In re Gti Capital Holdings, LLC

• Decision Date: 15 September 2009
• Docket Number: Bankruptcy No. 2:03-BK07923SSC.,Bankruptcy No. 2:03-BK07924SSC.,Adversary No. 2:09-AP-00006-SSC.
• Citation: 420 B.R. 1
• Parties: In Re GTI CAPITAL HOLDINGS, LLC, an Arizona Limited Liability Company, dba Rockland Materials, Debtor. In Re G.H. Goodman Investment Companies, LLC, Debtor. Grant H. Goodman and Teri B. Goodman, husband and wife (as Guarantors-Sureties for GTI Capital Holdings, LLC, and G.H. Goodman Invest. Co. LLC); GHG Inc., (managing agent for Stirling Bridge, LLC, a Delaware limited liability company); Stirling Bridge LLC (a Delaware limited liability company); Northern Highlands I, II (Arizona limited liability companies), Plaintiffs, v. California Portland Cement Company, (a California corporation, dba Arizona Portland Cement Company); Bombardier Capital Inc., Empire Southwest LLC (a Delaware Limited Liability Company); Burch & Cracchiolo, P.A., Norling, Kolsrud, Sifferman, & Davis, PLC; Mariscal, Weeks, McIntyre & Friedlander, P.A., Defendants.
• Court: U.S. Bankruptcy Court — District of Arizona

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420 B.R. 1

In Re GTI CAPITAL HOLDINGS, LLC, an Arizona Limited Liability Company, dba Rockland Materials, Debtor In Re G.H. Goodman Investment Companies, LLC, Debtor Grant H. Goodman and Teri B. Goodman, husband and wife (as Guarantors-Sureties for GTI Capital Holdings, LLC, and G.H. Goodman Invest. Co. LLC); GHG Inc., (managing agent for Stirling Bridge, LLC, a Delaware limited liability company); Stirling Bridge LLC (a Delaware limited liability company); Northern Highlands I, II (Arizona limited liability companies), Plaintiffs, v. California Portland Cement Company, (a California corporation, dba Arizona Portland Cement Company); Bombardier Capital Inc., Empire Southwest LLC (a Delaware Limited Liability Company); Burch & Cracchiolo, P.A., Norling, Kolsrud, Sifferman, & Davis, PLC; Mariscal, Weeks, McIntyre & Friedlander, P.A., Defendants.

Bankruptcy No. 2:03-BK07923SSC.

Bankruptcy No. 2:03-BK07924SSC.

Adversary No. 2:09-AP-00006-SSC.

United States Bankruptcy Court, D. Arizona.

September 15, 2009.

COPYRIGHT MATERIAL OMITTED

Grant Goodman, Grant H. Goodman, PLLC, Phoenix, AZ, for Plaintiffs.

Michael S. Rubin, Mariscal, Weeks, McIntyre, Et Al., William Novotny, Mariscal, Weeks, McIntyre, & Friedlander, Richard Aaron Edens, Burch & Cracchiolo, PA, Phoenix, AZ, Ryan J. Lorenz, Norling, Kolsrud, Sifferman & Davis, P., Scottsdale, AZ, Burch & Cracchiolo, P.A., Pro Se.

MEMORANDUM DECISION DISMISSING THIS ADVERSARY AND GRANTING CPCC'S MOTION FOR STAY PURSUANT TO THE ALL WRITS ACT

SARAH SHARER CURLEY, Bankruptcy Judge.

I. INTRODUCTION

On January 5, 2009, California Portland Cement Company ("CPCC") and Mariscal, Weeks, McIntyre & Friedlander, P.A. ("MWMF") filed a Notice of Removal with this Court. On January 9, 2009, Bombardier Capital Inc. and Norling, Kolsrud Sifferman & Davis, PLLC filed a Motion to Join Notice of Removal. The Notice of Removal sought the removal of an action ("Removed Action") filed by the Goodman Parties in the Maricopa County Superior Court ("State Court").¹ The Complaint, in the Removed Action, contained the following five potential claims for relief: (1) Arizona Racketeering, (2) Arizona Securities Fraud, (3) Arizona Rule of Civil Procedure 60 to set aside a judgment or order, (4) Civil Rights Violations, and (5) Aiding-and-Abetting Fraud. On January 7, 2009, the Goodman Parties filed an Omnibus Motion to Remand ("Motion to Remand"). On January 9, 2009, Empire Southwest LLC ("Empire Southwest") filed a Motion to Dismiss Complaint. A second Motion to Dismiss Complaint was filed by CPCC and MWMF on January 12, 2009. CPCC and MWMF also filed a "Motion for Stay [Injunctive Relief Pursuant to 28 U.S.C. § 1651 (All Writs Act)]" ("Motion for Stay under the All Writs Act") on January 12, 2009.

The Court entered an order on January 20, 2009, in which it granted the Goodman Parties, the Plaintiffs in the Removed Action, thirty days to amend their Complaint ("Order to Amend Complaint"), and denied all pending motions.² Because of the incoherent allegations set forth in the Complaint, the Court was unable to understand the Plaintiffs' arguments and render a decision for jurisdictional and issue preclusion purposes. However, instead of amending the Complaint, the Plaintiffs, through Grant H. Goodman ("Mr. Goodman") filed a "Writ of Supervisory Mandamus to Bankruptcy Court" ("Writ of Mandamus") on February 10, 2009 with the Federal District Court of Arizona ("District Court"). The Writ of Mandamus sought an order from the District Court directing this Court to remand the case back to the State Court. On March 20, 2009, the Honorable Susan R. Bolton dismissed the Plaintiffs' Writ of Mandamus.³

As a result of the Plaintiffs' failure to amend their Complaint, this Court set a Bankruptcy Rule 7016 Scheduling Conference for March 31, 2009. The Court stated in its Order Setting Scheduling Conference that the purpose of the conference was to determine whether one or more of the parties to the Removed Action wished to reinstate their motions previously denied by the Court without prejudice.

