Opinion
2:11-CV-1374 JCM (CWH)
04-03-2012
JUAN PABLO ORQUIZA, et al., Plaintiffs, v. WALLDESIGN, INC., et al., Defendants.
ORDER
Presently before the court is defendants D.R. Horton, Inc. and Ryland Homes Nevada, LLC's motion for reconsideration of the denial of defendants' motion to stay. (Doc. #66). Defendant Hand Construction Company has joined in the motion. (Doc. #77). Plaintiffs Juan Pablo Orquiza and Mazimino Buenaventura have filed an opposition (doc. #79) to which and the defendants have replied (docs. #81 and #83).
I. Background
The moving defendants are general contractors who had subcontracted with defendant Walldesign, Inc. Plaintiffs are former employees of Walldesign who allege that Walldesign violated the Fair Labor Standards Act and Nevada wage and hour laws by failing to properly pay them. Moving defendants, as well as other general contractors, have also been sued under the theory that the general contractors were co-employers of defendants.
Walldesign filed a bankruptcy petition with the United States Bankruptcy Court for the Central District of California on January 9, 2012. See Doc. #55, Ex. E. Accordingly, the case has been automatically stayed as to Walldesign. The moving defendants argue that because Walldesign has contracted to fully indemnify the moving defendants the bankruptcy stay should equally apply to the moving defendants. In essence, the moving defendants argue that because Walldesign is ultimately liable to pay any judgment recovered against the moving defendants, as well as the moving defendants' attorneys' fees, the whole action should be stayed pending Walldesign's bankruptcy proceedings.
Magistrate Judge Carl W. Hoffman denied the moving defendants' motion, holding that it was more appropriate for the bankruptcy court to determine whether or not its automatic stay should be extended to the moving defendants. In support of his holding, the magistrate judge cited the fact that this court does not have a "feel for the breadth of this case as related to the rest of the bankruptcy." See Court Reporter/FTR Recording, 2:56-2:58. Further, the magistrate judge held that it was clear that the indemnification claims could be substantial, and due to their possible effect on the bankruptcy estate, a request to extend the stay was more properly addressed to the bankruptcy court. Id.
For the reasons stated below, this court agrees with Magistrate Judge Hoffman's holding. II. Discussion
The moving defendants place great emphasis on the Ninth Circuit's opinion in Boucher v. Shaw, 572 F.3d 1087 (9th Cir. 2009). While this court acknowledges that the pertinent language in Boucher is only dicta, the court finds that it addresses the precise facts of the instant dispute. In Boucher, the Ninth Circuit explained that where a bankruptcy debtor is contractually obligated to indemnify non-debtor defendants in the same lawsuit, a stay is likely appropriate so that the plaintiff could pursue the matter in bankruptcy court. Id. at 1093. Specifically, the court explained:
This is, in fact, an easier case than our precedent cited supra. Here, the plaintiff's claim does not seek to reach property of the managers that has been pledged to secure the Castaways' debt, or that would otherwise impact property of the [bankruptcy] estate. . . However, if the liability of the non-debtor party were to affect the property of the bankruptcy estate, such as by a requirement that the debtor indemnify the non-debtor or by payment of the liability from a director's and officer's insurance policy, it may be necessary for the plaintiff in such a case to proceed against the non-debtor party through bankruptcy proceedings.Id. (emphasis added) (citations omitted).
In Boucher, the parties had not raised claims that the suit would affect the bankruptcy estate, thus the court did not reach the question of whether the stay should be extended to cover the non-debtor defendants. Id. The Fourth Circuit, however, has addressed the issue. In A.H. Robins Co. v. Piccinin, 788 F.2d 994 (4th Cir. 1986), the court held that a stay of litigation as to non-debtor defendants is warranted when the "debtor and non-debtor are so bound by statute or contract that the liability of the non-debtor is imputed to the debtor by operation of law." Id. at 999; see also Maxicare Health Plans, Inc. v. Centinela Mammoth Hosp., 105 B.R. 937, 942-943 (Bankr. C.D. Cal. 1989) ("the court finds that actions against non-debtor members will result in claims against the debtor for reimbursement or indemnification such that the debtor is the real party defendant").
However, Boucher did address the vehicle for extending a stay to non-debtor defendants. The Ninth Circuit explained that "the bankruptcy court would first need to extend the automatic stay under its equity jurisdiction." Boucher, 572 F.3d at 1093. The court went on to explain that "'"such extensions, although referred to as extensions of the automatic stay, [are] in fact injunctions issued by the bankruptcy court after hearing and the establishment of unusual need to take this action to protect the administration of the bankruptcy estate."'" Id. (quoting Patton v. Bearden, 8 F.3d 343, 349 (6th Cir. 1993)).
While this court accepts the moving defendants' arguments that it has the inherent authority to stay these proceedings pursuant to its power to control the disposition of the cases on its docket, see Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936) ("the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the cases on its docket with economy of time and effort for itself, for counsel, and for litigants."); see also CMAX Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962), the court is not inclined to exercise its power. Moving defendants are attempting to pick and choose which parts of Boucher they want applied. If they argue, pursuant to Boucher's dicta, that the bankruptcy stay should be extended, then they must follow the procedure the Boucher court described, and seek the proper injunction from the bankruptcy court.
Accordingly,
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED, that defendants' motion for reconsideration (doc. #66) be, and the same hereby is, DENIED.
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UNITED STATES DISTRICT JUDGE