Systematic Audio, LLC

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
STATESVILLE DIVISION
In re:

Systematic Audio, LLC,

Debtor.
Case No.: 26-50236
Chapter 11
Systematic Audio, LLC,

Plaintiff,

v.

Blue Building, LLC, Krubim 26
International, Inc. d/b/a WoofersEtc,
David Soleymani, Joshua Soleymani,
and Daniel Soleymani,

Defendants.
Adversary Proc. No. 26-05001 (LTB)

ORDER ON MOTIONS RELATED TO AUTOMATIC STAY ISSUES
This cause coming on to be heard before the Honorable Laura T. Beyer, United
States Bankruptcy Judge for the Western District of North Carolina, on David
Soleymani and Krubim 26 International, Inc. d/b/a WoofersEtc’s (the “State Court
_____________________________
Laura T. Beyer
United States Bankruptcy Judge
FILED & JUDGMENT ENTERED
Christine F. Ramsey
Western District of North Carolina
July 20 2026
Clerk, U.S. Bankruptcy Court
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Plaintiffs”)
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Motion for Relief from Automatic Stay (Dkt. 10) (“Motion for Relief from
Stay”) and Debtor’s Motion for an Order (I) Declaring the Section 362 Automatic Stay
Applies to Actions Against the Debtor’s CEO, or (II) in the Alternative, Preliminarily
Enjoining such Actions Under Section 105, and (III) Granting a Temporary
Restraining Order Pending a Full Hearing on the Motion (Adv. Dkt. 2) (the “Motion
to Extend Stay to Non-debtor and for Injunctive Relief”). Having considered the
motions, the evidence and testimony presented at the hearing, the arguments of
counsel, the applicable law, and the record in this case, the court finds and concludes
as follows:
A. The Motion for Relief from Stay
1. On May 4, 2023, the State Court Plaintiffs initiated litigation against
Defendants Jacob Fuller and Sundown Audio, LLC in the General Court of Justice,
Superior Court Division, of Catawba County, bearing Catawba County File No.
23CVS001091-170 (the “State Court Action”). The Debtor and non-debtor Scottie
Johnson (“Johnson”) were subsequently added as parties to the State Court Action.
2. The State Court Action was designated as exceptional pursuant to Rule
2.1 of the General Rules of Practice for Superior and District Courts, and with the
consent and approval of the parties, the Honorable Nathaniel J. Poovey, the Senior
Resident Superior Court Judge for Catawba County, was assigned to preside over the
case.

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This Motion was also filed on behalf of Blue Building, LLC, Joshua Soleymani, and Daniel Soleymani.
They took dismissals of their claims in the State Court Action. However, because Debtor listed them
as creditors, they also joined in this Motion.
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3. The jury trial of the State Court Action began on April 27, 2026. At the
conclusion of a three-week jury trial, the jury rendered verdicts in favor of the State
Court Plaintiffs on almost all issues. The jury found Johnson liable for tortious
interference with contract, fraud, and the commission of an unfair and deceptive
trade practice (“UDTPA”) in violation of N.C. Gen. Stat. § 75-1.1, et. seq. Based upon
a stipulation between the Debtor and Johnson, it appears the state court was to enter
judgment against the Debtor and Johnson, jointly and severally. No explanation was
provided to the court regarding the Debtor’s entry into the stipulation, and this court
questioned why the Debtor would have agreed to such a stipulation. The jury
awarded compensatory damages of $5,369,297.50 against Johnson for fraud, tortious
interference with contract, and the commission of unfair and deceptive trade
practices and also awarded punitive damages against him premised on the
aggravating factors of fraud and malice in the amount of $16,107,897.50.
4. On June 4, 2026, the State Court Plaintiffs submitted a proposed
judgment to the state court. Judge Poovey allowed Johnson and the Debtor until
June 9, 2026, to provide comments. The Debtor filed its Chapter 11 petition on June
9 before providing its comments to the state court, so a judgment has not been
entered.
5. The State Court Plaintiffs filed the instant Motion for Relief from Stay
to allow Judge Poovey to enter judgment on the jury verdicts in the State Court Action
and to entertain and rule on any post-trial motions.
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6. Under 11 U.S.C. § 362(d), the Bankruptcy Court “shall grant relief from
the stay” for “cause.” “Because the Code provides no definition of what constitutes
‘cause,’ courts must determine when discretionary relief is appropriate on a case-by-
case basis.” In re Robbins, 964 F.2d 342, 345 (4th Cir. 1992). “[A] desire to permit an
action to proceed to completion in another tribunal may provide . . . cause.” In re 210
West Liberty Holdings, LLC, 400 B.R. 510, 514 (N.D. W. Va. 2009) (quoting HR Rep.
No. 595, 95th Cong., 1st Sess. 343–33 (1977)).
7. In the Fourth Circuit, bankruptcy courts, in making a determination of
whether there is cause to lift the stay, “must balance potential prejudice to the
bankruptcy debtor’s estate against the hardships that will be incurred by the person
seeking relief from the automatic stay if relief is denied.” Robbins, 964 F.2d at 345.
Accordingly, the Fourth Circuit has set forth three factors that courts must consider
in deciding whether to lift the automatic stay with respect to pending litigation:
(1) whether the issues in the pending litigation involve only state
law, so the expertise of the bankruptcy court is unnecessary; (2)
whether modifying the stay will promote judicial economy and
whether there would be greater interference with the bankruptcy
case if the stay were not lifted because matters would have to be
litigated in bankruptcy court; and (3) whether the estate can be
protected properly by a requirement that creditors seek
enforcement of any judgment through the bankruptcy court.

