Palm Street Capital LLC v. Xie

• Court: District Court, N.D. California
• Decided: April 2, 2024
• Docket: 5:22-cv-01932
• Status: Unknown

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8 PALM STREET CAPITAL LLC, and 9 others, Case No. 22-cv-1932 NC

10 Plaintiffs, ORDER TO SHOW CAUSE TO 11 v. PLAINTIFFS AND THEIR COUNSEL CONCERNING 12 CAIXING XIE, FAILURE TO DISCLOSE BANKRUPTCY CASE 13 Defendant.

15 16 Plaintiffs’ counsel filed on December 7, 2023, a Joint Case Management 17 Conference Statement. Dkt. No. 87. In the Statement, Plaintiffs stated that “Plaintiff is 18 ready to proceed with the jury trial as currently set.” Statement at p. 1. In a section titled 19 “Related Cases” Plaintiffs made no mention of a bankruptcy case. Statement at p. 5. And 20 in the final section titled “Scheduling” Plaintiffs stated they will object to any “last-minute 21 trial continuance” attempt made by Defendant to prolong the proceedings in this case. 22 Statement at p. 6. 23 The Court relied on the Statement in referring the case for a Settlement Conference 24 with Magistrate Judge Kim. Dkt. No. 88. Judge Kim set the settlement conference for 25 January 3, 2024. Dkt. No. 90. The Court also began preparing for the January 29 trial. 26 Dkt. No. 88. 27 Yet at the time of Plaintiffs’ Statement, it appears that Plaintiffs and Plaintiffs’ 1 || bankruptcy petition against defendant Caixing Xie. See Dkt. No. 91 (Notice of 2 || Bankruptcy, attaching Petition). In accordance with 11 U.S.C. § 362, this case was 3 || automatically stayed as a result of the bankruptcy case petition filed against defendant Xie. 4 The U.S. Bankruptcy Code protects parties in the bankruptcy court from continuing 5 || litigation in a non-bankruptcy forum. Title 11 U.S.C. § 362 provides: “an individual 6 || injured by any willful violation of a stay provided by this section shall recover actual 7 || damages, including costs and attorneys’ fees, and, in appropriate circumstances, may 8 || recover punitive damages.” 11 U.S.C. § 362(k)(1). And a party that continues litigating in 9 another forum risks sanctions. See Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1214 10 |} (9th Cir. 2002) (“A party violating the automatic stay, through continuing [litigation] in a 11 || non-bankruptcy forum, must automatically dismiss or stay such proceeding or risk possible 12 || sanctions for willful violations.”). 13 Furthermore, Northern District of California Civil Local Rule 11-4(a)(4) requires C 14 || attorneys practicing in this Court to “Practice with the honesty, care, and decorum required 3 15 || for the fair and efficient administration of justice.” Attorneys who engage in 16 |} unprofessional conduct may be referred for disciplinary proceedings. Local Rule 11-6. 5 17 Plaintiffs’ counsel at the April 3 CMC must be prepared to explain why counsel did 5 18 |} not disclose the bankruptcy proceeding in the December 7 CMC Statement or at any other 19 || time between November 2, 2023 (filing) and December 28, 2023 (when Defendant filed 20 || Notice of the Bankruptcy). Was this a willful violation of the bankruptcy stay? Did it 21 || unreasonably and vexatiously multiply the proceedings under 28 U.S.C. § 1927? The 22 || Court will consider whether this is unprofessional conduct that should be referred for 23 || disciplinary proceedings and/or sanctioned under 28 U.S.C. § 1927. 24 IT IS SO ORDERED. 25 26 Dated: April 2, 2024 h@he => _ NATHANAEL M. COUSINS 27 United States Magistrate Judge 28