Opinion
Case No. 91-00100, Chapter 11.
April 5, 2001
DECISION and ORDER ON DEBTORS' MOTION FOR SUMMARY JUDGMENT
For orientation we begin this decision by repeating the opening paragraph of our original decision, that entered December 24, 1997, in this matter:
Reorganized debtor Eagle-Picher Industries, Inc. ("EPI") has filed a Motion for Order Enforcing the Plan and the Confirmation Order to Stay Actions of Caradon Doors and Windows, Inc. (the "Motion"). Caradon was held liable for patent infringement in a suit by Therma-Tru Corporation. The subject of the patent in question was fiberglass skins. Such fiberglass skins had been sold by EPI's predecessor. (That predecessor was the pre-confirmation debtor Eagle-Picher Industries, Inc. in the captioned bankruptcy case. Hereafter, the term "debtor" will be used to refer to that entity.) Caradon has now filed suit against EPI in a Georgia U.S. District Court (the "Georgia suit") seeking damages on a number of theories. Caradon states that it limits its claim for damages to post-petition (i.e., post-January 7, 1991) damages.
In our prior decision, this court granted the motion of EPI. We did so on alternative bases: (1) that Caradon had abandoned its claim, and (2) that Caradon was an "unknown" creditor, that therefore notice by publication was sufficient for Caradon to be bound by the order of confirmation entered in the consolidated Chapter 11 bankruptcy cases captioned above, and therefore the suit filed by Caradon against EPI in a Georgia U.S. District Court violated the Plan and confirmation order entered in these consolidated cases, as well as 11 U.S.C. § 524 (a) and § 1141(a), (c), and (d)(1)(A). Caradon then appealed from the decision of this court to the U.S. District Court. The District Court reversed this court in its conclusion as to abandonment, but remanded the case for further findings as to whether Caradon was a "known" or "unknown" creditor. The District Court stated:
The United States Supreme Court has defined a "known" creditor as one whose identity is either known or "reasonably ascertainable by the debtor." Tulsa Professional Collection Service, Inc. v. Pope, 485 U.S. 478, 490 (1988). An "unknown" creditor is one whose "`interests are either conjectural or future, or, although they could be discovered upon investigation, do not in due course of business come to knowledge' [of the debtor." Chemetron, 72 F.3d at 346 (quoting Mullane v. Central Hanover Bank Trust Co., 339 U.S. 306, 317 (1950)).
"A creditor's identity is reasonably ascertainable if that creditor can be identified through `reasonably diligent efforts.'" Chemetron, 72 F.3d at 346 (quoting Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 798 n. 4 (1983)). "A debtor does not have a `duty to search out each conceivable or possible creditor and urge that person or entity to make a claim against it.'" Chemetron, 72 F.3d at 346 (quoting Charter Co., 125 B.R. at 654).
The District Court then said that this court had applied a standard in defining "known" creditor as "one that a debtor reasonably can expect to assert a claim," and determined that this standard was erroneous. The District Court remanded the matter to this court with the direction that this court "examine the evidence in light of the standards set forth above," and resolve "the factual question whether Appellant [Caradon] was a known or an unknown creditor." Caradon Doors and Windows, Inc. v. Eagle-Picher Indus., Inc. (In re Eagle-Picher Indus., Inc.), No. C-1-98-213 at 15-16 (S.D.Ohio Feb. 3, 1999) (J. Beckwith).
Following the remand, this court convened a status conference on July 27, 1999 for the purpose of scheduling discovery regarding the issue identified by the District Court. In the course of discovery, EPI came upon evidence which it asserted showed that Caradon had actual knowledge of the confirmation hearing prior to that event, and contended that if that were true, a determination of the "known"/"unknown" issue would be mooted. EPI moved to limit discovery to that issue, and that motion was granted. Subsequently, at the request of Caradon, discovery was broadened to include the issues of whether Caradon's claims in the Georgia Action were pre-petition or post-petition, and, if post-petition, whether such claims were administrative in nature. A discovery cutoff date of December 15, 2000, a deadline for filing dispositive motions of January 5, 2001, and a hearing date of February 6, 2001 were then set by the court. EPI then, on January 5, 2001, filed the present motion for summary judgment. Appropriate briefing by the respective parties followed.
Motions for summary judgment are governed by Fed.R.Civ.P. 56 which is incorporated into bankruptcy practice by Fed.R.Bankr.P. 7056. That rule provides in part that a motion for summary judgment is to be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." The moving party bears the initial burden of showing that there is no issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-324 (1986). The nonmoving party, however, bears the ultimate burden of showing that a genuine issue of material fact exists. In doing so, the nonmoving party cannot rest on its pleadings, but must, in response, offer some evidence which demonstrates a genuine issue of material fact for trial. Id.
