In re Griffin Trading Co.
| Decision Date | 18 July 2001 |
| Docket Number | No. 98 B 41742.,98 B 41742. |
| Citation | 270 BR 883 |
| Parties | In re GRIFFIN TRADING COMPANY, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
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David N. Missner, Janice L. Duban, Piper Marbury Rudnick & Wolfe, Chicago, IL.
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND MEMORANDUM OPINION
This matter comes before the Court on (1) the Chapter 7 Trustee's motion to approve a settlement agreement with certain creditors, authorize an interim distribution, and allow claims under 11 U.S.C. § 503(b)(3)(D); (2) the Joint Liquidators' cross motion to amend informal claims; and (3) the Group A English Creditors' motion to allow informal proofs of claim.
The "Joint Liquidators" opposed the Trustee's motion on the grounds that the agreement is not in the best interests of the creditors and the estate, and excludes from distribution the claims of more than eighty English creditors.
The Joint Liquidators also moved that their submissions be considered as informal claims subject to amendment so that the English creditors share pari passu in any distribution. In the alternative, the Joint Liquidators requested that this Court find that the bar date does not apply to English creditors.
The Group A English Creditors filed a motion to allow certain documents to stand as informal claims.1 Jamie Macleod, an English customer creditor, joined in the Joint Liquidators' cross-motion to amend informal claims and in the Joint Liquidators' opposition to the Trustee's motion to authorize the settlement agreement. Other creditors, Fortis Bank (Nederland) N.V. F/K/A Meespierson N.V. ("Fortis Bank") and Mark J. Walsh, Eva Walsh, and Mark J. Walsh Global L.P. (the "Walsh Claimants") opposed the Joint Liquidators' motion to amend the informal claims and the Group A English Creditors' motion to allow informal claims. The Walsh Claimants also objected to Jamie Macleod's joinder in the Joint Liquidators' motion.
At trial, the Court dismissed without prejudice the Joint Liquidators' claim against the Trustee for a breach of fiduciary duty because it was not filed as an adversary complaint.
After examining the evidence and each party's submissions, this Court concludes the following: 1) the Trustee's motion to authorize the settlement agreement is granted in part and denied in part; 2) the Joint Liquidators' cross-motion to amend informal proofs of claim is denied; and 3) the Group A English Creditors' motion to allow informal claims is denied.
1. On December 30, 1998, Griffin Trading Company (the "Company" or the "Debtor") filed its petition for relief under chapter 7 of title 11 of the United States Code. Thereafter, Leroy Inskeep was appointed Trustee.
2. The Debtor was a commodities broker. The Debtor had offices in Chicago and London, England.
3. The Debtor's creditors principally consist of customers, as that term is defined in Section 761(9) of the Bankruptcy Code, and general unsecured creditors.
4. The Debtor conducted business beginning in 1993 at its London office, where it had substantial assets and liabilities.
5. On January 5, 1999, this Court (on the Trustee's motion) authorized the Trustee to issue a winding-up petition in England and Wales. The UK Court authorized the appointment of Finbarr Thomas O'Connell and Michael John Andrew Jervis, both of Grant Thornton in London, a firm of chartered accountants, as the joint provisional liquidators with respect to the Debtor's affairs in the United Kingdom ("UK").
6. On February 17, 1999, the UK Court made a winding-up order, and the following day, Finbarr Thomas O'Connell and Michael John Andrew Jervis were confirmed as full Liquidators in the UK ancillary proceeding (the "English Proceeding"). By order of the UK Court dated October 13, 2000, Mr. O'Connell was replaced as a Joint Liquidator by Ipe Jacob, also of Grant Thornton.
7. The Debtor's English operations were regulated by the Securities and Futures Authority (the "SFA") in England, and Debtor held an account with (and cleared through) the London Clearing House (the "LCH").
8. One of the principal assets under the control, but not ownership, of Debtor's London branch was money received from or on behalf of customers ("Segregated Customer Funds"). Under the rules of the SFA, such funds must be segregated from the Debtor's other funds and are not property of the Debtor's ancillary estate. In addition, under English law (as under § 766 of the Bankruptcy Code), customers are entitled to a priority distribution of Segregated Customer Funds, subordinate only to the costs of administrating the Segregated Customer Funds.
9. In the case of the Debtor, it was apparent that the Segregated Customer Funds would not suffice to satisfy the English Customer Claims. Therefore, the Trustee and the Liquidators agreed that the Liquidators would make whatever distributions of the Segregated Customer Funds to English Customer Creditors they were required to make under English law, and any shortfall to English Customer Creditors ("Deficit Customer Claims") — plus all trade claims of English Trade Creditors — would be sought in the main U.S. proceeding. Those claims would rank pari passu with other like claims.
