In re Carmelo Bambace, Inc.
| Decision Date | 03 December 1991 |
| Docket Number | No. 90 B 20042.,90 B 20042. |
| Citation | 134 BR 125 |
| Parties | In re CARMELO BAMBACE, INC., Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Fink Weinberger, P.C., White Plains, N.Y., for Carmelo Bambace, Inc. (Richard L. Koral, of counsel).
Peter P. Paravati, P.C., Utica, N.Y., for New York State Teamsters Conference Pension & Retirement Fund (Vincent M. DeBella, of counsel).
DECISION ON OBJECTION TO CLAIM OF NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND AND MOTION FOR ORDER COMPELLING PRODUCTION OF DOCUMENTS
The debtor in this voluntary Chapter 11 case, Carmelo Bambace, Inc. ("Bambace"), objects to an Amended Proof of Claim filed by the New York State Teamsters Conference Pension and Retirement Fund ("Pension Fund") because the amendment relates to withdrawal liability while Pension Fund's timely claim was based on delinquent contributions. Pension Fund argues that its withdrawal liability claim is valid for various reasons. First, Pension Fund asserts that the withdrawal liability claim is not untimely because the Pension Fund advised the debtor by letters before the claims bar date that it had incurred withdrawal liability and that the letters constitute informal proofs of the claim. In addition, Pension Fund contends that even if the claim is time barred, amending the timely filed claim for outstanding contributions so that it includes withdrawal liability is proper under prevailing case law because the claims are directly related to each other and the debtor is not unduly prejudiced by the amendment because the debtor was aware of Pension Fund's intent to hold it liable. Pension Fund also alleges that it was unable to calculate the amount of its withdrawal liability claim because the debtor unjustly refused to produce its books and records for the purpose of an audit thereby preventing Pension Fund from timely filing the claim. Pension Fund argues that the amended claim should be recognized because otherwise the debtor would unfairly benefit from its dilatory tactics and legal recalcitrance.
Bambace filed with this court on January 17, 1990 a petition for reorganizational relief under Chapter 11 of the Bankruptcy Code and continued in possession and management of its business as a debtor in possession pursuant to 11 U.S.C. §§ 1107 and 1108. The debtor is in the business of distributing beverages. Pursuant to Federal Rule of Bankruptcy Procedure 3003(c)(3), this court approved August 15, 1991 as the bar date by which claims and requests for payment were to have been filed. On August 28, 1991, the debtor's plan of reorganization was confirmed by order of this court pursuant to 11 U.S.C. § 1129. The court retained jurisdiction for purpose of permitting the debtor to file objections to claims within 60 days of entry of the confirmation order.
Pension Fund is a multiemployer pension fund, as defined by 29 U.S.C. § 1002(37)(A). It was created by an Indenture of Trust entered into between participating employers and union locals affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, AFL-CIO ("Teamsters"). Pension Fund is the sponsor of an employee benefit and multiemployer pension plan ("Plan"). Pension Fund receives contributions from participating employers which operate within the jurisdiction of local union branches affiliated with the Teamsters and which have joined Pension Fund's Plan. In turn, Pension Fund disburses pension and retirement benefits to qualified employee members of the Plan. Employers taking part in the Plan have agreed to be subject to Pension Fund's rules.
Bambace employed members of Teamsters Local Union 812. Pursuant to a collective bargaining agreement with the union, the debtor participated in and was required to make contributions to the Pension Fund. Before the filing of the petition in bankruptcy, Bambace failed to make several payments due and owing to Pension Fund under the collective bargaining agreement and Plan rules.
On July 2, 1991, Pension Fund filed a proof of claim with the court for $1,069.85, plus interest from the date of accrual, which represents the outstanding employee benefit contributions due for pre-petition services. Pension Fund's claim is entitled to priority status under 11 U.S.C. § 507(a)(4) because it represents services rendered within 180 days before the petition date and it does not exceed the $2,000.00 limit for each employee. The debtor did not object to the claim and therefore, it is deemed allowed pursuant to 11 U.S.C. § 502(a). Moreover, distribution has already been made on the claim.
