In re Ice Cream Liquidation, Inc.

• Decision Date: 03 January 2005
• Docket Number: 03-3075CLMW),03-3183(LMW).,03-3076(LMW),Bankruptcy No. 01-34624 (LMW). Adversary No. 03-3074(LMW)
• Citation: 319 B.R. 324
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re ICE CREAM LIQUIDATION, INC. f/k/a Fieldbrook Farms, Inc., Debtor. Ice Cream Liquidation, Inc. f/k/a Fieldbrook Farms, Inc., Plaintiff, v. Calip Dairies, Inc., Defendant. Ice Cream Liquidation, Inc. f/k/a Fieldbrook Farms, Inc., Plaintiff, v. EPC of Virginia, Inc., Defendant. Ice Cream Liquidation, Inc. f/k/a Fieldbrook Farms, Inc., Plaintiff v. Integrated Brands, Inc., Defendant. Ice Cream Liquidation, Inc. f/k/a Fieldbrook Farms, Inc., Plaintiff v. Coolbrands International, Inc., Defendant.

319 B.R. 324

In re ICE CREAM LIQUIDATION, INC. f/k/a Fieldbrook Farms, Inc., Debtor.

Ice Cream Liquidation, Inc. f/k/a Fieldbrook Farms, Inc., Plaintiff, v. Calip Dairies, Inc., Defendant.

Ice Cream Liquidation, Inc. f/k/a Fieldbrook Farms, Inc., Plaintiff, v. EPC of Virginia, Inc., Defendant.

Ice Cream Liquidation, Inc. f/k/a Fieldbrook Farms, Inc., Plaintiff v. Integrated Brands, Inc., Defendant.

Ice Cream Liquidation, Inc. f/k/a Fieldbrook Farms, Inc., Plaintiff v. Coolbrands International, Inc., Defendant.

Bankruptcy No. 01-34624 (LMW). Adversary Nos. 03-3074(LMW), 03-3075CLMW), 03-3076(LMW), 03-3183(LMW).

United States Bankruptcy Court, D. Connecticut.

January 3, 2005.

COPYRIGHT MATERIAL OMITTED

Barry S. Feigenbaum, Rogin, Nassau, Caplan, Lassman & Hirtle, LLC, Hartford, CT, for Plaintiff/Debtor.

Wanda Borges, Borges & Associates, LLC, Syosset, NY, for Plan Examiner.

Thomas D. Goldberg, Thomas J. O'Neil, Day, Berry & Howard, LLP, Stamford, CT, Ted A. Berkowitz, Patrick Collins, Farrell Fritz, P.C., Uniondale, NY, for Defendants.

MEMORANDUM OF DECISION ON CONSOLIDATED MOTIONS TO DISMISS (TREATED AS MOTIONS FOR SUMMARY JUDGMENT PURSUANT TO FED. R. CIV. P. 12(b))

LORRAINE MURPHY WEIL, Bankruptcy Judge.

The matters before the court are the above-referenced motions to dismiss the above-captioned adversary proceedings (the "Proceedings") which motions (the "Motions"), pursuant to a prior order of the court, have been treated and disposed of as motions for summary judgment.

I. BACKGROUND¹

The Bankruptcy Filing and the Sale

Fieldbrook Farms, Inc. (now known as Ice Cream Liquidation, the "Debtor") commenced this chapter 11 case by petition filed on September 21, 2001 (the "Petition Date"). Subsequent to the filing of that petition (and until plan confirmation), the Debtor remained in control of its assets and business affairs as a debtor in possession pursuant to Bankruptcy Code §§ 1107 and 1108.² On December 20, 2001, the court approved a sale (the "Sale") of all or substantially all of the Debtor's operating assets to Fieldbrook Acquisition, Inc. (See Case I.D. No. 210.)³

By order dated August 13, 2002, the court confirmed the Modified First Amended Joint Liquidating Plan of Reorganization (Case Doc. I.D. No. 394, the "Plan") which had been proposed by the Debtor and the Official Committee of Unsecured Creditors then serving in the case. It is uncontested that the Plan has become effective in accordance with its terms.⁴

The Plan and Disclosure Statement

Pursuant to the Plan, the Debtor's assets remaining after the Sale were to be liquidated for the benefit of its creditors. By its terms, the Plan vests in the postconfirmation Debtor all of the Debtor's "property of every, nature, kind and description...." (Plan § 5.2.) The Plan does not preserve the Debtor's preconfirmation status as a debtor in possession or create a postconfirmation bankruptcy estate.

The Plan confers certain "powers and duties" on the postconfirmation Debtor, including:

(a) to liquidate all of its property to cash;

.....

(c) to prosecute any claims under Sections 544, 547, 548 and 550 collectively, "Avoidance Actions" of the Bankruptcy Code; and

.....

(f) other powers and duties described in the Plan or conferred upon it by operation of law.

(Plan § 5.2.)⁵ Paragraph 4.1 of the Disclosure Statement states in relevant part: "The Debtor shall prosecute all preference and other actions to recover funds for the estate under Chapter 5⁶ of the Bankruptcy Code ...." (Disclosure Statement at 25.) That language does not appear in the Plan. Plan § 8.1 authorizes the Debtor to "compromise or settle" any "Chapter 5 litigation." Neither the Plan nor the Disclosure Statement refers to actions brought pursuant to Bankruptcy Code § 542(b)⁷ either by section number or as "turnover" actions nor does either document specifically refer to collection of the Debtor's outstanding accounts receivable (if any) or invalidation of setoffs. Neither the Plan nor the Disclosure Statement contain any description of the specific Avoidance Actions (or turnover actions, if any) intended to be within the scope of Plan § 5.2. Neither the Plan nor the Disclosure Statement identifies specific transfers, transferees or categories of transfers or transferees involved in actions to be brought by the Debtor postconfirmation. The Disclosure Statement indicates that holders of unsecured claims are unlikely to receive any distribution under the Plan except for net recoveries on the Debtor's causes of action and that the Debtor had, as of the date of the Disclosure Statement, identified potential preference avoidance actions in the aggregate amount of approximately $1,500,000. (See Disclosure Statement at 11-12.) The Disclosure Statement further states that, as of the date of the Disclosure Statement, "the Debtor's counsel and consultant are developing the information necessary to identify and prosecute additional avoidance actions." (See id.)

