In re Penn-Dixie Industries, Inc.
| Decision Date | 28 October 1980 |
| Docket Number | Adversary No. 80 5317A.,Bankruptcy No. 80 B 10473 |
| Citation | 6 BR 832 |
| Parties | In re PENN-DIXIE INDUSTRIES, INC., Debtor. NAMED PLAINTIFFS AND the CERTIFIED CLASSES THEY REPRESENT IN the CEMENT ANTITRUST LITIGATION, Plaintiffs, v. PENN-DIXIE INDUSTRIES, INC., Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Fried, Frank, Harris, Shriver & Jacobson, New York City, for debtor; Ilene Karpf, New York City, of counsel.
Law Offices of Josef D. Cooper, P.C., San Francisco, Cal., for plaintiffs; Josef D. Cooper and Tracy R. Kirkham, San Francisco, Cal., of counsel.
Plaintiffs commenced this action in order to seek relief from the automatic stay of Section 362 of the Bankruptcy Code1 to the limited extent of allowing discovery to go forward against the Debtor (production of documents . . . customer lists) in antitrust litigation pending outside this Court. Plaintiffs do not seek to lift the stay for purposes of proceeding against this defendant in the antitrust litigation.
Penn-Dixie Industries, Inc. ("Penn-Dixie") was served between November, 1976 and December, 1979, as a party defendant in civil antitrust suits commenced in various United States district courts against producers of cement by a group of cement purchasers ("Plaintiffs"). Each complaint alleges violations of federal antitrust laws and some of the complaints also allege state antitrust law violations. Penn-Dixie's answers to the complaints deny any violation. For pre-trial purposes, the multi-district litigation has been consolidated in the United States District Court for the District of Arizona (In re Cement & Concrete Antitrust Litigation, 465 F.Supp. 1299 Jud.Pan. Mult.Lit.1979).
By an order dated March 9, 1979 (as clarified by orders of January 15 and 16, 1980), the Arizona District Court certified the litigation to proceed on behalf of three different classes of cement purchasers, all of whom purchased cement between January 1, 1968 and December 31, 1976. Following certification, Plaintiffs served interrogatories and document requests concerning customer lists held by defendants. The purpose of the discovery was to aid Plaintiffs in preparing notice to putative plaintiffs in the certified classes. Penn-Dixie objected to the production of their customer lists on several grounds, but most particularly, because the request was burdensome and required disclosure of post December 31, 1976 customers.
On April 7, 1980, Penn-Dixie filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code and has continued in the operation of its business as debtor in possession. By a letter dated April 23, 1980, Penn-Dixie informed Plaintiffs through their lead counsel of its petition and noted therein that pursuant to Section 362 of the Bankruptcy Code, all actions pending against it were automatically stayed.
Several months later, on July 16, 1980, the Arizona District Court approved Plaintiffs' proposed manner of disseminating notice to class members in the antitrust suit (pre-trial Order No. 50). Plaintiffs' plan included sending notice of the antitrust litigation to each individual identified in customer lists obtained from defendants, supplemented by extensive national publication. Abiding by the stay, Plaintiffs asked Penn-Dixie to voluntarily turn over their customer lists. Upon being rebuffed, Plaintiffs, on September 2, 1980, initiated a proceeding in the Chapter 11 case and served upon the Court and the Debtor papers entitled, "Certain Creditors' Request for Relief from Automatic Stay to the Limited Extent of Requiring the Debtor to Produce Customer Lists." By a letter posted the following day, this Court informed Plaintiffs that the relief expressly requested must be brought on by a summons and complaint in an adversary proceeding, Rule 701 et seq. of the Rules of Bankruptcy Procedure, and see, In re Willis, 2 B.R. 643, 5 B.C.D. 1390 (W.D.Va.1980), but that since it appeared that Plaintiffs were not seeking relief from the automatic stay and were only moving for production of books and records in accordance with Rule 34 of the Federal Rules of Civil Procedure, the Court treated the papers as a motion for discovery. Plaintiffs were explicitly instructed that if they did desire relief from the automatic stay, to properly comply with the procedural requirements. On the basis of a "Motion to Expedite Hearing" accompanying Plaintiffs' papers, a return date of September 18, 1980 was placed on the calendar as requested. Compare, Bankruptcy Rule 906. No further action was taken by Plaintiffs.
