Unreported / Non-Citable
Background
Plaintiff Oscar Ramos filed suit against La Paz Enterprises, Inc. and other defendants. On September 4, 2026, the court ordered Ramos to show cause why his claims against La Paz should not be dismissed for failure to serve the defendant under Federal Rule of Civil Procedure 4(m). In response, Ramos argued for the first time that La Paz is subject to the automatic stay because it is included as an asset in the Chapter 7 bankruptcy proceedings of non-party Servin Velasquez (In re Rhina De La Paz Servin, 2:25-bk-26940). The court directed supplemental briefing on the applicability of the automatic stay. Ramos filed a supplemental brief invoking the “unusual situation” exception, arguing that La Paz is the alter ego of Velasquez and that any action against La Paz would implicate the bankruptcy estate. He also asserted without citation that he and his attorney are listed as creditors in the bankruptcy.
The court addressed the dispute on the record described in the opinion. Allegations are presented as allegations, and the procedural posture controls what the ruling establishes. The result therefore turns on the motion and evidence actually before the court, not on a final resolution of every claim in the underlying litigation overall.
The Court’s Holding
The court declined to extend the automatic stay to La Paz. It held that the automatic stay generally protects only the debtor, property of the debtor, or property of the estate, and that a corporation is a separate legal entity from its shareholders and officers. The Ninth Circuit has recognized but not adopted the “unusual situation” exception, and any extension of the stay to non-debtors is an injunction that must be issued by the bankruptcy court after a hearing. The court also found that Ramos is not listed as a creditor in the bankruptcy proceeding. Because La Paz remains unserved, the court directed Ramos to either serve La Paz within 30 days and file proof of service, or request clarification from the bankruptcy court regarding the stay’s applicability and file proof of that request within 30 days. The initial scheduling conference was vacated and reset for February 22, 2027.
The district court did not decide whether the stay covered La Paz and did not dismiss the claims. It declined to resolve an unopposed stay question involving an unserved nondebtor, explaining that an extension ordinarily requires bankruptcy-court action. Ramos instead received 30 days to serve La Paz or seek clarification from the bankruptcy court.
Key Takeaways
- The automatic stay under 11 U.S.C. § 362(a) does not automatically apply to non-debtor corporate entities, even if the debtor claims an ownership interest in the entity.
- The Ninth Circuit has not adopted the “unusual situation” exception to extend the automatic stay to non-debtors; any such extension requires a bankruptcy court injunction under 11 U.S.C. § 105(a).
- A district court will not sua sponte extend the automatic stay to a non-debtor defendant; the proper forum is the bankruptcy court via an adversary proceeding.
- Plaintiff’s unsupported factual assertions (e.g., that he and his counsel are creditors in the bankruptcy) will be rejected when contradicted by the court’s own review of the bankruptcy docket.
- Failure to serve a defendant under Rule 4(m) is not excused by a plaintiff’s unilateral assertion of a bankruptcy stay without proper authority or bankruptcy court action.
Why It Matters
This order clarifies the procedural posture required when a plaintiff asserts that an unserved non-debtor defendant is protected by a third party’s bankruptcy stay. It reinforces that the automatic stay is personal to the debtor and that extensions to non-debtors are extraordinary remedies requiring bankruptcy court intervention. The decision also underscores the plaintiff’s burden to either effect service or seek appropriate relief from the bankruptcy court, rather than relying on unsubstantiated alter ego theories to avoid Rule 4(m) obligations.
This is an interim service order. The automatic-stay issue remains open, and the order should not be read as a ruling that the stay either applies or does not apply.