TENTATIVE RULING

Plaintiff Jason Smith’s Ex Parte Application to Lift the Stay as to Individual Defendants Adrian Steckel, Bradley J. Pizer, and Kevin Dawson is GRANTED.

Plaintiff Jason Smith to give notice.

REASONING

On May 9, 2024, Defendant MoveCU Inc. (“MoveCU”) filed a voluntary petition for bankruptcy in United States Bankruptcy Court for the District of California (Mot., Glaser Decl. ¶ 3), which stayed the action automatically pursuant to title 11 United States Code section 362(a). Plaintiff Jason Smith (“Plaintiff”) moves the Court for an order lifting the stay in this action as to Defendants Adrian Steckel, Bradley J. Pizer, and Kevin Dawson (“Defendants”). Defendants oppose the issuance of an order lifting the stay because all causes of action except for one are alleged against all Defendants, including MoveCU, such that MoveCU will need to appear or be considered in connection with apportionment if damages are awarded; Defendants are alleged to have acted in their capacities on behalf of MoveCU and are entitled to a defense and indemnity by MoveCU, which cannot be provided due to the bankruptcy; and Defendants are consulting with MoveCU’s bankruptcy counsel to consider obtaining a bankruptcy court order expanding the stay to ensure litigation does not affect MoveCU.

The Court first notes that Defendants take issue with Plaintiff’s compliance with the rules relating to an ex parte application. The Court considered this application on an ex parte basis but requested opposition and reply briefing, such that the application was essentially converted into a noticed motion heard on shortened notice. Thus, the Court finds that any arguments as to compliance with ex parte application requirements are inapposite.

As a general matter, the automatic stay of judicial proceedings against a debtor in bankruptcy does not apply to non-debtor codefendants, and “[i]t is clearly established that the automatic stay does not apply to non-bankrupt co-defendants of a debtor even if they are in a similar legal or factual nexus with the debtor.” (Seiko Epson Corp. v. Nu-Kote International, Inc. (Fed.Cir. 1999) 190 F.3d 1360, 1364-1365, quotation marks omitted.)

There are narrow exceptions in unique circumstances, such as “when there is such identity between the debtor and the third-party defendant that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment or finding against the debtor.” (A.H. Robins Co. v. Piccinin (4th Cir. 1986) 788 F.2d 994, 999.) However, the Court is not convinced that this case represents the sort of unusual situation requiring a stay of the entire action as to all defendants. First, Defendants provide no evidence that MoveCU’s participation is necessary to allow Defendants to fully present their defenses, and their arguments that MoveCU will need to appear and be considered for apportionment of damages is not well taken because this would essentially eliminate the rule that bankruptcy stays are limited only to the debtor because a significant number of cases are brought against many parties, and if apportionment is a basis to stay the whole action, this would be evident in legal authority. Defendants’ consultation with MoveCU’s bankruptcy counsel is also not a persuasive reason for staying this action as to Defendants. Accordingly, Plaintiff Jason Smith’s Ex Parte Application to Lift the Stay as to Individual Defendants Adrian Steckel, Bradley J. Pizer, and Kevin Dawson is GRANTED.