
3
  The generic syntax of the term "a client" reasonably suggests the client was
one that defense counsel was representing in a different matter. In addition,
defense counsel did not dispute the motion judge's observation at oral argument
that he had "made a decision between two clients which one you were going to
provide your services to, the one that was meeting you that day or the one that
had to be in court." Plaintiff's counsel never certified or explained to the judge
why he chose to remain in the office, or what attempts he or his staff made to
reach the client and advise he was needed immediately in court.
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      Meanwhile, plaintiff's counsel arrived at the courthouse, having left

"immediately" from his own office in a different county to get there. Upon his

arrival, he apologized to the court staff and the arbitrator for being late. As

plaintiff's counsel represented on the record to the motion judge, he then:

            advised the court staff what the situation was. I was the
            last one before—in the—in the hallway before the
            arbitrations were closed for the day. I explained to the
            arbitrator what had happened, I still hadn't heard from
            [defense counsel] at that point what his availability
            was, whether he was coming, whether he was not
            coming. The arbitrator and I had the conversation. I
            had my proofs with me. And he decided to move
            forward. We moved forward. I put my proofs before
            him and he entered and issued the arbitration award.
            The next time I heard from [defense counsel] was when
            I was back in my office at 1:15 [p.m.] or whatever it
            was.

The arbitrator considered plaintiff's proofs, and then issued, in a one-page form

decision, a monetary award in plaintiff's favor against both defendants Shaili

and Patel, "jointly and severally."

      When he got back to his office, plaintiff's attorney sent the following e-

mail to defense counsel at 1:32 p.m.:

            No need to be there[.] I was the last one there, they
            called the Case and issued an award. I am enclosing it
            herewith. I am not sure how either but without the
            issuance of any Order from this Court I don't [think] it
            is automatically stayed.

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        Defense counsel eventually arrived at the courthouse at around 2:00 p.m.,

as reflected by a parking lot receipt stamped 1:58 p.m.         By that point all

arbitrations had concluded, and plaintiff's attorney was already back in his

office. Upon discovering he was too late, defense counsel drove away at 2:18

p.m. Before he did so, he sent the following e-mail to plaintiff's attorney at 2:12

p.m.:

              I wish you would have called me. I am here in
              Morristown. De novo. [4]

        On February 11, defense counsel tendered to the clerk's office a request

for a trial de novo, accompanied by a filing fee. Two days later, on February

13, the clerk's office notified defense counsel that the de novo request was

improper because defendants had not appeared for the arbitration. Defense

counsel took no further action at that point.

        Then, on March 7, plaintiff timely moved to confirm the arbitration award,

which had been issued forty-two days earlier. See R. 4:21A-6(b)(3) (allowing a

party fifty days to move to confirm an arbitration award and enter judgment

thereon). Defendants filed opposition, explaining to the trial court what had

4
   The "de novo" reference signifies an intent for defense counsel to request a
trial de novo and set aside the arbitration award. As we shall discuss, defendants
had no right under the Court Rules to file such a de novo request, due to their
non-appearance at the arbitration hearing.
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                                         9
occurred and also supplying the court with bankruptcy documents substantiating

the automatic stay in favor of Shaili that had been entered before the arbitration

took place.

      After a lengthy oral argument quizzing both counsel about the

circumstances, the motion judge granted plaintiff's motion to confirm the

arbitration award and rejected defendants' arguments to set it aside.

      Among other things, the judge found in her oral opinion that defendants

had not complied with the Rules of Court in several respects. She noted Rule

4:21A-4(f) expressly disallows de novo filings by a party that fails to appear for

a court-ordered arbitration. The judge further noted that defendants had failed

to move for relief under subsection (f) within twenty days of the date of service

of the award.

      The judge noted that defendants' assertion of a need to conduct more

discovery before the arbitration was unavailing because the DED had passed and

no motion had been made seeking to extend the discovery period. See R. 4:24-

1(c) (prescribing the standards for discovery extensions).       The judge also

admonished defendants for belatedly submitting an adjournment request after-

hours on the brink of the arbitration. And, as we have already mentioned, the

judge observed that defense counsel chose to remain in his office awaiting

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another client, despite being notified by the court that morning the adjournment

had been denied.

