MedPlus Urgent Clinic, LLC

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF MISSISSIPPI
IN RE: MEDPLUS URGENT CLINIC, LLC CASE NO. 24-11163-SDM
MEDEX, LLC CASE NO. 24-11781-SDM
DEBTORS CHAPTER 11
MEMORANDUM OPINION AND ORDER DENYING IN PART AND GRANTING IN
PART DEBTORS’ MOTION FOR RELIEF FROM AUTOMATIC STAY
The matters before the Court are the Motion for Relief from Stay Effective as of the Petition
Date filed by MedPlus Urgent Clinic, LLC (“MedPlus”) [Case No. 24-11163-SDM, Dkt. #340]
and the Motion for Relief from Stay Effective as of the Petition Date filed by MedEx, LLC
(“MedEx”) [Case No. 24-11781-SDM, Dkt. #160] (collectively, the “Motions”). Karol B. Turner
and M & K Equipment Rentals, LLC (collectively, the “Respondents”) filed responses in
opposition in both cases [Case No. 24-11163-SDM, Dkt. #356; Case No. 24-11781-SDM, Dkt.
#165]. The Court held a hearing on April 21, 2026, at which counsel for the Debtors, counsel for
John and Samantha Logan, and counsel for the Respondents presented argument.
The Motions ask the Court to grant relief from the automatic stay effective as of the
applicable petition dates, thereby retroactively validating a dismissal order entered by the
____________________________________________________________________________
The Order of the Court is set forth below. The case docket reflects the date entered.
____________________________________________________________________________
SO ORDERED,
United States Bankruptcy Judge
Judge Selene D. Maddox
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Chancery Court of Lee County, Mississippi while the automatic stay was in effect. Alternatively,
the record and arguments also raise whether prospective relief from stay should be granted so that
the parties may proceed in state court generally, but mainly with the pending Rule 60 motion,
appeal, severance issues, and related procedural matters.
For the reasons set forth below, the Court concludes that the request for retroactive relief
or annulment of the automatic stay should be denied. As a result, the Dismissal Order remains
ineffective as to MedPlus and MedEx to the extent the order was entered through continuation of
proceedings as to the Debtors during the pendency of the automatic stay. The Court further
concludes, however, that cause exists to lift the automatic stay prospectively to allow the parties
to proceed in the Lee County Chancery Court and any related appellate proceedings. Accordingly,
the Motions are granted in part and denied in part.
I. JURISDICTION
The Court has jurisdiction pursuant to 28 U.S.C. §§ 157 and 1334 and the Standing Order
of Reference signed by Chief District Judge L.T. Senter and dated August 6, 1984. This is a core
proceeding under 28 U.S.C. § 157(b)(2)(G). Venue is proper in this District.
II. BACKGROUND
These bankruptcy cases arise against the backdrop of several related state court disputes
involving MedPlus, MedEx, John Logan, Samantha Logan, the Respondents, and other parties.
The Court has already addressed portions of that broader litigation history in other orders and
opinions. For purposes of the present Motions, the relevant dispute is the action pending in the
Chancery Court of Lee County, Mississippi styled Turner, et al. v. Logan, et al., Cause No.
CV2020-1413-41-M (the “Lee County Action”).
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The Lee County Action was filed in 2020. MedPlus and MedEx were defendants in that
action, along with other non-debtor defendants. The case was active for a short time after its filing
and then experienced a lengthy period of inactivity. The parties dispute the cause and legal
significance of that inactivity. The Debtors contend that the case became stale long before
bankruptcy and that the state court would have dismissed it regardless of the later bankruptcy
filings. The Respondents contend that the inactivity must be viewed considering related litigation,
attempted settlement, the Lafayette County proceedings, and later the automatic stay.
MedPlus filed its Chapter 11 petition on April 23, 2024. MedPlus filed a suggestion of
bankruptcy in the Lee County Action on April 29, 2024, notifying the state court and the parties
that the automatic stay had been triggered. MedEx filed its Chapter 11 petition on June 21, 2024.
The Respondents assert that MedEx did not promptly file a separate suggestion of bankruptcy in
the Lee County Action, although the bankruptcy cases and stay issues were later known to the
parties. On May 15, 2024, after MedPlus filed its suggestion of bankruptcy, MedPlus, MedEx, and
the other Lee County defendants filed a motion to dismiss the Lee County Action for failure to
prosecute under Mississippi Rule of Civil Procedure 41(b). The Respondents opposed dismissal
on May 28, 2024. The Lee County defendants filed a reply on June 4, 2024. The motion then
remained pending for more than a year.
