In re Rubin Bros. Footwear, Inc.
| Decision Date | 19 September 1990 |
| Docket Number | No. 83 CIV. 6910(SWK).,83 CIV. 6910(SWK). |
| Citation | 119 BR 416 |
| Parties | In re RUBIN BROS. FOOTWEAR, INC., a New York Corporation, Debtor. In re RUBIN BROS. FOOTWEAR, INC., a Georgia Corporation, Debtor. RUBIN BROS. FOOTWEAR, INC., a New York Corporation, Rubin Bros. Footwear, Inc., a Georgia Corporation, Elliott Rubin and Cyrus Rubin, Plaintiffs, v. CHEMICAL BANK, Louis A. "Buddy" Solomon, and Sanford Astarita, Defendants. |
| Court | U.S. District Court — Southern District of New York |
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This action involves claims pursuant to the Bankruptcy Code, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), state tort law, and state contract law. Jurisdiction is founded on 28 U.S.C. § 1331 and principles of pendent jurisdiction. Now before the court is the Report and Recommendation of Magistrate Joel J. Tyler (hereinafter "R & R") concerning summary judgment motions by all parties and objections thereto.
Because this opinion follows a prior opinion of the Court in this matter, In re Rubin Bros. Footwear, Inc., 73 B.R. 346 (S.D.N.Y.1987) and the Magistrate Tyler's thorough Report, familiarity with both of which is assumed, the Court will present the facts in only a summary fashion.1
Rubin Bros. Footwear, Inc. (a New York Corporation) and Rubin Bros. Footwear, Inc. (a Georgia Corporation) (collectively, "Rubin Bros.") had an ongoing business relationship with Chemical Bank ("Chemical") which, by March 1982, included a debt of approximately $700,000. At that time, Rubin Bros. was experiencing severe financial difficulty, and considered filing a bankruptcy petition. Cyrus Rubin met with defendant Sandford Astarita ("Astarita"), the Chemical officer who handled the Rubin Bros. accounts. Astarita recommended that, rather than filing a bankruptcy petition, Rubin Bros. seek the services of Louis A. "Buddy" Solomon ("Solomon"), an adviser who specialized in rescuing foundering businesses. Rubin Bros. followed Astarita's advice.
Solomon took complete control of Rubin Bros. and attempted to repair the business rather than seek the protection of the bankruptcy laws. A great deal of the work done by Solomon involved restructuring Rubin Bros.' debts. Rubin Bros. initially borrowed additional money from Chemical against future accounts receivable. Cyrus and Elliott Rubin ("The Rubins") personally guaranteed repayment of Rubin Bros. original debt to Chemical. One result of this restructuring was the repayment to Chemical of the loans guaranteed by the Rubins. Chemical became unwilling to extend further credit to Rubin Bros., and requested that another creditor be found to take over the accounts receivable arrangement.
On April 13, 1983, another creditor purchased Chemical's loans to Rubin Bros. Shortly thereafter, Solomon left Rubin Bros. without notice and continued his work, begun some months before and pursuant to a court order, overseeing assets belonging to a company called "Occulens," of which Chemical was the secured lender.2 On May 16, 1983, Rubin Bros. filed petitions for bankruptcy. The instant action was instituted shortly thereafter.
Plaintiffs make bankruptcy claims against defendant Chemical, asserting that payments made were voidable preferences or fraudulent transfers under 11 U.S.C. §§ 544, 547, and 548. Plaintiffs allege civil claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964(c), against Chemical, Astarita, and Solomon. Plaintiffs also claim common law fraud, prima facie tort, fraudulent conspiracy, and intentional interference with business relations under New York and Georgia law. Finally, the individual plaintiffs seek recision of personal guarantees executed for the benefit of Chemical. Defendant Solomon asserts counterclaims for indemnity, damage resulting from false statements allegedly made by plaintiffs, abuse of process, and breach of his employment contract by nonpayment of wages. Chemical asserts counterclaims seeking indemnity from the Rubins in the event it is found liable to Rubin Bros., and attorney's fees incurred in defending this action.