As scheduled, oral argument was heard. Following argument, this Court ruled (and later embodied in an order dated September 24, 1980) that the discovery requested by Plaintiffs' Motion fell beyond the scope of discovery appropriate under Rules 114 and 205 of the Rules of Bankruptcy Procedure and must be denied.2 Plaintiffs were advised, however, that if they desired, upon the filing of the requisite fee and satisfaction of other procedural niceties, their papers and requests would be treated as a complaint seeking relief from the automatic stay under § 362 to the limited extent of requiring the Debtor to produce its customer lists, and the Court would reconsider the matter on this basis. Plaintiffs accepted the invitation to travel this adversarial route. The Debtor thereafter responded with a motion to dismiss for failure to state a claim upon which relief can be granted. Bankruptcy Rule 712(b); Fed.R.Civ.P. 12(b)(6). We deal here with the Debtors' motion to dismiss.
Section 362(d) sets forth the circumstances upon which the Court may grant relief from the automatic stay. In pertinent part, this section provides:
Due to the general nature of the "cause" standard for obtaining relief from the stay, an examination of the legislative history of Section 362 to divine Congress' intent is warranted.
The Congressional reports accompanying the statute provide an informative sample listing of factors and examples constituting "cause". In relevant part, the reports state:
. . . causes might include the lack of any connection with or interference with the pending bankruptcy case. For example, a divorce or child custody proceeding involving the debtor may bear no relation to the bankruptcy case. In that case, it should not be stayed. A probate proceeding in which the debtor is an executor or administrator of another\'s estate usually will not be related to the bankruptcy case, and should not be stayed. Generally, proceedings in which the debtor is a fiduciary, or involving post-petition activities of the debtor, need not be stayed because they bear no relationship to the purpose of the automatic stay, which is debtor protection from his creditors. The facts of each request will determine whether relief is appropriate under the circumstances.
House Report No. 95-595, 95th Cong., 1st Sess. (1977) 343-344; Cf. Senate Report No. 95-989, 95th Cong., 2d Sess. (1978) 52, U.S. Code Cong. & Admin.News 1978 at 6300.
A fortiori, an important key to determining whether to permit an action to proceed in another tribunal turns upon the issue of "connection with or interference with the pending bankruptcy case."4 This is evidenced in the two examples set out, which do not provide illustrations of carte blanche authority to proceed. Both fact patterns in the examples are couched with important limiting language, i.e.: "may bear no relation to the bankruptcy case"; "usually will not be related to the bankruptcy case". The purpose of the automatic stay is the protection of the debtor and his estate from his creditors, and thus it follows that if a proceeding is not connected with, or will not interfere with, the pending bankruptcy case, so as to not violate the purpose and policy of the automatic stay, "cause" exists to grant relief from the stay. The resolution of this question, the legislative history tells us, turns upon the particular facts of each request.
On both of the above two grounds, Plaintiffs' request for relief from the stay must be denied. Paring the facts to essentials, Plaintiffs are creditors of the Debtor, and designate themselves as such in their moving papers. They wish to proceed in a suit which would impact on property of the estate, (Section 541). Thus, the action is connected with the pending bankruptcy case. In neither of the two examples presented in the legislative history by Congress to guide the Court, (where "cause" was found and the lifting of the stay recommended), do we have creditors seeking to move against the debtor's estate.5
The granting of Plaintiffs' requested relief would also interfere with the pending bankruptcy case. As pointed out earlier, Plaintiffs' requested relief from the automatic stay does not ask for permission to proceed in full with their antitrust suit. What they seek is specific production of lists to aid discovery in litigation outside this Court that is already stayed. Nowhere does the Bankruptcy Code or Rules of Bankruptcy Procedure provide for this, and to require the Debtor to comply with the request will necessitate a deviation from the Debtor's duties and...
To continue reading
Request your trial