In re Geauga Trenching Corp.

Decision Date21 February 1990
Docket NumberBankruptcy No. 883-31386-21,Adv. No. 088-0067-21.
Citation110 BR 638
PartiesIn re GEAUGA TRENCHING CORP., Debtor. Ronald LIPSHIE, Trustee for Geauga Trenching Corp., Plaintiff, v. AM CABLE TV INDUSTRIES, INC., Defendant.
CourtU.S. Bankruptcy Court — Eastern District of New York

E. Holtzman and B. Levantino, Hauppauge, N.Y., for defendant, AM Cable TV Industries, Inc. (AM Cable).

F. Scharf, New York City, for plaintiff, Ronald Lipshie, Trustee, for Geauga Trenching Corp. (Trustee).

FRANCIS G. CONRAD, Bankruptcy Judge.*

The Trustee sued AM Cable for breach of a Chapter 11 post-petition contract with Debtor. AM Cable moved1 for an order dismissing the Trustee's complaint on grounds that: (a) we lack subject matter jurisdiction over this proceeding; (b) both the Bankruptcy Court and the U.S. District Court for the Eastern District of New York lack in personam jurisdiction over AM Cable; (c) improper venue; and, (d) further proceedings in the Bankruptcy Court will impinge on its Constitutional right to a jury trial.

We determine that: this proceeding is a core matter over which we have subject matter jurisdiction; we have in personam jurisdiction over AM Cable; and, proper venue of this proceeding is in the Bankruptcy Court for the Southern District of Florida. We defer the issue of a Bankruptcy Court's power to conduct a jury trial over a core matter to the Bankruptcy Court for the Southern District of Florida.

For purposes of this Memorandum of Decision, we pen only those averments and general background information necessary for an understanding of the proceeding. We make no findings about the correctness or incorrectness of the facts alleged by the parties.

Debtor filed for reorganization under Chapter 11 of Title 11, 11 U.S.C. §§ 101 et seq., on or about July 15, 1983 in the Eastern District of New York and continued to operate as a debtor-in-possession, 11 U.S.C. §§ 1101, et seq., until it was converted to a case under Chapter 7 on April 10, 1985.

The Trustee alleges Debtor is an Ohio corporation with its principal place of business being in the Eastern District of New York at the time it filed for Chapter 11 relief. AM Cable disputes the Trustee's averment that Debtor did business in New York. Rather, it claims Debtor did business in Massachusetts and Florida. AM Cable, in its answer, admitted it is a Delaware corporation with its principal place of business being in Pennsylvania at all times material to the matters herein.

The Trustee's claim hinges on an alleged oral agreement or representation, and partial performance, between Debtor and AM Cable for work on a cable television project in Vero Beach, Florida, in the Southern District of Florida. Both parties allege unhappiness about each other's performance in Vero Beach, and thus, this breach of contract adversary proceeding filed by the Trustee.

Of key importance to our decision is AM Cable's averment that it did not know Debtor was under Chapter 11 protection, and had it known this fact, it would not have negotiated with or hired Debtor. The Trustee, by affidavit, disputes AM Cable lacked knowledge of the bankruptcy.

In its answer, AM Cable raised eleven (11) affirmative defenses, paraphrased as follows:

1). Lack of subject matter jurisdiction;
2). Adjudication of this matter would deprive AM Cable of its right to a jury trial ss "guaranteed by the Seventh Amendment to the United States Constitution;"
3). Improper venue 4). Lack of personal jurisdiction over the defendant because of our lack of subject matter jurisdiction;
5). Negotiations between it and Debtor concerning the Vero Beach project resulted in a March 5, 1984 written letter of intent that incorporated the parties agreed upon pricing schedule. AM Cable paid Debtor\'s requests for payments under the schedule between July, 1984 and August, 1984 and, under industry practice, retained ten (10%) percent of its payments pending Debtor\'s successful completion of the project. The amount of payments retained by AM Cable was less than the claims AM Cable was required to pay to others because of Debtor\'s deficient workmanship;
6). Debtor submitted accounts, invoices and/or requests for payments during July and August of 1984. AM Cable\'s payments to Debtor in response to Debtor\'s invoices constitutes "accord and satisfaction" of all of Debtor\'s claims against AM Cable. Debtor accepted AM Cable\'s payments without reservation;
7). After AM Cable made payments to Debtor, an "account was taken and stated" and AM Cable owes no further sums to Debtor;
8). Statute of limitations;
9). Statute of frauds;
10). Waiver, estoppel, laches or unclean hands; and,
11). Complaint fails to state a claim upon which relief may be granted.

In the event we determine that we have subject matter jurisdiction, AM Cable demands a trial by jury.

