Case Number: VC062924    Hearing Date: July 22, 2014    Dept: SEC

TOTAL HYDROPONICS CENTER, INC. v. FLDS, LLC
CASE NO.: VC062924
HEARING: 07/22/14

#2
TENTATIVE ORDER

I. Cross-complainant/defendant FLDS, LLC and defendant GREGG
FIELDS’s motion for summary judgment or, in the alternative,
summary adjudication, is ORDERED OFF-CALENDAR, with a new
hearing date to be set in accordance with this order.

II. Defendants FLDS, LLC and GREGG FIELDS’s motion for
sanctions is ORDERED OFF-CALENDAR, with a new
hearing date to be set in accordance with this order.

Pursuant to this order, the entire action is STAYED pending the conclusion of the bankruptcy proceedings.

When the bankruptcy is concluded, the parties may contact the Court for a new hearing date. Both motions have been fully briefed. However, if additional facts must be presented to the Court prior to the new hearing date, counsel may request that the Clerk set a briefing schedule.

This action concerns a landlord/tenant dispute. The moving parties (landlords) seek summary judgment or, in the alternative, summary adjudication of plaintiff tenant TOTAL HYDROPONICS CENTER, INC.’s (“THC”) complaint, the cross-complaint filed against JACKI HARRIS and JOHNNIE HARRIS and the answer filed to the cross-complaint. Jacki Harris is the principal, sole shareholder and alleged alter ego of THC. As acknowledged in his answer, cross-defendant Johnnie is a guarantor of the lease. (The Harrises will herein be referred to by their first names).

Cross-defendant Jacki Harris filed for Chapter 13 bankruptcy on March 25, 2014. The Notice of Stay was filed May 23, 2014. As this Court ruled on June 17, 2014, the action is stayed as a matter of law as to cross-defendant Jacki. 11 U.S.C. § 362.

Generally, the automatic stay of section 362 protects only the debtor and does not stay the action as to other parties. The opposing parties argue that the action should be stayed against all parties, citing the Court’s inherent authority under Code of Civil Procedure section 128.

Some courts have recognized an “unusual circumstances” exception which may extend the stay where there is such an identity between the debtor and the other defendant that the debtor is deemed a necessary party or where a judgment against the non-bankrupt party would essentially constitute a judgment against the debtor. See Wordtech Systems, Inc. v. Integrated Network Solutions, Inc. (E.D. Cal.) 2012 U.S. Dist. LEXIS 172789. The 9th Circuit has not expressly adopted the “unusual circumstances” doctrine as articulated in A.H. Robins Co. v. Piccinin (4th Cir. Va. 1986) 788 F.2d 994. See, e.g. Chugach Forest Prods., Inc. v. Northern Stevedoring & Handling Corp. (9th Cir. 1994) 23 F.3d 241). Nonetheless, the Court finds that it is within its authority to issue a stay under these facts.

Jacki is the sole owner and shareholder of signatory THC. While the motion for summary judgment on the complaint could be litigated, it makes little sense to do so. Both the complaint and cross-complaint seek damages under the same lease agreement. Litigating the pleadings separately would require an unnecessary duplication of efforts. Similarly, whether cross-defendant Johnnie is liable as a guarantor requires a determination of THC’s liability under the lease.

Defendants/cross-complainant argues that the opposing parties are required to seek an injunction in the bankruptcy court in order to obtain a stay of the entire action. In re Excel Innovations, Inc. (9th Cir. 2007) 502 F.3d 1086 (setting the standards for obtaining injunctive relief). While a party to the bankruptcy may seek injunctive relief in that forum, the trial court has the inherent authority to issue a stay where it finds it would be more efficient to stay the entire case rather than litigating it on a piecemeal basis. Wordltech, supra. The Court makes such finding here.

Defendant/cross-complainants FLDS and Fields argue that Jacki failed to include this case in her bankruptcy schedule as an asset of THC. While that is true, she submitted her bankruptcy attorney’s declaration attesting to the inadvertent omission and has since filed an amended bankruptcy schedule to include this action. Under those circumstances, judicial estoppel does not apply. See In re Superior Crewboats, Inc. (5th Cir. 2004) 374 F.3d 330 (noting the requirements that the court accepted the previous position and that the inconsistency was not inadvertent). Plaintiff THC’s action will be litigated upon the discharge of Jacki’s bankruptcy, along with any remaining claims.

The stay on the entire action also necessitates a continuance of the motion for sanctions, as noted above.