On July 8, 2025, the Lee County Chancery Clerk filed a notice or motion concerning
dismissal for lack of prosecution. The Respondents opposed dismissal and requested entry of a
scheduling order, arguing that pending motions, pending bankruptcies, and the implications of the
automatic stay constituted good cause for allowing the action to remain pending. On December
30, 2025, the Lee County Chancery Court entered an Opinion and Order of Dismissal (the
“Dismissal Order”). The Dismissal Order granted the defendants’ Rule 41(b) motion and granted
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relief based on the Clerk’s stale-case notice. The Dismissal Order focused primarily on the
Respondents’ lack of prosecution and found that dismissal was appropriate under Mississippi law.
The Dismissal Order did not analyze the effect of the automatic stay or determine whether the state
court could proceed to dismissal notwithstanding the bankruptcy cases.
After entry of the Dismissal Order, the Respondents filed a Rule 60 motion in the Lee
County Action, arguing that the Dismissal Order should be set aside because it was entered in
violation of the automatic stay. The Respondents also filed a notice of appeal. The Debtors then
filed the present Motions, asking this Court to grant relief from the automatic stay effective as of
the petition dates so that the Dismissal Order may be given full force and effect.
At the hearing, the Debtors argued that if cause ever existed to lift the stay, it exists here
because the parties need the related state court litigation to move forward. Counsel emphasized
that Judge Mask issued a detailed decision dismissing the Lee County Action and argued that
retroactive relief is necessary to give that order effect. Counsel also argued that the Debtors
believed in good faith that they could seek dismissal of claims against them for the benefit of the
bankruptcy estates and that preserving the dismissal would reduce litigation expense.
The Respondents argued that the Debtors cannot knowingly participate in dismissal efforts
in a stayed action, obtain a favorable ruling, and then seek retroactive relief only after the fact. The
Respondents characterized the requested relief as an improper attempt to use the automatic stay as
both shield and sword. They also argued that the Debtors had other options available, including
seeking stay relief before filing or pursuing the dismissal motion, requesting severance, or seeking
a comfort order from this Court. The Court now turns to the applicable law.
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III. DISCUSSION
A. Scope and Purpose of the Automatic Stay
The filing of a bankruptcy petition operates as a stay, applicable to all entities, of “the
commencement or continuation . . . of a judicial, administrative, or other action or proceeding
against the debtor” that was or could have been commenced before the bankruptcy case. 11 U.S.C.
§ 362(a)(1). The stay arises automatically and immediately upon the filing of a bankruptcy petition.
In re Okedokun, 593 B.R. 469, 525 (Bankr. S.D. Tex. 2018) (internal citations omitted). It protects
the debtor by providing a breathing spell from litigation and collection efforts, but it also protects
creditors by preventing piecemeal litigation and preserving the estate for orderly administration.
Matter of Cowin, 864 F.3d 344, 352 (5th Cir. 2017) (internal citations omitted); see also, Maritime
Electric Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d. Cir. 1991) (explaining the
automatic stay serves the interests of both debtors and creditors).
The automatic stay applies broadly. In Pope v. Manville Forest Products Corp., the Fifth
Circuit held that, absent relief from stay, a district court lacked authority to dismiss a pending Title
VII action against a debtor. 788 F.2d 238, 239 (5th Cir. 1985). The Fifth Circuit stated that the case
was required to remain pending until the bankruptcy court granted relief from the stay or the stay
otherwise terminated. Id. The Court recognizes that Pope expressly limited its holding to the facts
before it. Id. Nevertheless, Pope remains instructive because it reflects the Fifth Circuit’s
recognition that courts should proceed cautiously before taking dispositive action in litigation
against a debtor where the applicability of § 362(a)(1) has not been resolved. The Court does not
interpret Pope as announcing a categorical prohibition on all procedural activity in litigation
involving a debtor. Rather, Pope reflects the Fifth Circuit’s caution that dispositive action in
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litigation against a debtor may present significant stay concerns where relief from the automatic
stay has not been obtained and the applicability of § 362(a)(1) remains unresolved.
The Fifth Circuit also applies a posture-at-inception rule to determine whether litigation is
“against the debtor.” Freeman v. Commissioner, 799 F.2d 1091, 1092-93 (5th Cir. 1986). In
Freeman, the Fifth Circuit explained that whether a proceeding is “against the debtor” is
determined by the posture of the case at its inception rather than from later procedural
developments. Id. Thus, the fact that a debtor later takes defensive or affirmative action within the
litigation does not necessarily alter the proceeding’s original character as one commenced against
the debtor. See In re Edwin A. Epstein, Jr. Operating Co., 314 B.R. 591, 596-98 (Bankr. S.D. Tex.
