In re Austin Company, Case No. 05-93363 (Jointly Administered) (Bankr. N.D. Ohio 11/3/2009), Case No. 05-93363 (Jointly Administered).
| Decision Date | 03 November 2009 |
| Docket Number | Case No. 05-93363 (Jointly Administered).,Adversary Proceeding No. 08-1130. |
| Parties | In re: THE AUSTIN COMPANY, et al., Chapter 11, Debtors. MARK A. ROBERTS as Liquidating Trustee of TAC LIQUIDATING TRUST, successor to THE AUSTIN COMPANY, et al., Plaintiffs, v. AAC DESIGNERS BUILDERS, INC.,dba AUSTIN AECOM, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
Plaintiff Mark A. Roberts, Liquidating Trustee of TAC Liquidating Trust, successor to debtor The Austin Company and affiliated debtors (the trustee), filed an amended complaint against defendant AAC Designers Builders, Inc. (AAC). The trustee moves for summary judgment against AAC on counts IV, V, VI, VII, and XII of that complaint, which AAC opposes.1 AAC, in turn, moves for summary judgment against the trustee on counts I-VII, X, and XIII, which the trustee opposes.2 For the reasons stated below, both motions are denied.
Jurisdiction exists under 28 U.S.C. § 1334 and General Order No. 84 entered by the United States District Court for the Northern District of Ohio. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), (E), (F), (H) and (O).
The Austin Company (Austin or debtor) and related entities Austin Holdings, Inc. and RB of PA, Inc. (collectively, debtors) performed architectural, engineering, design-build, and construction management services. The debtors filed chapter 11 petitions on October 14, 2005.3 Before the bankruptcy filing, Austin sold several of its divisions to AAC. That sale and related transfers are the focus of this adversary proceeding.
The debtors began to market their businesses for sale in 2004. They hired FMI Corporation as their finder and exclusive representative for this purpose; FMI reviewed the debtors' business and financial information and prepared an offering memorandum which was sent to potentially interested parties. At some point, AECOM Technology Corporation (AECOM parent), the direct or indirect parent of AAC and Austin-AECOM, expressed an interest in acquiring all or some portion of the debtors and their businesses. Ultimately, AECOM parent created a subsidiary, AAC, which acquired Austin operations in Schaumburg, Illinois; Kalamazoo, Michigan; and Houston,4 Texas pursuant to an asset purchase agreement (APA).
The APA was subject to the condition that AAC "shall have received from FMI Corporation a solvency opinion and a fairness opinion, in forms satisfactory to Buyer, related to the solvency of Seller after giving effect to the Transaction and the fairness of the consideration to Seller and its shareholders."5 FMI provided negative opinion letters on January 3, 2005, but later modified them.
Under the APA, Austin agreed to "sell, convey, assign, transfer, and deliver" to AAC all of the purchased assets and AAC agreed to pay $6,500,000.00 and to assume certain liabilities associated with the operations which it purchased. The purchased assets included the accounts receivable arising out of the operations after December 31, 2004 and all of Austin's (and its parent's) rights and interests arising under or in connection with any contracts. Under § 6.5, Austin agreed that if it received payments relating to the purchased assets or business after the closing date, it would remit them to AAC within five business days. The transaction closed on January 21, 2005.
Austin and the United States government were parties to a contract which related to a construction project at the Robins Air Force Base in Georgia (the Robins contract). The contract and Austin's right to receive payments under it were included in the sale transaction.
These are the relevant APA provisions6 regarding the Robins contract and contract payments:
Section 2.4 — which states that execution, delivery, and performance under the agreement will not require the consent, approval, order or authorization of any third-party, but specifically excludes the Robins contract.
Section 2.10 — which states that the consent or approval of any party to a contract is not required in connection with the transaction, but expressly excepts the Robins contract.
Sections 4.16 and 5.9 — which state that the buyer and seller shall have entered into a cooperation agreement for the performance of the Robins contract.
