AUTOMATIC STAY -
1.1 Covered Activities
1.1.a Court denies injunction against actions involving debtors’ affiliates. Shortly after filing their chapter 11 cases, the debtors in possession sought, in the alternative, extension of the automatic stay to the litigation against affiliates or stays of the litigation. The Ninth Circuit has questioned the authority to extend the stay and instead has directed the bankruptcy courts to proceed through the more settled form of a preliminary injunction. A preliminary injunction requires a showing of likelihood of success on the merits, potential for irreparable harm, a balance of equities, and the public interest. In a chapter 11 case, a likelihood of success on the merits means likelihood of confirming a plan. At the early stages of a case, that showing is all the more difficult. Similarly, because the nonbankruptcy litigation is in the early discovery stages, a showing of irreparable harm is also difficult. The debtor in possession here fails to make either showing adequately, so the court denies the injunction. In re Mariner Health Central, Inc., ___ B.R. ___, 2023 Bankr. LEXIS 95 (Bankr. N.D. Cal. Jan. 12, 2023).
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