In re Atlantic Computer Systems, Inc., 92 Civ. 6108 (SWK).
| Citation | 154 BR 166 |
| Decision Date | 03 May 1993 |
| Docket Number | No. 92 Civ. 6108 (SWK).,92 Civ. 6108 (SWK). |
| Parties | In re ATLANTIC COMPUTER SYSTEMS, INC., et al., Debtors. COMMERCIAL MARKETING, INC., Appellant, v. ATLANTIC COMPUTER SYSTEMS INC., Appellee. |
| Court | U.S. District Court — Southern District of New York |
Fitzgerald, Schorr, Barmettler and Brennan, Omaha, NE by William Jay Riley, Thomas L. Saladino; Luskin & Stern, New York City by Nathan M. Eisler, Jeanne M. Murphy, for appellant/claimant.
Kleinberg, Kaplan, Wolff & Cohen, P.C., New York City by Norris D. Wolff, Monica L. Kaiser, for appellee/debtor.
Appellant/Claimant Commercial Marketing, Inc. ("CMI") appeals from a Memorandum Endorsed decision of the United States Bankruptcy Court for the Southern District of New York (Lifland, C.J.) (the "Bankruptcy Court"), dated June 24, 1992, in which the Bankruptcy Court granted Appellee/Debtor Atlantic Computer Systems Inc.'s ("ACS") motion for summary judgment and disallowed CMI's claim in its entirety.1
The following facts are undisputed by the parties. In early 1988, ACS's British parent, Atlantic Computers, Plc, began examining CMI's subsidiary, Systems Marketing, Inc. ("SMI"), an IBM computer leasing company, for a proposed purchase of its stock or its assets. A letter of interest was issued in July 1988, a letter of intent was presented to CMI in October 1988, and a further letter of intent dated March 22, 1989, was offered by ACS and accepted by CMI on March 31, 1989. Each of these letters provided that they were either a letter of interest or a letter of intent, and each contained the language "Subject to Contract." Each letter of intent also contained a "walk-away" provision allowing either party the option to walk away from the deal without liability in the event negotiations were unsuccessful.
Sometime around June 13, 1989, the structure of the acquisition was changed from a purchase of the SMI stock to a portfolio purchase of assets. Thereafter, on June 28, 1989, CMI and ACS entered into an Agreement2 (the "June Agreement" or the "June 28, 1989 Agreement") whereby ACS was to purchase certain assets and assume certain liabilities of CMI's subsidiary, SMI. That Agreement stated in part:
See Agreement, attached to CMI's Proof of Claim and designated by CMI as D-1 for the record on appeal.
Although there is some dispute as to precisely what else transpired between ACS and CMI around the time of the June Agreement, it is clear that: (1) from June 26, 1989 through June 30, 1989, work was done on a final Portfolio Purchase Agreement; (2) employment agreements following standard ACS forms were sent from ACS to SMI and were signed by SMI management personnel; (3) ACS requested short-term financing from Commercial Federal Savings and Loan Association, the parent of SMI and CMI; (4) Commercial Federal Corporation, SMI's ultimate parent, filed its Hart-Scott-Rodino notification with the Federal Trade Commission and the Justice Department on July 10, 1989; (5) ACS's Vice President of Acquisitions visited SMI in Phoenix, Arizona and addressed a meeting of SMI employees; (6) in early July, a matter arose regarding a lawsuit between SMI and its former owner, Robert Russell, whereby Commercial Federal Savings and Loan, CMI and SMI agreed to provide ACS with full indemnification regarding the Russell litigation; and (7) an indemnification agreement was included in the Portfolio Purchase Agreement.
On June 29, 1989, a regular meeting of the Board of Directors of ACS was held. At that meeting, an SMI purchase committee with the mandate to recommend the approval or disapproval of the purchase of SMI assets to the full Board was created.
