In re Elder-Beerman Stores Corp., Bankruptcy No. 95-33643
| Decision Date | 12 February 1997 |
| Docket Number | Bankruptcy No. 95-33643,Adversary No. 96-3047. |
| Citation | 206 BR 142 |
| Parties | In re The ELDER-BEERMAN STORES CORP., an Ohio Corporation, et al., Debtors. The ELDER-BEERMAN STORES CORP., Plaintiff, v. THOMASVILLE FURNITURE INDUS. INC., Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
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Lawrence E. Oscar, Hahn Loeser & Parks, Cleveland, Ohio.
William B. Sullivan, Womble Carlyle Sandridge & Rice, Winston-Salem, NC.
Richard A. Chesley, Jones, Day, Reavis & Pogue, Columbus, Ohio.
Randy T. Slovin, Mason Slovin & Schilling Co., LPA, Cincinnati, Ohio.
The court has jurisdiction over this matter pursuant to 28 U.S.C. ?? 157(a) & 1334, and the standing General Order of Reference in this District. This proceeding constitutes a core proceeding pursuant to 28 U.S.C. ? 157(b)(2)(A) & (O) (1994).
This case originally came before the court by way of the filing of the Verified Complaint for Injunctive Relief by Plaintiff The Elder-Beerman Stores Corp., Inc., et al. (hereinafter Elder-Beerman or Plaintiff) on March 14, 1996. Since that time the court has had numerous hearings and has considered a multitude of pleadings. After a determination by this court that Defendant Thomasville Furniture Industries, Inc. (hereinafter Thomasville or Defendant) was not entitled to relief from the automatic stay, see In re Elder-Beerman Stores Corp., 195 B.R. 1012 (Bankr.S.D.Ohio 1996), and that Defendant has committed acts in violation of the automatic stay, see Elder-Beerman Stores Corp. v. Thomasville Furniture Indus., Inc. (In re Elder-Beerman Stores Corp.), 195 B.R. 1019 (Bankr.S.D.Ohio 1996), the parties and the court turned their attention to the matter of what damages, if any, may be awarded for such violations. As the result of a subsequent hearing, the court rejected the Plaintiff's request for damages under 11 U.S.C. ? 362(h) (1994), see Elder-Beerman Stores Corp. v. Thomasville Furniture Indus., Inc. (In re Elder-Beerman Stores Corp.), 197 B.R. 629 (Bankr.S.D.Ohio 1996), but reserved for a later hearing the issue of what damages, if any, might arise under 11 U.S.C. ? 105(a) (1994) or under state contract law.
Prior to the final hearing on this matter on October 24 and 25, 1996, the parties engaged in extensive settlement negotiations conducted by senior bankruptcy judge the Honorable Burton Perlman. As a result of those negotiations, the court entered an Agreed Order on September 26, 1996 which considerably focussed the issues before the court. See Agreed Order, Adv. Doc. # 81-1. In addition, the Final Pretrial Conference Order specified that the law of the State of Ohio would govern any breach of contract cause of action litigated by the parties. Final Pretrial Conference Order, Adv. Doc. # 86-1, at ? 1.
On October 24 and 25, 1996, the court conducted the final hearing on this matter. At the close of that hearing, the court took the remaining issues under advisement for subsequent decision. The court is now prepared to render its decision in this matter.
After having considered the multitude of pleadings, depositions, testimony, and exhibits submitted by the parties for the October 24 and 25, 1996 and previous hearings, the court recognizes that several unresolved issues remain for the court's determination. First, it is necessary to address what effect, if any, the court's previous findings of fact have on the issues raised in the October 24 and 25 hearings. Second, the court will consider that admissibility of testimony from Plaintiff's expert witness, Mr. Julian Taub. Third, the court will address its power to award damages under both 11 U.S.C. ? 105(a) and state contract law. Next, the court must determine whether the Plaintiff has sustained its burden of proof as to causation of any alleged damages. If the court finds that the Plaintiff has sustained its burden, it then becomes necessary for the court to address the three independent claims for damages by the Plaintiff, that of lost profits from lost Thomasville sales, from lost ancillary sales, and from lost credit transactions. In examining those claims, the court must address the expert testimony of both the Plaintiff's and the Defendant's witnesses, as well as the court's role in reaching independent conclusions as to damages. In addressing the issue of lost credit transactions, the court will consider an issue raised in the October 24 and 25 hearings, the effect of the language in the Agreed Order addressing damages arising from credit sales. Finally, the court will determine what attorneys' fees, if any, are appropriate under the Agreed Order.
