Prescription Supply Inc et al v. Musa et al

Filing 28

ORDER denying 24 Motion to Stay. Signed by District Judge Arthur J. Tarnow. (MLan)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

PRESCRIPTION SUPPLY, INC., ET. AL.,
Case No. 16-12070
Plaintiffs,
SENIOR U.S. DISTRICT JUDGE
ARTHUR J. TARNOW

v.
MOUSSA “MARK” MUSA, ET. AL.,

U.S. MAGISTRATE JUDGE
DAVID G. GRAND

Defendants.
/

ORDER DENYING DEFENDANT CARE HOME RX, CORP.’S MOTION TO STAY [24]
On September 8, 2016 Defendant Care Home RX, Corp. filed a Motion to
Stay [24]. Plaintiff responded [25] on September 22, 2016 and a Supplemental
Response on September 27, 2016 [26]. Defendant Care Home RX, Corp. did not
file a reply. For the reasons stated below, Defendant’s Motion to Stay [24] is
DENIED.
Plaintiffs are bringing claims against Defendants Mohamad Musa (“Mike”),
Laureen Musa, Moussa Musa (“Mark”), and Care Home RX, Corp. (“Care
Home”). The Complaint alleges that while working for Plaintiffs, Defendants Mark
and Mike Musa engaged in unlawful competitive behavior prohibited by the APA
1

and the Employment Agreements. Defendants Mark and Mike are alleged to have
used the assistance Defendant Laureen to divert customers and opportunities to
Care Home, unlawfully stealing customers and opportunities. Plaintiffs allege
claims of: breach of contract, tortious interference with business relationships,
misappropriation of trade secrets, unfair competition, breach of fiduciary duty,
business defamation, unjust enrichment, breach of personal guaranty, conversion,
conspiracy and seek amounts owed on account.
Defendants Mark and Laureen have filed for bankruptcy and there is
currently an automatic stay in effect related to the claims against them.1 Defendant
Care Home RX, Corp. requests a stay of the entire action because the bankruptcies
of Laureen and Mark will impact its ability to conduct discovery in this case. It is a
“rare exception to the rule” to extend a stay to a non-debtor co-defendant. Al-Shara
v. Wal-Mart Stores, Inc., No. 11-CV-14954, 2012 WL 1119339, at *4 (E.D. Mich.
Apr. 3, 2012), citing Wedgeworth v. Fibreboard Corp., 706 F.2d 541, 544 (5th
Cir.1983); Lynch v. Johns–Manville Sales Corp., 710 F.2d 1194, 1197–98 (6th
Cir.1983) (recognizing that “it would distort congressional purpose to hold that a
third party solvent codefendant should be shielded against his creditors by a device
intended for the protection of the insolvent debtor and creditors thereof”). Courts
1

Defendant Mike has not filed for bankruptcy and has been engaging in discovery
with Plaintiff.
2

have acknowledged two exceptions to this general rule. First, if the identity
between the third party Defendant and the debtor is such that a judgment against
the third party Defendant would in effect be a judgment against the debtor, a stay
should be extended. Id. Second, if the pending litigation against the co-defendant
would cause irreparable harm to the debtor, the estate, or the reorganization plan,
than a stay should be extended. Id at *5.
In its Motion to Stay [24], Defendant Care Home does not allege that either
of these exceptions apply to them. As to the first exception, Defendant Care
Home’s repeatedly denies any connection to the other co-defendants in its brief in
support of the Motion to Dismiss, pointing to the complaint to illustrate that there
are no facts pled to connect Defendant Care Home to the other Defendants [6].
Additionally, the second exception does not apply as there have been no claims
from the debtors that this pending litigation would cause any irreparable harm, and
Defendant Care Home has also not argued this nor presented any evidence of this
risk in their Motion.
Defendant Care Home’s argument for a stay revolves around efficiency,
arguing that it is in the interests of fairness and efficiency to stay the entire
proceedings due to the implications on discovery of Defendants Mark and
Laureen’s bankruptcy. However, Defendant Care Home does not detail how
3

discovery will be affected when the Defendant Mike is still a co-defendant in the
case who has been engaging in discovery with Plaintiff.
Defendant Care Home cites several cases to support their proposition,
however the case law cited differ from the situation presented in this case and do
not support extending a stay. Mediterranean Enterprises, Inc. v. Ssangyong Corp.,
708 F.2d 1458, 1465 (9th Cir. 1983) and Leyva v. Certified Grocers of California,
Ltd., 593 F.2d 857, 864 (9th Cir. 1979) consider a Court’s ability to stay
proceedings pending arbitration rather than the bankruptcy of a co-defendant and
as such are unpersuasive. Defendant Care Home also cites Zurich Am. Ins. Co. v.
Trans Cal Associates, No. CIV. 2:10-01957 WBS, 2011 WL 6329959, at *3 (E.D.
Cal. Dec. 16, 2011) to support their stay. In that situation, the case was stayed
because all of the individual Defendants filed for bankruptcy, leaving only the
entity Defendants remaining. In this case, there is a remaining individual
Defendant, Mike, who is remains and therefore Defendant Care Home has the
ability to engage in discovery with Defendant Mike and prepare its defenses.
Finally, in J & J Sports Prods., Inc. v. Brar, No. 2:09-CV-3394-GEB-EFB, 2012
WL 4755037, at *2 (E.D. Cal. Oct. 3, 2012), there were two co-defendants and one
filed for bankruptcy. The case was stayed because both Defendants were being
sued individually and as “d/b/a Aura,” were served at the same address and had
4

identical claims leveled against them. Id. In this case, none of those factors are at
play.
Defendant Care Home has not presented a persuasive argument to the Court
to justify a granting of a stay and also has not explained how their efforts at
discovery would be impacted given that Defendant Mike remains as a co-defendant
outside of the stay and has been participating in discovery. Accordingly,
IT IS ORDERED that Defendant Care Home’s Motion to Stay [24] is
DENIED.
SO ORDERED.

Dated: October 12, 2016

s/Arthur J. Tarnow
Arthur J. Tarnow
Senior United States District Judge

5