Id.
8. For the reasons set forth on the record, the court finds that the Robbins
factors weigh in favor of the State Court Plaintiffs such that sufficient “cause” exists
to lift the automatic stay to allow Judge Poovey, subject to the terms and conditions
of this Order, to enter final judgment, rule on post-trial motions, including motions
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for judgment notwithstanding the verdict, determine any award of attorneys’ fees and
costs, and permit any appeals in the State Court Action to proceed. The court
concludes that is especially true given the procedural posture of the State Court
Action at the time the Debtor filed this Chapter 11 case.
9. With respect to the first Robbins factor, Judge Poovey is best positioned
to enter a final judgment, set forth the factual findings supporting the jury’s punitive
damages award, determine any interest to be awarded, and determine any award of
attorneys’ fees. While this court routinely adjudicates state law claims, the issues
remaining in the State Court Action do not implicate the bankruptcy court’s
expertise. Rather, they arise solely under state law and are more appropriately
resolved by the state court.
10. The second Robbins factor likewise weighs in favor of granting relief
from the automatic stay. Judicial economy is best served by permitting Judge Poovey
to resolve the limited matters remaining in the State Court Action. The case has
already been tried to a jury, and Judge Poovey is uniquely familiar with the evidence,
the parties’ stipulations, and the procedural history of the case and has ruled on
disputes concerning the issues submitted to the jury. Requiring this court to address
those matters would unnecessarily duplicate the efforts of the state court and the
parties, resulting in additional delay and expense. Under these circumstances, the
prejudice to the State Court Plaintiffs from denying stay relief outweighs any
prejudice to the Debtor. Allowing the state court to complete the proceedings through
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entry of final judgment and resolution of post-trial matters is therefore the most
efficient and appropriate course.
11. The third Robbins factor also weighs in favor of granting relief.
Allowing Judge Poovey to liquidate the State Court Plaintiffs’ claims will not
prejudice the Debtor’s estate or other creditors because this court retains exclusive
control over the administration of the estate and the enforcement of the automatic
stay. The relief granted herein is limited to the entry of a final judgment and the
resolution of any remaining post-trial matters, including any appeals. Nothing in this
Order authorizes the State Court Plaintiffs to enforce any judgment, pursue collection
efforts against the Debtor or property of the estate, foreclose upon estate property, or
cause any judgment lien to attach absent further order of this court. The practical
effect of this limited relief is to permit the court most familiar with the litigation to
complete liquidation of the State Court Plaintiff’s claims, while preserving this court’s
authority over the administration of the Debtor’s estate. Accordingly, the court
concludes that granting such relief will not materially affect the assets of the estate
or prejudice the interests of other creditors.
B. Motion to Extend Stay to Non-debtor and for Injunctive Relief
12. Johnson has not filed for bankruptcy, and therefore the automatic stay
is not applicable to proceedings against him. Bankruptcy Code § 362(a)(1) “is
generally said to be available only to the debtor, not third-party defendants or co-
defendants.” A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986). A
bankruptcy court may stay proceedings against non-bankrupt co-defendants only in
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“unusual circumstances” where “something more than the mere fact that one of the
parties to the lawsuit has filed Chapter 11 bankruptcy must be shown in order that
proceedings be stayed against non-bankrupt parties.” Id.
13. The “unusual circumstances” exception does not apply where the non-
debtor’s liability is independent of the debtor’s, “as, for example, where the debtor
and another are joint tortfeasors or where the non-debtor’s liability rests upon his
own breach of duty.” A.H. Robins, 788 F.2d at 999 (quoting In re Metal Center, 31 B.R.
458, 462 (D. Conn. 1983)). Stated differently, the exception does not apply where “the
third party codefendant has obligations that are ‘ “independent” and primary, not
derivative of those of the debtor.’ ” Holland v. High Power Energy, 248 B.R. 53, 58
(S.D. W. Va. 2000) (quoting O'Malley Lumber Co. v. Lockard (In re Lockard), 884 F.2d
1171, 1179 (9th Cir. 1989).
14. The Debtor argues that the “unusual circumstances” exception applies
where there is such an identify of interest that the Debtor is in effect the real party
defendant, and that, by virtue of the parties’ stipulation, a judgment against Johnson
effectively constitutes a judgment against the Debtor. The court is not persuaded,
however, that the relationship between the Debtor and Johnson gives rise to the type
of identity of interests required to extend the automatic stay to Johnson.
15. As A.H. Robins makes clear, the fact that a debtor and non-debtor may
be jointly liable does not, standing alone, constitute the type of unusual circumstance
