United States District Court, D. North Dakota
Madjid Berd, et. al., Plaintiffs,
Paul De Bastos and Paul Real Estate, Inc., Defendants.
Charles S. Miller, Jr., Magistrate Judge United States
the court is a pro se “Motion to Stay Pending
Bankruptcy” filed by Defendant Paul De Bastos
(“De Bastos”) on November 27, 2017. For the
reasons set forth below, the motion is denied.
filed this action in the wake of proceedings filed against
North Dakota Developments, LLC (“NDD”), Robert
Gavin, Daniel Hogan, and relief Defendants by the United
States Securities and Exchange Commission, alleging that NDD,
Gavin, and Hogan had fraudulently raised more than $62
million from investors through the sale of interests in North
Dakota man camps. See Case No. 4:15-cv-053 (D.N.D.
May 5, 2015). In their complaint, plaintiffs allege Paul De
Bastos and Paul Real Estate, Inc. (“Paul Real
Estate”), acting as NDD's sales agents, actively
assisted NDD in offering and selling unregistered, nonexempt,
and fraudulent securities from May 2012 to April 2015.
See Docket No. 1. Specifically, plaintiffs assert
claims against Paul Real Estate and De Bastos, by separate
counts, for violations of Section 10(b)-5 of the Securities
Exchange Act of 1934 (15 U.S.C. § 78(j)) and SEC Rule
10b-5 (17 C.F.R. § 240.10b-5) in connection with the
offer or sale or NDD securities and for violations of
N.D.C.C. § 10-04-17 by offering and selling unregistered
securities and selling securities as an unlicensed agent. De
Bastos is president of Paul Real Estate, a Florida
corporation and alleged alter ego of De Bastos.
Real Estate apparently filed for bankruptcy in the Southern
District of Florida on or about June 8, 2017. On November 27,
2017, De Bastos filed a motion to stay the above-entitled
action in its entirety pending Paul Real Estate's
bankruptcy, averring that his assets and those of Paul Real
Estate may be intertwined.
November 29, 2017, plaintiffs filed a response in opposition
to De Bastos's motion. They aver the circumstances of
this case are no so unusual so as to warrant an extension of
the automatic stay to De Bastos.
11 of the United States Code, section 362(a)(1)
“provides that upon the filing of a bankruptcy
petition, all judicial and other proceedings are
stayed.” Missouri v. U.S. Bankruptcy Court for E.D.
of Arkansas, 647 F.2d 768, 775 (8th Cir. 1981). The
automatic generally applies to bar actions against the
debtor; it does not typically extend to solvent codefendants.
C.H. Robinson Co. v. Paris & Sons, Inc., 180
F.Supp.2d 1002, 1009-10 (N.D. Iowa 2001) (citing case law
from the 3d, 4th, 5th, 8th, and 10th Circuits). However,
“the Eighth Circuit Court of Appeals has recognized
that, under ‘unusual circumstances, ' the automatic
stay provision can embrace claims against non-bankrupt
codefendants.” Id.; see also Ritchie v.
Capital Management, L.L.C. v. Jeffries, 653 F.3d 755,
762 (8th Cir. 2011); Croyden Assoc. v. Alleco, Inc.,
969 F.2d 675, 677 (8th Cir. 1992) (citing A.H. Robins Co.
v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986)).
unusual circumstances in which the bankruptcy court can stay
cases against non-debtors are rare.” Ritchie,
653 F.3d at 762. “They typically arise where there is
such identity between the debtor and third-party defendant
that the debtor may be said to be the real party defendant
and that a judgment against a third-party defendant will in
effect be a judgement or finding against the debtor.”
Id. (internal quotation marks omitted). “In
other words, the automatic stay will apply to non-debtors
only when a claim against the non-debtor will have an
immediate adverse economic consequence for the debtor's
estate.” Id. (internal quotation marks
reviewed the record, the court is not convinced this is one
of the rare instances where the stay may apply to De Bastos,
a non-debtor. At this point De Bastos is merely speculating
that some of his assets may be intertwined with
those of Paul Real Estate and the record is otherwise devoid
of any suggestion that there is a “formal tie, ”
“contractual indemnification, ” or “joint
obligation” between De Bastos and Paul Real Estate that
may be sufficient to create the necessary “identity of
interests.” See Catholic Order of Foresters v. U.S.
Banccorp Piper Jaffray, Inc., 337 F.Supp.2d 1148, (D.
Bastos's motion to stay this case as to him (Doc. No. 35)
is at this point DENIED.