On this motion for summary judgment, EPI expressly states that it is prepared to prove at trial that it mailed the disclosure statement and notice of confirmation hearing to Caradon in September, 1996, but it excludes this issue from the present motion. The basis for the motion instead is the assertion by EPI that it now has evidence "that Caradon had actual knowledge of Eagle-Picher's Plan of Reorganization and reasonable notice of the Confirmation Hearing." Motion of EPI for Summary Judgment at 1. In support of its motion, EPI refers to deposition testimony by David H. Kennedy, an attorney in a firm employed by Caradon, and a bill rendered by Kennedy's firm to Caradon. That bill itemizes services on November 7, 1996 as consisting of "review of Eagle-Picher Plan of reorganization and disclosure statement." EPI Ex. H. EPI then says that page 1 of the disclosure statement stated that the hearing on confirmation of the Plan was scheduled for November 13, 1996, and thereby Kennedy would have had notice of the hearing on confirmation. Knowledge by an attorney, of course, will be imputed to the client. See e.g., Bryan v. Land (In re Land), 215 B.R. 398, 404 (B.A.P. 8th 1997); Devers v. Frankina (In re Frankina), 29 B.R. 983, 985-6 (Bankr.E.D.Mich. 1983).
EPI comments further that at his deposition, Kennedy said that he reviewed the Plan on November 7, 1996, but did not have any current recollection of having reviewed the disclosure statement. EPI also remarks that Kennedy testified at his deposition that when he reviewed the Plan he made no effort to determine the date of the confirmation hearing. He said that the reason that he made no such effort was because he was not particularly concerned about whether the Plan had been confirmed.
On this motion it is the position of EPI that because Caradon had actual knowledge of the date the confirmation hearing would be held, whether Caradon was a "known" or "unknown" creditor is mooted. For this proposition, EPI cites Sequa Corp. v. Christopher (In re Christopher), 28 F.3d 512 (5th Cir. 1994); In re DCA Dev., 489 F.2d 43 (1st Cir. 1973); In re Intaco Puerto Rico, Inc., 494 F.2d 94 (1st Cir. 1974); Pettibone Corp. v. Payne (In re Pettibone Corp.), 151 B.R. 166 (Bankr. N.D. Ill. 1993).
In response, Caradon asserts that the evidence produced by EPI does not entitle EPI to summary judgment. Caradon does not contest that Kennedy received a copy of a proposed Plan on November 7, 1996, but correctly states that the Plan contains no information about a hearing on confirmation. Caradon Ex. 14. EPI's contention that Caradon had actual notice of the confirmation hearing rests entirely on the entry in the billing record of Kennedy's law firm which charges time to a review of Eagle-Picher's plan of reorganization and disclosure statement. EPI Ex. H. It is here the position of EPI that the Disclosure Statement contained the date of the hearing on confirmation of the plan (though we do not find such a document in the exhibits provided by EPI). But even assuming that a version of the disclosure statement contained the date of the confirmation hearing, we conclude that the evidence is insufficient to establish that Caradon had actual knowledge of the date of the confirmation hearing. Indeed, there is a clear issue of fact presented by the evidence before the court on this motion.
Caradon presents a copy of a proposed disclosure statement in which the date of the confirmation hearing is left blank. Caradon Ex. 15. While Kennedy did not testify that he saw this version of the disclosure statement (his testimony at deposition was that he had no recollection of reviewing a disclosure statement), he might have. Thus, there is a clear issue of fact as to whether Kennedy, and thus Caradon, knew of the confirmation date before its occurrence. (Caradon argues in addition that the Kennedy billing record may not be accurate because the evidence shows that only one document, the plan, was furnished to Kennedy by Federal Filings, Inc., a firm which for a fee provided copies of documents in large bankruptcy cases. Our review of the relevant evidence, EPI Exs. I and M, satisfies us, however, that this position is not supported.)
While the foregoing is sufficient to dispose of the present motion, several additional remarks are in order. The first is the question of whether any knowledge by Caradon of the confirmation hearing, if knowledge was obtained, was obtained sufficiently in advance of the confirmation hearing that it might be regarded as reasonable. The scenario presented by EPI is that such knowledge was gained on November 7, 1996. The date of the confirmation hearing was November 13, 1996. That there was only a 6-day period between gaining knowledge and the date of confirmation itself presents a question of fact, for the reasonableness of notice must be determined from the totality of the circumstances. Pettibone Corp. v. Payne (In re Pettibone Corp.), 151 B.R. 166, 172 (Bankr.N.D.Ill. 1993). Secondly, in its memorandum, Caradon devotes considerable space to arguing the question presented by the District Court on remand, that if this court concludes that the claims of Caradon arose post-petition, this court "may be required to determine whether the claims relate to administrative expenses and, if so, whether they are dischargeable." In re Eagle-Picher, No. C-1-98-213 at 16-17. Caradon in its memorandum on the present motion then presents its arguments that its claims are indeed post-petition administrative expense claims, and argues further the due process requirements which this conclusion places upon a debtor. Because those arguments do not relate to the present motion of EPI, we will not here address them. Third, EPI argues at considerable length in its memoranda that sanctions should be imposed on Caradon, asserting that the conduct of Caradon in the discovery phases of this proceeding have been such as to warrant the imposition of sanctions. We are unpersuaded from what EPI here presents that the imposition of sanctions is warranted, and we decline to impose them.
The motion of EPI for summary judgment is denied.
The Clerk will promptly schedule a further status and scheduling conference.
So Ordered.