Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_11-cv-02369/USCOURTS-caed-2_11-cv-02369-1/pdf.json

Nature of Suit Code: 423
Nature of Suit: Bankruptcy Withdrawal 28 USC 157
Cause of Action: 28:0157 Motion for Withdrawal of Reference

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UNITED STATESDISTRICT COURT

EASTERN DISTRI CT OF CALIFORNIA

In re:

SK FOODS, LP, a California

limited partnership, et al.,

Debtors.

BRADLEY D. SHARP, Chapter 11

Trustee,

Plaintiff, CIV. NO. S-11-2369 LKK

v.

SKPM CORP., et al., O R D E R

Defendants.

 /

Before the court is defendants’ September 12, 2011 ex parte

“emergency” motion for an order staying all bankruptcy court

proceedings in Sharp v. SKPM Corp., Inc. (In re SK Foods, L.P.),

Adv. Pro. No. 11-2337 (Bankr. Case No. 09-29162-D-11). For the

reasons set forth below, the motion is DENIED.

BACKGROUND

On April 11, 2011, this court issued an order remanding

several adversary proceedings to the Bankruptcy Court for

consideration of whether they should be stayed pending the

Case 2:11-cv-02369-TLN Document 11 Filed 09/14/11 Page 1 of 5
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 On remand, the Bankruptcy Court stayed the proceedings, and 1

subsequently certified its stay orders for direct appeal to the

Ninth Circuit.

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completion of a related criminal case involving Frederick Salyer.

Sharp v. SSC Farms 1, LLC (In re SK Foods, L.P.), Civ.

No. S-10-Civ-1492, Dkt. No. 74. On May 4, 2011, the Trustee filed 1

this adversary proceeding. (Bankr. Dkt. No. 1). On May 18th and

again on August 15, 2011, defendants moved the Bankruptcy Court for

a stay of this adversary proceeding, scheduling it for September

28, 2011. (Bankr. Dkt. Nos. 6, 7, 36, 37 & 44).

On August 31, 2011, the Trustee moved the Bankruptcy Court for

a Temporary Restraining Order against defendants enjoining

defendants from dissipating certain assets of the estate. (Bankr.

Dkt. No. 61). On September 1, 2011, the Bankruptcy Court issued

a TRO enjoining defendants from dissipating the assets, pending a

September 15, 2011 Order To Show Cause why they should not continue

to be so enjoined until a trial could be had on the matter.

(Bankr. Dkt. No. 77).

On that same day, September 1, 2011, defendants moved ex parte

to delay the OSC until their motion for a stay could be heard on

September 28, 2011. (Bankr. Dkt. No. 81). The Bankruptcy Court

denied the ex parte motion because the TRO would expire before the

proposed continuation date, and there was no stipulation from all

parties extending its restrictions. (Bankr. Dkt. No. 84).

On September 7, 2011, defendants filed a motion to withdraw

the reference of the adversary proceeding to the Bankruptcy Court,

Case 2:11-cv-02369-TLN Document 11 Filed 09/14/11 Page 2 of 5
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 It is this court’s understanding that the prior motion to 2

stay, previously scheduled for September 28, 2011 has accordingly

been mooted by the partial grant of this later stay motion.

 Because the motion for a stay is denied on other grounds, 3

this court is not called upon to determine whether defendants’

unsupported assertion that Mr. Salyer’s testimony is required,

would be sufficient to obtain a stay.

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citing Stern v. Marshall, 564 U.S. ___, 131 S. Ct. 2594 (2011).

(Bankr. Dkt. No. 90). The same day, defendants moved in the

Bankruptcy Court for a stay of all proceedings, pending the hearing

on the motion to withdraw the reference. (Bankr. Dkt. No. 99).

On September 8, 2011, the Bankruptcy Court granted defendants’

motion, in part. The Bankruptcy Court stayed all proceedings in

the adversary proceeding “pending the outcome of the Motion to

Withdraw the Reference,” except that it denied the stay motion with

regard to the pending OSC hearing. (Bankr. Dkt. No. 108). The 2

Bankruptcy Court determined that if it delayed the OSC hearing, the

TRO would expire, thus allowing defendants to impair the assets

protected under the TRO. Id. In that event, “the court would be

unable to grant meaningful relief to the Trustee in the event he

ultimately prevails in this adversary proceeding.” Id.

On September 12, 2011, defendants filed the instant ex parte

motion to stay all proceedings in the adversary proceeding, arguing

that they “cannot adequately defend” against the preliminary

injunction “without evidence from Mr. Salyer.” Ex Parte

Application for Stay at 5 (Dkt. No. 3).3

DISCUSSION

The Bankruptcy Court acted entirely within its sound

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discretion. A central goal of the bankruptcy laws is to preserve

the assets of the estate. See In re Palmdale Hills Property, LLC,

423 B.R. 655, 663 (BAP 9th Cir. 2009) (“The automatic stay

preserves assets for both the estate and creditors”), aff’d, ___

F.3d ___, 2011 WL 3320429 (9th Cir. 2011). This court’s remand

order – and the Bankruptcy Court’s stay orders – do not give

defendants a free hand to act however they wish regarding the

assets of the estate (or assets claimed to belong to the estate),

with no oversight from the Bankruptcy Court. This court’s April

14, 2011 remand order does not compel the Bankruptcy Court to stay

emergency motions seeking to preserve the assets of the estate, and

to maintain the status quo.

Accordingly, the Bankruptcy Court did not err in denying

defendants’ requested stay of the OSC (preliminary injunction)

hearing.

SUMMARY

IT IS HEREBY ORDERED:

1. Defendants’ ex parte motion for a stay of all bankruptcy

proceedings (Dkt. No. 3) is DENIED.

2. Defendants’ Motion for an Order Withdrawing Reference

(Dkt. No. 2) is hereby scheduled to be heard on this court’s

regular Law and Motion Calendar on October 24, 2011. Opposition

to the motion shall be filed in this court no later than September

28, 2011. Any Reply shall be filed in this court no later than

October 4, 2011.

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IT IS SO ORDERED.

DATED: September 14, 2011.

Case 2:11-cv-02369-TLN Document 11 Filed 09/14/11 Page 5 of 5