      The judge also noted that the "rules on trial de novos are strictly enforced."

She observed that defendants, although their flawed de novo demand had been

rejected, could have filed a timely motion for relief under Rule 4:21A-4(f), but

did not do so.

      The judge chose not to make any findings as to whether both attorneys

had actually agreed to having the arbitration adjourned. The judge stressed that,

in any event, it was not up to the attorneys to control the court's calendar or that

of the arbitrator. The judge accepted the representation of plaintiff's counsel

that he told the arbitrator about the situation upon his arrival. She also noted

the absence of any "independent communication between [defense counsel] and

the court on those details," and that defense counsel "instead chose to rely on

opposing counsel." The judge further observed that the arbitrator and the court

"did what [they could]" to "accommodate" the situation, and that they were not

obligated to "just wait until you [defense counsel] perhaps show up."

      With respect to the bankruptcy stay imposed as to Shaili, the judge

criticized defendants' failure to notify the court sooner and to provide supporting

documentation of the stay along with the adjournment request. That said, the

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judge acknowledged that the award might be "void or voidable" due to the

bankruptcy, and that "is something I'm sure the parties will have to address."

      This appeal ensued. Defendants principally argue the bankruptcy stay

renders the arbitration award a nullity, and that the arbitration hearing should

not have gone forward while one of the co-defendants was protected by the stay.

They further argue the case should have been allowed to be tried on its merits,

despite counsel's actions and inactions, and the judgment should be vacated on

the grounds of excusable neglect under Rule 4:50-1(a).

      Alternatively, defendants contend the court should have exercised its

discretion to impose a less drastic remedy, such as requiring them to bear the

costs of the arbitrator's time.

      Lastly, defendants contend the amount of the damages awarded by the

arbitrator were unjustified, and that the court should have conducted a proof

hearing to evaluate the evidence of damages in this default situation.

                                       II.

      Our analysis of this appeal does not require very extensive discussion.

      To begin with, we are cognizant of our general preference to have

contested matters decided on their merits rather than based on procedural

deficiencies. See Crescent Park Tenants Ass'n v. Realty Equities Corp. of N.Y.,

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                                      12
58 N.J. 98, 107-08 (1971) (citations omitted).         However, we are equally

cognizant of the importance of adherence to court rules that strive to adjudicate

cases in an efficient and consistent manner. Leitner v. Toms River Reg'l Schs.,

392 N.J. Super. 80, 91 (App. Div. 2007) (noting an objective of the court rules

is to make litigation "expeditious and efficient").

      Those civil rules include those governing the arbitration program, which

is an important undertaking of the bench and bar that resolves thousands of

pending civil cases annually. See Hartsfield v. Fantini, 149 N.J. 611, 616 (1997)

(recognizing the policy objectives underlying mandatory court-annexed

arbitration seeking to "preserve judicial resources and improve efficiency"). As

the motion judge rightly emphasized, the arbitration program depends on the

cooperative efforts of professionals who serve as arbitrators as well as the

judiciary staff, lawyers, and litigants. The deadlines established in the program

are generally to be "strictly enforced." Id. at 616.

      We review the motion judge's disposition of this matter through a

deferential prism of appellate review, subject to federal bankruptcy law

mandates that we will discuss, infra. On appeal, we ordinarily defer to the civil

trial court's handing of pretrial matters and application of the civil rules "unless

the court has abused its discretion or its determination is based on a mistaken

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                                        13
understanding of the applicable law." Rivers v. LSC P'ship, 378 N.J. Super. 68,

80 (App. Div. 2005) (citing Payton N.J. Tpk. Auth., 148 N.J. 524, 559 (1997)).

The abuse-of-discretion standard is violated "when a decision is 'made without

a rational explanation, inexplicably departed from established policies, or rested

on an impermissible basis.'" Flagg v. Essex Cty. Prosecutor, 171 N.J. 561, 571

(2002) (quoting Achacoso-Sanchez v. Immigration & Naturalization Serv., 779

F.2d 1260, 1265 (7th Cir. 1985)).

      Having considered the circumstances here, we conclude the motion judge

acted fairly in enforcing the rules and in declining to set aside the arbitrati on

award. Although we need not comment on all aspects of the case, a few subjects

merit discussion.

