In re Pettibone Corp.
| Decision Date | 03 January 1994 |
| Docket Number | Bankruptcy No. 86 B 01563 to 86 B 01572. |
| Citation | 162 BR 791 |
| Parties | In re PETTIBONE CORPORATION, et al., Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
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Thomas M. Sheehan, Robert D. Kolar & Assoc., Chicago, IL, for debtors.
Edmund W. Sinnott, Paul E. Freehling, Pope Ballard Shepard & Fowle, Chicago, IL, for Allied Companies.
Paul B. O'Flaherty, Jr., Baker & McKenzie, Chicago, IL, for TWA.
Table of Contents
FINDINGS OF FACT Page
Introduction 796
The Hawxhurst Accident and Activities in the New York Court (January 1982-January
1986) 797
Relevant Proceedings in the Bankruptcy Court (January 1986-December 1988) 798
State Court Litigation (1986-1991) 799
Lack of Notice to TWA 800
Presentation of the Present Motions 801
Pettibone's Insurance Coverage and Claims Against It 801
Applicable Terms of the Confirmed Plan and Step-Down Agreement 802
Absence of Prejudice to Pettibone 804
CONCLUSIONS OF LAW
Jurisdiction 806
The Allied Companies' Motion 806
The TWA Motion 807
Due Process Requirements of Notice 807
Bankruptcy Notice Requirements 808
Pettibone's Objections under 11 U.S.C. § 502 809
Is American Centennial Obliged to Defend? 810
Authorities Cited by Pettibone 811
Authority to Grant These Motions 814
Burden of Proof 814
Asserted Prejudice to Pettibone's Insurer Does Not Bar the Motions 815
Conclusion 815
FINDINGS OF FACT AND CONCLUSIONS OF LAW ON MOTIONS OF TWA AND ALLIED COMPANIES TO FILE LATE CLAIMS
The Debtors' consolidated Plan was confirmed under Chapter 11 of the Bankruptcy Code on December 9, 1988. Disputes over claims treated under that Plan were to be resolved by this Court following confirmation. The Allied Companies and TWA moved for leave to file their late claims after expiration of a claims bar date set by order prior to confirmation. Debtors (collectively "Pettibone") objected. In the resulting contested proceeding, summary judgment was sought and denied, but undisputed facts were found to be established for purposes of the forthcoming evidentiary hearing. Evidence was taken on factual issues posed, and the parties rested. Final argument was heard and considered, along with written Findings and Conclusions proposed by the parties as part of their respective arguments. Having considered the foregoing, the Court now makes and enters the following Findings of Fact and Conclusions of Law. Based thereon, both of the requested late claims may be filed.
Pettibone was and is a manufacturer of heavy machinery and equipment. Many users of those products claim to have been mangled thereby, and sought redress on product liability theories. Many of those claimants failed to file claims in this Chapter 11 bankruptcy proceeding or to take other steps to avoid the pitfalls of bankruptcy law.
Substantial post-confirmation litigation resulted. Those disputes included motions of Rockwell International Corporation and Allied-Signal, Inc. to file late claims (allowed at 110 B.R. 837) (Jan. 23, 1990); of Rodney Hunt to file late claims (denied at 123 B.R. 304) (Oct. 23, 1990); Adversary Complaint to enjoin injury suit, Pettibone v. Barbara Payne () (Jan. 21, 1993). Finally, Robert Hawxhurst, whose alleged injury underlies the instant disputes, moved to file a late claim. His motion to file a late claim against estate assets was denied because his counsel disregarded repeated notices concerning the claims bar date. However, he was allowed to continue his suit against Pettibone as a basis to proceed against insurance. 156 B.R. 220, July 2, 1993 (hereafter the "Hawxhurst Order").
Findings of Fact contained in the Hawxhurst Order provide an available introduction hereto, and need not be repeated fully here. 156 B.R. 220.
