Corker v. Costco Wholesale Corporation

[4] 5 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON [6] AT SEATTLE [7] BRUCE CORKER, et al., 8 CASE NO. 2:19-cv-00290-RSL 9 Plaintiffs, v. [10] COSTCO WHOLESALE CORPORATION, 11 ORDER et al., [12] 13 Defendants. [15] This matter comes before the Court on plaintiffs’ “Motion for Preliminary Approval [16] of Class Settlement.” Dkt. # 871. The proposed settlement involves defendant Mulvadi [17] Corporation, which has filed for bankruptcy protection. Under 11 U.S.C. § 362 (a), a [18] bankruptcy petition automatically stays the continuation of all judicial proceedings against [19] the debtor except in the types of cases specifically enumerated in § 362(b). [20] The purpose of § 362(a)’s automatic stay is to protect both the debtor and his [21] creditors. [22] The automatic stay is one of the fundamental debtor protections 23 provided by the bankruptcy laws. It gives the debtor a breathing spell 24 from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or [26] ORDER - 1 1 reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy. [2] 3 S. Rep. No. 989, 95th Cong., 2d Sess. 54-55 (1978), reprinted in 1978 U.S. Code Cong. & Admin. News 5787, 5840-41. [4] 5 The automatic stay also provides creditor protection. Without it, certain creditors would be able to pursue their own remedies against 6 the debtor’s property. Those who acted first would obtain payment of the claims in preference to and to the detriment of other creditors. [7] Bankruptcy is designed to provide an orderly liquidation procedure 8 under which all creditors are treated equally. A race of diligence by creditors for the debtor's assets prevents that. [9] 10 H.R. Rep. No. 595, 95th Cong., 1st Sess. 340, reprinted in part in 1978 U.S. Code Cong. & Admin. News 5787, 6297. [11] Upon a showing of “cause,” a bankruptcy court “shall grant relief from the [12] [automatic] stay.” 11 U.S.C. § 362 (d). “‘Cause’ has no clear definition and is 13 determined on a case-by-case basis.” In re Tucson, 912 F.2d at 1166. [14] In re Conejo Enterprises, Inc., 96 F.3d 346 , 351–52 (9th Cir. 1996) (footnote omitted). [15] While plaintiffs acknowledge Mulvadi’s bankruptcy, they do not attempt to show that the [16] automatic stay does not apply to a preliminary settlement approval, that the settlement [17] funds are not part of the bankruptcy estate, or that the Hawaiian bankruptcy court has lifted [18] the stay. Section 362(a) stays judicial action or proceedings in their entirety, not simply the [19] entry of final judgment. The Court understands that the settlement funds will be provided [20] by Mulvadi’s insurers, but the Court does not have enough information to determine [21] whether the policy and/or its proceeds are properly considered assets of the bankruptcy [22] estate. See In re Minoco Grp. of Companies, Ltd., 799 F.2d 517, 519 (9th Cir. 1986); In re [23] SVB Fin. Grp., 650 B.R. 790 , 798 (Bankr. S.D.N.Y. 2023). [26] ORDER - 2 [1] For all of the foregoing reasons, the Court declines to consider the Motion for [2] Preliminary Approval unless and until plaintiffs show either that the automatic stay does [3] not apply or that the bankruptcy court has found cause to grant relief from the stay. [4] 5 Dated this 13th day of July, 2023. [7] Robert S. Lasnik 8 United States District Judge [26] ORDER - 3