In re Comdisco, Inc., 01 B 24795.

• Decision Date: 03 January 2002
• Docket Number: No. 01 B 24795.,01 B 24795.
• Citation: 271 B.R. 273
• Parties: In re COMDISCO, INC., et al., Debtors.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

271 B.R. 273

In re COMDISCO, INC., et al., Debtors.

No. 01 B 24795.

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

January 3, 2002.

John Wm. Butler, Jr., George N. Panagakis, Chicago, IL, for the Debtor.

Roman Sukley, Chicago, IL, for the U.S. Trustee.

William J. Barrett, Gardner, Carton & Douglas, Chicago, IL, for Creditor's Committee (Local Counsel).

Richard G. Mason, Chaim J. Fortgang, New York City, for Creditor's Committee.

Ann Marie Bredin, Jones, Day, Reavis & Pogue, Chicago, IL, for DIP Lenders (Local Counsel).

Michael Bassett, Jones, Day Reavis & Pogue, New York City, for DIP Lenders.

Ronald W. Hanson, Latham & Watkins, Chicago, IL, for Pre-Petition Lenders.

David F. Heroy, Carmen H. Lonstein, Bell, Boyd & Lloyd, Chicago, IL, for Equity Security Holders (Local Counsel).

Edward S. Weisfelner, Scott M. Berman, New York City, for Equity Security Holders.

Adam J. Levitt, Wolf, Haldenstein, Adler, Freeman & Herz, Chicago, IL, for Peter Moser and Lead Plaintiff (Local Counsel).

Daniel W. Krasner, Lawrence P. Kolker, Wolf, Holdenstein, Adler, Freeman &amp Herz, New York City, for Peter Moser and Lead Plaintiff.

MEMORANDUM OPINION

RONALD BARLIANT, Bankruptcy Judge.

Before Comdisco, Inc., the Debtor in this case, filed its petition for relief under chapter 11 of the bankruptcy code, several people who had bought its common stock filed complaints in the district court against the Debtor and two individual defendants. They alleged that the defendants violated various securities laws by misrepresenting the Debtor's prospects and operations, thereby inflating its stock price. The various claims were all assigned to District Judge Milton I. Shadur, who joined them and the parties into a single action captioned "Comdisco Securities Fraud Class Action" He also designated Peter Moser (the "plaintiff") the lead plaintiff. The plaintiff purports to represent a class of "all purchasers of the common stock of Comdisco between January 25, 2000 and October 2, 2000."

Once all the initial procedural steps had finally been taken, it was time for an amended complaint consolidating the class claims in the single action. Before that complaint could be filed, however, the Debtor filed its chapter 11 petition on July 16, 2001, thereby imposing an automatic stay of any proceedings against the Debtor in the class action. See § 362(a).¹ Thereafter, according to the plaintiff, Judge Shadur at a series of status hearings, "strongly indicated his desire for Class Counsel to seek at least a partial modification of the automatic stay." Memorandum in Support of Stay Motion 4.² The plaintiff, by class counsel, then dutifully presented to this Court a motion for a limited modification of the stay, seeking only to be allowed to file an amended complaint against all the defendants, including the Debtor. (Of course, the automatic stay does not prevent the plaintiff from proceeding against the individual defendants.) Based on prior proceedings, everyone agrees that the defendants will respond to the amended complaint by filing Fed.R.Civ.Pro. 12(b)(6) motions to dismiss for failure to state a claim for relief. The plaintiff's motion sought only relief from the stay sufficient to allow the amended complaint and the Debtor's motion to dismiss to be filed, so that Judge Shadur could decide the motions of all the defendants at the same time.

This Court heard the plaintiff's motion to modify the automatic stay on November 28, 2001, and denied it with an oral ruling on the same day, immediately following the hearing.³ Now the plaintiff has moved for a reconsideration of that denial, which this Court will treat as a Rule 59(e) motion to alter or amend its order. The present motion to reconsider is supported by a letter dated December 10, 2001, from Judge Shadur to the plaintiff's attorneys, with a copy to this Court. As the plaintiff's lawyer put it at the argument of the motion to reconsider, the act of sending such a letter was "extraordinary." There is, so far as this Court is aware, no rule that allows such a communication, nor does Judge Shadur have jurisdiction or standing in this case. Nevertheless, the plaintiff has adopted the letter as part of his argument and this Court will so regard it.⁴

