Case Number: EC061440    Hearing Date: August 22, 2014    Dept: A

Unava LLC v World Organics LLC

DEMURRER & MOTION TO STRIKE

Calendar: 9
Case No: EC061440
Date: 8/22/14

MP: Defendants, World Organics, Bagrat Ogannes, Giorgi Imnaishvili, and
Tigran Hakobyan
RP: Plaintiffs, Unava LLC and Organic America, LLC

RELIEF REQUESTED:
Demurrer and Motion to strike directed at Second Amended Complaint.

DISCUSSION:
The parties in this case were in the business of micro-greens, tiny vegetables used in fine dining restaurants to enhance the beauty, taste and freshness of dishes. The Plaintiff, Unava, LLC, is an investor in a joint venture with Defendants, World Organics, LLC, Bagrat Ogannes, Tigran Hakobyan, and Giorgi Imnaishvili. The Plaintiff provided funding and the Defendants agreed to provide intellectual property, trade secrets, and their knowledge of the business of micro-greens.
The parties established Plaintiff, Organic America, LLC, and entered into an operating agreement on December 1, 2011. Unava, LLC received 67% of the shares and World Organics, LLC received 33% of the shares of Organic America, LLC. World Organics was in charge of day-to-day operations and Bagrat Ogannes, Tigran Hakobyan, and Giorgi Imnaishvili were employed to operate the business. Bagrat Ogannes was the CEO.
This dispute arose because the parties disagreed on the management of the company. The Plaintiff brought this action to claim that the Defendants are mismanaging Organic America, LLC.
The case is subject to a bankruptcy stay.

This hearing concerns the Defendants’ demurrer and motion to strike to the Second Amended Complaint. The matter was continued from July 18, 2014 due to the notice of bankruptcy filed by the Defendants, Bagrat Ogannes and Giorgi Imnaishvili and so that the Plaintiff could obtain orders in the bankruptcy court.

A petition in bankruptcy creates an automatic stay of all judicial proceedings against the debtor. 11 USC section 362(a). Judicial proceedings in violation of the automatic stay are void. In re Schwartz (9th Cir. 1992) 954 F.2d 569, 571. After a person files for bankruptcy protection, the person’s property becomes part of the bankruptcy estate and is administered by the bankruptcy trustee. See 11 USC sections 323 and 541; see e.g., Cloud v. Northrop Grumman Corp. (1998) 67 Cal. App. 4th 995, 1001.
The Trustee is empowered by statute to represent the interests of bankruptcy estate, which primarily inures to the benefit of the unsecured creditors. 11 USC section 323(a); In re Liles (Bankr. E.D. Tex. 2002) 292 B.R. 138, 139. As the representative of the estate, the Trustee has both a legally cognizable interest in the adversary proceeding and a duty to intervene as necessary for the benefit of the creditors. See In re Andrews (9th Cir. 1995) 49 F.3d 1404, 1407-08.

In the pending case, the Defendants, Bagrat Ogannes and Giorgi Imnaishvili, have open bankruptcy actions. The references to exhibits in the following discussion are the exhibits in the Plaintiffs’ request for judicial notice that the Plaintiffs filed on July 11, 2014.
The bankruptcy case of Bagrat Ogannes was reopened by order of the Bankruptcy Court on March 17, 2014 because the bankruptcy trustee discovered that an additional asset had not been scheduled in Bagrat Ogannes’ petition (see exhibit C). This additional interest is the Defendant’s interest in the Defendant, World Organics, LLC (see exhibit B). The bankruptcy court reappointed the United States Trustee as the trustee of the bankruptcy estate (see exhibit C).
The bankruptcy case of Giorgi Imnaishvili was reopened by order of the Bankruptcy Court on February 28, 2014 because the bankruptcy trustee discovered that an additional asset had not been scheduled in Giorgi Imnaishvili’s petition (see exhibit G). This additional interest is the Defendant’s interest in the Defendant, World Organics, LLC (see exhibit F). The bankruptcy court reappointed the United States Trustee as the trustee of the bankruptcy estate (see exhibit G).

The open bankruptcy cases of Bagrat Ogannes and Giorgi Imnaishvili create automatic stays that bar the continuation of the claims in the pending case against them. Further, case law provides the trial court with discretion to stay any unstayed aspects of a case when it is impracticable to litigate the case against nonbankrupt defendants. Traweek v. Finley, Kumble, etc. Myerson & Casey (1991) 235 Cal.App.3d 1128. In Traweek, the Court held that when there are multiple defendants and a bankruptcy stay applies to some, the Court should determine whether it practicable to proceed separately against the nonbankrupt defendants. If it is practicable, the case may proceed. If it is impracticable, the actions should be stayed as to the nonbankrupt defendants as well.
In the pending case, the open bankruptcy cases of Bagrat Ogannes and Giorgi Imnaishvili concern an unscheduled asset, which is their interest in another Defendant, World Organics, LLC. It is not practicable to proceed separately against World Organics, LLC, because it is an asset of the bankruptcy cases.
Further, this case concerns the Plaintiffs’ claim that the Defendants, who were operating the business, were mismanaging it. Since the Defendants were collectively managing the company, it is not practicable to proceed separately against the remaining Defendant, Tigran Hakobyan, in the absence of the other Defendants.

On July 30, 2014, the Plaintiff filed a notice of bankruptcy orders. These orders indicate that the bankruptcy trustee obtained authority to sell the interests of Bagrat Ogannes and Giorgi Imnaishvili World Organics, LLC, to the Plaintiff. There is no order discharging the Defendants’ bankruptcies.

Therefore, the Court will take the demurrers off calendar in light of the bankruptcy stay. Further, the Court will order that the entire action is stayed pending the conclusion of the bankruptcy cases of Bagrat Ogannes and Giorgi Imnaishvili because, in their absence, it is impracticable to litigate the case against the nonbankrupt Defendants.

Finally, the Court will set a case management conference regarding the status of the bankruptcy matters, i.e., when a bankruptcy discharge will be issued and the stay lifted.

RULING:
TAKE OFF CALENDAR the demurrer and motion to strike in light of bankruptcy stay.
STAY entire action.
SET a case management conference regarding the status of the bankruptcy case.