Frouws v. Edgio Incorporated

• Court: District Court, D. Arizona
• Decided: February 27, 2025
• Docket: 2:23-cv-00691
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Mehran Esfandiari, et al., No. CV-23-00691-PHX-DJH

10 Plaintiffs, ORDER

11 v.

12 Edgio Incorporated, et al.,

13 Defendants. 14 15 The Court has received the Notice of Suggestion of Bankruptcy for Defendant Edgio 16 Incorporated. (Doc. 40). Because of this, the automatic stay under 11 U.S.C. § 362(a) is 17 in effect for Defendant Edgio. See Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1214 18 (9th Cir. 2002) (“The plain language of § 362(a)(1) [of the Bankruptcy Code] prohibits the 19 continuation of judicial actions.”). 20 Ultimately, Plaintiff is required to prosecute this case. See O’Donnell v. Vencor 21 Inc., 466 F.3d 1104, 1110 (9th Cir. 2006) (noting that the bankruptcy stay did not preclude 22 dismissal of the case against debtor based on plaintiff’s failure to prosecute). To that end, 23 Plaintiff generally must either dismiss his claim against Defendant Edgio without prejudice 24 and pursue that claim in bankruptcy court or file a motion in the bankruptcy court to lift 25 the automatic stay to permit his claim against Defendant Edgio to proceed in this Court. 26 The Court also notes that there is currently a fully briefed Motion to Dismiss 27 awaiting resolution which all Defendants have brought collectively. (Doc. 37). Plaintiff 28 has brought claims for (1) violation of §10(b) of the Securities Exchange Act and Rule 10b-5 against all Defendants and (2) violation of §20(a) of the Act against the individual 2|| defendants. (Doc. 32 at □□□ 169-74). The Section 20(a) claim alleges that the individual 3|| Defendants acted as “controlling persons” of Defendant Edgio. (/d. at 4 174). The 4|| automatic bankruptcy stay does not necessarily automatically extend to the individual 5 || Defendants Robert Lyons, Daniel Boncel, and Stephen Cumming. See e.g., In re Chugach 6|| Forest Prods., Inc., 23 F.3d 241, 246 (9th Cir. 1994). However, without an underlying || violation of the Securities Exchange Act by Defendant Edgio, there can be no “controlling 8 || person” liability under Section 20(a). In re Netflix, Inc., Sec. Litig., 923 F. Supp. 2d 1214, 1226 (N.D. Cal. 2013) 10 Accordingly, 11 IT IS ORDERED that the claims against Defendant Edgio only are stayed and will || be dismissed, without prejudice, without further notice on March 7, 2025, unless prior 13 || thereto the Court is advised that the bankruptcy stay has been lifted, or a request for a lifting of the bankruptcy stay has not been ruled upon by the bankruptcy court. 15 IT IS FURTHER ORDERED that the pending Motion to Dismiss (Doc. 37) is denied without prejudice to re-file within 14 days of the stay being lifted in this Court. See || In re Miller, 262 B.R. 499, 503 (B.A.P. 9th Cir. 2001); In re Perryman, 631 B.R. 899, 903 18] (B.A.P. 9th Cir. 2021). 19 Dated this 27th day of February, 2025. 20 21 5 fe □□ 22 norable' Diang4. Huretewa 3 United States District Fudge 24 25 26 27 28

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