SDNY Bankruptcy Judge Refuses to Extend Bankruptcy Stay to Non-Bankrupt Building Owner

            Typically, when a large retail company files for bankruptcy protection hundreds (if not thousands) of personal injury claimants are dramatically affected by the “stay” typically granted under the Bankruptcy Code.  When the defendant is a “self-insured” entity the stay usually cannot be lifted and the plaintiffs are lumped in with the other unsecured creditors.  At the end of the bankruptcy proceedings these claimants usually get some token amount – very rarely a sum that reasonably compensates them for their injuries.

            However, there is a way of avoiding this result IF the case involves a sidewalk accident in New York City where there is a lawsuit against the building owner.  Last week, the Honorable Robert Drain denied A&P’s motion seeking to extend the bankruptcy stay protection to a non-bankrupt building owner.  The significant factors in our presentation to the Court were: a) we severed the debtor from the State Court proceedings; b) the negligence claim was based on NYC Adm. Code §7-210 – which imposes a non-delegable duty on building owners to maintain the adjacent sidewalk; and c) The lease provision between the landlord and A&P whereby A&P has to indemnify the landlord for any accident claims involving the sidewalk is probably void under New York Law.    

            By fighting for our client, her case will be proceeding to trial next month -instead of being put on hold until the bankruptcy proceedings for a multi-billion dollar entity are concluded.