In re Dahlgren Intern., Inc., Civ. A. No. 3-89-501-H.

• Decision Date: 22 June 1992
• Docket Number: Civ. A. No. 3-89-501-H.
• Citation: 147 BR 393
• Parties: In re DAHLGREN INTERNATIONAL, INC., BALDWIN TECHNOLOGY CORPORATION, Plaintiff, v. DAHLGREN INTERNATIONAL, INC., Defendant.
• Court: U.S. District Court — Northern District of Texas

147 B.R. 393 (1992)

In re DAHLGREN INTERNATIONAL, INC.,

BALDWIN TECHNOLOGY CORPORATION, Plaintiff, v. DAHLGREN INTERNATIONAL, INC., Defendant.

Civ. A. No. 3-89-501-H.

United States District Court, N.D. Texas, Dallas Division.

August 7, 1992.

Nunc Pro Tunc, June 22, 1992.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

William B. Steele, III and Susan L. Karamanian, Locke Purnell Rain Harrell, Dallas, Tex., Warren H. Roter and Vincent A. Castiglione, Morgan & Finnegan, New York City, for plaintiff.

Donald C. Templin, Haynes & Boone, Bill C. Hunter, Hunter Van Amburgh & Wolf, Dallas, Tex., Daniel W. Sixbey, Steven P. Weihrouch and Stuart J. Friedman, Sixbey Friedman Leedom & Ferguson, McLean, Va., for defendant.

MEMORANDUM OPINION AND ORDER

SANDERS, Chief Judge.

Before the Court are Dahlgren International, Inc.'s ("DII" or "Dahlgren") Motion to Enter Judgment Disallowing the Administrative Expense Claim of Baldwin Technology Corporation Against Dahlgren and Granting Related Relief, filed May 18, 1992 ("Motion to Enter Judgment"); Dahlgren's supporting Brief, filed May 27, 1992; Baldwin Technology Corporation's ("Baldwin") Brief in Response, filed June 3, 1992; Dahlgren's Reply, filed June 9, 1992; and Baldwin's Surreply, filed June 15, 1992.¹

Also before the Court is Dahlgren's Motion to Strike Affidavit of Wayna M. Marshall, filed June 9, 1992, and Baldwin's response thereto, filed June 12, 1992, as well as Baldwin's Motion Pursuant to Fed. R.Civ.P. 6(b), filed May 15, 1992.² DII's response to the latter motion is contained in its May 27 brief.

I. Background

This is a patent case. Its bankruptcy roots, however, generate the current controversy. Those roots bear recounting here.

Dahlgren, a one-time manufacturer of printing machinery, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code on December 29, 1986. Dahlgren maintained possession of its assets and continued to operate its business pursuant to sections 1107 and 1108 of the Code. On October 27, 1988, Baldwin, also active in the printing industry, filed suit against Dahlgren under the patent laws of the United States, particularly Title 35, United States Code, sections 271 and 281, claiming that Dahlgren's post-petition activities infringed Baldwin's patent on a printing "dampening system." The suit, numbered CA3-88-2664-C, was assigned to the Honorable Sam R. Cummings.

In the bankruptcy proceedings, Baldwin sought to claim relief requested in CA3-88-2664-C as an administrative expense pursuant to section 503(b)(1)(A) of the Bankruptcy Code (11 U.S.C.A. § 503b1A West Supp.1992). See Baldwin's Request for Payment of Administrative Expense, filed February 9, 1989, In re Dahlgren International, Inc., No. 386-35215-A-11 (Bankr.N.D.Tex.). Baldwin moved for mandatory withdrawal of reference on this request on February 22, 1989, and the motion was assigned to this Court. On March 17, 1989, Judge Cummings administratively closed CA3-88-2664-C.

Baldwin's Administrative Expense Claim was addressed in Dahlgren's Second Amended Plan of Reorganization ("the Plan"), which was confirmed by the Bankruptcy Court on May 12, 1989. See Order Confirming Plan Pursuant to 11 U.S.C. Section 1129, filed May 12, 1989, In re Dahlgren International, Inc. This Court then granted Baldwin's pending motion and withdrew reference on Baldwin's Administrative Expense Claim. See Order, filed May 31, 1989 (concluding that withdrawal was mandatory pursuant to 28 U.S.C. § 157d).

After continuances initiated by both parties and the Court, trial was ultimately set for May 18, 1992.³ Four days before trial, Dahlgren requested leave to file the extant motion. The Court held a conference the morning of trial, at which it granted Dahlgren's request, postponed the trial, and ordered additional briefing.

By Agreed Order, filed June 15, 1992, the Court reopened CA3-88-2664-C, transferred it to this docket, and consolidated it into this action.⁴

In its motion, Dahlgren contends that Paragraph 6.01.2 of the Plan precludes Baldwin's recovery on the Administrative Expense Claim and any further claims for post-petition money damages based on patent infringement disputes between the parties unless judgment was obtained and certified to the bankruptcy court by May 12, 1992. With the passing of that date, Dahlgren now asks the Court to bar Baldwin's claims in this suit.

II. Analysis

How the Court applies Plan Paragraph 6.01.2 to the claims before it is the first issue at hand.

Jurisdiction

Both parties view the jurisdictional issues before the Court as a murky morass. They propose divergent pathways to settled ground. Dahlgren avers that the order confirming the Plan is res judicata with respect to Baldwin's Administrative Expense Claim and, therefore, completely bars the relief sought in this suit. Baldwin argues that the Court should withdraw reference on the Plan.

