In re Record Club of America
| Decision Date | 24 August 1983 |
| Docket Number | Civ. A. No. 82-1052 to 82-1055. |
| Citation | 38 BR 691 |
| Parties | In re RECORD CLUB OF AMERICA, Debtor. |
| Court | U.S. District Court — Middle District of Pennsylvania |
Nancy G. Grossman, New York City, for debtor.
John W. Thompson, Jr., York, Pa., for appellants.
Atlantic Recording Corporation (hereinafter Atlantic), Pickwick International, Inc. (hereinafter Pickwick), Keel Manufacturing, Inc. (hereinafter Keel), and Warner Electra Atlantic (hereinafter Warner) have filed appeals to the order confirming the plan of arrangement of Record Club of America, Inc. (hereinafter RCOA). The history of RCOA's Chapter XI is now more than eight years old and it is helpful at this point to outline the relevant events of those years.
RCOA, the debtor, filed a petition for a reorganization under Chapter XI on December 23, 1974. Various meetings of the creditors were conducted during 1975 and January 1976. The plan of arrangement was filed on July 14, 1975 and amended on August 19, 1975. The creditors' meeting was continued generally on January 21, 1976. On June 29, 1975 the Pennsylvania Bureau of Consumer Protection was appointed to protect the interest of the consumer creditors, i.e. the club members of RCOA.
On October 3, 1980 upon application of the debtor, the bankruptcy court found that the debtor's plan of arrangement had been accepted by the requisite number of creditors and in the requisite amount. The first meeting of the creditors was closed. It should be noted that both Keel and Atlantic are certified as having voted to accept the plan of arrangement.
Notice was sent to the creditors and all parties in interest scheduling a confirmation hearing for October 30, 1980. The confirmation hearing of October 30, 1980 was continued until June 9, 1981. On June 8, 1981 the confirmation hearing was continued without date to reconvene. An order of October 26, 1981 scheduled the hearing on confirmation to reconvene on February 16, 1982.
The bankruptcy court ordered all objections to the confirmation of the plan to be filed by January 15, 1982. U.S.C.S. Bankruptcy Rules, Rule 11-38(c). None of the appellants in this case filed any objections.
The confirmation hearing was held on February 16, 1982 and after testimony was taken and arguments were made on confirmation the hearing was continued until April 20, 1982. The purpose of the continuance was to allow time for the development of an amendment to the plan concerning the consumer creditors. On April 15, 1982 the confirmation hearing was continued until May 11, 1982. The April 15 order required the debtor to submit to the court a written progress report on the status of efforts to dispose of the consumer credit claims. The progress report was to be filed by April 20, 1982. On April 19, 1982 a letter was mailed from the debtor to the creditors' committee about a proposed application to file an immaterial modification to the plan relating to the consumer creditors. The same day the application was filed with the court. On May 5, 1982 the confirmation hearing was continued until June 8, 1982.
The bankruptcy court allowed the application for the modification on May 17, 1982. The modification was found not to materially and adversely affect the interest of any creditor who had not in writing accepted it and therefore no notice was given or hearing held. See U.S.C.S. Rules of Bkry. Rule 11-39.
On June 8, 1982 the hearing on the confirmation of plan was resumed. There was discussion among the attorneys relating to a modification of the plan to remove the consumer creditors from the plan and treat them separately. The participants at the hearing included the attorney for the appellants in the present appeals.
The bankruptcy court issued the order confirming the plan on June 18, 1982. A number of notices of appeals were filed, but the only appeals remaining are the four which are the subject of this memorandum. The appellants raise a number of objections to the confirmation order or the way the bankruptcy court proceeded. These objections will be dealt with seriatim.
Local Rule of Court 401.8 describes the format and general approach that a party must use in preparing a brief. The appellants' brief fails to conform to the rule. The local rule assumes that an attorney admitted to practice is capable of organizing his arguments in a rational, clear and concise way. Sometimes this court receives a brief which leads it to question that assumption. The brief filed by the attorney for the appellants is replete with misspellings, punctuation errors and incomplete sentences. The appellants' attorney apparently did not proofread the brief or did not do so adequately.
