Corporate protection under chapter 11 bankruptcy

Yes, the automatic stay provisions of the Bankruptcy Act effectively stay all other proceedings. You may petition the bankruptcy court for leave to lift the stay if your circumstances warrant such action. Good luck!

In addition to the response from Mr. Mohen, you could also move to have the case dismissed as a bad faith filing pursuant to section 1112(b) of the Bankruptcy Code IF the hallmarks for a bad faith filing are present. Different courts have different standards, but some of the hallmarks identified -- which are helpful to use if the filing was really done to forum shop and attempt to get a better result in bankruptcy court than in federal or state court -- are:

(1) pre-petition litigations already pending in the state court between the parties;

(2) it is basically a two party dispute;

(3) the debtor is either solvent or it has very few unsecured debts which the debtor is able to meet;

(4) the Petition is filed for an improper purpose;

(5) there is no need for reorganization and the filing was for the sole purpose to use the judicial resources of the bankruptcy court, most likely under the assumption that the debtor will receive a more favorable treatment in the bankruptcy court then it had received so far in the state court, and

(6) there is no ability or sincere desire to reorganize the financial affairs of the debtor.

In re Serfass, 325 B.R. 901, 905-06 (Bankr. M.D.Fla. 2005)

These are non-exclusive, and the bankruptcy court will have discretion as to whether the hallmarks are met. Again, courts in different jurisdictions will articulate the standard somewhat differently. Nonetheless, this course of action, if successful, will also result in your being able to proceed with the prepetition litigation. It is not uncommon to see a motion for relief from stay with alternative relief requested of dismissing the case entirely. Relatedly, you could also see the appointment of Chapter 11 Trustee or conversion of the case to a case under chapter 7 if the hallmarks for a bad faith filing are met. Of course, this will not automatically result in a lifting of the stay, but, if management is making bad litigation decisions, perhaps a chapter 11 trustee (or chapter 7 trustee if case is converted) would see things differently or try to settle the matter with you.