In re Bridge Information Systems, Inc.

• Decision Date: 28 May 2003
• Docket Number: Adversary No. 03-4360-293.,Bankruptcy No. 01-41593-293.
• Citation: 293 B.R. 479
• Parties: In re BRIDGE INFORMATION SYSTEMS, INC., et. al., Debtors. Scott Peltz, Plan Administrator, Plaintiff, v. Gulfcoast Workstation Group, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Missouri

293 B.R. 479

In re BRIDGE INFORMATION SYSTEMS, INC., et. al., Debtors Scott Peltz, Plan Administrator, Plaintiff, v. Gulfcoast Workstation Group, Defendant.

Bankruptcy No. 01-41593-293.

Adversary No. 03-4360-293.

United States Bankruptcy Court, E.D. Missouri, Eastern Division.

May 28, 2003.

COPYRIGHT MATERIAL OMITTED

Gregory D. Willard, St. Louis, MO, Thomas J. Moloney, New York City, for Bridge Information Systems, Inc.

Peter Lumaghi, St. Louis, MO, United States Trustee.

Michael A. Becker, Mark L. Prager, Michael J. Small, Peter E. Pinnow, Foley and Lardner, David B. Goroff, Chicago, IL, for Unsecured Creditors Committee.

MEMORANDUM OPINION

DAVID P. MCDONALD, Bankruptcy Judge.

This case is before the Court on Gulfcoast Workstation Group's ("Gulfcoast") motion to strike Plan Administrator's preference complaint against it (the "Preference Action") and to enforce a settlement agreement that allegedly resolved all disputes between the parties (the "Alleged Settlement Agreement").¹

Gulfcoast commenced an adversary proceeding against Bridge Information Systems, Inc. and certain of its subsidiaries (collectively "Debtor") relating to Gulfcoast's claim against Debtor's estate. (the "2002 Adversary"). Debtor filed a counterclaim in the 2002 Adversary against Gulfcoast asserting fraud, negligent misrepresentation and unjust enrichment causes of action against Gulfcoast. The parties announced that they had settled the 2002 Adversary on November 5, 2002.

Gulfcoast first asserts in its motion that the Preference Action was a compulsory counterclaim to the 2002 Adversary under Fed.R.Civ.P. 13(a). Gulfcoast further contends that Debtor released its preference action in the Alleged Settlement Agreement. Gulfcoast additionally argues that the Alleged Settlement Agreement precludes Plan Administrator's preference action on claim preclusion grounds. Finally, Gulfcoast maintains that because Debtor failed to assert its preference claim at the time it objected to Gulfcoast's claim, § 502(d) prohibits Plan Administrator from prosecuting the Preference Action at this point.

The Court will deny Gulfcoast's motion for the reasons set forth below.

JURISDICTION AND VENUE

This Court has jurisdiction over the parties and subject matter of this proceeding under 28 U.S.C. §§ 1334, 151, and 157 and Local Rule 9.01(B) of the United States District Court for the Eastern District of Missouri. This is a core proceeding under 28 U.S.C. § 157(b)(2)(F), which the Court may hear and determine. Venue is proper in this District under 28 U.S.C. § 1409(a).

FACTUAL AND PROCEDURAL BACKGROUND

Gulfcoast filed a claim against Debtor's estate in the amount of $1,052,574.88 on May 1, 2001. Gulfcoast argued that its claim was secured in the amount of $713,677.88 because it was entitled to setoff that amount under 11 U.S.C. § 553(a). The basis of Gulfcoast's setoff theory is that it is entitled to setoff the amount one of its related companies, Relational Funding, Inc. ("Relational") owed Debtor because Gulfcoast was the entity responsible for Relational's liability to Debtor.

Debtor objected to Gulfcoast's claim arguing that the claim was completely unsecured because Gulfcoast did not have right to setoff Relational's liability to it under § 553(a). Debtor also asserted that Relational owed it $713,677.88. By agreement of the parties, the Court allowed Gulfcoast to convert its claim into the 2002 Adversary. Count I of the 2002 Adversary is a request for a declaration that Gulfcoast's claim is secured in the amount of $713,677.88. Gulfcoast requested in Count II of the 2002 Adversary that the Court declare that only Gulfcoast and not Relational was liable to Debtor for the $713,677.88 owed to Debtor.

Debtor field an amended counterclaim, alleging that Gulfcoast and Relational had misrepresented the Gulfcoast/Relational relationship and which entity would be responsible for remitting payment to Debtor. Specifically, Debtor asserted a fraud, negligent misrepresentation and unjust enrichment claims against Gulfcoast. Just prior to trial, the parties announced that they had settled the dispute and would submit a proposed order to the Court for approval of the settlement. The parties, however, never requested that this Court approve the Alleged Settlement Agreement under Bankr.R. 9019(a).

Plan Administrator filed the Preference Action against Gulfcoast seeking to avoid $2,117,476.10 of payments to Gulfcoast under 11 U.S.C. § 547(b) and to recover those payments from Gulfcoast under 11 U.S.C. § 550(a)(1). Gulfcoast filed this motion to strike the Preference Action on four grounds.

