Debtor was a majority shareholder in a corporation ("vTRax") that filed a pre-petition patent infringement suit against Avaya and other defendants. The patent infringement suit continued after Debtor filed a joint Chapter 7 case. The patent infringement suit was dismissed post-petition by the trial court when vTRax's counsel was allowed to withdraw from the case. Avaya is now seeking recovery of its attorneys' fees from vTRax and from Debtor and has filed a motion with the bankruptcy court so that its actions do not run afoul of the automatic stay. Avaya's motion is denied as to actions against the Debtor or the Debtor's estate. Avaya's actions against vTRax are not implicated.
The Court found that the automatic stay prevented Avaya from seeking recovery from Debtor individually. Avaya’s attempt to limit the recovery of attorneys’ fees to post-petition periods was rejected. The caselaw supporting Avaya’s position was inopposite. Here, the plaintiff in the suit is distinct from the debtor. The corporate form provides insulation from personal liability. E.g., State ex rel. Continental Distilling Sales Co. v. Vocelle, 27 So. 728 (Fla.1948). Here, Debtor is not a party to the Patent Case. Debtor’s 80% ownership interest in vTrax did not automatically create any personal liability.
File:
Date:
08/23/2011