In re RBGSC Inv. Corp.
| Decision Date | 05 January 2000 |
| Docket Number | Bankruptcy No. 99-31799DAS. Adversary No. 99-0892. |
| Parties | In re RBGSC INVESTMENT CORP., Debtor. Red Bell Brewing Company and Red Bell Brewery and Pub Company — Headhouse, Inc., Plaintiffs, v. GS Capital, L.P., Bella's Place, Inc., RBGSC Investment Corp., and Nick Sommaripa, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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Walter Weir, Jr., Weir & Partners, Philadelphia, PA, for debtors.
Michael T. Farrell, Post & Schell, P.C., Kevin J. Carey, Philadelphia, PA, for Red Bell.
Paul B. Maschmeyer, Ciardi, Maschmeyer & Karalis, PC, Philadelphia, PA, for Creditors' Committee.
Kenneth E. Aaron, Buchanan Ingersoll, P.C., Philadelphia, PA, for GS Capital, L.P.
David B. Smith, Philadelphia, PA, for Bella's Place, Inc. and Nick Sommaripa.
George E. Pallas, Cohen, Seglias, Pallas & Greenhall, P.C., Philadelphia, PA, for debtor in Common Pleas Action.
Jeffrey Meyers, Philadelphia, PA, for Marketplace Redwood, L.P.
Joseph A. Dworetsky, Philadelphia, PA, for Headhouse Retail Associates, L.P.
Joseph DiGiuseppe, Philadelphia, PA, for City of Philadelphia.
Frederic Baker, Ass't U.S. Trustee, Philadelphia, PA, trustee.
The instant proceeding ("the Proceeding"), was removed from state court and retained here for reasons discussed in a prior opinion arising out of the instant voluntary Chapter 11 bankruptcy case of RBGSC INVESTMENT CORP. ("the Debtor"), published at 240 B.R. 536, 542-44 (Bankr.E.D.Pa.1999) ("RBGSC I"). By agreement of the parties in the course of the trial of the Proceeding on December 1, 1999, we are presently confined to deciding whether the Defendants in the Proceeding, the Debtor, GS CAPITAL, L.P. ("GS"), BELLA'S PLACE, INC. ("BP"), and NICK SOMMARIPA, or any of them, are liable to the Plaintiffs herein, RED BELL BREWING COMPANY ("RBBC") and RED BELL BREWERY AND PUB COMPANY — HEADHOUSE, INC. ("RBHH"), for breaching the contracts among the parties; if so, whether injunctive relief or other relief is appropriate to remedy those breaches; and whether the Defendants are entitled to relief on their counterclaim.
We find that the Plaintiffs' claims, amounting to almost $10 million, are grossly overblown. Analyzing all of the contract-related claims, excepting the Plaintiffs' claims for defamation and "interference with business relations," we find that only the following are viable: (1) a claim of RBBC against BP only for license fees due under those parties' License and Consulting Agreement of May 20, 1998 ("the LCA") through only the end of the one-year term of the LCA, May 19, 1999, which appears to amount to less than $20,000; and (2) a claim of RBBC against BP order an oral contact regarding sales of RBBC's wearable items, which is only made in the amount of $1256.00.
In the course of this discussion, which follows from what we consider a straightforward analysis of the parties' contracts, we find that the Plaintiffs have no continuing rights in the two "brew pub" sites at issue, which may resolve the issue raised in the counterclaim regarding the liquor license at one of the sites without resort to the injunction requested by the Defendants against the Plaintiffs in the counterclaim. A further hearing on damages, the issues not addressed herein, and the counterclaim is scheduled on January 26, 2000.
We incorporate herein the procedural and factual history recited in RBGSC I, 240 B.R. at 539-41. That recitation, id. at 540, included reference to the parties' last written contract, a Settlement Agreement of December 10, 1998 ("the SA"). The SA succeeded a letter of intent of December 5, 1997 ("the LOI"), between Ken Sweet of GS and James Bell of RBBC to enter into a management contract and joint venture to own and operate a brew pub featuring RBBC products in the Reading Terminal Headhouse in Center City Philadelphia ("the Headhouse Site"). Id. at 539-40. Subsequent and pursuant to the LOI, the LCA, regarding the establishment of another much smaller brew pub site in the Philadelphia International Airport ("the Airport Site") and a Management Agreement between the Debtor, BP, and GS ("the MA") regarding the Headhouse Site were both executed on May 20, 1998. The Debtor's motion to reject the MA was granted, over the Plaintiffs' objection, in RBGSC I, 240 B.R. at 541-42.
