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| 1 minute read

Analyzing Gaseous Possibilities: The Automatic Stay’s Potential Extension to Non-Debtor Parties in the Hydraulic Fracturing Sector

The statutory language is clear. As of a bankruptcy petition’s filing date, the automatic stay of section 362 constricts many a creditor and bars many an action. The broad scope of section 362(a)(1) proscribes “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 commencement of the case under this title.” And section 362(a)(3) prohibits “any act” either “to obtain possession of property of the estate or of property from the estate” or “to exercise control over property of the estate ….”

Beginning decades ago, a line of “extraordinary” cases have extended the protective embrace of the automatic stay to persons named in neither section 362(a)(1) nor section 362(a)(3): certain kinds of non-debtor third-parties. At the circuit level, two opinions hewed the standard to guide such interpretive feats: A.H. Robins Co. v. Piccinin, a 1986 Fourth Circuit decision expanded upon by the Second Circuit in 2003’s Queenie Ltd. v. Nygard Int’l. Over time, sheer repetition made the logic of Robins and Queenie seem almost mundane. Beneath the surface, however, conflicts over their reach proliferated, and discord over their specific application remains rampant.  

One of the more recent U.S. energy phenomena—the U.S. shale energy boom-and-bust cycle—provides a timely excuse to reexamine the foundations and plumb the possibilities of this contested case law.

In an article originally published in the June 2022 issue of the Norton Journal of Bankruptcy Law and Practice, and first posted on SSRN on April 5, 2023, Amir Shachmurove does precisely that. 

"[I]n another demonstration of that old saw—in law, an exception can frequently be found, and a 'but' can often be reflexively posited—precedent has blessed the limited expansion of the statutory stay ... [to] a claim to establish an obligation of which the debtor is a guarantor, a claim against a debtor's insurer, and actions where ‘there is such identity between the debtor and the third-party defendant that the debtor may be said to be the real party defendant …' ... [or] 'when a claim against the non-debtor will have an immediate adverse economic consequence for the debtor's estate.'" "[W]hen one member of a fracking pool turns to the Code, the hydraulic fracturing industry's peculiarities can produce an atypical concatenation of the oft-cited circumstances sufficient to lead to the imposition of the automatic stay on per Queenie and Robins."


natural gas, hydraulic fracturing, fracking, bakken formation, automatic stay, energy, natural resources, unconventional energy, restructuring & insolvency