2004) (rejecting debtor’s attempt to treat its request for affirmative relief within an existing
arbitration as outside the automatic stay).
The Lee County Action was filed against MedPlus and MedEx. It, therefore, was a
proceeding against the Debtors for purposes of § 362(a)(1). That characterization did not change
simply because the Debtors later sought dismissal of the claims asserted against them. The Debtors
rely, at least in part, on cases recognizing that the stay does not apply to claims brought by a debtor.
That principle is correct but does not resolve this matter. In Carley Capital Group v. Fireman’s
Fund Insurance Co., the D.C. Circuit held that the automatic stay did not apply to an appeal in a
case originally brought by the debtor because § 362(a)(1) stays actions against the debtor, not
actions brought by the debtor that would benefit the estate. 889 F.2d 1126, 1127 (D.C. Cir. 1989).
Similarly, Maritime Electric Co. recognized that, in multi-party and multi-claim litigation, courts
must disaggregate claims and determine which claims are against the debtor and which are brought
by the debtor or non-debtors. 959 F.2d at 1204-5.
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Those authorities do not help the Debtors as much as they suggest. Carley involved
litigation originally filed by the debtor. Maritime Electric supports careful claim-by-claim analysis,
but it also emphasizes that proceedings against the debtor are stayed and that the effect of the stay
does not depend on whether the nonbankruptcy court rules for or against the debtor. 959 F.2d at
1206. Here, the relevant claims were asserted against MedPlus and MedEx. The Debtors were not
prosecuting independent claims for affirmative recovery. They were seeking dismissal of claims
brought against them in a prepetition action. The Court, therefore, concludes that the Lee County
Action was a proceeding against MedPlus and MedEx for purposes of § 362(a)(1) and remained
subject to the automatic stay notwithstanding the Debtors’ later defensive litigation activity within
that proceeding.
B. Whether the Dismissal Activity Implicated the Stay
The next question is whether the postpetition pursuit and adjudication of the contested
dismissal under Rule 41(b) of the Mississippi Rules of Civil Procedure constituted continuation of
a judicial proceeding against the Debtors within the meaning of § 362(a)(1). The Debtors argue
that the dismissal of claims against them benefited the bankruptcy estates, reduced litigation
expenses, and furthered efficient administration. They also argue that defendants commonly
defend themselves in litigation and that a dismissal of claims against a debtor is different from
collection activity against estate property.
The Court does not disagree that dismissal of claims against a debtor can benefit the
bankruptcy estate. Nor does the Court suggest that a debtor is powerless to defend itself in all
circumstances. The question here is narrower: whether the Debtors could affirmatively seek and
obtain dispositive relief in a prepetition action against them while the automatic stay was in place,
without first obtaining relief from the bankruptcy court.
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The Court does not hold that every defensive litigation act taken by a debtor in pending
litigation violates § 362(a)(1). Debtors necessarily must respond to litigation in various procedural
contexts, and courts have recognized limited circumstances in which certain administrative or
procedural actions may proceed notwithstanding the stay. Under the unusual posture presented
here, however, the Court concludes that the Debtors’ affirmative pursuit of contested Rule 41(b)
dismissal relief in litigation originally commenced against them constituted continuation of a
judicial proceeding against the Debtors within the meaning of § 362(a)(1). The Debtors and co-
defendants sought adjudication and termination of claims pending against the Debtors in stayed
litigation without first obtaining relief from the stay or clarification regarding the stay’s
applicability. The Court does not hold that every defensive act by a debtor in pending litigation
violates the automatic stay, nor that every procedural dismissal entered postpetition is prohibited.
The Court holds only that the particular dismissal activity pursued here sufficiently continued the
adjudication of claims against the Debtors to require prior stay relief or clarification before
proceeding.
The Debtors and interested parties point to authorities from other circuits recognizing a
limited ability of courts to manage their dockets notwithstanding the stay. The Court has
considered those cases but notes that they are not controlling here. In Dennis v. A.H. Robins Co.,
the Eighth Circuit held that a district court was not prevented by the stay from dismissing a case
on its docket for failure to comply with court orders, reasoning that a bankruptcy court cannot
prevent another court from handling its docket in a manner not inconsistent with the purposes of
the stay. 860 F.2d 871, 872 (8th Cir. 1988). In O’Donnell v. Vencor Inc., the Ninth Circuit held that
a Rule 41(b) dismissal for failure to prosecute did not violate the stay where the dismissal was
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procedural, not merits-based, and did not threaten the debtor, the estate, or creditor equality. 466
F.3d 1104, 1110-11 (9th Cir. 2006).