In its prior opinion, the Court dismissed one of plaintiffs' RICO claims against Chemical and several of their common law fraud claims pursuant to Fed.R.Civ.P. 12(b)(6). In re Rubin Bros., 73 B.R. 346 (S.D.N.Y.1987). After significant discovery, defendants Chemical and Astarita moved for summary judgment on all of plaintiff's claims pursuant to Fed.R.Civ.P. 56, or in the alternative for dismissal of plaintiffs' Eighth and Ninth claims for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1). Defendant Solomon also moved for summary judgment and dismissal of plaintiffs' amended complaint. The Rubins moved for summary judgment in their favor as to the invalidity of personal guarantees which they executed, as well as for summary judgment on the counterclaims asserted by Chemical and Astarita. The parties' motions for summary judgment were referred to Magistrate Tyler.
Magistrate Tyler has recommended that this Court grant defendants' motion for summary judgment as to all of plaintiffs' claims, with the exception of plaintiffs' nineteenth cause of action seeking a declaration as to the invalidity of the personal guarantees executed by the Rubins. The R & R recommends granting summary judgment for the Rubins on their nineteenth cause of action. Magistrate Tyler further recommends that plaintiffs' motion for summary judgment as to the counterclaims asserted by Chemical be granted. Finally, Magistrate Tyler recommends sua sponte dismissal of Solomon's counterclaims. Acceptance of Magistrate Tyler's recommendations by the Court would dispose of this litigation.
The corporate plaintiffs and defendants Chemical and Solomon have submitted objections to the Magistrate's report. The individual plaintiffs have not objected to Magistrate Tyler's report, but have responded to the objections of Chemical and Solomon.
Mindful of the Second Circuit's admonitions regarding the overuse of summary judgment, post, the Court nonetheless considers the Magistrate's recommendations to be well-reasoned and supported. As discussed below, the Court adopts the Magistrate's report in full.
1. Rubin Bros.' Objections
The objections presented by the corporate plaintiffs relate to Magistrate Tyler's recommendations as to several items: the absence of genuine factual issues relating to the alleged agency relationship between Chemical and Solomon; the applicability to this case of Levit v. Ingersoll Rand Financial Corp., 874 F.2d 1186 (7th Cir.1989); the applicability to the instant motion of a prior opinion of this Court; the validity of its claims under section 548(a) of the Bankruptcy Code; and the validity of its RICO claims.
Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Rule 56(c). In testing whether the movant has met this burden, the Court must resolve all ambiguities against the movant. Lopez v. S.B. Thomas, Inc., 831 F.2d 1184, 1187 (2d Cir.1987) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962)).
The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Adickes v. S.H. Kress and Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). The movant may discharge this burden by demonstrating to the Court that there is an absence of evidence to support the nonmoving party's case on which that party would have the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).3 The non-moving party then has the burden of coming forward with "specific facts showing that there is a genuine issue for trial." Rule 56(e). The non-movant must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986). Speculation, conclusory allegations and mere denials are not enough to raise genuine issues of fact. To avoid summary judgment, enough evidence must favor the non-moving party's case such that a jury could return a verdict in its favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) ( the "genuineness" requirement).
The Magistrate rightly pointed out that issues of state of mind are especially difficult to resolve on summary judgment, but that summary judgment is available as to such questions if the non-moving party fails to offer any concrete evidence from which a reasonable juror could return a verdict in his favor. R & R at 26 (citing Liberty Lobby, supra, 477 U.S. at 256, 106 S.Ct. at 2514). He also noted, somewhat ruefully, that the Second Circuit is often loath to affirm grants of summary judgment; the Circuit has also pointed out, however, that the use of Rule 56, even in complex litigation, should not be discouraged. R & R at 27 ().
The disposition of the claims in this case turn on two central questions: first, whether there is a genuine issue of material fact going to the existence of fraud on the part of Chemical, Astarita, or Solomon; and second, whether there are facts to raise such an issue that Solomon was Chemical's agent during the events in question. The claims for common law fraud, fraudulent conveyance, and all of the RICO claims depend on the former, and the claims for voidable preferences and fraudulent conveyances depend on the latter. R...
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