The Hawxhurst Accident, and Activities in the New York Court (January 1982-January 1986)
On January 6, 1982, Robert Hawxhurst, an employee of Trans World Airlines, Inc. ("TWA"), was allegedly injured at John F. Kennedy International Airport in New York when an electric baggage truck ("EBT") manufactured by Pettibone rolled over on him. Allied Ex. 19
In October of 1982, Hawxhurst registered in the Supreme Court of the State of New York, Nassau County, his personal injury complaint against New York Telephone Company ("N.Y. Telephone") and Pettibone, alleging they were responsible for his injuries. The Hawxhurst case was assigned to, and still pends before, New York State Supreme Court Justice John S. Lockman. Allied Ex. 19 at Finding No. 6. June 14, 1993 Tr. (testimony of Cook) at 41-43; June 17, 1993 Tr. (testimony of Gorfinkel) at 311-12.
Hawxhurst's employer TWA (through its insurance carrier INA) served a Notice of Lien with respect to any recoveries Hawxhurst might recover against Pettibone. However, receipt of the worker's compensation lien did not create or represent any debt owed by Pettibone to TWA or its insurance carrier. Notice of the lien claim was received by Pettibone on April 18, 1983. Tr. Proceedings at 208 (testimony of Douglas Johnson).
In response to the Hawxhurst personal injury complaint, Pettibone retained the New York law firm, then known as Rivkin, Leff, Sherman & Radler, (the "Rivkin Firm") to represent Pettibone. The Rivkin Firm soon took a number of steps, including the following:
a. Sought from Hawxhurst a bill of particulars.
b. Engaged in investigation within Pettibone's organization. As a result of such investigation, the Rivkin Firm identified the model and serial number of the EBT involved in the incident, and placed in its files the applicable product manuals.
c. Interviewed the design engineer then employed by Pettibone.
d. Noticed and requested (but did not take) Hawxhurst's deposition.
June 16, 1993 Tr. (testimony of Johnson) at 189, 256-60; June 17, 1993 Tr. (testimony of Gorfinkel) at 307, 310-13, 319, 341.
In October 1983, Hawxhurst provided a bill of particulars to N.Y. Telephone and Pettibone. Allied Ex. 26. Later in October 1983, Hawxhurst amended his complaint and added the Allied Companies as defendants. Allied Ex. 1.
On December 2, 1983, the Allied Companies served on all parties their Answer to Hawxhurst's Amended Complaint and their Cross-Complaint for indemnification and contribution against N.Y. Telephone and Pettibone. Allied Ex. 2. On January 6, 1984, the Rivkin Firm forwarded a copy of the Allied Companies' Answer and Cross-Complaint to Pettibone's counsel, together with a cover letter. Pettibone Ex. 56. On February 6, 1984, Pettibone served on all parties its Answer to Hawxhurst's Amended Complaint and its own Cross-Complaint for indemnification and contribution against N.Y. Telephone and the Allied Companies. Allied Ex. 3.
The formats of the Allied Companies' and Pettibone's Cross-Complaints against each other (Allied Exs. 2 and 3) were similar. Neither pleading mentioned in its title that a cross-complaint was embodied within the pleading. However, no attorney who read either document could fail to see the cross-complaint contained therein. Accordingly, any suggestion that the Allied Companies' cross-complaint was unknown would be frivolous.
On January 16, 1984, N.Y. Telephone served on all parties its Answer to Hawxhurst's Amended Complaint and its Cross-Complaint against Pettibone and the Allied Companies.
Under New York law and practice, a cross-defendant is presumed to have denied the cross-claim allegations. It need not serve a response to the cross-complaint (unless the cross-claimant demands a response, which no cross-claimant did in the Hawxhurst case). Accordingly, although Pettibone did not respond to the Allied Companies' Cross-Complaint in the Hawxhurst case, no inference can be drawn that Pettibone was unaware it had been named as a cross-defendant. Indeed, it is clear that Pettibone acquired actual knowledge of the Allied Companies' cross-complaint at the time its attorneys were served with a copy of it.
The evidence did not demonstrate material activity in the state court litigation during the two years before Pettibone filed its bankruptcy petition in 1986.
Relevant Proceedings in the Bankruptcy Court (January 1986 — December 1988)
On January 31, 1986, Pettibone filed under Chapter 11 of the Bankruptcy Code. Allied Ex. 19 at Finding No. 7. By letter dated February 24, 1986, M. Paul Gorfinkel, an attorney at the Rivkin Firm, forwarded to Mendes & Mount, attorneys for the Allied Companies in the Hawxhurst case, a cover letter...
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