The pertinent res judicata inquiry is well established in the Fifth Circuit:

This circuit\'s test for res judicata requires that: (1) The parties be identical in both suits, (2) A court of competent jurisdiction rendered the prior judgment, (3) There was a final judgment on the merits in the previous decision, and (4) The Plaintiff raises the same cause of action or claim in both suits.

Howe v. Vaughan (In re Howe), 913 F.2d 1138, 1143-44 (5th Cir.1990) (footnote omitted). As the background of this case attests, only the third prong of the test is now at issue.

A confirmed plan of reorganization has the effect of a judgment rendered by the district court. In re Doty, 129 B.R. 571, 583 (Bankr.N.D.Ind.1991); In re French Gardens, Ltd., 58 B.R. 959, 962 (Bankr.S.D.Tex.1986) (citing Stoll v. Gottlieb, 305 U.S. 165, 166-67, 59 S.Ct. 134, 135, 83 L.Ed. 104 reh'g. denied, 305 U.S. 675, 59 S.Ct. 250, 83 L.Ed. 437 1938). Whether it has the effect of a final judgment on a particular claim, however, depends on whether and how the claim was resolved in the plan. See Southmark Properties v. Charles House Corp., 742 F.2d 862, 870 n. 10 (5th Cir.1984) (quoting 1B J. Moore, Moore's Federal Practice ¶ 0.4091.-1 at 301 2d ed. 1983, in determining that a claim must be "finally disposed of"); In re Consolidated Cos., 113 B.R. 269, 273-74 (Bankr.N.D.Tex.1989).

In this case, the Plan explicitly defers the bankruptcy court's decision on Baldwin's Administrative Expense Claim pending district court action. Indeed, the Plan provides that the bankruptcy court will await a new "request for classification and allowance of the claim." Plan at ¶ 6.01.2(c)(1). It adds that Dahlgren reserves the right to later assert defenses to any such request made by Baldwin. See id. The Plan sets parameters, but plainly does not dispose of Baldwin's Administrative Expense Claim. See Southmark Properties v. Charles House Corp., 742 F.2d at 870 n. 10; Republic Supply Co. v. Shoaf, 815 F.2d 1046, 1053 (5th Cir.1987) (applying Southmark).

The three year provision also can be analogized to a statute of limitations. This, however, does not render it a final judgment on the merits. The running of a statute of limitations constitutes a final judgment for res judicata purposes only when the claims involved are dismissed. See Steve D. Thompson Trucking, Inc. v. Dorsey Trailers, Inc., 870 F.2d 1044, 1046 (5th Cir.), reh'g denied, 880 F.2d 818 (1989); Nilsen v. City of Moss Point, 701 F.2d 556, 562 (5th Cir.1983) (en banc) (citations omitted); see also Mathis v. Laird, 457 F.2d 926, 927 (5th Cir.) (highlighting that a "ruling" based on the limitations period is required), cert. denied, 409 U.S. 871, 93 S.Ct. 201, 34 L.Ed.2d 122 (1972). In this case, as already noted, while the Plan establishes the three year period and the relief to follow should the period run, it does not dismiss the Administrative Expense Claim.

Ergo, the Plan renders no final judgment on Baldwin's Administrative Expense Claim and is not res judicata with respect to it.⁵

Already, the Court has the claims of CA3-88-2664-C before it and has withdrawn reference on the Administrative Expense Claim. It need not withdraw reference on the remaining portions of Paragraph 6.01.2, as Baldwin suggests.⁶ Instead, the Court establishes its jurisdictional footing on other grounds.

What Dahlgren's motion asks the Court to do is enforce a separate agreement between the parties regarding the claims before the Court, the agreement being Paragraph 6.01.2 of the Plan. Thus, Dahlgren invokes basic contract theory and needs nothing more to interject its motion into this case.

An agreed provision in a plan of reorganization functions as a binding contract between parties. See Official Creditors Comm. of Stratford of Tex., Inc. v. Stratford of Tex., Inc. (In re Stratford of Tex., Inc.), 635 F.2d 365, 368 (5th Cir.1981); Temex Energy, Inc. v. Haste & Kirschner (In re Amarex, Inc.), 96 B.R. 330, 332 (Bankr.W.D.Okla.1989) (citing In re Stratford of Tex., Inc.). To be sure, "(a) Chapter 11 Plan, whether it is one contemplating reorganization or the liquidation of assets, is nothing more nor less than a contract between a debtor and the creditors of the bankruptcy estate." Retail Marketing Co. v. Northwest Nat'l Bank (In re Mako, Inc.), 120 B.R. 203, 207 (Bankr.E.D.Okla. 1990), on subsequent remand on other grounds, 127 B.R. 474, 476 (1991). That the Plan was later confirmed by court order changes not the validity of the contract. See In re Stratford of Tex., Inc., 635 F.2d at 368; see also United States v. ITT Continental Baking Co., 420 U.S. 223, 236-37, 95 S.Ct. 926, 934, 43 L.Ed.2d 148 (1975) (holding that consent decrees and orders should be construed as contracts). Consequently, for purposes of this ruling, the Court may consider Paragraph 6.01.2 simply as a contract pertaining to the patent infringement claims in this case.

All issues and claims germane to Dahlgren's Motion to Enter Judgment are now before the Court. Before reaching the merits of the motion, the Court addresses...