In bet-the-company litigation, it is not unusual for one or more defendants to file for bankruptcy during the course of the proceedings. While the Bankruptcy Code normally imposes an automatic stay of the claims against the debtor, is an Illinois state court plaintiff still free to pursue its claims against the other, non-debtor defendants? A series of Mechanics Lien Act (777 ILCS 60, et seq.) cases suggest that the answer to this question depends, in large part, on whether the debtor is a necessary party to the action.
In Illinois, fundamental principles of due process and fairness require the joinder of all necessary parties. The failure to join a necessary party may be raised at any time, either by the parties or by the trial and appellate courts sua sponte. An order entered without jurisdiction over a necessary party is void. A necessary party is one whose presence is required to:
(1) protect that party’s interest in the controversy which would be materially affected by a judgment entered in its absence;
(2) protect the interests of the parties before the court; or
(3) enable the court to completely determine the controversy.
In Garbe Iron Works, Inc. v. Priester, 99 Ill.2d 84, 89 (1983), the Illinois Supreme Court held that a general contractor is a necessary party to a Section 28 action, the section of the Mechanics Lien Act that governs suits by laborers, materialmen, or sub-contractors.
In Concrete Products, Inc. v. Centex Homes, 308 Ill. App. 3d 957, 960-61 (2d Dist. 1999), a sub-contractor brought a Section 28 action against a general contractor and the owner of a property to foreclose on its mechanic’s lien. During the course of the proceedings, the general contractor filed for bankruptcy.
Despite the imposition of the automatic bankruptcy stay on the claims brought against the general contractor, the case nevertheless proceeded to summary judgment against both defendants with the trial court ultimately granting judgment in favor of the plaintiff. Both the general contractor and the property owner appealed.
Finding that the automatic bankruptcy stay required abatement of the entire action until either the general ontractor was discharged in bankruptcy or the plaintiff obtained relief from the automatic stay in the bankruptcy court, the appellate court reversed the trial court’s decision. In doing so, the appellate court relied on Garbe and explicitly rejected the plaintiff’s argument that the action could proceed against the other, non-debtor defendant who had not filed for bankruptcy, noting that the cases cited by the plaintiff were distinguishable "because the debtor in each case was not a necessary party to the litigation ." (emphasis added.)
Thus, while Garbe and Concrete Products are both Mechanics Lien Act cases, they suggest that where a necessary party files for bankruptcy during a case, the entire case must be stayed until the party is either discharged from bankruptcy or the plaintiff obtains relief from the bankruptcy court from the automatic stay.
 People ex rel. Sheppard v. Money, 124 Ill. 2d 265, 281 (1988).
 Emalfarb v. Krater, 266 Ill. App. 3d 243, 247 (2d Dist. 1994).
 In re Marriage of McHale, 2016 WL 6780525, at *2).
 Caparos v. Morton, 364 Ill.App.3d 159, 175 (2006).