In re REA Exp., Inc.

• Decision Date: 26 March 1981
• Docket Number: Bankruptcy No. 75 B 253.
• Citation: 9 BR 896
• Parties: In re REA EXPRESS, INC., f/k/a Railway Express Agency, Inc., Bankrupt.
• Court: U.S. Bankruptcy Court — Southern District of New York

9 B.R. 896 (1981)

In re REA EXPRESS, INC., f/k/a Railway Express Agency, Inc., Bankrupt.

Bankruptcy No. 75 B 253.

United States Bankruptcy Court, S.D. New York.

March 26, 1981.

Marcus & Angel, New York City, co-counsel for trustee.

Whitman & Ransom, New York City, for trustee.

Seham, Klein & Zelman, New York City, for BRAC Emp.

Wisehart, Friou & Koch, New York City, for trustee.

MEMORANDUM & ORDER

JOHN J. GALGAY, Bankruptcy Judge.

C. Orvis Sowerwine, as trustee of REA Express, Inc., (REA), has moved for authority to discontinue the appeal of an antitrust action, REA Express Company, Inc. v. California Motor Transport Company, which is presently pending before the Court of Appeals for the Ninth Circuit. After hearing on notice held on March 24 at which time the objections of Wisehart, Friou & Koch as former special counsel to the trustee were voiced, and after review of the documents submitted, the record of this case, and the relevant case law, this Court grants the motion of the trustee.

The litigation presently at issue may be a victim of the warfare between the trustee, together with his bankruptcy co-counsel Whitman & Ransom, and the firm of Wisehart, Friou and Koch which has existed at least since 1976. The California action, commenced on August 15, 1972 by Wisehart and Koch, in conjunction with Mr. Khourie, charges conspiracy by certain motor carriers beginning in 1959 to block the granting of operating authority to REA in California in violation of Sections 1 and 2 of the Sherman Act. The complaint was modeled on the one used in the successful case of California Motor Transport v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972). On February 18, 1975 REA filed a petition under Chapter XI of the Bankruptcy Act and the provision of that act continue to control all actions or proceedings in this case. Bankruptcy Code, Section 403(a). Shortly thereafter, on June 30, 1975, Broad, Khourie & Schulz, as California counsel to REA, filed a second amended complaint in the antitrust action which added two more parties. By November of 1975, REA's reorganization had failed, REA was adjudicated a bankrupt and the trustee was qualified.

Although an order was signed by this Court on May 16, 1977 retaining Broad, Khourie & Schulz for continued prosecution of the California Transport litigation, some dispute developed concerning the terms of that retention and, based on the information provided at the hearing, the firm has provided no services since 1977. In August 1980, a motion was made by one of the California defendants to dismiss the action for want of prosecution. At about the same time the Khourie firm applied to the California court to be relieved as counsel of record. Donald Wallace, as counsel to the trustee, appeared at the hearing on the dismissal motion and argued in opposition to it. Judge William Ingram, of the Northern District of California, granted the motion to dismiss.

The trustee retained new local counsel, Dunne, Phelps, Mills & Jackson, who filed the notice of appeal to the U.S. Court of Appeals for the Ninth Circuit. At the hearing before this Court, Mr. Friou questioned the propriety of the trustee's retention of this firm as Dunne, Phelps has represented railroad interests and may actually have represented some of the defendants in this action several years ago. This possibility of conflict is not germane to the only issue before this Court, whether continued prosecution is in the best interests of the estate.

Under the local rules of that circuit, in order for that appeal to be perfected briefs must be filed by March 30, 1981. Therefore this Court has endeavored to determine as quickly as possible whether the estate and its creditors would be better served by prosecution or abandonment of this appeal.

The trustee seeks authority to discontinue the appeal, that is, to abandon a cause of action which is property of the estate. "It is settled that a trustee in bankruptcy is not obligated to accept onerous or unprofitable property when surrendered as part of the estate . . ." Stanolind Oil & Gas Co. v. Logan, 92 F.2d 28, 31 (5th Cir. 1937). The trustee, as representative of the estate and its creditors, has the right and the duty to determine if a suit should be abated, provided that such action would be in the best interests of the estate. See Meyer v. Fleming, 327 U.S. 161, 66 S.Ct. 382, 90 L.Ed. 595 (1...