## Facts

- PTI Holding Corp. and affiliated entities (including London Fog-related entities) filed for chapter 11 relief in the U.S. Bankruptcy Court for the District of Nevada.
- In a 2004 transaction, Homestead Holdings, Inc. acquired London Fog-related assets from Broome & Wellington (B&W).
- The acquisition structure included personal and third-party guarantees by Steven and David Greenstein and Greenco Enterprises Co., Inc. to secure part of the purchase-price obligations owed to B&W.
- The transaction documents included an English choice-of-law provision and contemplated English fora for disputes involving the guarantees.
- After the bankruptcy filings, B&W filed a proof of claim in the bankruptcy cases for approximately $7 million allegedly owed on the acquisition debt.
- B&W notified the Greensteins and Greenco that it intended to bring proceedings in England to enforce the guarantees.
- Homestead commenced an adversary proceeding and moved for a preliminary injunction to stop B&W from initiating or prosecuting the English litigation, arguing the foreign litigation would impair reorganization by diverting the principals’ time and resources.

## Issues

1. Whether the bankruptcy court should issue a preliminary injunction under 11 U.S.C. § 105(a) to restrain a creditor from pursuing foreign litigation against non-debtor guarantors.
2. Whether anticipated distraction, burden, and expense to non-debtor principals from defending an English guarantee action constitutes irreparable harm to the bankruptcy estate sufficient to justify stay-like relief.
3. How contractual choice-of-law/forum expectations and international comity affect a bankruptcy court’s willingness to enjoin a contractually contemplated foreign proceeding.

## Decision

- The court denied Homestead’s motion for a preliminary injunction.
- Homestead did not meet the Ninth Circuit standard for preliminary relief (likelihood of success and irreparable harm, or serious questions with hardships tipping sharply in its favor).
- The proposed English action targeted non-debtor guarantors on separate contractual obligations and was not shown to be tantamount to an action against the debtors or against estate property.
- The asserted harm—principals’ distraction and the burdens of foreign litigation—was too speculative and indirect to establish irreparable injury to the estate or a direct, material threat to reorganization.
- Considerations of comity and enforcement of the parties’ English-law/English-forum expectations weighed against enjoining the foreign proceeding absent a stronger estate-based showing.

## Legal Principles

- Section 362(a)’s automatic stay generally protects only the debtor; extending stay-like protection to non-debtors requires unusual circumstances and a strong showing of direct, immediate adverse impact on the estate.
- Under 11 U.S.C. § 105(a), a bankruptcy court may issue injunctions to protect the estate and the reorganization process, but such relief is exceptional and requires proof of imminent, substantial harm to the estate.
- Litigation against non-debtor guarantors based on independent guarantee obligations ordinarily does not justify injunctive relief unless it effectively operates as litigation against the debtor or would directly impair estate assets or reorganization.
- Contractual choice-of-law/forum provisions and international comity counsel caution before restraining a foreign action that the parties contemplated, particularly where estate harm is not clearly demonstrated.

## Conclusion

The bankruptcy court refused to stop B&W from pursuing an English guarantee action against non-debtor guarantors because Homestead failed to show a direct and imminent threat to the bankruptcy estate or reorganization, and the equities—including comity and the parties’ contractually selected English law and forum—did not support extraordinary injunctive relief under § 105(a).


In re PTI Holding Corp. (Homestead Holdings, Inc. v. Broome & Wellington), 346 B.R. 820 (Bankr. D. Nev. 2006)