Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_12-cv-02077/USCOURTS-caed-1_12-cv-02077-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

HARLEY-DAVIDSON CREDIT CASE NO. 1: 12-cv-02077-AWI-BAM

CORPORATION, 

Plaintiff, ORDER STAYING ACTION AS TO

DEFENDANT JERRY KUTUMIAN;

REQUEST FOR ADDITIONAL BRIEFING

AS TO DEFENDANT ZOVINAR

DEVELOPMENT, LLC

vs.

JERRY KUTUMIAN and ZOVINAR

DEVELOPMENT, LLC,

Defendants.

 /

In light of Defendant Jerry Kutumian’s Notice of Filing of Bankruptcy (Doc. 28), pursuant to 11

U.S.C. § 362, the Court STAYS this action with respect to Defendant Kutumian. However, the Court

questions whetherit mayproceed against Defendant Zovinar Development, LLC. Pursuant to 11 U.S.C.

§ 362, the filing of the bankruptcy petition operates as an automatic stay of this action against Jerry

Kutumian. See 11 U.S.C. § 362(a). However, Section 362 does not automatically stay this action as

to the other, non-bankrupt defendant, Zovinar Development, LLC. See Ingersoll–Rand Financial Corp.

v. Miller Mining Co. Inc., 817 F.2d 1424, 1427 (9th Cir.1987) (“In the absence of special circumstances,

stays pursuant to section 362(a) are limited to debtors and do not include non-bankrupt co-defendants.”) 

Nonetheless, the Court does have the authority to stay the entire action. See Zurich Amer. Ins.

Co. v. Trans Cal Associates, 2011 WL 6329959, at *2–3 (E.D. Cal. Dec.16, 2011) (explaining the

“unusual circumstances” exception and ultimately staying the action as to non-bankrupt co-defendants

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pursuant to the court's inherent authority). “The courts have carved out limited exceptions [to the general

rule that stays pursuant to § 362(a) are limited to debtors and do not include non-bankrupt

co-defendants] where: (1) ‘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,’ or (2) extending the stay against

codefendants ‘contributes to the debtor's efforts of rehabilitation.’ ” United States v. Dos CabezasCorp.,

995 F.2d 1486, 1491 n. 3 (9th Cir. 1993) (quoting A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th

Cir.1986); Matter of S.I. Acquisition, 817 F.2d 1142, 1147 (5th Cir.1987)) (citations omitted); see also,

Queenie, Ltd. v. Nygard Int'l, 321 F.3d 282, 287 (2nd Cir. 2003) (staying the proceedings against not

only the debtor individual defendant, but also the non-debtor corporation co-defendant that was wholly

owned by him because the “claim against the non-debtor will have an immediate adverse economic

consequence for the debtor's estate”). 

The Court is inclined to extend the automatic stay to co-defendant Zovinar Development, LLC.

It appears there is such an identity between Kutumian and Zovinar Development, LLC that Kutumian

may be said to be the real party defendant and that a judgment against Zovinar Development, LLC will

in effect be a judgment or finding against Kutumian. In this respect, a claim against Zovinar

Development, LLC will have an immediate adverse economic consequence for Kutumian’s estate, or

would otherwise infringe on Kutumian’s efforts of rehabilitation. 

No later than July 24, 2013, Plaintiff shall inform the Court whether Plaintiff believes this case

should be stayed with respect to Zovinar Development, LLC. If Plaintiff believes this case should

proceed against Defendant Zovinar Development, LLC, Plaintiff shall submit a brief that explains, with

supporting legal authority, why the stay should not be extended to Zovinar Development, LLC. The

brief shall not exceed ten (10) pages in length. 

IT IS SO ORDERED. 

Dated: July 17, 2013 /s/ Barbara A. McAuliffe 

10c20k UNITED STATES MAGISTRATE JUDGE

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