Those cases identify an important and practical principle in that the automatic stay should
not always prevent a court from taking purely administrative or ministerial docket-management
actions. But those cases arose in materially different contexts involving court-driven procedural
dismissals arising from failures to comply with court orders, deadlines, or other litigation
obligations. Here, by contrast, the postpetition dismissal proceedings arose from a contested
motion affirmatively pursued by the Debtors and their co-defendants after bankruptcy filings had
already occurred and after at least one suggestion of bankruptcy had been filed in the Lee County
Chancery Court. The Dismissal Order did not merely clear an inactive matter from the docket
through administrative action. It expressly addressed the Debtors’ and co-defendants’ Rule 41(b)
motion, analyzed the parties’ litigation history, and adjudicated the continued viability of claims
pending against the Debtors. Moreover, unlike the authorities discussed above, neither Dennis nor
O’Donnell involved the particular posture presented here, where debtors in litigation originally
commenced against them affirmatively sought contested dispositive relief and later requested
retroactive validation of that relief after stay concerns were raised. Nor do these cases involve
purely ministerial action taken independently by the state court clerk or court without substantive
adjudication.
The Fifth Circuit’s decision in Arnold v. Garlock Inc. also does not require a different result.
In Arnold, the Fifth Circuit held that district courts could grant plaintiffs’ voluntary dismissals of
bankrupt defendants under Rule 41(a), reasoning that such dismissals reduced litigation against
the debtor, and were consistent with the automatic stay and effective docket management. 288 F.3d
234, 236-37 (5th Cir. 2002). Unlike Arnold, this case does not involve a plaintiff’s unilateral
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abandonment of claims against the Debtors. The Dismissal Order instead required adjudicative
action by the state court concerning the continued viability of claims pending against the Debtors
after bankruptcy filings had occurred. Here, the Debtors themselves affirmatively pursued a
contested dismissal and later sought retroactive validation of that dismissal after the Respondents
challenged the order on stay grounds.
The distinction is important. A voluntary dismissal by a plaintiff can reduce litigation
pressure on the debtor and may be consistent with the purposes of the stay. A debtor’s postpetition
motion asking a state court to adjudicate and dismiss claims asserted against it presents a different
posture. Again, the Court need not hold that every defensive step taken by a debtor in a stayed case
is prohibited. But under the facts here, the pursuit and entry of the Dismissal Order at minimum
implicated substantial automatic stay concerns under § 362(a)(1). Accordingly, the Court
concludes that the postpetition dismissal activity in the Lee County Action, at least as to MedPlus
and MedEx, implicated and violated the automatic stay under the circumstances presented.
C. Effect of a Stay Violation in the Fifth Circuit: Void or Voidable
The parties also dispute the effect of any stay violation. This Court recently addressed the
distinction between “void” and “voidable” in In re Hood, No. 16-14511-SDM, 2022 WL 1791063,
at *10 (Bankr. N.D. Miss. June 1, 2022). There, this Court explained that, in the Fifth Circuit,
actions taken in violation of the automatic stay are voidable, not void. Id. (citing, In re Dillon, 619
B.R. 357, 362 (Bankr. S.D. Miss. 2020) and Sikes v. Global Marine, Inc., 881 F.2d 176, 178 (5th
Cir. 1989)).
The Fifth Circuit’s decisions in Sikes, 881 F.2d at 178-79, and Picco v. Global Marine
Drilling Co., 900 F.2d 846 (5th Cir. 1990), establish that principle. In Sikes, the Fifth Circuit held
that acts taken in violation of the automatic stay are capable of discretionary cure because § 362(d)
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authorizes a bankruptcy court to annul the stay. Sikes, 881 F.2d at 178. In Picco, the Fifth Circuit
again recognized that actions taken in violation of the stay are voidable rather than void and that a
later stay-relief order may cure the defect. Picco, 900 F.2d at 850.
The Court’s Hood opinion explained the distinction this way: a void act is nugatory and
cannot be cured, while a voidable act is invalid when taken but may later be validated by
subsequent judicial action. Hood, 2022 WL 1791063, at *10 (citing Sikes, 881 F.2d at 178). Put
another way, an act taken in violation of the stay is ineffective unless and until the bankruptcy
court validates it through annulment. That is the proper lens here. Because the Court concludes
that the Dismissal Order was entered through proceedings conducted in violation of the automatic
stay as to MedPlus and MedEx, the Dismissal Order is ineffective as to those Debtors unless and
until validated through retroactive relief under § 362(d). The Court’s ruling is limited to the
bankruptcy effect of the automatic stay as it applies to the Debtors and does not adjudicate the
procedural or substantive effect of the Dismissal Order as to non-debtor parties.
