In re Production Plating, Inc., Bankruptcy No. 84-03036-G.
| Decision Date | 11 August 1988 |
| Docket Number | Bankruptcy No. 84-03036-G. |
| Citation | 90 BR 277 |
| Parties | In re PRODUCTION PLATING, INC., Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Michigan |
Steven G. Howell, John G. Colucci of Honigman, Miller, Schwartz & Cohn, Detroit, Mich., for Production Plating, Inc., debtor.
Martin L. Fried of Goldstein & Bershad, Southfield, Mich., for Alan A. May, Personal Representative of the Estate of Burnell Rawls, III, Deceased.
Anne Marie Burr, Detroit, Mich., for Branson Cleaning Equipment Co.
Haskell H. Shelton, Jr., Midland, Mich., for PPG Industries.
This reopened chapter 11 case is before the Court on Debtor's Motion for Order Enforcing Confirmed Plan of Reorganization. The Court must decide whether Section 1141(d)(1)(A) of Title 11 and the bar order entered by this Court in Debtor's bankruptcy case constitute a complete bar and defense to claims that Respondents have brought in state court.
After considering the briefs and exhibits submitted by Debtor and three Respondents to the motion, the arguments of counsel, and its independent research, the Court now grants Debtor's request for an order enforcing the confirmed plan and further directs that Respondents dismiss Debtor from pending Wayne County litigation in which Respondents assert a claim of intentional tort and claims of contribution and indemnity based on Debtor's prepetition conduct.
The Court finds the following facts. Debtor filed a chapter 11 petition in August 1984, and this Court entered its order confirming Debtor's modified plan of reorganization on August 11, 1986. Debtor's plan, in Article X, provided that:
all creditors not otherwise scheduled by the debtors or who have not previously filed claims against the Debtors with the Court must file such claims within 60 days after the date of confirmation of the Plan, or they shall be barred forever from making such claims.
The Confirmation Order provided, in par. G., that it would have:
. . . the effect set forth in 11 USC Section 1141, and shall vest all of the property of the estate, free and clear of all claims and interest of creditors . . . except as otherwise provided in the Plan and in this Order . . .
The Confirmation Order further provided, in par. B, that:
. . . this Order discharges the Debtor from any Debt that arose before the date of such confirmation . . . All creditors whose debts are discharged by this Order are hereby permanently enjoined from instituting any action . . . to collect such debts as liabilities of the Debtor herein.
In May 1987, the Personal Representative of the Estate of Debtor's former employee (Plaintiff # 1) and the deceased employee's wife joined Debtor as a defendant in Wayne County litigation that had been initiated against three other defendants in October 1985. Plaintiff # 1, in the original complaint, alleged only that the three named defendants were jointly and severally liable for the June 1984 injury and death of Debtor's employee. However, in May 1987, Plaintiff # 1 and the employee's wife amended their complaint and asserted claims based on allegedly tortious acts of Debtor, acts that occurred on June 5, 1984, and acts that allegedly resulted in the employee's death on June 9, 1984. A few days later, two of the three original defendants asserted third-party claims against Debtor, claiming rights of contribution or indemnity with respect to potential liability arising out of the June 1984 death.
The respondents, through their attorneys, knew about Debtor's chapter 11 bankruptcy case before this Court entered its order confirming the plan in August 1986. Attorneys for Plaintiff # 1, the deceased employee's wife, and the three original defendants attended a deposition of Debtor's Secretary-Treasurer on June 20, 1986. At that deposition, the Secretary testified to Debtor's August 1984 bankruptcy filing. Moreover, the Court has no reason to discredit the sworn statement of Debtor's President and Chief Operating Officer that in August 1984, late Fall of 1984, and early 1985, he told first the deceased employee's father and later the attorneys for Plaintiff # 1 and for the deceased employee's wife about the chapter 11 bankruptcy case. Finally, Respondents do not contradict the sworn statement of Debtor's President that, during the course of Debtor's bankruptcy case, the attorneys for Plaintiff # 1 and the deceased employee's wife represented that their clients intended to bring suit against only the three original defendants.
The Court presumes that one respondent received mailed notices of bankruptcy proceedings because Debtor listed that respondent on the matrix that accompanied the chapter 11 petition and scheduled the same respondent as an unsecured trade creditor in the bankruptcy case. However, Debtor did not schedule Plaintiff # 1, the employee's wife, nor one of the original defendants as creditors. Neither did Debtor schedule any of the respondents as holders of contingent contribution-indemnity claims.
