TERRY L. MYERS, Bankruptcy Judge.
Julie Lyon ("Debtor") filed a voluntary chapter 7 petition on February 11, 2019, commencing this case. Doc. No. 1. Among the creditors listed in Debtors' schedules is JC Hospitalists, PLLC ("JCH"). Doc. No. 21 at 22.
Debtor asserts JCH holds a contingent, unliquidated and disputed unsecured claim. Id. Debtor also notes that this claim was the subject of a lawsuit against Debtor and others pending at the time of bankruptcy, JC Hospitalists, PLLC v. Julie Lyon, M.D., et al., Case No. CV01-17-23494, District Court of the Fourth Judicial District, State of Idaho, Ada County (the "State Court Action"). Id.; see also Doc. No. 24 at 3 (statement of financial affairs).
On May 13, JCH timely filed a complaint against Debtor commencing Adv. Proc. No. 19-06041, alleging "The Debtor's liability to JCH on its claims in the State Court Action are nondischargeable debts under 11 U.S.C. § 523(a)(4) and 11 U.S.C. § 523(a)(6)." Adv. Doc. No. 1 at 7.
There is no disagreement that the State Court Action has been lengthy and litigious.
Two days after filing its adversary proceeding, JCH filed a "Motion for Relief From the Automatic Stay Pursuant to 11 U.S.C. § 362(d)." Doc. No. 66 (the "Motion"). JCH's Motion asks the Court to "lift or modify the automatic stay with respect to [the State Court Action] solely to allow JCH to determine the amount and nature of its claim against the Debtor[.]" Id. at 1-2. Debtor opposes the Motion. Doc. No. 73 ("Objection"). JCH and Debtor were heard on these matters on June 24, 2019, and the same were taken under advisement.
JCH generally contends that several factors, including the parties' prior investment of time and effort, the state court's expertise and familiarity with the litigation, and the presence of non-Debtor defendants, support this Court allowing the State Court Action to continue. Debtor disagrees with this analysis and also argues that JCH failed to comply with Local Bankruptcy Rule requirements and misrepresented Debtor's prior positions taken in earlier proceedings. JCH rejoins that Debtor failed to appropriately address relevant case law.
Debtor notes, correctly, that JCH failed to fully comply with LBR 4001.2(g) governing required notices in stay lift motions and proceedings filed in this Court.
JCH's Motion commences with a reference to certain comments about Idaho discovery rules that were made in connection with a prior Rule 2004 motion hearing before this Court. JCH seemingly suggests that these statements made by Debtor's counsel indicate a preference or requirement for litigation in Idaho state court, to which "JCH agrees, and requests that this Court modify the automatic stay to allow JCH's claim to be liquidated in that forum." Doc. No. 66 at 1. Debtor deems this to "misstate[] and blatantly mischaracterize[] Debtor's counsel's argument and pleadings[.]" Doc. No. 73 at 2.
JCH did not expressly argue that Debtor somehow consented to stay relief. But its implicit suggestion, that Debtor's earlier arguments indicated she desired continued litigation in state court, is not at all persuasive. The Court need not validate the sense of outrage expressed by Debtor in order to find that JCH's suggestion simply lacks merit.
JCH's Motion is grounded on the proposition that "cause" exists under § 362(d)(1) to terminate the automatic stay and allow the State Court Action to proceed "to determine the nature and amount of JCH's claims against the Debtor." Doc. No. 66 at 9.
The Ninth Circuit Bankruptcy Appellate Panel has held:
Shin v. Altman (In re Altman), 2018 WL 3133164, *6 (9th Cir. BAP June 26, 2018) (citing Kronemyer v. Am. Contractors Indem. Co. (In re Kronemyer), 405 B.R. 915 (9th Cir. BAP 2009) and In re Curtis, 40 B.R. 795 (Bankr. D. Utah 1984)).
Id. at *7 (citing Christensen v. Tucson Estates, Inc. (In re Tucson Estates, Inc.), 912 F.2d 1162 (9th Cir. 1990)).
Both JCH and Debtor recognize Curtis and Tucson Estates are relevant to the issue and that their non-exclusive factors are intended to assist the Court in resolving the question of whether "cause" exists to lift the stay under § 362(d)(1). See, e.g., Doc. Nos. 66, 73, 79. Not surprisingly, they focus on those factors that are perceived as supportive of their respective position, and downplay or ignore those that are not.
In any given case, some factors will not apply at all, others will apply only tangentially, and others will be directly relevant. As this Court has stated:
Wolford v. Montee (In re Montee), 2018 WL 1305419, *3 (Bankr. D. Idaho Mar. 12, 2018) (citations omitted). See also In re Tactical Ordinance & Equip. Corp., 2005 WL 4705285, *3 (Bankr. D. Idaho Mar. 17, 2005) (considering a stay lift request in order to prosecute a state court jury trial and stating "Certain [of the Curtis] factors may tilt decidedly in favor of the motion, and others in the opposite direction. Still others may add little to the balance. At best, these factors provide analytic tools by which proof can be sifted and weighed, assisting the Court in appropriately exercising its discretion.").