D. Authority to Annul the Stay
Section 362(d) provides that, on request of a party in interest and after notice and a hearing,
the Court may grant relief from the stay by “terminating, annulling, modifying, or conditioning”
the stay. 11 U.S.C. § 362(d). The inclusion of the word “annulling” gives the bankruptcy court
authority to grant retroactive relief from the stay. Sikes, 881 F.2d at 178; Picco, 900 F.2d at 850.
Nevertheless, the existence of that power does not mean it should be exercised routinely or
automatically whenever litigation activity occurs while stay questions remain unresolved.
Annulment is an equitable remedy committed to the bankruptcy court’s discretion. In re Cueva,
371 F.3d 232, 236 (5th Cir. 2004). The Fifth Circuit has repeatedly recognized that bankruptcy
courts possess authority to grant retroactive stay relief where equity and cause warrant such relief.
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See Sikes, 881 F.2d at 178-79; Picco, 900 F.2d at 850. At the same time, courts applying Fifth
Circuit law have cautioned that the discretion to retroactively validate actions taken in violation of
the stay should be exercised sparingly because of the potential prejudice to parties who honored
the stay and the importance of preserving the orderly administration purposes underlying § 362.
See In re Brown, 178 Fed. Appx. 409, 410 (5th Cir. 2006); In re Jackson, 392 B.R. 666, 671 (Bankr.
S.D. Miss. 2008); and In re Thornburg, 277 B.R. 719, 731 (Bankr. E.D. Tex. 2002). Rather, the
decision requires a fact-specific equitable inquiry considering the totality of circumstances.
Although the Fifth Circuit has not articulated a rigid multi-factor test governing annulment,
bankruptcy courts within this Circuit have recognized that annulment under § 362(d) requires a
flexible equitable analysis based on the particular facts presented. See Jackson, 392 B.R. at 671-
72. Courts considering whether retroactive relief is appropriate generally consider factors such as
whether the parties had knowledge of the bankruptcy, whether the debtor or movant engaged in
inequitable conduct, whether relief from stay likely would have been granted if requested
prospectively, whether parties proceeded notwithstanding unresolved stay concerns, whether
retroactive relief would prejudice other parties, and whether annulment would further or
undermine the purposes of the automatic stay. Id.; see also In re Fjeldsted, 293 B.R. 12, 24 (9th
Cir. BAP 2003) (listing twelve factors bankruptcy courts might consider in determining whether
annulment is appropriate); 3 COLLIER ON BANKRUPTCY, ¶ 362.12[1] (16th ed. 2026)
(“[R]etroactive relief should be granted only in extraordinary circumstances, such as when a
creditor acted without knowledge of the stay, under circumstances in which relief from the stay
would have been available, and where the creditor changed its position in reliance on the validity
of its action.”). These considerations are not a scorecard or mandatory checklist but instead provide
a framework for equitable analysis under the particular facts presented here.
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Matter of Pinetree, Ltd., illustrates circumstances where annulment may be appropriate.
There, the Fifth Circuit concluded that a mortgagee’s foreclosure should not be nullified where the
mortgagee lacked notice of the debtor’s unrecorded interest and the debtor failed to assert its status
before foreclosure. 876 F.2d 34, 37 (5th Cir. 1989). The Fifth Circuit held that the stay should be
annulled with respect to the postpetition foreclosure. Id. Pinetree is materially different from the
circumstances presented in this case. Here, the Debtors unquestionably had knowledge of their
own bankruptcy cases and of the automatic stay, and MedPlus filed a suggestion of bankruptcy in
the Lee County Action before the dismissal motion was pursued.
In re Edwin A. Epstein, Jr. Operating Co., Inc., provides a more useful comparison. In that
case, the bankruptcy court refused to annul the stay to validate an arbitration panel’s postpetition
action taken at the debtor’s request. 314 B.R. 591, 602-03 (Bankr. S.D. Tex. 2004). The court
emphasized that while stay violations may be voidable in the Fifth Circuit, no one has a right to
rely on an act taken in violation of the stay unless and until it is validated by court action. Id. at
601. The court further concluded that retroactive relief would be inequitable where it would
prejudice a party that had respected the stay. Id. at 602.
More recently, in McConathy v. Foundation Energy Fund IV-A, L.P., the Fifth Circuit
reaffirmed that actions taken in violation of the stay are voidable rather than automatically void
and that bankruptcy courts have power to retroactively validate stay violations where equity
warrants. 111 F.4th 574, 585-86. The Fifth Circuit also emphasized the bankruptcy court’s
flexibility to modify or condition the stay as circumstances change and to allow litigation outside
bankruptcy to proceed where doing so no longer threatens estate administration. Id. at 584.
McConathy supports the Court’s authority to fashion practical relief, but it does not compel
retroactive annulment under the facts presented here.
