In re Futuronics Corp.
| Decision Date | 20 September 1982 |
| Docket Number | No. 82 Civ. 1660 KTD.,82 Civ. 1660 KTD. |
| Citation | 23 BR 281 |
| Parties | In re FUTURONICS CORPORATION, Debtor. FUTURONICS CORPORATION, Plaintiff-Appellee, v. SYCAMORE INDUSTRIES, INC., Defendant-Appellant. |
| Court | U.S. District Court — Southern District of New York |
Finley, Kumble, Wagner, Heine, Underberg & Casey, New York City (Michael V. Blumenthal, Neil A. Friedman, New York City, of counsel), for appellee Futuronics Corp.
Abramson, Freedman & Blackman, P.C., Philadelphia, Pa. (Jeffrey M. Freedman, Philadelphia, Pa., of counsel), for appellant Sycamore Industries, Inc.
Sycamore Industries, Inc. ("Sycamore") appeals pursuant to Bankr.R.P. 801 from Bankruptcy Judge Lewittes' February 10, 1982 order denying Sycamore's motion to set aside the stipulation and order dated September 2, 1980 (the "September 2 Stipulation"). The September 2 Stipulation had limited Sycamore's claim for damages against Futuronics Corporation ("Futuronics"), the appellee and debtor, to $854,000 without prejudice to the pending objection of Futuronics.
This matter arises out of a licensing agreement between Futuronics and Sycamore dated August 1, 1973. On January 3, 1975, Futuronics filed a Chapter XI petition in the Bankruptcy court below. On June 9, 1975, Sycamore filed proof of claim No. 212 (the "Original Claim"), alleging a $1,100,000 indebtedness arising out of an alleged breach of the August 1, 1973 licensing agreement with Futuronics. Futuronics objected to Sycamore's Original Claim. Sycamore filed an answer to Futuronics' complaint and objection to claim on August 13, 1980, by its attorneys Halpert & Halpert. Eight days later Israel Halpert of Halpert & Halpert entered into a stipulation (the September 2 Stipulation) with counsel for Futuronics reducing Sycamore's claim from $1,100,000 to $854,000 in conformity with Sycamore's answer of August 13, 1980. This stipulation was filed with the court and "So Ordered" by Judge Lewittes on September 2, 1980.
On February 3, 1981, Halpert & Halpert withdrew as counsel for Sycamore, and the law firm of Abramson, Freedman & Blackman appeared on Sycamore's behalf. On April 1, 1981, Abramson, Freedman & Blackman filed a "second" or amended proof of claim in the amount of $4,453,361. Futuronics filed an application on September 22, 1981 seeking an order enforcing the September 2 Stipulation and an order expunging the new claim. The court issued orders granting this application on November 16, 1982. On October 30, 1982, Sycamore moved to set aside the September 2 Stipulation alleging that Israel Halpert did not represent Sycamore at the time he entered into the stipulation, and/or that he was not authorized to do so on Sycamore's behalf. A hearing was held on December 1, 1981, at which time Judge Lewittes denied the motion. This appeal ensued.
Appellant's cite several errors in the court below, which fall into two categories: (1) Judge Lewittes' failure to invalidate the September 2 Stipulation; and (2) Judge Lewittes' refusal to allow Sycamore to amend its proof of claim against Futuronics. I hold that Judge Lewittes did not abuse his discretion in refusing to allow Sycamore to amend its claim, which is sufficient to uphold the bankruptcy court's decision below. Even assuming that Israel Halpert did not have the authority to enter into the September 2 Stipulation, Sycamore still had to amend its Original Claim to increase its claim to $4,453,361. Because Judge Lewittes was well within his discretion when he denied the motion to amend, appellant's claims concerning Halpert's alleged lack of authority are not grounds for reversal, even were these assertions correct.
The issue of Halpert's authority, however, must still be examined in order to determine the present amount of Sycamore's proof of claim. Although the motion to amend was denied properly, if Halpert was unauthorized to execute the stipulation on Sycamore's behalf, then its claim remains at the original figure of $1.1 million and not $854,000 as Judge Lewittes held.
I have assumed that Halpert did not have the authority to enter into a permanent and binding limitation of Sycamore's claim because, like a settlement or compromise, such an action would require explicit client approval. However, though Halpert may not have had authority to bind Sycamore to a permanent reduction of its claim, as counsel of record he could enter into a stipulation — without prejudice to a future valid amendment — conforming the amount of Sycamore's claim to the amount set out in its answer. See Prate v. Freedman, 583 F.2d 42, 48 (2d Cir. 1978); cf. ABA Code of Professional Responsibility EC 7-7 ("In certain areas of legal representation not affecting the merits of the cause or substantially prejudicing the rights of a client, a lawyer is entitled to make decisions on his own."). Sycamore's rights were not substantially prejudiced by the stipulation because, as even appellant understood, "the Stipulation did not prohibit Sycamore from filing an amended claim. . . ." Thus, Halpert, as Sycamore's attorney, had sufficient implicit authority to make Sycamore's filings consistent.
Moreover, Sycamore's assertion that Halpert had no authority to act on its behalf at the time the stipulation was entered into is groundless. Judge Lewittes' Finding of Fact No. 14 that Halpert was appellant's attorney of record must be accepted "unless it is clearly erroneous." Bankr.R.P. 810; see generally cases cited in Appellee's Brief at 9-10. There is ample evidence in the record and in Appellant's own brief to support Judge Lewittes' finding: Halpert obtained several adjournments prior to his entering into the stipulation (Sycamore's Brief at 3); Halpert prepared an answer to Futuronics' objection to claim, with the assistance of Sycamore's president, just eight days prior to entering into the stipulation, (Sycamore's Brief at 4); Halpert obtained several adjournments after the stipulation was entered into, (Sycamore's Brief at 5); and Halpert did not withdraw as counsel before the bankruptcy court until February 3, 1981, over five months after the September 2 Stipulation. On the basis of this factual record, Judge Lewittes' Finding of Fact No. 14 is supported by the record.
Halpert's established authority to conform Sycamore's proof of claim to its answer renders Sycamore's "second" proof of claim an attempt to amend the Original Claim to...
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...and that "the crucial question is whether the opposing party would be unduly prejudiced by the amendment." In re Futuronics Corporation, 23 BR 281, 283 (BC S.D.N.Y. 1982); see also, In re International Horizons, Inc., et al., 31 B.R. at 725-728, 751 F.2d at In determining prejudicial effect......