The Court has evaluated the arguments of the parties as to the various factors and has independently reviewed the FAC and other documents from the State Court Action. Without belaboring details, the Court finds the majority of the relevant Curtis factors weigh against relief. It will focus on but a few of the more important issues.
That stay relief and the completion of the State Court Action would result in a "complete resolution" of the issues is uncertain and, in this Court's view, unlikely. Additional litigation before this Court would be necessary, and judicial economy and expeditious resolution of litigation would not be served.
JCH emphasizes that the parties "have invested heavily" in the State Court Action and have "expended substantial resources" in preparing the matter for trial, and it contends the parties' investment "would be largely squandered if the case is bifurcated into multiple proceedings or transferred to the Bankruptcy Court[.]" Doc. No. 66.
JCH argues that "[i]f the Debtor is allowed to `camp out' in chapter 7 indefinitely even though the discharge order has been entered, the rights of all the other parties to the State Court Action will be severely prejudiced." Doc. No. 79 at 11. And JCH claims that "all" of the "substantial resources" it invested "will be lost if the case malingers with no solution or timeline for resolving it, as the Debtor appears to be advocating." Id. at 12. Its view of Debtor's "position" is hyperbolic.
JCH also argues that the state court has "expertise" in this matter, which relates to the factor of economical and expeditious administration even if the state court would not be considered a "specialized tribunal." JCH does not explain the nature of the expertise, though this Court's experience allows it to assume Idaho state courts hear commercial disputes of this nature regularly, much as this Court hears such disputes. Perhaps the argument is more that the state court has become familiar with the matter and the litigants. See, e.g., Doc. No. 79 at 3 (in which JCH references the "advanced stage" of the State Court Action, the number of substantive motions heard, etc.). The Court would not gainsay such advantages. It would note, however, that the final state court pretrial order issued by Fourth Judicial District Judge Reardon, Doc. No. 66-3, not only set a trial date but provided specific notice that seven potential alternative senior judges and "all sitting Fourth District Judges" may preside at trial. Id. at 2. This dilutes the weight of the "familiarity" contention.
The Court is required to, and has, weighed all the factors identified in the case law to the extent they have arguable relevance. It concludes that the most significant factor here is the presence of the § 523(a)(4) and § 523(a)(6) claims in JCH's adversary proceeding. These are "core" matters. See 28 U.S.C. §§ 157(b)(1), (b)(2)(I). This Court has exclusive jurisdiction to hear § 523(a)(2), (4) and (6) cases. Deitz v. Ford (In re Deitz), 760 F.3d 1038, 1043 (9th Cir. 2014). This Court regularly determines, in such proceedings and under its core jurisdiction, whether a debtor owes a debt to the creditor, the amount of that debt, and the alleged nondischargeability of that debt. "It is well accepted that this Court can establish the amount of a debtor's liability in the process and context of determining whether such debt is nondischargeable." In re Frantz, 2015 WL 1778068, *13 (Bankr. D. Idaho Apr. 16, 2015) (citing Sasson v. Sokoloff (In re Sasson), 424 F.3d 864, 867-70 (9th Cir. 2005), and Cowen v. Kennedy (In re Kennedy), 108 F.3d 1015, 1017-18 (9th Cir. 1997)). As Smith noted,
389 B.R. at 914 (citing Sasson)).
In addition to the authorities previously mentioned, the decision of the BAP in Schneider v. Jordan (In re Jordan), 2010 WL 6259987 (9th Cir. BAP June 29, 2010), is instructive. The bankruptcy court there had denied a motion for relief from the automatic stay to continue with proceedings in state court in which the debtor (Jordan) had alleged claims against her employer, a law firm, and one of the firm's lawyers for discrimination, sexual harassment and wrongful termination. The lawyer had filed a cross-complaint against Jordan for stalking, civil extortion, and intentional infliction of emotional distress. The firm and lawyer received a summary judgment ruling on Jordan's complaint and, immediately following that hearing and ruling, Jordan filed her bankruptcy petition, staying the ability of the firm and lawyer to obtain a judgment as to the complaint and staying the lawyer from proceeding on the cross-complaint.
With this background, the BAP noted the factors which inform the exercise of the bankruptcy court's discretion in considering relief from stay in order to continue the litigation. It stated:
Id. at *3 (internal citations omitted).
The Court finds and concludes that JCH's burden has not been met, and good and sufficient "cause" has not been shown to terminate the § 362(a) stay and allow the State Court Action to proceed insofar as the claims against Debtor.
This Court concludes that the Motion will be denied. An order will be entered accordingly.
Those incorporated provisions address the timing of and content required in objections to such motions, service of the objection, and the objector's scheduling of a preliminary hearing.