that justifies extending the automatic stay. Here, the claims asserted in the State
Court Action are not derivative of the Debtor’s liability. Rather, they arise from
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Johnson’s own alleged conduct, as the jury found Johnson liable for fraud. In addition,
any indemnification right Johnson may have does not alter that conclusion. The
viability of those rights is uncertain given the jury’s fraud verdict. In addition, the
indemnification provision in the Operating Agreement appears to have been executed
after the conduct giving rise to the State Court Plaintiffs’ claims, and the Debtor’s
Chapter 11 filing may affect the enforceability or scope of any such indemnification
rights. Accordingly, the court concludes that the “unusual circumstances” exception
is inapplicable because Johnson’s liability to the State Court Plaintiffs is direct and
primary, rather than derivative of the Debtor’s liability.
16. At the hearing, the Debtor presented evidence that Johnson’s day-to-day
involvement with the Debtor was necessary for the operational success of the Debtor
and, in turn, the Debtor’s reorganization efforts. The Debtor further argued that
absent extension of the stay, Johnson would be distracted by the State Court Action,
impacting his ability to contribute to the Debtor’s operations. The court is not
persuaded. Johnson has been actively involved in the State Court Action for the past
three years, including a three-week jury trial, yet the evidence reflects that the
Debtor continued to operate successfully during that period. According to the Debtor’s
Independent Manager, the Debtor generated approximately $23 million in sales in
2025 and achieved EBITDA of approximately $3.4 million. Accordingly, the evidence
does not establish that allowing the State Court Action to proceed against Johnson
will materially impair the Debtor’s operations or its reorganization efforts.
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17. The court further finds that the hardship to the State Court Plaintiffs
resulting from any additional delay in obtaining a final judgment against Johnson
outweighs any hardship the Debtor may suffer if the automatic stay is not extended
to Johnson. In addition, because the court is permitting the State Court Action to
proceed to final judgment as to the Debtor and Johnson, the Debtor’s concerns
regarding collateral estoppel, res judicata, and stare decisis do not provide a basis for
extending the automatic stay to Johnson.
18. With respect to the Debtor’s request for injunctive relief, the court
incorporates its analysis above to the extent applicable. The considerations that
weigh against extending the automatic stay likewise weigh against the issuance of
an injunction. Accordingly, the court limits its consideration to the first factor of the
four-factor test for injunctive relief. Although the Debtor has begun its reorganization
efforts and those efforts appear to have been successful thus far, the court cannot
conclude, at this early stage of the Chapter 11 case, that the Debtor has demonstrated
a likelihood of a successful reorganization. Accordingly, the court concludes the
Debtor has not satisfied its burden of establishing entitlement to the extraordinary
remedy of injunctive relief.
THEREFORE, it is hereby ORDERED, ADJUDGED and DECREED as
follows:
1. The State Court Plaintiffs’ Motion for Relief from Stay is GRANTED to
allow the state court to enter final judgment against the Debtor in the State Court
Action; rule on post-trial motions, including, but not limited to, any motions for
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judgment notwithstanding the verdict; determine and award attorneys’ fees and
costs, if appropriate; and permit any appeal to proceed;
2. Except as expressly provided herein, the automatic stay remains in full
force and effect. Nothing in this Order authorizes the State Court Plaintiffs to enforce
any judgment against the Debtor or property of the estate, create or perfect any lien
against the Debtor or its property, including springing statutory liens under N.C.
Gen. Stat. § 1-234, or otherwise exercise or pursue any remedy against the Debtor or
property of the estate during this case without further order of this court;
3. The automatic stay shall not prohibit the State Court Plaintiffs from
pursuing collection or enforcement of any judgment entered in the State Court Action
against any party other than the Debtor; provided, however, that any effort or
proceeding to enforce or realize upon any judgment against the Debtor or property of
the Debtor shall, if at all, be pursued exclusively through proceedings in this court;
4. The Debtor’s
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Motion to Extend Stay to Non-debtor and for Injunctive
Relief is DENIED; and
5. Pursuant to Bankruptcy Rule 4001(a)(4), this Order shall become
effective 14 days from its entry.

This Order has been signed electronically.
The judge’s signature and Court’s seal appear
at the top of the Order.
United States Bankruptcy Court

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The court’s ruling also applies to any party who joined in the Debtor’s Motion to Extend Stay to Non-
debtor and for Injunctive Relief.
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