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E. Whether Retroactive Relief is Warranted
The Debtors argue that cause exists for retroactive relief because the Lee County Action
had been pending since 2020, had experienced long periods of inactivity, and was dismissed by a
state court familiar with the record. The Debtors further argue that the dismissal benefits the estates
by reducing litigation expense and moving at least one piece of the parties’ broader disputes toward
finality. At the hearing, counsel emphasized that the Debtors believed dismissal could be pursued
in good faith for the benefit of the estates and that some relief is necessary to get the state court
cases moving.
The Court acknowledges the force of these arguments. The Lee County Dismissal Order
was not a perfunctory or purely ministerial order. It was a reasoned ruling addressing the state
court’s view that the case had gone stale. The Dismissal Order appears to rest significantly on
prepetition inactivity and procedural history predating the bankruptcy filings. In other words, the
state court may well have reached the same result had the parties first sought clarification regarding
the stay or obtained prospective relief before pursuing dismissal. That point weighs in favor of
annulment. The automatic stay should not be applied in an overly rigid or mechanical manner
divorced from practical reality, and there is some force to the argument that retroactive relief here
would avoid elevating form over substance.
Even so, the Court must consider more than the likely substantive outcome. The automatic
stay is not merely a procedural technicality. It serves important functions in bankruptcy
administration by pausing litigation against the debtor and requiring parties to obtain appropriate
relief or clarification before proceeding in nonbankruptcy forums. See Sosebee v. Steadfast Ins.
Co., 701 F.3d 1012, 1025 (5th Cir. 2012); and Pursue Energy Corp. v. Mississippi State Tax
Comm’n., 338 B.R. 283, 290-91 (S.D. Miss. 2005). The orderly administration purposes of the
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stay would be substantially weakened if parties could proceed with contested litigation activity
while stay applicability remained unresolved and seek retroactive validation after adjudicative
relief has already been obtained. The orderly administration purposes of § 362 are best served
when parties seek relief from stay or clarification regarding the stay’s applicability before
proceeding with contested adjudicative activity affecting claims against a debtor. Retroactive
annulment under the circumstances presented here would risk encouraging parties to proceed first
and seek validation only after a favorable result has been obtained.
At the same time, the procedural uncertainty surrounding the automatic stay was not
created solely by the Debtors. The Respondents likewise did not seek stay relief or a determination
from this Court before continuing to litigate in the Lee County Action, opposing dismissal on the
merits, filing post-dismissal Rule 60 motions, and pursuing appellate relief. Nor does the record
reflect that either side squarely presented the stay issue to the Lee County Chancery Court before
entry of the Dismissal Order. The Court does not view this matter as involving one-sided disregard
of the automatic stay. Even so, the present Motions seek affirmative retroactive validation of
postpetition dismissal activity undertaken without prior stay relief or clarification. That procedural
posture distinguishes the relief presently requested from the Respondents’ later defensive efforts
to challenge the Dismissal Order after its entry.
The timing and posture of the request for retroactive relief also weighs against annulment.
The Debtors did not seek stay relief before filing or pursuing the dismissal motion, nor did they
seek a comfort order from this Court regarding whether the contemplated dismissal motion
implicated the stay. Instead, the Debtors sought retroactive relief only after obtaining a favorable
ruling and after the Respondents filed a Rule 60 motion and appeal challenging the Dismissal
Order on stay grounds.
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The Court does not find it necessary to characterize the conduct of either side as being
undertaken in bad faith. The record reflects legitimate pressures, including significant litigation
expense, overlapping state court disputes, and the need to move long-pending litigation toward
finality. At the same time, equitable relief under § 362(d) requires more than a showing that the
ultimate result may have benefited the estate or promoted efficiency. The Court must also consider
whether the requested relief under the circumstances presented would undermine the integrity of
the automatic stay.
On balance, the Court concludes it would. Granting retroactive annulment here would
validate contested litigation conduct undertaken with knowledge of the bankruptcy cases and
without prior stay relief or clarification from the Court. It would also materially prejudice the
Respondents by eliminating their stay-based challenge to the Dismissal Order after they raised that
issue through Rule 60 and appeal. The Respondents may or may not ultimately prevail in state
court, and this Court expresses no view regarding which party held the better interpretation of the
stay prior to this ruling. But retroactive annulment here would effectively decide one of the
Respondent’s principal procedural arguments after the fact.
The availability of alternatives also weighs against annulment. The Debtors could have
sought stay relief or clarification before pursuing dismissal. The parties could have asked this
Court to determine whether the stay applied. The parties also could have requested severance of
the debtor and non-debtor parties in the Lee County Action before dispositive relief was pursued,
although the Court recognizes the parties dispute whether severance would have been practical
given the intertwined nature of the claims and parties. Under the particular facts presented here,
the Court concludes that retroactive relief is not warranted.
