Baisa et al v. Indymac Federal Bank et al

Filing 36

ORDER to SHOW CAUSE signed by Judge William B. Shubb on 10/01/09 ORDERING that within ten days of the date of this order, defendants Indymac, Baldwin Mortgage, Inc., and C21 Funding, Inc., shall either (1) pay sanctions in the amount of $150.00 each to the Clerk of the Court; or (2) submit a statement of good cause explaining their failures to comply with the court's 5/28/09 Order. IT IS FURTHER ORDERED that the Status (Pretrial Scheduling) Conference set for 10/05/09 at 2:00 p.m. is v acated and RESET for 11/02/09. The Joint Status Report filed 9/22/09 is stricken and the parties shall file a supplemental Joint Status Report that complies with the court's 5/28/09 Order no later than 10/19/09. IT IS FURTHER ORDERED that, withi n ten days of the dateof this Order, each non-bankrupt party shall submit a brief that states and provides supporting authority for the party's position on each of the three aforementioned issues that are raised by the Suggestion of Bankruptcy f iled on 6/22/09. The Clerk is instructed to mail a copy of this Order to Indymac Federal Reserve and/or Indymac Federal Bank at 888 East Walnut Street, Pasadena, California, 91101 and to C21 Funding, Inc. at 1528 South El Camino Real, Suite 101, San Mateo, California, 94402. (Mena-Sanchez, L)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. Order to Show Cause The court has an obligation to recuse itself from any case in which the judge might have a "financial interest," however small. 28 U.S.C. § 455(b)(4). Because corporate parties v. INDYMAC FEDERAL RESERVE; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; TRUSTEE CORPS; BALDWIN MORTGAGE, INC.; C21 FUNDING INC.; ORHAN TOLU; MYRNA D. BAESA and DOES 1-20 inclusive, Defendants. / ----oo0oo---UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA ----oo0oo---RODOLFO B. BAISA and BELLA G. BAISA, Plaintiffs, NO. CIV. 09-1464 WBS JMF ORDER TO SHOW CAUSE AND REQUEST FOR BRIEFING

are in the best position to identify their parent and subsidiary corporations, Federal Rule of Civil Procedure 7.1 and this court require all non-governmental corporate entities to submit 1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

corporate disclosure statements in order to assist the court in carrying out its recusal obligation. In its Order Setting Status

(Pretrial Scheduling) Conference issued on May 28, 2009, the court unequivocally instructed all non-governmental corporate parties to include corporate disclosures in the parties' Joint Status Report: Pursuant to Local Rule 16-240, the parties shall submit to the court a JOINT Status Report fourteen (14) calendar days prior to the hearing date, which shall contain: . . . (m) a statement by any nongovernmental corporate party identifying all of its parent and subsidiary corporations and listing any publicly held company that owns 10% or more of the party's stock. If any nongovernmental corporate party has no parent or subsidiary corporations or no publicly held companies owning 10% or more of its stock, it shall so state in the Joint Status Report. Thereafter, if there is any change in the information, the party shall file and serve a supplemental statement within a reasonable time after such change occurs. (Docket No. 5.) In so instructing, the court emphasized the importance of corporate disclosures and warned that failure to comply with the court's Order could warrant sanctions: The purpose of the corporate disclosure requirement in subpart (m) of this Order is to assist the court in carrying out this obligation, because corporate parties are in the best position to identify their parent and subsidiary corporations. Without this information, the court risks retaining a case in which it unknowingly has a financial interest. As a consequence, not only would the undersigned judge face public criticism, the public's confidence in an impartial judiciary would be eroded. Failure to assist the court in protecting these and the other interests advanced by § 455(b)(4)--especially in the face of a clear and direct request from the court--amounts to sanctionable conduct. (Id.; see also id. ("Failure to comply with the requirements of this subpart will result in the Joint Status Report being stricken and sanctions being ordered against any nongovernmental corporate party that did not submit its corporate disclosures.") 2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

(emphasis in original).)

The Court also clarified that, "the

requirement that corporate disclosures be included in the parties' Joint Status Report does not negate a nongovernmental corporate party's obligation to file a disclosure statement `with its first appearance, pleading, petition, motion, response, or other request addressed to the court' pursuant to Federal Rule of Civil Procedure 7.1." (Id.)

