Jennifer Nevarez vs. Horizon Global Corporation, a Delaware Corporation

Discussion

Pursuant to section 362(a) of the Bankruptcy Code, First Brands Group is subject to an automatic stay as to all actions proceeding against it. Defendant argues that this stay is appropriately extended to include actions against Defendant pursuant to section 362(a) of the Bankruptcy Code, and the entire instant action, as Defendant is an indispensable party. Plaintiff opposes.

Plaintiff does not appear to contest that the instant action is stayed as to Defendant, subject to the resolution of the First Brands Group bankruptcy, but argues that the stay should not be applied to the entire action, as Defendant is not an indispensable party, and no unusual circumstances exist here.

It is axiomatic that the automatic stay provision of the Bankruptcy Act is designed to shield the debtor from the burdens of litigation during the processes of bankruptcy. (Seiko Epson Corp. v. Nu-Kote Int'l., Inc. (C.A. Fed1999) 190 F.3d 1360, 1364.)

Bankruptcy Code section 362(a) provides, in relevant part:

Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of-- (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;

The bankruptcy of one defendant does not normally affect the case as to non-debtor defendants, absent unusual circumstances. (Totten v. Kellogg Brown & Root, LLC (C.D. Cal. 2016) 152 F.Supp.3d 1243, 1268.)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2022-00330147-CU-PL-GDS: Jennifer Nevarez vs. Horizon Global Corporation, a Delaware Corporation 12/31/2025 Hearing on Motion for Stay of Proceedings in Department 25

The bankruptcy court is empowered to enjoin non-debtor parties “from commencing or continuing litigation.” (In re All Seasons Resorts, Inc. (Bankr. C.D. Cal. 1987) 79 B.R. 901, 903.) As further explained in All Seasons Resorts:

the automatic stay under § 362 of the Code may be extended to cover non- debtors in special situations. However, to achieve this result, a debtor must proceed through § 105(a). In other words, the extension of § 362 does not occur automatically in this instance, but requires the filing of an appropriate adversary proceeding under § 105 and § 362 to achieve the desired result.

(Ibid.)

However, state courts “do[] not have the jurisdiction to extend the stay to a non-debtor party,” as “[i]n order to apply the automatic stay outlined in 11 U.S.C. § 362 to a nondebtor party, the bankruptcy court must issue an extension of the stay under its jurisdiction.” (Totten v. Kellogg Brown & Root, LLC, supra, 152 F.Supp.3d at p. 1267.)

Accordingly, as the Court lacks the jurisdiction to provide the relief requested in the instant motion, it must be denied. Defendant has provided no authority which would provide this Court with jurisdiction to grant the relief it requests.

Disposition

Based on the foregoing, the motion to stay is DENIED. This ruling is without prejudice to Defendant appropriately seeking the requested relief in bankruptcy court.

The minute order is effective immediately. No formal order pursuant to California Rules of Court, rule 3.1312 or further notice is required.