On July 13, 1989, a special meeting of ACI's Board of Directors was held. It was called specifically to review the proposed transaction between its wholly owned subsidiary, ACS, and SMI. At that meeting, it was decided that the SMI asset purchase was not in ACS's best interests. Thus, a motion was made, seconded and unanimously adopted formally rejecting the SMI transaction.
ACS's Board of Directors also held a special meeting on July 13, 1989. At this meeting, the Board unanimously voted to terminate discussions respecting the proposed asset purchase as it was not in the best interest of ACS and rejected the SMI purchase.
CMI and SMI were informed of the Boards' rejections by letter dated July 13, 1989. The letter, written by Philip E. Hold, the President of ACS at the time, states in relevant part:
See Letter from Philip E. Hold to Mike Minor, President of CMI, and Bill Bresnahan, President of SMI, dated July 13, 1989, attached as Exhibit "J" to Affidavit of John Sager, sworn to on March 3, 1992.
CMI filed suit against ACS in the United States District Court for the District of Arizona on May 18, 1990 based upon ACS's alleged breach of the contract to purchase assets and assume liabilities of CMI's subsidiary, SMI. This suit was pending and in the discovery stage when, on July 5, 1990, ACS filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. On May 3, 1991, CMI filed a $14,578,891 (estimated) claim in the above-captioned bankruptcy proceeding.
Thereafter, ACS filed an Objection and Notice of Motion to Disallow CMI's Claim and an Affidavit in Support of Objection and Motion to Disallow Claim. A hearing on the Motion to Disallow was held in the Bankruptcy Court on June 24, 1992, and was treated as a Motion for Summary Judgment. On the same day, the Bankruptcy Court issued a Memorandum Endorsed opinion granting ACS's motion for summary judgment and disallowing CMI's claim. Specifically, the Bankruptcy Court found that the parties did not intend the June 28, 1989 Agreement to be a binding acquisition contract. In fact, the Court found that the express terms of the June Agreement clearly demonstrated an intent not to be bound. Among other things:
142 B.R. at 660 (emphasis in original).
This appeal followed.4 The broad issue before this Court on appeal is whether the Bankruptcy Court erred in granting ACS's motion for summary judgment disallowing CMI's claim.5 CMI claims that the Bankruptcy Court erroneously limited its decision to an interpretation of the written June 28, 1989 Agreement. According to CMI, the Bankruptcy Court ignored CMI's position, and the evidence, that the June Agreement was an essential part of, but not the exclusive basis for, the parties' contract. CMI further claims that a look at the complete record demonstrates that the parties reached an agreement by June 30, 1989 on all material terms for ACS to acquire essentially all the assets and most of the liabilities of SMI, and thereafter acted on that agreement. According to CMI, by June 30, 1989, a final definitive agreement, the Portfolio Purchase Agreement, was drafted by ACS and by CMI/ SMI. The assets being purchased and the liabilities being assumed were identified in that document. Moreover, after June 30, 1989, nothing was left to be negotiated. The only event left was approval of the Portfolio Purchase Agreement by ACS's Board of Directors. In the alternative, CMI alleges that the June 28, 1989 Agreement at least obligated ACS to act in good faith toward concluding and performing the acquisition. Based on the foregoing, CMI seeks a reversal of the Bankruptcy Court's order granting summary judgment disallowing CMI's claim.
As indicated, the Bankruptcy Court granted summary judgment in favor of the debtor/appellee and disallowed the claim of CMI in its entirety. The grant of a motion for summary judgment by the Bankruptcy Court is subject to de novo review by the District Court. In re Fugazy Express, Inc., 124 B.R. 426, 430 (S.D.N.Y.1991) (citing Royal Bank and Trust v. Pereira, 99 B.R. 536 (S.D.N.Y.1989)).
The Court agrees with the Bankruptcy Court that in contract cases where "a question of intention is determinable by written agreements, the question is one of law, appropriately decided . . . on a motion for summary judgment." See In re Atlantic Computer Sys. Inc., 142 B.R. at 659 (citing ...
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