The Proceeding is based upon a Complaint filed by the Plaintiffs in the Philadelphia Court of Common Pleas ("the CCP") on May 21, 1999, which recites nine Counts seeking the following relief against all of the Defendants except Sommaripa, who is referenced in the eighth Count only:
(1) an injunction to prevent them from terminating the LCA;
(2) an injunction to prevent them from terminating the MA;
(3) damages for violating the LCA;
(4) an order granting specific performance of the LCA;
(5) damages for breach of an alleged oral contract to pay RBBC for certain wearable goods, e.g., tee-shirts, hats, etc., sold at the Airport Site;
(6) damages from breach of the MA;
(7) an order granting specific performance of the MA;
(8) damages for statements which allegedly defamed the Plaintiffs by Sweet and Sommaripa;
(9) damages for interfering with the Plaintiffs' business relationships through their attempts to terminate the LCA and the MA and the foregoing defamation.
We must note several relevant developments in the Debtor's main bankruptcy case since RBGSC I was decided on November 2, 1999. First, the Debtor has solicited votes on a Modified Plan of Reorganization ("the Plan"), which contemplates the Debtor's assumption, sale, and assignment of its leases at the two Sites. A confirmation hearing in reference to Plan scheduled on December 15, 1999, was continued to January 12, 2000. Second, on December 13, 1999, the Debtor filed a motion to sell substantially all of its assets, including a sale and assignment of its leases, to Joseph Evancich and William DeMarco, who allegedly own and operate the Dock Street Brewery, an entity similar to RBBC, for $2,850,000 ("the Sale Motion"). A hearing on the Sale Motion is scheduled on January 6, 2000, along with a motion by RBBC seeking an administrative claim of $19,250, based on its alleged post-petition rights under the LCA. Finally, on the claims bar date, November 30, 1999, the Plaintiffs filed a joint proof of claim in the total amount of $9,728,227.70 "plus other unliquidated sums." The proof of claim enumerated eight items, with the following accompanying calculation of damages for each:
(1) an Airport Site revenue claim, measured over the 10-year period of the Debtor's Airport Site lease at $5,550/month, for a total of $666,000;
(2) a Headhouse Site revenue claim, measured over 26 years of the Debtor's Headhouse Site lease at $164,000/year, for a total of $4,264,000;
(3) RBBC "management's time and expenses," at $149,321.77;
(4) LCA fees due between January and November, 1999, at $51,650;
(5) RBBC advances to vendors during construction, at $26,000;
(6) loss of "high profile strategically planned locations, and proprietary designed properties," at $500,000;
(7) breach of an oral wearables sale contract, at $1256;
(8) "irreparable harm and damage" to RBBC's trade name and marks, at $1,000,000; and
(9) damages for defamation by Sweet and Sommaripa, at $500,000.
At the trial of December 1, 1999, the parties agreed to incorporate, as part of the record, the testimony and exhibits presented not only in the trial of the preliminary injunction hearing in the Proceeding in the CCP, but also in the hearings of October 5, October 13, and October 20, 1999, addressing other matters at issue in this case, described in RBGSC I, 240 B.R. at 539. In the course of the seven-hour hearing of December 1, 1999, the Plaintiffs called Sommaripa as on cross-examination, Bell, and Robert T. Huttick, RBBC's vice-president and managing director. The Defendants called Michael Plumley, an attorney for the Pennsylvania Liquor Control Board ("the LCB"), by telephone; and Cynthia Gowdy, GS's President.
The Plaintiffs argue that GS, BP, and the Debtor are liable, jointly and severally, for alleged violations of the LOI, LCA, and MA, which they contend manifested a willful campaign to destroy a contemplated joint-venture-type arrangement between the parties to establish and operate RBBC brew pubs at two strategic Philadelphia sites and to then seize these sites for themselves. To the extent that provisions in the SA contradict any such claims, particularly those based on the LOI, the Plaintiffs suggest that these provisions can be disregarded because Bell was pressured to give up his ownership in the venture as part of the Plaintiffs' campaign. The Defendants, meanwhile, argue that the rights of the Plaintiffs are limited to those provided for in the contracts and may be asserted against only the parties to those particular contracts.
Both parties expended considerable energy debating whether letters of March 17, 1999, and May 3, 1999 ("the Letters"), from the Defendants' counsel to Bell, described in RBGSC I, 240 B.R. at 540-41, validly terminated the parties' relationships under the LCA and MA. The Proceeding in the CCP, by agreement there of the parties, focused exclusively on whether RBBC had become insolvent, thus allegedly justifying the alleged termination. Although the Defendants articulated several alternative additional grounds for its actions in this court, ultimately RBBC's alleged insolvency again become the focal point for this action.
After the trial of December 1, 1999, the parties agreed to simultaneously submit opening and reply briefs by December 15, 1999, and December 22, 1999, respectively. These dates were ultimately extended by agreement to December 20, 1999, and December 28, 1999, respectively.
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