United States District Court, E.D. Michigan, Southern Division
Prescription Supply, Inc., et. al., Plaintiffs,
Moussa "Mark" Musa, et. al., Defendants.
G. Grand U.S. Magistrate Judge.
ORDER DENYING DEFENDANT CARE HOME RX, CORP.'S
MOTION TO STAY 
J. Tarnow Senior United States District Judge.
September 8, 2016 Defendant Care Home RX, Corp. filed a
Motion to Stay . Plaintiff responded  on September
22, 2016 and a Supplemental Response on September 27, 2016
. Defendant Care Home RX, Corp. did not file a reply. For
the reasons stated below, Defendant's Motion to Stay 
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 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.
Mark and Laureen have filed for bankruptcy and there is
currently an automatic stay in effect related to the claims
against them. 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 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.
Motion to Stay , 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 . 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.
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 discovery will be affected when the Defendant
Mike is still a co-defendant in the case who has been
engaging in discovery with Plaintiff.
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 identical claims
leveled against them. Id. In this case, none of
those factors are at play.
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  is
 Defendant Mike has not filed for
bankruptcy and has been engaging in discovery with