Bash v. Textron Fin. Corp. (In re Fair Fin. Co.)
| Decision Date | 23 February 2018 |
| Docket Number | Case No. 10-50494,District Court Case No. 5:12-cv-987,Adversary Proceeding No. 12-5101 |
| Parties | In re: FAIR FINANCE COMPANY, Debtor. BRIAN BASH, TRUSTEE, Plaintiff, v. TEXTRON FINANCIAL CORP., Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
The court incorporates by reference in this paragraph and adopts as the findings and orders of this court the document set forth below. This document was signed electronically on February 23, 2018, which may be different from its entry on the record.
This proceeding is currently before the undersigned bankruptcy judge for recommendations regarding (1) the motion of defendant Textron Financial Corporation ("Textron") for summary judgment; (2) the motion of the plaintiff trustee ("Trustee") for partial summary judgment; and (3) several motions in limine filed by Textron related to potential expert testimony. For the reasons that follow, the undersigned judge submits these Proposed Conclusions of Law recommending that the district court:
1. The district court has jurisdiction over this action pursuant to 28 U.S.C. § 1334. The undersigned bankruptcy judge has authority to issue proposed conclusions of law pursuant to 28 U.S.C. § 157(c); Rule 9033 of the Federal Rules of Bankruptcy Procedure; Local General Order No. 2012-7, datedApril 4, 2012; and the Orders of the district court dated May 20, 2014, and October 4, 2016, re-referring this matter for pretrial supervision and recommendations on all dispositive motions (Case No. 5:12-CV-987, ECF Nos. 232 and 267). See also Exec. Benefits Ins. Agency v. Arkison, ___U.S.___, 134 S. Ct. 2165 (2014) ().
2. On February 7, 2012, the Trustee filed this adversary complaint against three defendants. Following the district court's withdrawal of its reference pursuant to 28 U.S.C. § 157(d), the first defendant, Textron, was dismissed on November 9, 2012, pursuant to a memorandum of opinion and order entered by U.S. District Judge Patricia A. Gaughan. Bash v. Textron Fin. Corp., 483 B.R. 630 (N.D. Ohio 2012).
3. On January 15, 2015, the district court largely denied cross-motions for summary judgment filed by the Trustee and the second defendant, Fortress Credit Corporation ("Fortress"). Bash v. Textron Fin. Corp., 524 B.R. 745 (N.D. Ohio 2015).
4. On June 8, 2015, the bankruptcy court approved a settlement between the Trustee and Fortress that had been negotiated with the assistance of the districtcourt. Case No. 1:10-BK-50494, ECF No. 1713.
5. On July 23, 2015, the district court entered an order dismissing the Trustee's claims against Fortress with prejudice. Case No. 5:12-CV-987, ECF No. 258.
6. On July 24, 2015, the district court dismissed the Trustee's claims against the third defendant, Fair Facility I, LLC ("Fair Finance SPE"), which never entered an appearance, filed an answer, or otherwise defended itself against the claims raised in this proceeding. Case No. 5:12-CV-987, ECF No. 260. The dismissal of Fair Finance SPE completed the dismissal of all claims and all parties, thereby making the 2012 dismissal of Textron a final appealable order.
7. On August 3, 2015, the Trustee appealed the 2012 order dismissing the claims against Textron to the Sixth Circuit. Case No. 5:12-CV-987, ECF No. 261.
8. On August 23, 2016, the Sixth Circuit issued an opinion affirming in part and reversing in part the district court's 2012 order dismissing the Trustee's claims against Textron. Bash v. Textron Fin. Corp. (In re Fair Finance), 834 F.3d 651 (6th Cir. 2016).
9. On September 23, 2016, the Sixth Circuit denied Textron's petition for rehearing and motion to certify questions of state law to the Ohio Supreme Court.
10. On October 3, 2016, the Sixth Circuit issued its mandate and remanded this proceeding to the district court. The mandate was entered on the district court docket on October 4, 2016. Case No. 5:12-CV-987, ECF No. 266.
11. On October 4, 2016, the district court referred this matter to the undersigned bankruptcy judge "for pretrial supervision" and to issue "a Report and Recommendation on all dispositive motions filed in this case." Case No. 5:12-CV-987, ECF No. 267.