      For starters, it was discourteous and inappropriate for counsel to make an

after-hours request to adjourn the arbitration and to presume that eleventh-hour

request would be granted the following morning. As Judge Pressler once

observed, "Calendars must be controlled by the court, not unilaterally by

[counsel]." Vargas v. Camilo, 354 N.J. Super. 422, 431 (App. Div. 2002). The

motion judge properly noted that court staff cannot be expected to attend to

after-hours requests throughout the night, despite counsel's use of electronic

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                                       14
filing systems such as "eCourts."       If lawyers submit filings for the court's

attention after the close of business, they act at their peril.

      We further point out that the bankruptcy stay only covered Shaili. As we

will discuss, infra, the stay did not automatically extend to Patel, and no motion

was filed in the bankruptcy court to expand the stay to include him. Moreover,

there is nothing in the record to show why Patel could not have appeared

personally and provided testimony or other responsive evidence to the arbitrator .

      We further concur with the motion judge that counsel should have

supplied the court with proof of the bankruptcy stay along with its adjournment

request. In many instances, bankruptcy cases are dismissed or the terms of an

initial automatic stay have been modified. The state court cannot be expected

to have constructive awareness of what appears on the federal bankruptcy

docket.

      In addition, we agree with the trial court that a claim of incomplete

discovery, particularly without a pending motion to extend the DED, does not

require an arbitration to be adjourned. That is clearly a matter within the trial

court's discretion, and it was not misapplied here.

      We need not say much about the communications and conduct of the

respective counsel on the day of the arbitration, and instead defer to the motion

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                                         15
judge's extensive consideration of the sequence of events. We do note that we

are particularly troubled that defense counsel did not leave his office

immediately after being notified by the court that the adjournment was denied

and instead chose to give priority to another client. We are also troubled that

defense counsel evidently did not communicate directly with the court staff to

explain his tardiness and update them as to his availability. 5 As the judge rightly

found, it was unreasonable for counsel to expect the arbitrator and his adversary

to wait around as late as 3:00 p.m. to begin the proceeding.

      In hindsight, it would have been preferable for a phone call to have been

placed to defense counsel or his office from the courthouse by either staff or

plaintiff's attorney, asking him to update his whereabouts before the arbitration

went forward. Even so, such a call may well have been futile because defense

counsel apparently lingered in his office before leaving and did not arrive at the

courthouse until 2:00 p.m. The arbitrator had the discretion expressly provided

by Rule 4:21A-4(f) to proceed in defendants' absence.

5
  We need not speculate whether the meeting with the client who was apparently
given priority attention was scheduled before or after defendant's counsel first
applied, after regular court hours, for an adjournment on the eve of the scheduled
arbitration hearing. In either event, it was presumptuous for counsel to schedule
a meeting with another client, and inappropriate to proceed with that meeting,
without confirming that the adjournment request had been granted.
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                                        16
      The motion judge properly applied Rule 4:21A-4(f) in her reasoning. That

rule is very straightforward on how to address situations of non-appearance at a

court-ordered arbitration:

            (f) Failure to Appear. An appearance on behalf of each
            party is required at the arbitration hearing. If the party
            claiming damages does not appear, that party's pleading
            shall be dismissed. If a party defending against a claim
            of damages does not appear, that party's pleading shall
            be stricken, the arbitration shall proceed and the non-
            appearing party shall be deemed to have waived the
            right to demand a trial de novo. A party obtaining the
            arbitration award against the non-appearing party shall
            serve a copy of the arbitration award within 10 days of
            receipt of the arbitration award from the court pursuant
            to R. 4:21A-5. Service shall be upon counsel of record,
            or, if not represented, upon such non-appearing party.
            Service shall be made as set forth in R. 4:21A-9(c).
            Relief from any order entered pursuant to this rule shall
            be granted only on motion showing good cause, which
            motion shall be filed within 20 days of the date of
            service on the non-appearing party by the appearing
            party. Relief shall be on such terms as the court may
            deem appropriate, including litigation expenses and
            attorney's fees incurred for services directly related to
            the non-appearance.

            [R. 4:21A-4(f)(emphasis added).]