Prior to the Scheduling Conference, on March 11, 2009, CPCC and MWMF filed a "Motion for Reconsideration (to Reinstate and Renew) Motion to Dismiss and Motion for Injunctive Relief" ("Motion to Reinstate"). At the Scheduling Conference, the Court granted the Motion to Reinstate the Motions, and also reinstated the Plaintiffs' Motion to Remand as well as Empire Southwest's Motion to Dismiss Complaint. An Omnibus Response was filed by the Goodman Parties on April 17, 2009. The Court set oral argument on the matters for May 14, 2009.

Taking into account the arguments of the parties, the documents filed, and the entire record before the Court, the Court has set forth in this decision its findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52, Bankruptcy Rule 7052. As set forth below, the Court has jurisdiction to determine the discrete issues presented in the various Motions.

II. FACTUAL BACKGROUND

On May 8, 2003, GTI Capital Holdings, LLC, an Arizona Limited Liability Company dba Rockland Materials ("GTI"), and G.H. Goodman Investment Companies, LLC, ("G.H. Goodman") an Arizona Limited Liability Company, (together known as the "Debtors") filed petitions for relief under Chapter 11 of the Bankruptcy Code. Grant and Teri Goodman each individually owned a 49.5% interest in GTI Capital and a 50% interest in G.H. Goodman Investment.⁴ On June 18, 2003, the Court entered an order for joint administration of the two cases.

During the early stages of the Chapter 11 proceedings, GTI and G.H. Goodman acted as debtors in possession. However, on July 3, 2003, after deciding a contested matter brought by the Debtors' principal creditor, the Court appointed an examiner, Edward M. McDonough, to handle and control all funds, bank accounts, and disbursements of the Debtors. Finally, on or about January 23, 2004, the Debtors ceased their business operations, and a sale of the Debtors' assets occurred. The subsequent proceedings involved a number of disputes, and subsequent appeals, among a number of parties as to how to divide the limited funds obtained from the liquidation of the Debtors' assets. Ultimately the Examiner determined that he had accomplished as much as he could with the limited resources. The United States Trustee, based upon the inactivity in the case, lack of operations and employees, and with the only remaining assets consisting of case being held in the Court registry and legal claims, filed a Motion to Convert to Chapter 7, which was noticed to all creditors and interested parties. The relief requested was set for hearing on April 26, 2007. At the hearing, the request for conversion was unopposed. On May 1, 2007, the cases were converted to Chapter 7, and David M. Reaves was appointed the Trustee of the Debtors' estates.⁵

The Debtors have been involved in lengthy and protracted litigation over numerous issues since the inception of the bankruptcy cases. Of importance in determining the issues presently before the Court is an analysis of the adversary proceeding originally commenced by the Debtors in 2007.⁶ The Debtors named Comerica Bank-California ("Comerica") as the defendant therein ("Comerica Adversary Proceeding"). The Comerica Adversary Proceeding sought the equitable subordination of the Comerica claim to the claims of all other creditors in the Debtors' bankruptcy proceedings because of Comerica's conduct. Specifically, the Debtors alleged that Comerica had withheld critical information from the Debtors, the other creditors of these estates, and the Court as to the perfection of Comerica's security interests on certain items of equipment and vehicles owned by the Debtors at the inception of the cases. The Debtors alleged that the Examiner, on behalf of the bankruptcy estates, was forced to pursue Comerica on the perfection issue in this Court and in various appellate courts, and was forced to litigate against Comerica on the propriety of various distributions to creditors, at a time when Comerica knew that it had improperly perfected security interests. The costs to the bankruptcy estates as a result of such litigation increased exponentially. The Debtors' estates are now administratively insolvent. Although the Debtors initially commenced the Comerica Adversary Proceeding, the Trustee, once appointed, determined to proceed with the litigation against Comerica.

Ultimately, the Trustee and Comerica entered into a settlement agreement ("Settlement Agreement") which provided for a general release of the claims between the Trustee, on behalf of the bankruptcy estates and Comerica. The Court set the approval of the Settlement Agreement for a hearing; however, on the day of the hearing, an untimely Objection was filed by Triad Commercial Captive, Stirling Bridge LLC, New York-Newport, and Teri and Grant Goodman (the "Objecting Parties").⁷ The Objecting Parties alleged that the Settlement Agreement was not in the best interest of the creditors of the estate and that the release of Comerica from third-party claims was overly broad. The Trustee presented evidence on the various factors under Ninth Circuit law to approve the settlement.⁸

At the conclusion of the hearing on the settlement, counsel for the Objecting Parties and counsel for Comerica agreed, on the record, to a modification of the proposed order approving the Settlement Agreement. The modified language made it clear that the claims of third parties against Comerica were not released by the Settlement Agreement. Accordingly, the Court entered an Order Granting Motion to Approve Compromise/Settlement ("Order Approving Settlement Agreement"), which incorporated the Settlement Agreement and provided that the Settlement Agreement did not release any claims asserted by non-debtor parties.⁹

Despite the clear language, the Objecting Parties nevertheless appealed the validity of the release language, among other issues, to the...