In re Highway Truck Drivers and Helpers, Local 107
| Decision Date | 23 May 1989 |
| Docket Number | Bankruptcy No. 87-05211F. |
| Citation | 100 BR 209 |
| Parties | In re HIGHWAY TRUCK DRIVERS AND HELPERS, TEAMSTERS LOCAL NO. 107, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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Michael L. Temin, Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pa., for Ronaldo Frances Gajkowsky.
Judith B. Chomsky, Philadelphia, Pa., for Bernard Bygott, John Mahalis, Gregory Patton, John O'Toole and Joseph Snyder.
Robert C. Cohen, Markowitz & Richman, Philadelphia, Pa., for Pa. Conference of Teamsters, Teamsters Joint Council Teamsters Joint Council Retirement Trust.
Nicholas Lepore, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for Teamsters Pension Fund Trust Teamsters Health & Welfare Fund.
The debtor, an unincorporated association serving as a labor union for its members, has filed a motion requesting that its fifth amended plan of reorganization1 be confirmed without the necessity of approval of a disclosure statement. Various parties who had filed proofs of claim object to confirmation, contending either that a disclosure statement is required because their claims are impaired or that the plan does not provide for their claims and thus violates the provisions of 11 U.S.C. § 1129. The debtor counters by objecting to the claims. One set of claimants has filed a motion to convert this chapter 11 case to one under chapter 7.
As will be discussed below, these disputes present various questions touching upon the power of bankruptcy courts to determine claims, the finality to be accorded state court judgments, and the meaning of the bankruptcy term "impairment" under 11 U.S.C. § 1124.2 Although the facts are a little unusual, they fortunately are not in dispute.
The debtor filed a voluntary petition under chapter 11 on October 16, 1987. Prior to that filing it was a defendant in two distinct lawsuits. The first suit was commenced in state court in 1980 by Robert and Francis Gajkowski, Robert Schipske, and William and Jean Abate (hereinafter the "Gajkowski plaintiffs"). This suit was the product of violence that occurred on the debtor's picket line, and was brought against a number of defendants, including the debtor. Damages were sought against the debtor on a theory of vicarious liability.
In March, 1984, judgment was entered in that case against the debtor in the approximate amount of $1.2 million. On appeal, the Pennsylvania Superior Court reversed and set aside the judgment. On further appeal to the Pennsylvania Supreme Court, the lower court judgment was reinstated by order dated August 31, 1987. The debtor then sought reconsideration from the state Supreme Court, which was denied. Faced with execution on the judgment, the union filed this chapter 11 bankruptcy case on October 16, 1987. Shortly after filing for bankruptcy, the debtor filed a second motion for reconsideration; this motion was granted. Argument in the Pennsylvania Supreme Court was set for April 1988.
In 1984, a second, unrelated suit was brought against the debtor in the District Court for the Eastern District of Pennsylvania by Bernard Bygott, John Mahalis, Gregory Patton, John O'Toole and Joseph Snyder (hereinafter the "Bygott plaintiffs"). This suit alleged a breach by the debtor of its statutory duty of fair representation. On June 10, 1986, judgment was entered in favor of the plaintiffs in the amount of $49,877.50. The debtor appealed and on June 25, 1987, a panel of the Third Circuit Court of Appeals reversed and vacated the judgment. Nos. 86-1456, 86-1027, 1987 WL 54392, 1987 U.S.App. Lexis 8058, withdrawn July 27, 1987. The plaintiffs then moved to have the entire Court of Appeals consider the matter en banc, which motion was granted. The panel decision was vacated, and reargument was scheduled before the whole court. Before the matter could be reargued, the debtor filed its chapter 11 petition; upon notification of the bankruptcy filing, the Court of Appeals stayed any further consideration of the appeal, pursuant to 11 U.S.C. § 362(a).
In February, 1988, the Bygott plaintiffs moved this court to dismiss or convert the bankruptcy case pursuant to 11 U.S.C. § 1112(b). They argued that the debtor had no intention of reorganizing under chapter 11 but had filed bankruptcy merely to pursue its state court appeal of the Gajkowski judgment without posting a supersedeas bond. Moreover, the Bygott plaintiffs contended that this initial lack of good faith in filing was exacerbated by the debtor's subsequent pursuit of the state court appeal without first obtaining relief from the automatic stay. See Assoc. of St. Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d 446 (3d Cir.1982). Accord, Teachers Ins. & Annuity Ass'n of America v. Butler, 803 F.2d 61 (2d Cir. 1986).