Relevant Scheduled Claims

Eskimo Pie Corporation (f/k/a EPC of Virginia, Inc. "Eskimo Pie") was listed (under its former name) on the Debtor's originally filed Schedule F as the holder of undisputed claims in the amount of $21,795.20 and $82,611.87. (See Case Doc. I.D. No. 101 (Schedule F—Creditors Holding Unsecured Nonpriority Claims).) Integrated Brands, Inc. ("Integrated Brands") was listed on Debtor's originally filed Schedule F as the holder of undisputed claims in the amount of $124,528.23. (See id.) On April 2, 2004, the Debtor filed a Notice of Debtor's Amendment to Schedule F whereby the Debtor deleted from Schedule F the entries for claims of Eskimo Pie and Integrated Brands. (See Case Doc. I.D. No. 537, the "Notice".) The Notice stated that "Debtor is deleting these Creditors pursuant to `pending setoff's on pre-petition accounts receivable' made within 90 days preceding commencement of this case," id. In accordance with Rule 1009(a) of the Federal Rules of Bankruptcy Procedure,⁸ the relevant Defendants (as defined below) were served with a copy of the Notice (see id. (attached Certification)), and neither objected to the Notice nor moved to be restored to the Schedule F by way of further amendment.⁹ Prior to the commencement of the Proceedings, the Defendants were not parties to any dispute before the court, nor has it been suggested that they participated in Plan negotiations.

Debtor's Schedule B and Statement of Financial Affairs

It is uncontested that none of the claims asserted by the Debtor in any of the Proceedings are noted under item number 20 on the Debtor's Schedule B—Personal Property ("Other contingent and unliquidated claims of every nature ...") nor anywhere else on Schedule B. CoolBrands International, Inc. ("CoolBrands") claims that the relevant setoff was not listed on the Debtor's Statement of Financial Affairs.¹⁰ (See Proceeding #03-3183 Doc. I.D. No. 27 at 10-11.) However, the Debtor disputes that allegation. (See Proceeding # 03-3183 Doc. I.D. No. 29 at 3.) The SOFA listed preferences against Eskimo Pie and against Integrated Brands. The SOFA listed setoffs taken by Eskimo Pie and Integrated Brands. The SOFA does not mention accounts receivable. However, in Schedule B, the value of accounts receivable is listed as $9,538,020.15, "total amount subject to adjustment for pending credits."

The Calip Complaint

The Debtor, as plaintiff, commenced Adversary Proceeding # 03-3074 by the filing of a complaint (the "Calip Complaint") filed on May 22, 2003. Calip Dairies, Inc. ("Calip") is the defendant in that proceeding. In the sole count of the Calip Complaint, Plaintiff alleges that Calip was indebted to the Debtor in the amount of $109,441.00 on the Petition Date and that Calip attempted to effect an illegal setoff against that debt, such that the debt is still due and owing. (See Calip Complaint ¶ ¶ 10-11.) The Debtor further asserts that it can set aside the alleged illegal setoffs pursuant to Bankruptcy Code § 553 and recover the alleged debt from Calip pursuant to Bankruptcy Code § 542(b). (See Calip Complaint 1112.) Other than the Debtor's assertion that the setoff occurred on September 20, 2001, was illegal and lacked mutuality, the Calip Complaint provides no other details regarding the alleged illegal setoff.

The Eskimo Pie Complaint

The Debtor, as plaintiff, commenced Adversary Proceeding # 03-3075 by complaint (the "Eskimo Pie Complaint") filed on May 22, 2003. Eskimo Pie is the defendant in that proceeding. In the sole count of the Eskimo Pie Complaint, Plaintiff alleges that Eskimo Pie received certain cash payments from the Debtor in the aggregate amount of$68,863.37 which are avoidable as preferences under Bankruptcy Code § 547(b). (See Eskimo Pie Complaint ¶ ¶ 10-13.) Other than providing the aggregate amount of the alleged cash payments and a range of dates during which they were allegedly made, the Eskimo Pie Complaint does not provide any other details regarding the alleged preference payments.

The Integrated Brands Complaint

The Debtor, as plaintiff, commenced Adversary Proceeding # 03-3076 by complaint (the "Integrated Brands Complaint") filed on May 22, 2003. Integrated Brands is the defendant in that proceeding. In Count I of the Integrated Brands Complaint, the Debtor alleges that Integrated Brands received certain cash payments from the Debtor in the aggregate amount of $216,388.42 which are avoidable as preferences under Bankruptcy Code § 547(b). (See Integrated Brands Complaint ¶ ¶ 10-13.) Other than providing the aggregate amount of the alleged cash payments and a range of dates during which they were allegedly made, the Debtor does not provide any other details of the alleged preference payments.

In Count II of the Integrated Brands Complaint, the Debtor alleges that Integrated Brands was indebted to the Debtor in the amount of $986,761.64 on the Petition Date and that Integrated Brands attempted to effect illegal setoffs against that debt, such that the debt is...