The arguments are amalgamations which often overlap and tend to repeat the nonessential points and fail to consider the critical ones. At one point the appellants' arguments are premised on a statute and cases which are thirty (30) years out of date. See infra at 698. Another argument is based on a section of the Bankruptcy Act which applies to Chapter X proceedings and not those under Chapter XI. See infra at 699. Most seriously the attorney for the appellants "edits" a transcript of a hearing before the bankruptcy court so that a distorted picture of the discussion is presented. See infra at 701-702. The "editing" borders on misrepresentation. See Code of Professional Responsibility DR 7-102(A)(5).
This court has little doubt that had the appellants' attorney provided a better brief the matters could have been resolved in a more timely fashion. Also if the attorney for the appellants had prepared a clearer presentation of the issues he might have chosen not to make some of the more frivolous ones. It is expected that any briefs filed with this court in the future will comply with the local rule.
The parties have requested oral argument on the appeals. The issues have been fully briefed in writing and oral argument would not appear to be particularly helpful at this point. The requests for oral argument will be denied.
The first objection to the plan is that the deposit which is to be posted by the debtor is inadequate to fund the plan. The bases for the objection are twofold: (1) the deposit allegedly does not include amounts to cover 16 or 17 claims, and (2) the deposit is based on estimates rather than the actual amounts found in the record.
The alleged shortfall of the deposit is asserted in part because of statements made by Sigmund Friedman, the President of RCOA, at the June 8, 1982 confirmation hearing. The statements occurred at the end of the hearing when the bankruptcy judge was questioning Friedman about the claims of record companies which remained unresolved. Transcript of June 8, 1982 hearing at 36. Friedman responded to the judge: "Phonogram, Phonodisc, Keel is of a somewhat different nature, but it is a fairly large claim." Id. The court and Friedman discuss whether proceedings are scheduled in any of the matters. The court then asked: "These are major claims?" Id. at 37. Friedman responded: Id. The seventeen or nineteen claims plus the Phonogram, Phonodisc, and Keel claim total approximately $700,000. Id.
The appellants argue that "the Debtor is $70,000 short by his own calculations...." The $70,000 figure apparently is 10% of the $700,000. The facts contradict this assertion. The Phonogram, Phonodisc and Keel claims are included in the deposit. As to the other seventeen or nineteen claims that Friedman refers to, he said specifically "we have provided for that the seventeen or nineteen claims in the deposit." Transcript of June 8, 1982 hearing at 37. The appellants do not offer any specific information about the seventeen or nineteen claims which they assert are not included in the deposit. Their brief does not name the creditors whose claims are not accounted for in the deposit. The record contradicts the appellants' assertion and this portion of the objection to the confirmation of the plan will be denied.
The appellants suggest two claims which are not accounted for in the deposit.1 One is a claim by Capitol Records in the amount of $750,000. The appellants appear to be referring to Capitol claim No. 96 which is in the amount of $805,123.42. This claim appears in the schedule of the deposits at the amount in which it was allowed by the bankruptcy court. The Capitol claim has now been considered by this court on appeal and the debtor and Capitol have entered into a stipulation to provide for the appropriate deposit when the claim is finally resolved.2 In re Record Club of America, Inc., 30 B.R. 413 (M.D.Pa.1983).
The second claim which the appellants suggest is not accounted for in the deposit is by Atlantic in the amount of $435,000. The claim by Atlantic was disallowed by the bankruptcy court because of a voidable preference and that decision has now been affirmed by this court and the United States Court of Appeals for the Third Circuit. Atlantic has as of this date returned the preference and Atlantic's claim has been reinstated. In re Record Club of America, Inc., 38 B.R. 361 (M.D.Pa.1983). Since the claim has been reinstated, RCOA has increased its deposit sufficiently to account for the claim. Id. The appellants' arguments are moot.
The deposit proposed by RCOA adequately accounts for all the claims which are raised by the appellants as bars to confirmation. None of the alleged inadequacies in the deposit are sufficient to block confirmation of the plan.
The appellants' other dispute with...
To continue reading
Request your trial