In re Bichel Optical Laboratories, Inc., 4-68-Bky 1246.

• Court: United States District Courts. 8th Circuit. United States District Court of Minnesota
• Writing for the Court: LARSON
• Citation: 299 F. Supp. 545
• Parties: In the Matter of BICHEL OPTICAL LABORATORIES, INC., a Minnesota corporation, Alleged Bankrupt.
• Docket Number: No. 4-68-Bky 1246.,4-68-Bky 1246.
• Decision Date: 06 May 1969

299 F. Supp. 545

In the Matter of BICHEL OPTICAL LABORATORIES, INC., a Minnesota corporation, Alleged Bankrupt.

No. 4-68-Bky 1246.

United States District Court D. Minnesota, Fourth Division.

May 6, 1969.

James B. Lund, Minneapolis, Minn., James W. Fahlgren and Maun, Hazel, Green, Hayes, Simon & Aretz, St. Paul, Minn., for Bichel Optical Laboratories, Inc., alleged bankrupt.

Alan W. Falconer, Wagner & Johnston, Howard A. Patrick, Elliot S. Kaplan and Robins, Davis & Lyons, Minneapolis, Minn., for petitioning creditors.

MEMORANDUM DECISION

LARSON, District Judge.

This is an action on an involuntary bankruptcy petition. On October 23,

299 F. Supp. 546

1968, three creditors of Bichel Optical Laboratories, Inc. (Bichel) filed a petition asking this Court to adjudge Bichel a bankrupt. Since that time another creditor has been allowed to intervene. Bichel filed an answer challenging the jurisdiction of this Court, which was subsequently amended to add a defense that Bichel had as an asset an antitrust claim against Shuron Continental, Division of Textron, Inc. (Shuron) and Universal Optical, Inc. (Universal), both of whom were petitioning creditors. At that time no antitrust suit had been filed, although Bichel has recently commenced an action

Bichel then moved for permission to file a counterclaim to recover treble damages for Shuron's alleged violation of the antitrust laws. This motion was denied on the basis of Associated Electronic Supply Co. of Omaha v. C.B.S. Electronic Sales Corp., 288 F.2d 683 (8th Cir. 1961), which states that a counterclaim may not be asserted as a basis for the recovery of a judgment for damages against a petitioning creditor.

Bichel has now presented the Court with a motion for production of documents relating to its antitrust claim against Shuron. Shuron challenges this motion on the ground that the Bankruptcy Court is an inappropriate forum in which to litigate antitrust issues.

Bichel's reason for pursuing this discovery of documents is to establish either that its antitrust claim is an asset or that the claim is a setoff against Shuron and Universal and will defeat their claims as petitioning creditors.

The status of Bichel's antitrust claim against Shuron and Universal is in an uncertain state. The Court has allowed Bichel to pursue discovery on this claim, feeling that sufficient evidence would be produced to allow an attorney, well versed in antitrust litigation, to render an opinion as to the validity and probability of success of Bichel's claim at trial. The Court has assumed that a jury could assess a monetary value for this claim as an asset of the alleged bankrupt.

At the hearing on Bichel's motion for production of documents counsel for the petitioning creditors challenged the Court's assumption and asserted that the antitrust claim may not be included as an asset in the bankrupt's estate or used as a setoff against the claim of Shuron as a petitioning creditor in order to defeat the jurisdiction of this Court. These issues are now squarely before the Court and should be decided in order to establish guidelines for the trial of this case. Two issues are presented:

1. Is a possible antitrust claim an asset?

2. Is an antitrust claim a defense cognizable in a bankruptcy proceeding to defeat a petitioning creditor?

Section 1(19) of the Bankruptcy Act, 11 U.S.C. § 1(19), provides that:

"A person shall be deemed insolvent within the provisions of this Act whenever the aggregate of his property * * * shall not at a fair valuation be sufficient in amount to pay his debts."

The key to determining whether or not an antitrust claim can be included as property available for the payment of debts is the phrase "fair valuation." In this regard it is clear that an alleged bankrupt may not avoid adjudication simply by claiming that it has a cause of action against another for an amount sufficient to pay its debts or by starting an action for an amount sufficient to pay its debts. On the other hand, an alleged bankrupt with a cause of action which may be readily collectible should not be forced into involuntary bankruptcy simply because a judgment has not been obtained or collected.

The Courts in applying the phrase "fair valuation" have to some extent solved this and similar problems by interpreting the phrase to mean "a value that can be made promptly effective by the owner of property to pay his debts." Stern v. Paper, 183 F. 228, 230 (D.C.N. D.1910), aff'd, Paper v. Stern, 198 F. 642 (8th Cir. 1912).

299 F. Supp. 547

Our Court of Appeals has recently stated that:

"Under the `balance sheet test' of the Bankruptcy Act, `insolvency' results when the aggregate of a debtor's property is not sufficient at a fair valuation to pay his debts, which means a fair market price that can be available for payment of debts within a reasonable period of time, and `fair market value' implies a willing seller and a willing buyer." American National Bank & Trust Company of Chicago, Ill. v. Bone, 333 F.2d 984, 987 (8th Cir. 1964).¹

The problem presented is to determine the value of Bichel's antitrust claim and the time within which that value can be made available to pay Bichel's debts.

As to the issue of value, it is apparent that usual tests such as a "willing seller and a willing buyer" are not applicable to an asset such as an antitrust claim. Counsel for Bichel propose to make discovery on their claim and to present all the evidence to an attorney experienced in antitrust litigation, who will testify as to the "value" of the claim. This is at best a shaky ground upon which to establish the value of the claim, see, In re Schindler, 223 F.Supp. 512, 528 (E. D.Mo.1963), but it appears to be the only method by which this purported asset may be valued. At this point it is difficult to determine exactly to what an expert could testify concerning the valuation of the asset. For the expert to testify that...