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F. The Symmetry Problem and Prospective Relief
Although the Court denies retroactive relief, that conclusion does not end the matter. The
denial of retroactive relief does not necessarily mean that continued prospective application of the
stay remains appropriate. The question whether parties should have obtained stay relief or
clarification before proceeding is distinct from the question whether continued enforcement of the
stay now serves a meaningful bankruptcy purpose. Those issues must be evaluated based on the
procedural posture of the Lee County Action.
The current posture creates a symmetry problem. If the automatic stay barred the Debtors
from pursuing dismissal of claims against MedPlus and MedEx, then the stay also likely affects
the Respondents’ efforts to prosecute a Rule 60 motion and appeal concerning those same claims
against the Debtors. The stay applies to the continuation of judicial proceedings against the
Debtors.1 It does not apply only when the action is harmful to the debtor or only when the debtor
invokes it. Courts interpreting § 362(a) have repeatedly recognized that the stay’s application does
not depend on whether the continuation of litigation ultimately benefits or harms the debtor. See
Pope v. Manville Forest Prods. Corp., 778 F.2d 238, 239 (5th Cir. 1985) (holding district court
lacked authority to dismiss stayed action against debtor absent relief from stay); Maritime Elec.
Co. v. United Jersey Bank, 959 F.2d 1194, 1204-06 (3d. Cir. 1991) (explaining the automatic stay
applies to proceedings against the debtor regardless of whether continuation of the litigation might
1 These are Chapter 11 cases, not Chapter 13 cases, and § 1301’s co-debtor stay therefore
does not apply. See 11 U.S.C. § 1301. Moreover, the automatic stay generally does not extend
automatically to non-debtor co-defendants merely because they are factually or legally related to
the debtor. See McConathy v. Foundation Energy Fund IV-A, L.P., 111 F.4th 574, 581-82 (5th Cir.
2024); Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194, 1205-06 (3d Cir. 1991); Marcus,
Stowell & Beye Gov’t Sec., Inc. v. Jefferson Inv. Corp., 797 F.2d 227, 230 n.4 (5th Cir. 1986).
Accordingly, to the extent the Lee County Dismissal Order affected claims involving non-debtor
parties, the bankruptcy consequences of the stay may differ as between the Debtors and the non-
debtor litigants.
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benefit the debtor); and In re Edwin A. Epstein, Jr. Operating Co., 314 B.R. 591, 597-98 (Bankr.
S.D. Tex. 2004) (rejecting debtor’s argument that stay did not apply because the proceedings
allegedly could not negatively affect the estate).
Importantly, that procedural asymmetry cuts both ways. Just as the Debtors did not seek
stay relief or clarification before pursuing dismissal, the Respondents likewise continued litigation
in the Lee County Action without first obtaining relief or clarification regarding how the automatic
stay affected the Rule 60 motion, appeal, and related litigation activity. The Court therefore
declines to interpret § 362(a)(1) in a manner that would permit one side to obtain adjudicative
relief in a stayed proceeding while simultaneously preventing the opposing parties from seeking
clarification or review of that same relief.
This issue was raised at the hearing. Counsel for the Debtors argued that, if the automatic
stay remains in place, the Respondents’ Rule 60 motion and appeal are likewise problematic
because they are efforts to continue litigation against the Debtors. The Respondents acknowledge
that stay relief may be necessary to proceed with the Rule 60 motion, appeal, and related state
court proceedings.
The Court agrees that prospective relief is appropriate. Unlike retroactive relief,
prospective relief does not validate past conduct or resolve disputed stay issues after the fact. It
simply permits the parties to proceed from this point forward in the proper forum. The Lee County
Chancery Court and, if necessary, the Mississippi appellate courts are best positioned to determine
the status and effect of the Dismissal Order considering this Court’s opinion and order, as well as
the Rule 60 motion, severance, and any appeal.
Cause also exists for prospective relief from the automatic stay. The Lee County Action
involves primarily state law issues among multiple parties, including non-debtors. This Court has
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already recognized in related proceedings that the underlying state law issues are more
appropriately resolved by the state court system before this Court addresses any resulting
bankruptcy consequences. Continued blanket application of the automatic stay to prevent any
further state court activity would not promote efficient administration of these bankruptcy cases.
It would instead risk procedural paralysis and unnecessarily prevent the state courts from resolving
issues uniquely governed by state law. Prospective relief also appropriately respects principles of
comity by permitting the Mississippi courts to address the procedural effect of their own orders
and related state-law procedural issues within the pending appellate and Rule 60 proceedings.
