Notice Of Motion And Motion To Sever Nonbankrupt Defendants For Relief From Automatic Stay As To Non-Bankrupt Defendants And For An Order Setting A Default Judgment Prove Up Hearing
Matter on calendar for Tuesday, November 4, 2025, Line 4, PLAINTIFF DAVID MILLSTEIN's Motion To Sever Nonbankrupt Defendants For Relief From Automatic Stay As To Non-Bankrupt Defendants And For An Order Setting A Default Judgment Prove Up Hearing.
Plaintiff's motion to sever nonbankrupt defendants for relief from automatic stay is denied. The court denies plaintiff's request to strike the opposition.
Plaintiff is correct that generally the bankruptcy automatic stay does not apply to nonbankrupt codefendants. (See In re Chugach Forest Prods., Inc., 23 F.3d 241, 246 (9th Cir. 1994) ["Section 362(a)(1) does not stay actions against guarantors, sureties, corporate affiliates, or other non-debtor parties liable on the debts of the debtor"].) The stay, however, may extend to third parties where property in the bankruptcy estate is at stake. (See United States v. Dos Cabezas Corp., 995 F.2d 1486, 1491 (9th Cir. 1993).) Status quo is the stay. Based on the present record and to further comity, promote reorganization, and to protect debtor's other creditors, the court denies the motion.
The bankruptcy proceeding is progressing, and the bankrupt defendant recently sold valuable real property that may service the debt. (Wong Decl., par. 7.) Moreover, Plaintiff is free to seek an order from the bankruptcy court clarifying that proceeding against the nonbankrupt defendants in this case will not inhibit the bankruptcy proceedings. The bankruptcy court is best positioned to make that determination and Plaintiff failed to demonstrate salient prejudice from having to seek its requested relief in the bankruptcy court rather than here.
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