In In re Clinton Centrifuge, Inc., 72 B.R. 900 (Bankr.E.D.Pa.1987), I concluded that the filing of a bankruptcy case which was triggered by the debtor's inability to post a supersedeas bond was not per se in bad faith. The additional fact that here the debtor may have violated the automatic stay was not, in my view, sufficient to warrant dismissal or conversion of the case. However, rather than deny the motion to dismiss or convert I directed the debtor to file a plan and disclosure statement within thirty days so as to insure that the bankruptcy process was not used solely for delay. The debtor complied with the directive; contested matters then arose involving the adequacy of the disclosure statement and viability of the plan.
Having been alerted to the holding of St. Croix by the Bygott motion, the debtor then filed a motion for relief from the stay nunc pro tunc so that it might continue with its request for reconsideration from the Pennsylvania Supreme Court. (No request was made by either the debtor or the Bygott plaintiffs, then or now, for relief to continue with the federal court appeal.) By unpublished memorandum I granted relief from the stay prospectively only; moreover, I granted the Gajkowski plaintiffs relief from the stay as well. The debtor appealed from this order granting relief and the Gajkowski plaintiffs cross-appealed; on April 7, 1989, the District Court affirmed the order granting relief from the automatic stay as to both camps. Apparently the Gajkowski plaintiffs have pursued their appeal to the Third Circuit.
The August, 1987 state Supreme Court decision holding the debtor vicariously liable to the Gajkowski plaintiffs had been decided by a 4 to 3 vote. On September 28, 1988 the Supreme Court, again by a 4 to 3 vote, granted the debtor's second request for reconsideration, vacated its earlier order which had reversed the Superior Court, and entered a new order affirming the Superior Court. Thus, the Supreme Court reversed its earlier decision and, in essence, vacated any judgment against the debtors. See Gajkowski v. International Brotherhood of Teamsters, 519 Pa. 320, 548 A.2d 533 (1988). Subsequently, the Pennsylvania Supreme Court denied the Gajkowski plaintiffs' request for reconsideration and the United States Supreme Court denied their petition for certiorari.3
The debtor thereafter amended its reorganization plan to eliminate any distribution to the Gajkowski plaintiffs and filed the instant objection to their proofs of claim. As to the Bygott plaintiffs, the fifth and latest amended plan provides that the debtor escrow 120% of the judgment amount and continue with the federal appellate review process. While all other creditors are to be paid in full on the effective date of the plan, the Bygott plaintiffs are to receive payment only if their judgment is affirmed on appeal. If it is not, they are to receive no distribution. Furthermore, the debtor has filed an objection to the Bygott plaintiffs' proofs of claim arguing that they have no claim, given the panel decision of the Third Circuit.
The dispute between the debtor and the Bygott plaintiffs regarding the validity of their claims may be quickly resolved. The Bygott plaintiffs hold valid claims in the amount of the district court judgment as the panel decision overturning the judgment has been vacated. The fact that a challenge to the judgment was pending on appeal prepetition does not deprive the judgment of finality for purposes of claim preclusion. See, e.g., Robi v. Five Platters, Inc., 838 F.2d 318, 327 (9th Cir.1988); Martin v. Malhoyt, 830 F.2d 237, 264 (D.C.Cir. 1987); Teachers Ins. & Annuity Ass'n of America v. Butler, 803 F.2d at 66; Restatement (Second) of Judgments § 13, comment f (1982); 1B Moore, Moore's Federal Practice, ¶ 0.416(3) (1988); 18 Wright, Miller & Cooper, Federal Practice & Procedure, § 4433 (1981). Until overturned by the Third Circuit en banc, this judgment must be viewed as binding upon this bankruptcy court. E.g., Heiser v. Woodruff, 327 U.S. 726, 66 S.Ct. 853, 90 L.Ed. 970 (1946); Teachers Ins. & Annuity Ass'n of America v. Butler. See also In re Caucus Distributors, Inc., 83 B.R. 921, 929 (Bankr. E.D.Va.1988).
As a result, the debtor's challenge to the proofs of claim filed by the Bygott plaintiffs must be rejected. It also follows that the debtor's request to proceed to confirmation without disseminating a disclosure statement should, in this instance, be denied. I agree with the debtor that if all creditors were unimpaired by its plan of reorganization, there would be no need for voting and no need for a disclosure statement as all creditors presumptively would vote in favor of the plan. 11 U.S.C. § 1126(f). See In re Shaffer Furniture Co., 68 B.R. 827, 831 (Bankr.E.D.Pa.1987). See also In re Entz-White Lumber & Supply, Inc., 850 F.2d 1338, 1340 n. 3 (9th Cir.1988) (); In re Feldman, 53 B.R. 355, 357 (Bankr.S.D.N.Y.1985) (same).
Here, though, the...
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