Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-02787/USCOURTS-cand-3_05-cv-02787-6/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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United States District Court

For the Northern District of California

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 Plaintiffs allege that Honolulu Rail and Credit Bureau International are controlled by Lighter

and were used in his scheme. Compl. at 4-6. 

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IRWIN GOOTNICK et al.,

Plaintiffs,

 v.

 ERIC A . LIGHTER, et al.,

Defendants. /

No. C 05-02787 SI

ORDER DENYING DEFENDANTS’

MOTION FOR STAY

By letter brief, defendants ask the Court to find that the automatic stay in related bankruptcy

proceedings applies to stay this action. Having carefully considered the papers submitted, and for good

cause shown, the Court hereby DENIES defendants’ motion for stay. 

BACKGROUND

Plaintiffs Irwin and Susan Gootnick filed suit in state court against defendants Eric Lighter,

Honolulu Rail and Development, Ltd., and Credit Bureau International, Inc., on May 18, 2005, alleging

that Lighter fraudulently gained control over the assets of the Gootnick Family Trust for his own benefit

under the guise of acting as a financial adviser to plaintiffs.1

 Compl. at 1-2. The suit was removed to

this Court on July 7, 2005. On February 15, 2006, one day after Lighter was served with discovery

requests in this action, Lighter filed papers seeking bankruptcy protection for the Gootnick Family Trust

in bankruptcy court in Hawaii. Pursuant to 11 U.S.C. § 362, the filing of bankruptcy papers serves to

automatically stay any proceedings against Gootnick Family Trust. See 11 U.S.C. § 362(a). Lighter

Case 3:05-cv-02787-SI Document 88 Filed 04/14/06 Page 1 of 2
United States District Court

For the Northern District of California

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 This is the second voluntary bankruptcy filing initiated by Lighter in Hawaii since his motion

to transfer this action to Hawaii was denied. The first, filed in December, 2005 on behalf of Quality

Income Systems, Inc., was dismissed by the bankruptcy court in February 2006, based on bad faith

filing. 

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 At the February 2006 hearing before the bankruptcy court in Hawaii, Judge Faris was alerted

to the new filing on behalf of Gootnick Family Trust. At that time he stated that the new case was not

before him at that time, but that “if people want to file motions, they can file motions and I’ll look at

them when they come in.” The instant order rejecting imposition of the automatic stay is without

prejudice to consideration of any orders which Judge Faris may ultimately issue in the Gootnick

Family Trust bankruptcy proceedings.

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asserts that this automatic stay applies to the instant action.2

DISCUSSION

The automatic stay provision applies to all actions seeking to obtain possession of the property

of the debtor estate. See id. However, the provision ordinarily only applies to actions against the debtor.

See U.S. v. Dos Cabezas Corp., 995 F.2d 1486, 1491 (9th Cir. 1993). Debtor Gootnick Family Trust

is not a defendant in this action. Courts have made limited exceptions in cases where there is such

identity between the nondebtor defendant and the debtor that a finding against the nondebtor defendant

would constitute a judgment against the debtor. The vitality of this exception in the Ninth Circuit is

unclear, see In re Chugach Forest Prods., 23 F.3d 241, 246-47 (9th Cir. 1994), but in any event the

exception does not apply where the nondebtor defendant’s liability does not derive from some obligation

of the debtor. See id. at 247. Plaintiffs’ action does not derive from any obligation of GFT; it is instead

based on Lighter’s alleged bad faith in his business dealings with the Gootnicks. See Compl. at 1-2.

Accordingly, the Court DENIES defendants’ motion to apply the automatic stay to the instant action

(Docket No. 72).3

 

IT IS SO ORDERED.

Dated: April 13, 2006

 

SUSAN ILLSTON

United States District Judge

Case 3:05-cv-02787-SI Document 88 Filed 04/14/06 Page 2 of 2