First, Gulfcoast asserts that the claims asserted in the Preference Action is a compulsory counterclaim under Fed.R.Civ.P. 13(a) to the 2002 Adversary. Second, Gulfcoast contends that the Alleged Settlement Agreement released all claims, including all avoidance actions under Chapter 5 of the Code, that Debtor had against Gulfcoast. The third argument in Gulfcoast's motion is that the Alleged Settlement Agreement precludes the Plan Administrator from prosecuting the Preference Action on a theory of claim preclusion. Finally, Gulfcoast argues in its motion that under 11 U.S.C. § 502(d) Debtor's failure to assert its preference claim at the time it objected to Gulfcoast's claim prohibits Plan Administrator from asserting the Preference Action at this time.

The Court finds that the pleadings do not demonstrate that the claims in the 2002 Adversary and the Preference Action arose out of the same transaction or occurrence so that the Preference Action is a compulsory counterclaim to the 2002 Adversary. Also, even assuming arguendo that the parties did in fact reach an agreement as to the settlement of the 2002 Adversary, because the Court has not approved the Alleged Settlement Agreement under 11 U.S.C. § 363(b)(1) and Bankr.R. 9019(a), it is unenforceable. Finally, because there is no final order disposing of the claims contained in the 2002 Adversary, neither claim preclusion nor § 502(d) apply to bar the Preference Action. Therefore, the Court will deny Gulfcoast's motion.

DISCUSSION

A. The Court will Treat Gulfcoast's Motion as a Motion to Dismiss under Fed.R.Civ.P. 12(b)(6).

Gulfcoast denominated its motion as a motion to "Strike Complaint and to Enforce Settlement Agreement." A court may strike a portion of a pleading that is "redundant, immaterial, impertinent or scandalous." Fed.R.Civ.P. 12(f). Here, however, Gulfcoast is requesting in its motion that the Court eliminate the Preference Action in its entirety. Thus, the Court will treat Gulfcoast's motion as a motion to dismiss the Preference Action under Fed.R.Civ.P. 12(b)(6). Goney v. E.I. Du Pount de Nemours & Co., 144 F.Supp.2d 1286, 1288 (M.D.Fla.2001).

Also, the Court notes that Gulfcoast attached to its motion several pieces of correspondence between its counsel and counsel for Debtor and Plan Administrator. When a party attaches matters outside the pleadings to a motion to dismiss under Rule 12(b)(6), the court has the discretion of either ignoring the extra-pleading materials or consider such material and treat the motion as one for summary judgment under Rule 56. Casazza v. Kiser, 313 F.3d 414, 417-18 (8th Cir.2002). If the extra-pleading material would not assist the court in adjudicating a summary judgment motion, the court should ignore the material and proceed under Rule 12(b)(6). Estate of Lennon v. Screen Creations, Ltd., 939 F.Supp. 287, 292 (S.D.N.Y.1996).

Here, as discussed below, even if the parties did in fact reach an agreement that settled the 2002 Adversary, such an agreement would be unenforceable because the Court had not approved the settlement under § 363(b)(1) and Bankr.R. 9019(a). Thus, the correspondence Gulfcoast attached to its motion would not assist the Court in ruling on a summary judgment motion. Therefore, the Court will not consider the extra-pleading material and will treat Gulfcoast's motion as a motion to dismiss under Rule 12(b)(6).

Because the Court will analyze Gulfcoast's motion under Rule 12(b)(6), it will accept all allegations contained in the Preference Action as true and view the facts alleged in the light most favorable to Plan Administrator. Ethex Corp. v. First Horizon Pharm. Corp., 228 F.Supp.2d 1048, 1050 (E.D.Mo.2002). Also, the Court will grant Gulfcoast's motion under Rule 12(b)(6) only if it appears that there is some "insuperable" bar to relief. Krentz v. Robertson Fire Protection Dist., 228 F.3d 897, 905 (8th Cir.2000).

B. The Court Cannot Determine that the Preference Action is Compulsory Counterclaims to the 2002 Adversary.

Fed.R.Civ.P. 13(a), made applicable to this adversary proceeding under Bankr.R. 7013, recites in relevant part that a party must assert as a counterclaim in a pleading any claim that it may have against the opposing party at the time if files the pleading if such claim "arises out of the transaction or occurrence that is the subject matter of the opposing party's claim." Principles of claim preclusion prevent a party from asserting a claim against an opposing party in a later proceeding that was a compulsory counterclaim to an earlier action under Rule 13(a). Popp Telcom v. Am. Sharecom, 210 F.3d 928, 940-41 (8th Cir.2000).

Because Gulfcoast's compulsory counterclaim argument is premised on claim preclusion grounds, the Court will analyze it as an affirmative defense to the Preference Action. See Rivet v. Regions Bank, 522 U.S. 470, 476, 118 S.Ct. 921, 139 L.Ed.2d 912 (1998) (observing that claim preclusion is an affirmative defense under Fed.R.Civ.P. 8(c) that must be plead and proved by the defendant). Therefore, the Court will dismiss the Preference Action under Rule 12(b)(6) as a compulsory counterclaim to the 2002 Adversary only if it appears from the face of the pleadings that it is in fact a compulsory counterclaim. See Whisman v. Rinehart, 119 F.3d 1303, 1309 (8th Cir.1997).

Two claims arise out of the same...