12. On November 4, 2016, the district court granted the Trustee's unopposed motion for leave to file a second amended complaint against Textron. Case No. 5:12-CV-987, ECF No. 270.
13. On December 19, 2016, Textron filed a motion to dismiss the second amended complaint. Case No. 5:12-CV-987, ECF No. 274.
14. On March 29, 2017, the undersigned judge issued proposed conclusions of law recommending that the district court deny Textron's motion to dismiss the Trustee's second amended complaint, with the exception of reaffirming the district court's earlier decision that the Trustee is not entitled to punitive damages for avoidance claims under 11 U.S.C. §§ 550 and 544. Case No. 5:12-CV-987, ECF No. 287.
15. On May 30, 2017, the district court accepted the recommendation that Textron's motion to dismiss be denied. Case No. 5:12-CV-987, ECF No. 298;Bash v. Textron Fin. Corp., 575 B.R. 814 (N.D. Ohio 2017).
16. On June 30, 2017, Textron filed its answer to the Trustee's second amended complaint. Case No. 5:12-CV-987, ECF No. 299.
17. During the same time that the parties were briefing Textron's motion to dismiss the second amended complaint, the undersigned judge established a discovery schedule, with a goal of completing all fact discovery, all expert discovery, and all dispositive motion briefing by the end of calendar year 2017. Adv. Pro. 12-5101, ECF No. 139.
18. The scheduling order also provided for mediation after the close of fact discovery. The parties conducted mediation in September 2017 with a private mediator that the parties themselves selected. Despite encouragement from the undersigned judge that this was the last best chance to resolve this litigation, the mediation resulted in no consensual resolution. See Adv. Pro. 12-5101, ECF No. 200, Transcript of Record at 32-35.
19. On November 3, 2017, Textron filed a motion for summary judgment. Case No. 5:12-CV-987, ECF No. 300. The Trustee also filed his own motion for partial summary judgment. Adv. Pro. 12-5101, ECF No. 223. Textron also filed several motions in limine related to potential expert testimony. Case No. 5:12-CV-987, ECF Nos. 304, 306, 308, and 310. All of these motions have now been fully briefed.
20. The underlying bankruptcy case was filed on February 8, 2010. In December 2015, the Trustee made an interim distribution totaling $18 million to approximately 5,180 general unsecured creditors, representing a pro rata distribution of about 8-9 percent. Case No. 10-50494, ECF No. 2098. With the retirement of Judge Pat E. Morgenstern-Clarren on May 1, 2017, the underlying bankruptcy case was reassigned to Judge Jessica E. Price Smith. In October 2017, the bankruptcy court approved a second interim distribution to general unsecured creditors totaling $5 million, representing an additional pro rata distribution of about 2-3 percent. Case No. 10-50494, ECF No. 2407.
21. The bankruptcy court has approved seven interim distributions of attorney's fees to the Trustee's counsel, Baker & Hostetler LLP, totaling more than $26 million. Case No. 10-50494, ECF No. 2403 at 5-6 and ECF No. 2423 at 3. The bankruptcy court has also approved another $5.6 million in attorney's fees for Baker & Hostetler LLP, which have been held back, for a total of more than $32 million. Case No. 10-50494, ECF No. 2403 at 4 and ECF No. 2423 at 3. In addition, the bankruptcy court has approved the reimbursement of more than $1.3 million in expenses incurred by Baker & Hostetler LLP. Case No. 10-50494, ECF No. 2403 at 5-6 and ECF No. 2423 at 3.
22. The Trustee's claims against Textron constitute the largest potentialasset in the bankruptcy estate that has yet to be liquidated.
23. The second amended complaint consists of four claims for relief. These claims for relief are largely identical to Counts I, XVI, XIX, and XXI of the first amended complaint that were the subject of the district court's 2012 order dismissing all claims against Textron, as well as the Sixth Circuit's 2016 decision affirming in part and reversing in part the decision of the district court.
24. The second amended complaint excludes the claims previously brought against Fortress and Fair Finance SPE, the dismissed defendants, and includes a few additional allegations within the same four claims for relief. Case No. 5:12-CV-987, ECF No. 270 (redline attachment).
25. Count I, which is largely identical to Count I of the first...
To continue reading
Request your trial