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Close v. UNR Industries, Inc. (In Re UNR Industries, Inc.)
Citations: 54 B.R. 270; 1985 Bankr. LEXIS 5328Docket: 19-05001
Court: United States Bankruptcy Court, N.D. Illinois; September 13, 1985; Us Bankruptcy; United States Bankruptcy Court
Frances Close filed a Complaint for Relief from Automatic Stay against several Debtors, including UNR Industries, Inc. and its affiliates, after they declared Chapter 11 bankruptcy on July 29, 1982. The Debtors, who had ceased manufacturing asbestos-containing products in the early 1970s, faced approximately 17,000 pending asbestos-related tort and wrongful death cases at the time of filing, with an estimated 30,000 to 120,000 additional cases anticipated in the future. Close, the widow of Floyd Close who died from mesothelioma allegedly linked to asbestos exposure from the Debtors' products, sought permission to proceed with a wrongful death lawsuit in state court. The Debtors opposed her motion, arguing insufficient cause had been shown for lifting the automatic stay under 11 U.S.C. 362(a)(1), which prevents civil litigation against them during bankruptcy proceedings. The court found that the proceedings constituted a core matter and noted the Debtors' financial burdens from defending the pending lawsuits significantly influenced their decision to file for bankruptcy. Plaintiff sought relief from the automatic stay under section 362(d)(1) of the Bankruptcy Code, which permits the court to grant such relief for cause, including inadequate protection of property interests. The burden of proof initially lies with the creditor to show cause, after which the debtor must prove their entitlement to maintain the stay. Courts may modify or lift the stay if it does not significantly prejudice the debtor or the bankruptcy estate, and if the plaintiff's hardship outweighs that of the debtor. In this case, resolving Plaintiff's claim does not require specialized bankruptcy expertise, and the liquidation of the claim may be more efficiently handled within the bankruptcy proceedings alongside other asbestos-related claims. However, the debtor's insurance carriers have refused coverage for related litigation. The Court must assess the specific facts surrounding the request for relief within the broader context of the ongoing bankruptcy litigation, which has lasted three years and involves complex asbestos-related liabilities. Allowing Plaintiff's request could compel the debtor to defend against the claim in a separate court, potentially using funds meant for all creditors, and could set a precedent for similarly situated parties. The automatic stay aims to protect the debtor's estate from chaotic asset distribution during bankruptcy. In this instance, granting relief to Plaintiff would contradict the fundamental purposes of the stay. The Court concluded that Plaintiff's arguments did not sufficiently establish cause for relief from the stay, while the debtor effectively demonstrated their need for ongoing protection. Consequently, the Court denied Plaintiff's Complaint for Relief From Automatic Stay.