Section 6.7 — which states that the rights and obligations under certain contracts, including the Robins contract, may not be assignable to the buyer and requires Austin and Austin Holdings, Inc. "to use commercially reasonable efforts" to obtain the consent to assignment from all third parties having rights under those contracts. If consents are not obtained and a contract is terminated by a third party, Austin and Austin Holdings, Inc. "shall deliver to the Buyer any amount of money refunded to [them] by such third party within five (5) business days of receipt of such refund." Austin and Austin Holdings also "agree to indemnify Buyer for any losses incurred due to the non-transferability of such contracts, unless [they] are otherwise able to provide Buyer, in its sole judgment, substantially all of the benefits to be derived under such contract."
A related cooperation agreement dated January 21, 2005 acknowledges that a novation of the Robins contract will not occur until after the asset purchase transaction had closed; that novation requires the consent of the government and execution by all parties of a novation agreement; that "the assets necessary for [Austin] to perform under the Contract will have been transferred to the exclusive control of [AAC];" and that "to comply with the terms of the Contract, [AAC] will have to perform in [Austin's] place under the Contract using the Purchased Assets."7
The cooperation agreement provides further that in the period before the novation:
(1) AAC will, without disturbing Austin's contractual relationship with the government, "provide all necessary personnel, facilities, equipment, materials, supplies, and services, and do all things reasonably necessary to perform and provide the contract work under the Contract."
(2) AAC will prepare and process invoices on behalf of Austin and Austin would invoice the government.
(3) "With respect to amounts remitted by the Government to [Austin] for work performed after Closing," Austin "was to remit such amounts to Buyer promptly, but in no less that 5 days, upon receipt by [Austin]."
The agreement also states that the parties are "acting independently and as independent contractors with the full power and authority and responsibility to select means, methods and manner of performing services" in carrying out the agreement. The agreement states further that it is "not intended to be contrary to, or inconsistent with, any of the terms of the [Robins Contract], or applicable regulations or statutes."
After the transaction closed, AAC performed under the Robins contract and received payment for that work from Austin. Austin made five payments to AAC in the total amount of $8,947,422.72 in the 90-day period before the debtors' bankruptcy filings, some part of which related to the Robins contract.8 After the filings and before the government consented to novation of the contract on November 30, 2005, Austin made two payments to AAC under the APA in the total amount of $2,823,032.08. Some part of the payment related to the Robins contract.9
Summary judgment is appropriate only where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c) ; see also Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986). The movant must initially demonstrate the absence of any genuine issue of material fact. Celotex Corp., 477 U.S. at 323. At that point, the burden is on the non-moving party to show the existence of a material fact which must be tried. Id. The non-moving party may oppose a proper summary judgment motion "by any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves . . . ." Id. at 324. All reasonable inferences drawn from the evidence must be viewed in the light most favorable to the party opposing summary judgment. Hanover Ins. Co. v. Am. Eng'g Co., 33 F.3d 727, 730 (6th Cir. 1994). Summary judgment is granted only when "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Northland Ins. Co. v. Guardsman Prods., Inc., 141 F.3d 612, 616 (6th Cir. 1998) (internal citations and quotation marks omitted).
The fact that the parties have filed cross-motions for summary judgment does not alter this analysis. "In evaluating each party's motion, the court must view all the facts and inferences in the light most favorable to the nonmoving party." Relford v. Lexington-Fayette Urban County Gov't, 390 F.3d 452, 457 (6th Cir. 2004). To the extent that there are genuine issues of material fact, summary judgment must be denied.
The trustee moves for summary judgment on counts IV, V, VI, and VII which seek to avoid and recover payments which AAC received after the asset purchase agreement closed and before the parties signed the novation agreement. The trustee also moves for summary judgment on count XII which requests disallowance of AAC's claims.
[seeking to avoid and recover transfers made in the 90 days before the bankruptcy filing]
Bankruptcy code § 547 provides that the trustee may avoid a transfer of an interest of the debtor in property:
(b)(1) to or for the benefit of a creditor;
(2) for or on account of an...
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