AM Cable filed a "Notice of Motion," and "Defendant's (AM Cable's) Memorandum of Law" together with supporting affidavits for its motion to dismiss this proceeding upon the following paraphrased grounds:

1). It "is a non-core matter in which a bankruptcy court may not enter a final judgment or render a final determination" because: it is a simple contract action that does not require application of and "bears no relationship" to federal bankruptcy law; or, it did not have knowledge that it had entered into a post-petition contract with a debtor-in-possession. AM Cable\'s "Notice of Motion," page 1; AM Cable\'s "Memorandum of Law," pages 4-18; "Affidavit of Thomas R. Ladd;" "Affidavit of Earl S. Punchard;"
2). Our adjudication "would impinge upon defendant\'s (AM Cable\'s) constitutional right to a jury trial of the (common law contract) issues," because it is jurisdictionally, at best, a "related to" matter. Without AM Cable\'s consent to our final disposition, it is subject to a District Court\'s de novo review that will render a jury verdict advisory. Moreover, a trial by us "impermissibly subjects the jury finding to reexamination." This result is "in contravention of the guarantees of the Seventh Amendment." AM Cable\'s "Notice of Motion," page 2; AM Cable\'s "Memorandum of Law," pages 18-21; and,
3). "{B}oth the Bankruptcy Court and the United States District Court for the Eastern District of New York lack in personam jurisdiction over the defendant" because: New York is not the proper venue under 28 U.S.C. § 1409(d) and 28 U.S.C. § 1391(a);2 proper venue may lie in Massachusetts, Pennsylvania or Florida where the parties were doing business and which provides the substantive law as the situs of the parties\' contract; and, no business was transacted between AM Cable and Debtor in New York, nor does AM Cable have any significant contact with New York. AM Cable\'s "Notice of Motion," page 2; AM Cable\'s "Memorandum of Law," pages 23-29; "Affidavit of Joseph J. Cadile;" "Affidavit of Earl S. Punchard."

The Trustee countered with an "Affidavit in Opposition" from Debtor's contract liaison officer. In reference to venue and in personam jurisdiction, the affidavit stated that Debtor had maintained a business operation on a continuous basis in the Eastern District of New York. "Affidavit in Opposition," pp. 2-3. The affidavit further stated that aside from New York as the residence of Debtor's most important witnesses, most of the non-party witnesses on the underlying claims of performance, non-performance, defective workmanship, wrongful stop work, and supporting documentary evidence are situated in Florida. "Affidavit in Opposition," pp. 14-17; see, "Plaintiff's Memorandum of Law In Opposition to Defendant's Motion," pp. 11-14.

In his memorandum, the Trustee argues that AM Cable's knowledge of Debtor's bankruptcy status should not affect our determination that Debtor's post-petition activity with AM Cable is within our subject matter jurisdiction as a core matter under 28 U.S.C. § 157(b)(1).3 "Plaintiff's Memorandum of Law In Opposition to Defendant's Motion," pp. 15-22.

The Trustee consents to AM Cable's demand for a trial by jury in the event such consent is necessary to support our jurisdiction over the subject matter. "Plaintiff's Memorandum of Law In Opposition to Defendant's Motion," page 22.

As for AM Cable's objection to in personam jurisdiction, the Trustee points out that even if we were to find that we have "related to" jurisdiction, nationwide service of process was properly had over AM Cable. "Plaintiff's Memorandum of Law In Opposition to Defendant's Motion," page 23.

Lastly, the Trustee argues that in the event we determine AM Cable has met its burden of proof that the New York venue was improper, then the appropriate forum is Vero Beach, Florida, under 28 U.S.C. § 1391(c), because this is where the parties were to perform significant obligations under their oral contract. "Plaintiff's Memorandum of Law In Opposition to Defendant's Motion," pp. 23-26.

AM Cable filed its response and argued that despite the Trustee's consent to a trial by jury, Grandfinanciera, S.A. v. Nordberg, 492 U.S. ___, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989), requires this proceeding, with AM Cable's jury demand, be tried before an Article III Court. Moreover, the Trustee's breach of a post-petition contract action is not a core proceeding because it does not concern the administration of Debtor's bankruptcy estate or, at best, is a "related to" proceeding and must be decided by an Article III Court. "Defendant's Reply Memorandum of Law In Support of Motion To Dismiss Adversary Proceeding," pp. 1-13.

AM Cable submitted reply affidavits to bolster its position that it had no knowledge of Debtor's bankruptcy status during the parties' contract negotiations and, had it known, it would not have engaged the Debtor as its sub-contractor. AM Cable counters the Trustee's position that Debtor maintained a "continuous" business presence in New York when Debtor's "Operating Statements" and "Statement of Financial Affairs for Debtor Engaged in Business," paragraph 1,...

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