None of the respondents filed, in Debtor's bankruptcy case, claims for damages or potential damages resulting from Debtor's conduct on June 5, 1984. Plaintiff # 1 and the deceased employee's wife did, however, process claims under the Michigan Worker's Disability Compensation Act. On March 5, 1986, Plaintiff # 1 and the deceased employee's wife settled, through Debtor's insurance carrier, "all claims of any nature whatsoever, known or unknown, for any and all liability" under the Act for $50,000. (See Agreement to Redeem Liability). As a result, at the time of confirmation and the entry of the order establishing a bar date for filing claims, the worker's compensation claim had been settled and was not a claim against the chapter 11 debtor.
The Court finds, on the basis of the affidavit submitted by Debtor's President and Chief Operating Officer, that neither he nor Debtor had preconfirmation knowledge of a potential intentional tort claim based on the employee's death in June 1984. It follows and the Court finds that Debtor knew of no contingent contribution or indemnity claims arising from as yet unasserted common liability between Debtor and Respondents. Therefore, despite Debtor's knowledge of Respondents' existence, despite Debtor's recognition of one Respondent as the holder of an unsecured trade claim, and despite Debtor's recognition of Plaintiff # 1 as a worker's compensation claimant, Debtor did not know about the respondents' status as holders of claims for intentional tort, contribution, or indemnity. Thus, the Court characterizes Respondents as unknown creditors and their claims as unknown claims.
The Court also accepts as true Respondents' assertions that they believed they held no claims against the employer-debtor until December 1986.
Debtor maintains, nevertheless, that the intentional tort claim asserted by Plaintiff # 1 and the third-party contribution and indemnity claims asserted by the original defendants existed as prepetition claims or debts within the meaning of section 101(11) of Title 11. These claims, Debtor submits, were completely discharged by the 1986 confirmation order even though Debtor did not schedule the claims and the claimants did not receive official notices of the chapter 11 bankruptcy proceedings.
Third-party-plaintiff Respondents counter that their claims for contribution or indemnity arose after this Court confirmed Debtor's plan of reorganization. Therefore, they say, the discharge does not affect their claims. Respondents reason that the exclusivity provision of the Worker's Disability Compensation Act prevented the Personal Representative from filing a claim against Debtor on an intentional tort theory. They, the argument continues, had no contribution or indemnity claims against the debtor-employer unless and until the employee had a claim.
Respondents also contend that a claim for contribution or indemnity against a joint tortfeasor arises when one tortfeasor pays more than his share of an underlying claim, not when the joint tortfeasors commit the underlying tortious act.
Alternatively, Respondents argue that if the claims arose prepetition, due process considerations preclude a discharge of these claims because the claimants had no formal or official "notice" of bankruptcy proceedings. Indeed, Plaintiff # 1 contends that:
the only relevant factor is whether or not this Creditor received requisite notices from the Bankruptcy Court advising this Creditor of significant bankruptcy occurrences including the bar date for filing claims, opportunity to vote on the Plan of Reorganization, and confirmation hearing.
Plaintiff # 1's Brief in Reply to Motion, p. 17.
Section 1141(d)(1)(A) of Title 11 provides that confirmation of a plan discharges a debtor from "any debt that arose before the date of such confirmation" whether or not a proof of claim based on the debt is filed, unless subsection (d)(1), the debtor's plan of reorganization, or the court's order confirming the plan provide differently. The Bankruptcy Code defines "debt" as "liability on a claim" but does not define the words "arose" or "discharge." 11 U.S.C. § 101.
When did the claims "arise?" Debtor's allegedly tortious acts occurred in June 1984, two months before Debtor filed its chapter 11 petition. Nevertheless, third-party plaintiff Respondents argue that Plaintiff # 1's claim for intentional tort as well as the third-party claims for contribution or indemnity arose in December 1986, several months after this Court confirmed Debtor's plan of reorganization, that is, on the decisional date of Beauchamp v. Dow Chemical Co., 427 Mich. 1, 398 N.W.2d 882 (1986).
The Michigan Supreme Court, in Beauchamp, considered an employee's right to assert intentional tort claims against an employer in spite of the Worker's Disability Compensation Act's exclusivity provision and despite the absence of express statutory language allowing...
To continue reading
Request your trial