As an initial matter, the court wishes to address what effect, if any, the court's earlier findings of fact have on Elder-Beerman's burden to establish causation. In both its May 1, 1996 and May 2, 1996 Orders, this court issued extensive findings of fact. See In re Elder-Beerman Stores Corp., 195 B.R. 1012 (Bankr.S.D.Ohio 1996); Elder-Beerman Stores Corp. v. Thomasville Furniture Indus., Inc. (In re Elder-Beerman Stores Corp.), 195 B.R. 1019 (Bankr.S.D.Ohio 1996).
It is clear that there exists a disagreement between the parties as to the effect of those previous findings of fact. In the October 24 and 25, 1996 hearing on damages, counsel for Elder-Beerman relied heavily on this court's previous findings of fact in attempting to meet its burden of proof to establish causation. In response, counsel for Thomasville has relied on the general rule that findings of fact in preliminary injunction proceedings are for the sole purpose of ascertaining what nature of injunctive relief was necessary or appropriate. See, e.g., Unsecured Creditors' Comm. of DeLorean Motor Co. v. DeLorean (In re DeLorean Motor Co.), 755 F.2d 1223, 1228 (6th Cir.1985). The Sixth Circuit, in United States v. Owens, reiterated the standard set forth by the Supreme Court as to factual findings in preliminary injunction hearings:
The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held. Given this limited purpose, and given the haste that is often necessary if those positions are to be preserved, a preliminary injunction is customarily granted on the basis of procedures that are less formal and evidence that is less complete than in a trial on the merits. A party is thus not required to prove his case in full at a preliminary injunction hearing, and the findings of fact and conclusions of law made by a court granting a preliminary injunction are not binding at trial on the merits. In light of these considerations, it is generally inappropriate for a federal court at the preliminary injunction stage to give a final judgment on the merits.
United States v. Owens, 54 F.3d 271, 276 (6th Cir.), cert. dismissed sub nom., Spirko v. United States, ___ U.S. ___, 116 S.Ct. 492, 133 L.Ed.2d 418 (1995) (emphasis added) (citing University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 1834, 68 L.Ed.2d 175 (1981)).
While this court recognizes this general rule regarding findings of fact in preliminary injunction hearings, the court also recognizes that automatic stay proceedings, though similar to preliminary injunction hearings in their equitable nature, are not governed by the same considerations. For example, ? 362 of the Bankruptcy Code allocates the burdens of proof to be applied in relief from stay actions:
In any hearing under subsection (d) or (e) of this section concerning relief from the stay of any act under subsection (a) of this section ?€” (1) the party requesting such relief has the burden of proof on the issue of the debtor\'s equity in property; and (2) the party opposing such relief has the burden of proof on all other issues.
11 U.S.C. ? 362(g) (1994). In preliminary injunction hearings, on the other hand, the burden of proof falls squarely on the party seeking the protection of the court. See Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers Local No. 70 of Alameda County, 415 U.S. 423, 441, 94 S.Ct. 1113, 1125, 39 L.Ed.2d 435 (1974).
In addition, it is clear that the concerns expressed by the Supreme Court in Camenisch do not exist as such in the case of automatic stay litigation. An automatic stay hearing is not one to preserve the status quo, but to alter it. See, e.g., University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 1834, 68 L.Ed.2d 175 (1981). Also, while automatic stay litigation is often less formal then other litigation, it is generally not conducted with the same degree of haste noted by the Supreme Court in Camenisch. Id.
Thus while automatic stay issues may be similar to preliminary injunction ones, the same rules do not always apply to both. Instead, it is the court's opinion that when, as in the instant case, an automatic stay proceeding is spread out over several hearings, the competing doctrine of "the law of the case" applies. See First Nat'l Bank of Boston v. Kors, Inc. (In re Kors, Inc.), 15 B.R. 444, 446 (Bankr.D.Vt.1981). As Judge Stevenson of the Western District of Michigan Bankruptcy court has found:
Under Rule 56(a), (d), and Rule 42(b), the district court exercises a broad authority to dispose of cases in stages. These decisions are interlocutory in character and until entry of judgment, they remain subject to change at any time. The doctrine of law of the case does not limit the power of the court in this respect. Yet the very purpose of deciding some issues ahead of others is to aid in the logical and orderly disposition of the whole. It would be utterly destructive of this end if...
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