In re MacGregor Sporting Goods, Inc.
| Citation | 199 BR 502 |
| Decision Date | 27 November 1995 |
| Docket Number | Bankruptcy No. 89-01973 (RG). Adv. No. 95-2261. |
| Parties | In re MacGREGOR SPORTING GOODS, INC., Debtor. Bruce H. LEVITT, Bankruptcy Trustee for MacGregor Sporting Goods, Inc., now known as M. Holdings, Inc., Paul Swanson Bankruptcy Trustee for MGS Acquisition, Inc., Plaintiffs, v. RIDDELL SPORTS, INC., RHC Licensing Corporation, Riddell, Inc., Equilink Licensing Corporation, Macmark Corporation, Ridmark Corporation and NBD Bank, N.A., Frederic H. Brooks, Frederick W. Isaacs, Jr., J. Harrison Beal, Marvin D. Geller, Stuart A. Miller, Hans S. Edersheim, Martin R. Bring, James F. Keegan and Emil W. Solimene, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
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Mudge, Rose, Guthrie, Alexander & Ferdon by Edward J. Boccher, Parsippany, NJ, for Trustee.
Skadden, Arps, Slate, Meagher & Flom by Gregg M. Galardi, Newark, NJ, for Defendants Riddell Sports, Inc., RHC Licensing Corporation, Riddell, Inc., Equilink Licensing Corporation, Macmark Corporation and Ridmark Corporation.
Bendit, Weinstock & Sharbaugh by James F. Keegan, West Orange, NJ, pro se.
Orloff, Lowenbach, Stifelman & Siegel by Linda B. Lewinter, Roseland, NJ, for Defendant Emil W. Solimine.
Molton & Meekins by Susan L. Meekins, Upper Montclair, NJ, for Defendant Frederick H. Brooks.
J. Harrison Beal, Knoxville, TN, pro se.
Marvin D. Geller, Allendale, NJ, pro se.
Stuart A. Miller, Pembroke Pines, FL, pro se.
Hans S. Edersheim, New York City, pro se.
Martin R. Bring, New York City, pro se.
Frederick W. Isaacs, Jr., Virginia Beach, VA, pro se.
There are presently before the Court nine Motions brought by Marvin D. Geller, Stuart A. Miller, Hans S. Edersheim, Martin R. Bring, James F. Keegan, Esq., Frederick W. Isaacs, Jr., J. Harrison Beal, Emil W. Solimine1, and Frederic H. Brooks (collectively referred to herein as "MacGregor Board Defendants" or "Movants") to Dismiss Count Three of the Plaintiffs' Adversary Complaint and one Motion brought by Frederic H. Brooks (hereinafter "Brooks") to Dismiss Count Four of the Plaintiffs' Adversary Complaint pursuant to Fed.R.Civ.P. 12(b)(6), incorporated by Fed.R.Bankr.P. 7012, for failure to state a claim upon which relief can be granted. Movants are all former directors of MacGregor Sporting Goods, Inc. at the time certain allegedly fraudulent transfers were made. Movant Martin R. Bring filed an affidavit (hereinafter "Bring Affidavit") in support of his motion to dismiss. In support of his motion to dismiss, James F. Keegan (hereinafter "Keegan") filed a brief which incorporated the Bring Affidavit by reference. Movant J. Harrison Beal (hereinafter "Beal") filed a declaration in support of the MacGregor Board Defendants' motions to dismiss. The Trustees filed a brief in opposition to the motions to dismiss. Movants Frederic Brooks and Emil Solimine (hereinafter "Solimine") each filed a reply memorandum in support of the motions to dismiss.
On August 22, 1995, the Court heard argument on the motions to dismiss. The Court reserved the decision on all motions. Subsequent to the hearing, the Court received a series of letter briefs from the parties addressing issues regarding the applicability of certain caselaw cited at the hearing. The following constitutes the Court's findings of fact and conclusions of law.
On March 16, 1989, MacGregor Sporting Goods, Inc., now known as M Holdings, Inc. ("MacGregor" or "the Debtor"), filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey (Case No. 89-01973). MacGregor is incorporated in Delaware with, at all times relevant herein, its principal place of business in East Rutherford, New Jersey.
On April 1, 1993, the then Debtor-In-Possession and the Official Unsecured Creditors' Committee ("the Committee") filed an adversary proceeding against Riddell Sports, Inc., RHC Licensing Corp., Riddell, Inc., Equilink Licensing Corp., Macmark Corp., Ridmark Corp., and NBD Bank, N.A. (Adv. Pro. No. 93-2214). The Complaint alleged that certain prepetition transactions involving the Debtor, its former subsidiaries and Riddell were voidable as fraudulent transfers under 11 U.S.C. § 554 and § 548(a). The Complaint alleged that sales of assets made by the Debtor to the defendants in April 1988 and February 1989 were fraudulent to MacGregor's creditors because the defendants paid less than "reasonably equivalent value" or "fair consideration" for the assets at the time of the sales. The Complaint further alleged that at such time, MacGregor was insolvent and undercapitalized.