Bambace continued to make post-petition payments to Pension Fund on behalf of its employees covered by the collective bargaining agreement until March 29, 1991, when the debtor ceased contributing to Pension Fund. Pension Fund alleges that Bambace's failure to make payments required by the Plan triggered employer withdrawal liability, which arises under 29 U.S.C. § 1383 when an employer permanently ceases to have an obligation to contribute to a multiemployer plan or when an employer stops all covered operations under the plan. On April 18, 1991, Pension Fund filed in the United States District Court for the Northern District of New York, a complaint in which it primarily sought an injunction requiring Bambace to produce all relevant books and records for the purpose of an audit. The audit was necessary for the Pension Fund to determine whether Bambace was making the contributions required by the Plan. The district court dismissed the complaint because it violated the automatic stay provision of 11 U.S.C. § 362(a)(1) which a debtor invokes upon the filing of its bankruptcy petition. Bambace has refused to allow Pension Fund to conduct an audit.
Pension Fund advised principals of Bambace, by correspondence dated June 10, 1991, that, as a result of the cessation of required payments, employer withdrawal liability was likely and that Pension Fund would calculate the amount due, if any. Withdrawal liability is an extension of the future pension contributions owed by a withdrawn employer. This liability is mandated because the Pension Fund is required to provide pension benefits to employees of a withdrawn employer even though the employer ceases contributing to the Plan. The payment of withdrawal liability insures that the Pension Fund is adequately endowed.
Pension Fund also forwarded to the debtor a copy of a letter to its accountants dated June 14, 1991 requesting calculation of Bambace's withdrawal liability. By letter dated August 28, 1991, the same day that Bambace's plan of reorganization was confirmed by this court, Pension Fund notified Bambace that it was subject to withdrawal liability in the amount of $36,032.00. Pension Fund also advised Bambace that it would file an Amended Proof of Claim with this court for $37,101.85, representing $36,032.00 for the alleged withdrawal liability and $1,069.85 for the outstanding contributions previously claimed. On September 6, 1991, Pension Fund filed its Amended Proof of Claim dated August 19, 1991, which reflects the debtor's withdrawal liability.
Bambace objects to Pension Fund's Amended Proof of Claim. The debtor asserts that the Amended Proof of Claim is invalid because it does not relate to Pension Fund's original claim of July 2, 1991 for outstanding contributions, but rather, represents an entirely new claim for withdrawal liability. The additional claim for withdrawal liability, the debtor argues, is untimely as it was filed after the August 15, 1991 bar date.
Pension Fund opposes Bambace's objection and asserts that its claim for withdrawal liability is indeed valid for two reasons. First, Pension Fund asserts that the claim for withdrawal liability is timely because it notified the debtor several times by letter before the bar date that the debtor had incurred withdrawal liability. These notifications, Pension Fund maintains, should be recognized as a legitimate informal proof of claim because they apprised Bambace of a claim for withdrawal liability. Pension Fund argues that its subsequent filing of the Amended Proof of Claim on September 6, 1991 perfected the informal proof of claim.
Second, Pension Fund asserts that even if the letters do not constitute an informal proof of claim, its Amended Proof of Claim for withdrawal liability should be allowed as a proper amendment to its previously filed claim for delinquent payments to the Plan. Pension Fund reasons that the claims are related and Bambace is not unduly prejudiced by the amendment. Pension Fund contends that the claims have a direct causal relationship to each other because they arose out of the same underlying facts, namely, Bambace's failure to contribute to the Plan. Bambace is not harmed by the amendment, Pension Fund argues, because the debtor was informed of the withdrawal liability claim on two separate occasions prior to the bar date. Furthermore, Pension Fund alleges that the debtor has engaged in dilatory tactics by refusing to produce its books and records and allow Pension Fund to conduct an audit, despite the debtor's obligation to do so under Pension Fund rules. This refusal, Pension Fund contends, has made it impossible to calculate accurately withdrawal liability and prevented Pension Fund from filing the claim before the bar date. Pension Fund argues that if its withdrawal liability claim was expunged, the debtor would unfairly benefit from its unjust refusal to produce its corporate books and records. Additionally, Pension Fund seeks the production of the debtor's books and records under Bankruptcy Rule 2004.
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