10. May 11, 1999 was the bar date for filing proofs of claims with this Court (the "Bar Date").
11. According to the Certificate of Service (Joint Exhibit 3), in early January, 1999, Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors and Deadlines was served on some 676 creditors and other parties in interest of the Debtor, including various persons in England. The Notice stated that "Proof of claim must be received by the bankruptcy clerk's office by . . . May 11, 1999." (emphasis in original)
12. As noted above, the Debtor's creditors principally consist of customers as that term is defined in 11 U.S.C. § 761(9) and general unsecured creditors. Fortis Bank is the Debtor's largest non-customer unsecured creditor. It filed Claim No. 76 against the Debtor in the amount of $4,757,674.58. The Walsh Claimants are the Debtor's largest customer creditors. They filed Claim Nos. 21, 22 and 23 in the amounts of $1,016,990.80, $2,279,828.10, and $80,402.07, respectively. As of October 16, 2000, customer claims (including claims that are subject to objections that have not yet been resolved) that were actually filed before the Bar Date totaled $1,857,995.88 after adjusting for customer property paid to such creditors by the Joint Liquidators. As of October 16, 2000, unsecured non-customer claims (including claims that are subject to objections that have not yet been resolved) that were actually filed before the Bar Date totaled $6,142,877.83. As of October 16, 2000, there were 17 unsecured claims filed in the amount of $564,995.71 in this case after the Bar Date.
13. In early 1999, the Joint Liquidators were aware that some English creditors had received a notice of the Bar Date in this case.
14. In February, 1999, Mr. O'Connell, Robert Cundy and Michael Tappin (of Grant Thornton) and Messrs. Inskeep and Missner and Ms. Duban had one (or more) telephone conversation(s) during which they discussed various matters regarding the administration of these estates.
15. On February 4, 1999 (at 7:40 p.m. London time and 1:40 p.m. Chicago time), the Joint Liquidators faxed to Trustee a draft of a report to English Creditors (Joint Exhibit 6) that stated in part:
I am aware that a notice has been sent by the U.S. trustee advising that a meeting of creditors will be held in Chicago on 10 February 1999 at the offices of Rudnick & Wolfe. This notice also requests that all clients submit details of their claim against GTC to the trustee. The deadline set for submitting claims is as per the notice, i.e., 11 May 1999. I have recommended to those clients that I have spoken to that they should submit details of their full claims to the trustee and I will be speaking to him on this point specifically in the next few days.
16. On February 5, 1999, before receipt of the final report to English creditors from the Joint Liquidators, Mr. Missner faxed a letter to Mr. O'Connell (Joint Exhibit 8) responding to his draft report to English creditors.
17. On or about February 5, 1999 (at 7:23 p.m. London time and 1:23 p.m. Chicago time), the Joint Liquidators faxed a revised report to Trustee and Mr. Missner (Joint Exhibit 11), which changed the language relating to claims and stated, in part:2
I have had discussion with the U.S. trustee and, notwithstanding the notice sent by the U.S. trustee to all creditors, he has agreed that creditors in England may submit their claims to English liquidator. It is, therefore, intended that, as soon as a liquidator has been appointed, he will write to all the English creditors inviting them to submit their claims to the English liquidator for agreement. Creditors who have already submitted their customer claims to me, and whose claims are accepted, will not need to submit further details of their customer claims. Once all the English claims have been settled, they will be transmitted by the English liquidator to the U.S. trustee in order to participate in distributions in the U.S. bankruptcy in accordance with their rankings in the U.S. bankruptcy.
18. The meeting of creditors pursuant to § 341 of the Bankruptcy Code was scheduled for February 10, 1999, in Chicago. Accordingly, Mr. O'Connell and Mr. Tappin traveled to Chicago to meet with the Trustee on February 9, 1999. Peter Fidler of Stephenson Harwood (an English law firm acting for the Joint Liquidators) traveled separately to Chicago. He arrived at the February 9, 1999 meeting approximately 1½ hours after it began. David Missner and Janice Duban (counsel for the Trustee) were also present at the February 9, 1999 meeting.
19. By motion dated April 6, 1999 (Joint Exhibit 37), the...
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In re Griffin Trading Co.
... ... Appellants/Cross-Appellees, ... Meespierson, N.V., Appellee/Cross-Appellant ... No. 98 B 41742, 00 C 2056 ... United States District Court, N.D. Illinois, Eastern Division ... November 26, 2001. David N. Missner, Janice ... ...