Regalado v. Fresno County

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 C.R.A. by and through his legal guardian Case No. 1:23-cv-00672-KES-BAM NATASHJA ALVAREZ, MELCHOR 12 DAVID ALVAREZ, as successors in ORDER STAYING PROCEEDINGS interest to decedent RAYMOND AGAINST DEFENDANT WELLPATH, LLC 13 REGALADO, PURSUANT TO 11 U.S.C. § 362(a) 14 Plaintiffs, ORDER TO SHOW CAUSE WHY CASE SHOULD NOT BE STAYED 15 v. 16 FRESNO COUNTY, et al., 17 Defendants. 18 19 This action commenced on May 2, 2023. (Doc. 1.) The operative first amended 20 complaint, which was filed by Plaintiffs C.R.A. (by and through his legal guardian Natyshja 21 Alvarez) and Melchor David Alvarez, asserts claims against Defendants: (1) Wellpath LLC; (2) 22 County of Fresno; (3) Fresno County Sheriff’s Department; and (4) Does 1-25. 1 (Doc. 63.) Trial 23 has not been set. 24 On November 15, 2024, Defendant Wellpath, LLC (“Wellpath”) filed a suggestion of 25 bankruptcy and notice of stay indicating that on November 11, 2024, Wellpath filed for 26 bankruptcy in the United States Bankruptcy Court for the Southern District of Texas (Houston 27 1 Based on the filing of the first amended complaint, the Clerk of the Court is directed to update the 28 caption of this action as reflected in this order. (See Doc. 63.) 1 Division) for relief under chapter 11 of the United States Bankruptcy Code. (Doc. 61.) 2 Based on the suggestion of bankruptcy and notice of stay, this Court vacated the 3 December 17, 2024 Scheduling Conference and directed Plaintiffs to file a status report within ten 4 days of the bankruptcy court lifting or modifying the stay. (Doc. 62.) Having further considered 5 the matter, the Court vacates its directive to file a status report and issues the instant order. 6 Pursuant to Section 362 of the Bankruptcy Code, all actions against a defendant who has 7 filed a bankruptcy petition are automatically stayed once the petition is filed. 11 U.S.C. § 362(a) 8 (staying “the commencement or continuation, including the issuance or employment of process, 9 of a judicial, administrative, or other action or proceeding against the debtor that was or could 10 have been commenced before the commencement of the case under this title, or to recover a claim 11 against the debtor that arose before the commencement of the case under this title”). 12 Accordingly, all proceedings in this matter against Wellpath are STAYED pursuant to 11 U.SC. § 13 362(a). 14 However, in this circuit, section 362(a) does not empower bankruptcy courts to stay 15 proceedings against non-debtor defendants, such as Defendants County of Fresno and Fresno 16 County Sheriff’s Department. See In re Miller, 262 B.R. 499, 503-04 & n.6 (B.A.P. 9th Cir. 17 2001); In re Silverman, 616 F.3d 1001, 1005 n.1 (9th Cir. 2010) (holding that non-bankruptcy 18 courts should “treat the BAP’s decision as persuasive authority given its special expertise in 19 bankruptcy issues and to promote uniformity of bankruptcy law throughout the Ninth Circuit”); 20 see also Acosta v. Valley Garlic, Inc., No. 1:16-cv-01156-AWI-EPG, 2017 WL 3641761, at *1 21 n.1 (E.D. Cal. Aug. 24, 2017), on reconsideration, No. 1:16-cv-01156-AWI-EPG, 2018 WL 22 288017 (E.D. Cal. Jan. 4, 2018) (citing In re Miller and declining to stay proceedings against non- 23 debtor defendants). Because the Court is persuaded by In re Miller, the Court declines to stay 24 proceedings against the non-debtor defendants in this action, Defendants County of Fresno and 25 Fresno County Sheriff’s Department, pursuant to 11 U.S.C. § 362(a). 26 Nonetheless, district courts have the inherent power to stay a lawsuit. Landis v. North 27 American Co., 299 U.S. 248, 254-55 (1936). If an independent and related case is pending, in 28 certain circumstances federal courts may stay the instant suit while the independent proceeding 1 moves forward. Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th 2 Cir. 2007); Levya v. Certified Grocers of California, Ltd., 593 F.2d 857, 863 (9th Cir. 1979). 3 To determine whether a Landis stay is appropriate, courts weigh the following competing 4 interests: (1) whether there is a fair possibility that a stay will cause damage; (2) whether a party 5 may suffer hardship or inequity if a stay is not imposed; and (3) whether a stay will contribute to 6 the orderly course of justice. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). 7 Additionally, a Landis stay (4) cannot be imposed only for judicial economy and (5) cannot be 8 indefinite and result in undue delay. Dependable Highway Exp., Inc., 498 F.3d at 1066-67. A 9 stay may be the most efficient and fairest course when there are “independent proceedings which 10 bear upon the case.” Levya, 593 F.2d at 863. 11 In light of the pending bankruptcy proceeding, IT IS HEREBY ORDERED that: 12 1. The Court vacates its directive to file a status report, as stated in Doc. 62. 13 2. Within twenty-one (21) days of the date of service of this order, Plaintiffs shall show 14 cause in writing why the entire action should not be stayed until the bankruptcy 15 proceeding in the related case is resolved. 16 3. Within twenty-one (21) days of the date of service of this order, Defendants County 17 of Fresno and Fresno County Sheriff’s Department shall file written notice advising 18 the Court of their position regarding a stay of these proceedings pursuant to Landis. 19 IT IS SO ORDERED. 20

21 Dated: December 13, 2024 /s/ Barbara A. McAuliffe _ UNITED STATES MAGISTRATE JUDGE 22

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