(PS)Thacker v. AT&T Mobility, LLC

[7] 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA [10] 11 DAVID C. THACKER, No. 2:20–cv–0255–KJM–CKD PS 12 Plaintiff, ORDER 13 v. 14 AT&T CORPORATION, et al., 15 Defendants. [16] 17 This case has now settled between the main parties: plaintiff and defendants AT&T 18 Corporation and AT&T Mobility LLC.1 (ECF No. 49.) However, there still remains at least one 19 active claim against a third defendant, Diversified Consultants, Inc. (“DCI”). (See ECF No. 12 20 (First Amended Complaint) at 5.) The already-extended deadline for dispositive motions in this 21 case was July 2, 2021 (ECF No. 38 at 2), and no dispositive motions have been filed. The court 22 therefore issues this order to require plaintiff to notify the court whether and how he plans to 23 proceed against DCI, which will soon be the last remaining defendant in this action. 24 Plaintiff is reminded that his claims against DCI in this lawsuit are still stayed pursuant to [25] 11 U.S.C. § 362 , due to DCI’s ongoing Chapter 7 bankruptcy proceeding. See In re: Diversified [26] 27 1 The AT&T defendants have not been formally dismissed yet, as the undersigned’s May 5, 2021 findings and recommendations to order their voluntary dismissal under Rule 41(a)(2) are still 28 pending with the Chief District Judge. (ECF No. 53.) 1 Consultants, Inc., No. 3:20-bk-01311-CJJ (Bankr. M.D. Fl.), ECF No. 106 at 2 (ordering that the 2 § 362 automatic stay applies to plaintiff’s claims against DCI in this lawsuit, while noting that 3 plaintiff’s Proof of Claim No. 50 in the Bankruptcy Case would be treated as timely filed). 4 Accordingly, plaintiff will not be able to proceed with his claims against DCI until the 5 Bankruptcy Case concludes. See 11 U.S.C. § 362 (c)(2) (duration of automatic stay). 6 Plaintiff is further reminded that because defendant DCI is a corporation undergoing 7 Chapter 7 bankruptcy, it is effectively a defunct entity and likely will not be able to satisfy any 8 judgment that might be rendered in this action—which would necessarily occur after all of DCI’s 9 assets are liquidated via the Chapter 7 process (prompting the automatic stay to lift).2 The court 10 further notes that, once the automatic stay lifts, plaintiff would likely have to resort to a motion 11 for default judgment under Rule 55(b)(2) because DCI will almost certainly still be unrepresented 12 by counsel and therefore unable to defend itself in this lawsuit. See D-Beam Ltd. P’ship v. Roller 13 Derby Skates, Inc., 366 F.3d 972 , 973-74 (9th Cir. 2004) (“It is a longstanding rule that 14 corporations . . . must appear in court through an attorney.”) (cleaned up). [15] 16 2 As the court stated in its October 2020 order permitting counsel for DCI to withdraw: 17 In bankruptcy proceedings under Chapter 7—as opposed to Chapter 11—no discharge of debts may be granted to a debtor that is 18 not an individual. 11 U.S.C. § 727 (a)(1); N.L.R.B. v. Better Bldg. Supply Corp., 837 F.2d 377, 378 (9th Cir. 1988) (“Partnerships and 19 corporations may not discharge their debts in a liquidation proceeding under Chapter 7 of the Code.”). “The filing of a chapter 7 20 [bankruptcy petition] creates a defunct corporation.” In re Tri-R Builders, Inc., 86 B.R. 138, 141 (Bankr. N.D. Ind. 1986). See Matter 21 of Liberty Tr. Co., 130 B.R. 467, 471 (W.D. Tex. 1991) (“The consequence of denying discharge to corporations and partnerships 22 in a Chapter 7 proceeding is to render such entities ‘defunct.’”); see also Thacker v. Fed. Commc’ns Comm’n, No. AP 03-04274-PBS, [23] 2005 WL 8161960 , at *4 (W.D. Wash. June 24, 2005) (collecting cases), aff’d sub nom. In re Magnacom Wireless, LLC, 503 F.3d 984 24 (9th Cir. 2007). 25 Because defendant DCI is a corporation undergoing Chapter 7 bankruptcy, it is now effectively a defunct entity. That is, “the 26 corporation ceases to operate or own any assets,” though it might technically continue to exist by virtue of its certificate of 27 incorporation from the state. In re Tri-R Builders, 86 B.R. at 141 . 28 (ECF No. 28 at 4-5.) ] Given all of these circumstances, it appears that plaintiff's best chance to recover anything 2 || from DCI is through his claim in the Bankruptcy Case, not through this lawsuit. The court 3 || therefore encourages plaintiff to consider moving to voluntarily dismiss his present claims in this 4 || suit against DCI, under Rule 41(a)(2).? On such a motion—which need not be noticed for 5 || hearing—the undersigned would be inclined to recommend that the Chief District Judge order the 6 || dismissal without prejudice. Assuming the Chief District Judge adopts the undersigned’s 7 || recommendations, that would render all claims against all defendants dismissed and bring this 8 | litigation to a close. 9 Still, the choice is entirely up to plaintiff. The court simply requires plaintiff to advise the 10 || court of his intentions with respect to DCI. Accordingly, IT IS HEREBY ORDERED that: 11 1. Within 14 days of the entry of this order, plaintiff shall file either (a) a motion to 12 voluntarily dismiss his claims against DCI under Rule 41(a)(2), or (b) a status report 13 advising the court how he intends to proceed against DCI; and 14 2. Failure to timely comply with this order may result in the imposition of sanctions, 15 including a potential recommendation that the claims against DCI be dismissed with 16 prejudice pursuant to Federal Rule of Civil Procedure 41(b). 17 | Dated: July 8, 2021 fed) / Fac ANG fu ! CAROLYNK.DELANEY 19 UNITED STATES MAGISTRATE JUDGE [21] 22 AW, thac.255 [26] 27 | > Plaintiff cannot simply file a unilateral notice of voluntary dismissal under Rule 41(a)(1) because much earlier in the litigation (while it still had counsel) DCI appeared and answered the 28 | complaint. See Fed. R. Civ. P. 41(a)(1)(A)().