The plaintiff moved under § 362(d)(1) to modify the automatic stay "for cause." It is intuitively obvious that determining whether cause exists to modify the stay to permit a lawsuit to proceed in another court requires a balancing of the costs and benefits of maintaining the stay. See In re Fernstrom Storage & Van Co., 938 F.2d 731, 735 (7th Cir.1991) (applying test that includes prejudice to the debtor or estate if stay were modified and hardship to movant if stay were maintained).⁵ It is also obvious from Congress's use of the undefined word "cause" that whether the stay should be modified to permit a lawsuit to proceed depends on the facts of the specific case. Congress did choose to specify and define one cause to modify the stay in all cases where it is found — lack of adequate protection of a property interest. See §§ 361, 362(d)(1). But it did not specify anything else that would be cause in all cases in which it existed. Therefore, cause to modify the stay to permit a lawsuit to proceed "is determined on a case-by-case basis." Fernstrom, 938 F.2d at 735, quoting In re Tucson Estates, 912 F.2d 1162, 1166 (9th Cir.1990).

Because the inquiry must be case-specific, copying and checking off lists of "factors" from other cases that had different facts is all but useless. As the 7th Circuit has recognized, "a list of factors without a rule of decision is just a chopped salad." In re Synthroid Mktg. Litig., 264 F.3d 712, 719 (7th Cir.2001). This Court has previously rejected the factor-counting approach to judicial decision-making. Chase Manhattan Bank v. Murphy (In re Murphy), 190 B.R. 327, 333 (Bankr.N.D.Ill.1995) ("the fact-finding process is only clouded by copying a list of factors from other cases and weighing evidence according to how well it matches that list.") The only factors that matter are those that arise from the circumstances of the present case, and even they must be weighed in the context of all the relevant circumstances.

This Court applied these principles when it denied the stay motion, having considered all the circumstances of this case, identified the most pertinent factors that arose from those circumstances, and weighed those factors in balancing the costs and benefits of maintaining the stay. The present motion for reconsideration invokes its own standard for decision. "Motions for reconsideration serve a limited function: to correct manifest errors of law or fact or to present newly discovered evidence." Keene Corp. v. International Fidelity Ins. Co., 561 F.Supp. 656, 666 (N.D.Ill.1982)(Shadur, J.), aff'd, 736 F.2d 388 (7th Cir.1984). The plaintiff does not allege that there is newly discovered evidence; the narrow issue is whether this Court committed a manifest error of law or fact. It did not, as this opinion will demonstrate, and the motion to reconsider will be denied.

The first argument the plaintiff made in support of its position that cause exists to modify the automatic stay is that, if the stay is not modified, he would be faced with the risk of inconsistent decisions by Judge Shadur. That is, Judge Shadur might decide an issue one way on a motion to dismiss made by the individual defendants, and then, after this case is over and (presumably) the Debtor can be pursued in the class action again, Judge Shadur might decide the same issue differently when the Debtor raises it. This Court found that such a possibility is so remote as to be "academic" and not substantial cause to modify the stay. Judge Shadur, however, incorrectly accuses this Court and the parties of engaging in "mindreading" and points out the irrelevant fact that each defendant in a multi-defendant securities case might have a defense unique to that defendant.

The plaintiff argued that if the stay were not modified the plaintiff would have "the risk of inconsistent judgments ..." because after the individual defendants had their motion ruled upon, along would come the Debtor with a similar motion on similar grounds, and there might be a different result. Tr. 67. It was in that context that this Court said, "That's a fairly academic risk, isn't it?" and discussed the unlikelihood that Judge Shadur could be persuaded to change his mind. Id. The fact is that no judge is likely to change his mind about an issue once that judge has "reached a decision after full adversarial presentation and judicial consideration...." Judge Shadur Letter 2. It may be (as both counsel agreed) that Judge Shadur is particularly exemplary in that regard, as he is in so many others. But nobody at the hearing attempted to predict how Judge Shadur would rule on any issue, or otherwise attempt to read his mind. Everyone did agree only that once that mind is made up, it is, as it ought to be, difficult to change.

Of course, Judge Shadur is correct that a defendant in a securities case might have unique defenses, not available to other defendants in the same case. Indeed, that is a possibility in any multi-defendant litigation, regardless of the subject matter. But that point has nothing to do with the risk of "inconsistent judgments" that was under discussion. Obviously, that risk pertains to the possibility of different resolutions of the same issue, not the resolution of an issue unique to one party. The problem that may arise from any projected need to deal with the Debtor's unique defenses is delay, which is the issue this Court will address next. With respect to the allegation that the plaintiff faces a significant risk of inconsistent decisions, this Court made no error of law or fact, manifest or otherwise. That risk is minimal, if it exists at all.

The automatic stay almost always delays litigants. That, after all, is its purpose,...