      The Rule makes abundantly clear that a party who fails to appear for a

court-ordered arbitration "shall be deemed to have waived the right to demand

a trial de novo." Ibid. The only recourse is for the non-appearing party to file a

motion for relief under subsection (f) "within 20 days of the date of service [of

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                                       17
the award] upon [that] non-appearing party." Ibid. That relief, if timely sought,

can only be granted by the court upon a showing of "good cause." Ibid.

      Here, the arbitration award was served on defense counsel by plaintiff's

attorney by email on January 24. Defendants therefore had twenty days, until

February 13, to move for relief under Rule 4:21A-4(f). They never filed such a

motion and instead waited until plaintiff moved to confirm the arbitration award

before taking any action. Even then, defendants did not file a cross-motion

seeking relief under subsection (f). The judge did not misapply her authority in

enforcing the deadlines mandated by the Rules.

      We uphold the judge's assessment that defendants failed to demonstrate

grounds to set aside the award. We incorporate by reference and adopt her oral

decision in this regard. For similar reasons, we reject defendants' plea to vacate

the judgment on grounds of alleged excusable neglect under Rule 4:50-1(a).

      We are unpersuaded by defendants' argument that the judge was obligated

to impose less severe consequences short of confirming the award, such as the

shifting of litigation expenses and counsel fees stemming from the non -

appearance as authorized under Rule 4:21A-4(f).         The judge considered a

proposal by defense counsel during the oral argument to pay the arbitrator's costs

(but not mentioning those of his adversary), and evidently concluded that the

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                                       18
circumstances did not call for such lesser measures. We decline to second-guess

the judge's ultimate determination, once again bearing in mind that defendants

never even moved for relief under subsection (f).

      There was no need for a proof hearing, since the damages in this case were

not unliquidated, and the arbitrator had the opportunity to consider the exhibits

provided by plaintiff in its written submission and presentation. Conversely,

defendants did not tender a written arbitration statement required under the

Rules. The court did not misapply its authority to confirm the award without

further ado.6

      In sum, the motion judge enforced the law and did not abuse her discretion

in confirming the arbitration award. This is not a simple instance of an attorney

arriving late to court, but a scenario unfortunately involving multiple failures to

abide by the rules.

                                            III.

      Turning now to the bankruptcy implications, we are constrained by federal

law to vacate the judgment as against Shaili. The automatic stay renders the

judgment voidable as to Shaili, regardless of whether the state court had

6
  That said, we offer no commentary about defendants' contention that the lease
was terminated before it commenced and that the calculated damages were
excessive.
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                                       19
sufficient documentation of it at the time. As we noted in Clark v. Pomponio,

397 N.J. Super. 630, 638 (App. Div. 2008), "[t]he stay is automatic, in that it

immediately goes into effect once the bankruptcy petition is filed." (citing 11

U.S.C. § 362(a); Constitution Bank v. Tubbs, 68 F.3d 685, 691 (3d Cir. 1995);

Henry J. Sommer et al., Collier Family Law and the Bankruptcy Code, ¶ 362.02

(Alan N. Resnick & Henry J. Sommer eds., 2007)). "The stay binds parties even

if they are unaware of the bankruptcy filing." Ibid. (citing Tubbs, 68 F.3d at

691).

        By contrast, the automatic stay does not extend to the judgment against

Patel individually, unless the bankruptcy court says otherwise. See Minelli v.

Harrah's Resort Atlantic City, __ N.J. Super. __, __ (App. Div. 2020)

(recognizing that the automatic stay of Section 362(a)(1) is "generally limited

to the debtor," although "a bankruptcy court may extend the stay under that

section to 'non-bankrupt co-defendants'") (citing A.H. Robins Co. v. Piccinin,

788 F.2d 994, 999 (4th Cir. 1986)). In fact, defense counsel was evidently aware

that Patel would not be covered by the automatic stay, as he noted in his January

23 adjournment letter that Shaili had applied for bankruptcy protection "and that

portion of the case may be stayed by [the] Judge[.]" (emphasis added).

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      All other points raised on appeal lack sufficient merit to warrant

discussion. R. 2:11-3(e)(1)(E).

      The final judgment is affirmed as to defendant Patel, and is vacated as to

defendant Shaili. The trial court shall issue a modified final order within twenty

days consistent with our disposition.

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