Allowing the state courts to proceed also avoids requiring this Court to adjudicate issues of
Mississippi procedural law more appropriately addressed within the state appellate process.
McConathy v. Foundation Energy Fund IV-A, L.P., supports this practical approach. There,
the Fifth Circuit emphasized that bankruptcy courts retain flexibility to modify or condition the
stay as circumstances change and that relief from the stay may become appropriate when the
factual or legal landscape materially changes. 111 F.4th at 581, 584 (5th Cir. 2024). The court
further recognized that the automatic stay is not intended to operate as a permanent bar to litigation
and approved the bankruptcy court’s decision to allow related state court litigation to proceed once
doing so no longer threatened the administration of the estate. Id. at 584-86.
That flexibility is important here. Prospective relief appropriately balances the competing
interests implicated in this dispute. Refusing retroactive annulment preserves the principle that
parties ordinarily should obtain relief from stay or clarification before proceeding with litigation
activity implicating § 362(a)(1). At the same time, prospective modification recognizes that
continued blanket application of the stay no longer serves a meaningful bankruptcy purpose and
instead risks preventing the orderly resolution of the related state court proceedings. As
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McConathy reflects, bankruptcy courts may appropriately modify or condition the stay to permit
litigation in nonbankruptcy forums to proceed when doing so no longer threatens estate
administration or undermines the protections afforded by § 362.
The Court will, therefore, terminate and lift the automatic stay prospectively to permit the
parties to proceed with the Lee County Action and any related appellate proceedings.
G. Effect of This Ruling
This ruling is intentionally narrow. The Court determines only the effect of the automatic
stay under § 362(a)(1) as it applies to MedPlus and MedEx. Because the Court declines to annul
the stay retroactively, the Lee County Dismissal Order remains ineffective as to the Debtors unless
and until otherwise validated through appropriate bankruptcy relief. The Court does not determine
the procedural or substantive effect of the Dismissal Order under Mississippi law, nor does it
determine the effect of the Dismissal Order as to non-debtor parties.
The Court’s ruling is limited to the effect of § 362(a)(1) as it applies to MedPlus and MedEx
under the procedural posture presented here. The Court concludes that the postpetition dismissal
proceedings implicated and violated the automatic stay as to the Debtors and that retroactive
annulment is not warranted. The Court expresses no opinion regarding the ultimate procedural or
substantive effect of the Dismissal Order under Mississippi law or as to non-debtor parties.
The Court also does not decide whether any party is entitled to sanctions, damages, or other
relief arising from an alleged violation of the automatic stay. No motion seeking such relief is
presently before the Court in this contested matter. The issue here is limited to whether the stay
should be annulled retroactively or modified/lifted prospectively under § 362(d).
The Court simply holds that retroactive annulment is not warranted based on the
circumstances before it, but prospective relief is warranted to allow the state courts to proceed
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from this point forward. The Court’s ruling is confined to the unusual procedural posture presented
here and should not be construed as establishing a categorical prohibition on all defensive litigation
conduct undertaken by debtors in pending nonbankruptcy proceedings.
IV. CONCLUSION
The automatic stay is one of the fundamental protections of the Bankruptcy Code. It is
broad, immediate, and applies to all entities. At the same time, the Fifth Circuit treats actions taken
in violation of the stay as voidable rather than void, meaning that a bankruptcy may grant
retroactive relief under § 362(d) where cause and equity warrant.
This is not, however, an appropriate case for annulment. Under the circumstances presented
here, retroactive validation of the dismissal activity would not appropriately serve the purposes
underlying § 362. At the same time, continued application of the stay going forward would create
unnecessary delay, procedural uncertainty, and continued impediments to resolution of the Lee
County Action. The Court’s ruling preserves the integrity of the automatic stay by declining to
retroactively validate contested litigation activity undertaken without prior relief from stay while
also recognizing that continued prospective application of the stay no longer serves the interests
of efficient administration or orderly adjudication.
Accordingly, it is hereby ORDERED:
1. The Motions are GRANTED IN PART and DENIED IN PART.
2. The Debtors’ request for relief from the automatic stay effective as of the petition date is
DENIED.
3. The automatic stay is terminated and lifted prospectively as of the date of entry of this
Order to permit the parties to proceed with the Lee County Action and any related appellate
proceedings.
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4. Nothing in this Order shall be construed as a determination regarding the procedural or
substantive validity of the Lee County Dismissal Order under Mississippi law or as to non-
debtor parties.
5. Nothing in this Order shall be construed as a determination that any party has or has not
committed a sanctionable violation of the automatic stay.
##END OF ORDER##
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