On June 9, 1993, the Committee and the Debtor filed an amended complaint also alleging that the 1988 and 1989 sales were avoidable as fraudulent transfers. Paul Swanson, the Trustee of MGS Acquisition, Inc. ("MGS"), was added as a co-plaintiff. The amended complaint did not name as individual defendants the members of the MacGregor Board of Directors at the time the transactions were negotiated and closed.
Upon reconsideration of a prior denial of defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) and Bankruptcy Rule 7012, this Bankruptcy Court, by written Opinion dated and filed on October 24, 1994, ordered the dismissal of the amended adversary complaint brought by the Debtor and the Committee as time barred under 11 U.S.C. § 546(a)(1) the Third Circuit decision of In re Coastal Group, Inc., 13 F.3d 81 (3d Cir.1994). On that same date, this Court granted the Committee's motion for the appointment of a trustee. Bruce H. Levitt was appointed Chapter 11 Trustee for MacGregor by Order dated November 3, 1994.
The present adversary action was filed on March 10, 1995 by the Trustees for MacGregor and MGS (collectively, "the Trustees"). The Trustees, pursuant to 11 U.S.C. § 548(a), seek to avoid two transactions between MacGregor, its former subsidiaries, and Riddell as fraudulent transfers.
The first transaction ("the 1988 transaction") was closed on April 18, 1988 pursuant to an Asset Purchase Agreement dated April 10, 1988. MacGregor filed a Current Report under Form 8-K with the United States Securities and Exchange Commission ("SEC") on May 16, 1988. A press release was issued through PR Newswire Association, Inc. ("PR Newswire") on April 18, 1988. The second transaction ("the 1989 transaction") was entered into pursuant to a License and Stock Purchase Agreement dated February 2, 1989 among MacGregor, RHC Licensing Corp. and Riddell Sports, Inc. MacGregor filed a Current Report under Form 8-K with the American Stock Exchange on February 14, 1989 and the SEC on February 15, 1989. A press release was issued through PR Newswire on February 10, 1989. Bring Affidavit, Exhibits B-E.
The Trustees' Complaint names as defendants members of the MacGregor Board of Directors. Count Three of the Complaint alleges that the MacGregor Board Defendants breached their fiduciary duty of care, loyalty and good faith to MacGregor, its shareholders and creditors when they approved the 1988 Transactions and 1989 Transactions which sold MacGregor assets for less than reasonably equivalent value or for less than fair consideration.
The MacGregor Board Defendants move to dismiss Count Three of the Trustees' Complaint on the grounds that the action is time barred.
In addition to Brooks' Motion to Dismiss Count Three, Brooks also moves to dismiss Count Four of the Trustees' Complaint, which sets forth a separate claim against Brooks individually for breach of fiduciary duty arising from his conduct in negotiating the 1989 transaction on behalf of both MacGregor and Riddell.
Bankruptcy Rule 7012(b), which incorporates Federal Rule 12(b)(6), provides for dismissal of any complaint that fails to state a claim upon which relief can be granted. When considering a motion to dismiss, a court must accept as true all allegations in the complaint and all reasonable inferences drawn from those allegations, and view them in light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421-22, 89 S.Ct. 1843, 1849, 23 L.Ed.2d 404, reh'g denied, 396 U.S. 869, 90 S.Ct. 35, 24 L.Ed.2d 123 (1969); Schrob v. Catterson, 948 F.2d 1402, 1405 (3d Cir.1991). The test for determining when to dismiss under this Rule is whether, under any reasonable reading of the pleadings, the plaintiff may be entitled to relief. See Holder v. Allentown, 987 F.2d 188, 194 (3d Cir.1993). In making this determination, the court accepts the nonmovant's narrative of the facts and any reasonable inferences, but a court does not accept conclusory statements about the legal effect of those assertions. Id. at 194 (citing Wright & Miller, 5A Fed. Practice & Proc., § 1357 at p. 319). Movants are entitled to dismissal if the plaintiff can prove no set of facts in support of their claim that would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957).
Federal Rule of Civil Procedure ("Rule") 56, made applicable to Adversary Proceedings by Federal Bankruptcy Rule 7056, provides in pertinent part:
(c) Motion and Proceedings Thereon . . . The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c). The party moving for summary judgment ("movant") has the burden of establishing the nonexistence of any "genuine issues of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (...
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