ORANGE COUNTY IN BANKRUPTCY : Judge’s Decision is Discouraging for Those With Civil Suits Against O.C. : Courts: A restaurant is blocked from pursuing its lawsuit against the county, filed before the bankruptcy. Hundreds of actions are on hold.

A U.S. Bankruptcy Court judge sent a discouraging signal Thursday to hundreds of people who are suing bankrupt Orange County for damages.

Judge John E. Ryan denied a San Clemente restaurant owner, La Famiglia Genovese Inc., the chance to get a civil lawsuit against the county started up again in Superior Court.

If the owner’s appeal to lift a court ban on proceeding with pending suits against the county had succeeded, it could have opened a floodgate of litigation from as many as 817 parties in 514 actions in state and federal court, all of which were filed before the county declared bankruptcy on Dec. 6, county attorneys said.

Under bankruptcy laws, any civil lawsuits filed against the county before the filing for bankruptcy are in effect frozen unless a litigant can get special permission from Ryan to proceed.

Ryan stopped short of making a broad ruling to prohibit any further attempts to pursue civil suits against the county.

However, he made it clear in comments Thursday that he will not allow anyone to divert the county’s attorneys or resources from the county’s main task of coming up with a plan to settle its bankruptcy.

“In general, a case of this magnitude requires a substantial amount of time--a breathing spell--for the debtor to understand and get control of a case without being distracted by other litigation,” Ryan told attorney Mark Dimino, who represented the restaurant.

“The county’s highest priority is its reorganization effort,” the judge added. Confronted with so much litigation, “they could fail in that. I can’t take that risk.”

County bankruptcy attorney John Amsden said at least five other litigants are scheduled in the next two weeks to make the same kind of appeal to Ryan as the restaurant owners did. He expects Ryan will handle each matter on a case-by-case basis.

“He probably wants to give everyone their day in court,” Amsden said. “This only holds back the floodgates for the time being.”

But, Amsden added: “He clearly understands the debtor’s need for a breathing space. We hope he rules the same way in the future.”

County attorneys put the cost of litigating all the pending suits at more than $230,000 per month in legal fees, and estimated that potential losses from the suits could range from $50 million to $100 million.

That money would have to be paid out of the county’s general fund, which already is expected to run a $170-million deficit, Amsden said.

La Famiglia Genovese Inc., run by the Genovese family in San Clemente, is seeking $1.5 million in damages against the county, the Orange County Flood Control District, and the City of San Clemente.

The family contended that flooding in 1993 from the county’s Segunda Deshecha Canada Storm Channel destroyed their 23-year-old restaurant, Ernesto’s Italian Villa. The owner charged that the county was responsible for the flooding because it failed to properly design and maintain the channel.

Attorneys for the restaurant argued that moving ahead with the suit would not interfere with county efforts to solve its financial problems, and that the county has a legal responsibility to reimburse the owner for the full value of the property.

“This was a traumatic event,” Dimino told Ryan. “It was a close, family-run business for 23 years. Now they don’t have a steady source of income.”

Dimino said after the hearing he plans to proceed against the flood control district, which is not protected by the county’s bankruptcy filing, and the City of San Clemente. He was unavailable for further comment.