Of the five corporate defendants in this case, none of them submitted the corporate disclosures that the court's May 28, 2009 Order required. Moreover, of those five defendants, only

defendant Mortgage Electronic Registration Systems, Inc. ("MERS") complied with Rule 7.1.1 Accordingly, the court will strike the

parties' Joint Status Report, provide the corporate defendants with an opportunity to submit their corporate disclosures, and order defendants Indymac Federal Reserve ("Indymac"), Baldwin Mortgage, Inc., and C21 Funding, Inc. to pay sanctions of $150.00 each or show good cause why sanctions should not be levied.2

1 MERS filed a "Notice of Interested Parties," which states that MERS "is a wholly-owned subsidiary of MERSCORP, Inc., a privately held Delaware stock corporation." (Docket No. 12.) Although MERS did not include this information in the Joint Status Report and neglected to identify whether MERS owns any subsidiary companies, MERS' compliance with Rule 7.1 provides good cause not to levy sanctions against it for failure to comply with the court's May 28, 2009 Order. The court expects, however, that MERS will include its corporate disclosures, including any subsidiaries it owns, in the parties' Supplemental Joint Status Report. 2 While defendants Indymac Federal Reserve ("Indymac") and C21 Funding, Inc. have yet to make an appearance in this action, they were served with the Complaint on June 3, 2009 and June 9, 2009, respectively. (Docket Nos. 6, 7.) The court also notes that plaintiff's Complaint and First Amended Complaint identify Indymac as "Indymac Federal Reserve," but plaintiff served "Indymac Federal Bank," which appears to be the correct

3

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

II.

Request for Briefing On June 22, 2009, counsel for Aegis Mortgage

Corporation, a/k/a UC Lending, New America Financial, and Caledon Capital, filed a "Suggestion of Bankruptcy" indicating that Aegis Mortgage Corporation had filed bankruptcy on August 13, 2007. Pursuant to the automatic stay provision of 11 U.S.C. § 362(a)(1), the filing of bankruptcy by a defendant in a pending action "prevents the `commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement' of the bankruptcy case." Dean v. Trans World

Airlines, Inc., 72 F.3d 754, 755 (9th Cir. 1995). "In the absence of special circumstances, stays pursuant to section 362(a) are limited to debtors and do not include [claims against] non-bankrupt co-defendants." Ingersoll-Rand Fin. Corp. v. Miller Mining Co., 817 F.2d 1424, 1427 (9th Cir. 1987) (citing Teachers Ins. & Annuity Ass'n of Am. v. Butler, 803 F.2d 61, 65 (2d Cir. 1986)). Although the Ninth

Circuit has provided little guidance about when a case presents "special circumstances," a court may not rule on issues that require the court to consider the possible liability of the debtor in the underlying case. See Dean, 72 F.3d at 756-57

(providing that a court may only consider a motion to dismiss a claim against the debtor if "there [is] no conceivable way for

name of the entity. The court will defer addressing defendant Aegis Wholesale Corporation's lack of corporate disclosures until the court determines, as discussed in more detail below, whether this action is stayed as to that defendant. 4

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

the court's consideration of the motion to harm the bankrupt" defendant); see also Lewis v. Russell, No. S-03-2646, 2009 WL 1260290 (E.D. Cal. May 7, 2009). Before proceeding with this action, the court must therefore determine (1) whether defendant Aegis Wholesale Corporation is the same entity as Aegis Mortgage Corporation; (2) whether plaintiff's action against Aegis Wholesale Corporation "`could have been commenced before the commencement' of the bankruptcy case," Dean, 72 F.3d at 755; and (3) whether the automatic stay provision of § 362(a)(1) should apply to the entire action or only Aegis Wholesale Corporation. IT IS THEREFORE ORDERED that, within ten days of the date of this Order, defendants Indymac, Baldwin Mortgage, Inc., and C21 Funding, Inc., shall either (1) pay sanctions in the amount of $150.00 each to the Clerk of the Court; or (2) submit a statement of good cause explaining their failures to comply with the court's May 28, 2009 Order. IT IS FURTHER ORDERED that the Status (Pretrial Scheduling) Conference set for October 5, 2009 at 2:00 p.m. is vacated and reset for November 2, 2009. The Joint Status Report

filed September 22, 2009 is hereby stricken and the parties shall file a Supplemental Joint Status Report that complies with the court's May 28, 2009 Order no later than October 19, 2009. IT IS FURTHER ORDERED that, within ten days of the date of this Order, each non-bankrupt party shall submit a brief that states and provides supporting authority for the party's position on each of the three aforementioned issues that are raised by the "Suggestion of Bankruptcy" filed on June 22, 2009. 5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

The Clerk of the Court is instructed to mail a copy of this Order to Indymac Federal Reserve and/or Indymac Federal Bank at 888 East Walnut Street, Pasadena, California, 91101 and to C21 Funding, Inc. at 1528 South El Camino Real, Suite 101, San Mateo, California, 94402. DATED: October 1, 2009

6