Benedor Corp. v. Conejo Enterprises, Inc. (In re Conejo Enterprises, Inc.)

OVERVIEW

Ronald L. Durkin, the trustee in bankruptcy, and Western Waste Industries, a creditor in bankruptcy (collectively “the appellants”), appeal the district court’s order remanding a pre-petition state action brought by Benedor Corporation (Benedor) against the debtor in bankruptcy, Conejo Enterprises (Conejo), to state court and granting Benedor relief from the automatic stay.

FACTS AND PROCEDURAL BACKGROUND

Conejo collects and disposes of waste. In May 1993, it allegedly entered into a contract with Benedor, obligating it to deliver its “green waste” to Benedor and to pay Bene-dor for disposal. When Conejo refused to deliver its “green waste” pursuant to the contract, Benedor filed suit against Conejo in a California state court alleging, inter alia, a state law breach of contract claim (referred to as the “state action”), and seeking $26,-000,000 in damages. One year later, in May 1994, Conejo filed for Chapter 11 bankruptcy and removed the Benedor state action to the bankruptcy court.

Prior to filing a proof of claim, Benedor requested that the bankruptcy court abstain from hearing its state action and moved for relief from the automatic stay so it could pursue the…

Partial Concurrence, Partial Dissent:

I concur in the majority opinion except for the part that deals with the lift of the automatic stay. I respectfully dissent from the majority’s decision to require the district court to remand to the bankruptcy court to allow it to reconsider whether relief from the automatic stay should be granted. We should simply affirm the district court or, at most, remand to the district court to consider all relevant factors, including abstention, in determining whether the bankruptcy court abused its discretion.

The majority is correct that abstention and stay are discrete issues. However, since the decision of the district court to abstain is non-reviewable, the bankruptcy court’s decision is now almost irrelevant. We should look to whether, in light of the decision to abstain, the district court abused its discretion in reversing the bankruptcy court’s refusal to lift the stay.

Ordinarily, we review the decision of the district court de novo to determine whether it erred in its review of the bankruptcy court in determining whether the bankruptcy court abused its discretion. In re Arnold, 806 F.2d 937, 939 (9th Cir.1986); See also In re Windmill…