In re Schwinn Bicycle Co.
| Decision Date | 03 August 1995 |
| Docket Number | Bankruptcy No. 92 B 22474-92 B 22482. Adv. No. 94 A 01618. |
| Citation | 184 BR 945 |
| Parties | In re SCHWINN BICYCLE CO., et al., Debtors. SCHWINN PLAN COMMITTEE, Plaintiff, v. AFS CYCLE & CO. LTD., et al., Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
Howard Feller, Dion W. Hayes, McGuire Woods Battle & Boothe, Richmond, VA, Mark K. Thomas, Terry R. Hortwitz Kass, Katten Muchin & Zavis, Chicago, IL, for plaintiff.
Scott J. Goldstein, Spencer Fane Britt & Browne, Kansas City, MO, for defendant Betty Campbell.
This Adversary proceeding was filed by the Schwinn Plan Committee ("Plaintiff" or "Committee") pursuant to the confirmed liquidating Plan of Schwinn Bicycle Company and related companies (collectively "Schwinn" or "Debtor"), under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et seq. The instant Adversary Complaint was filed against a number of defendants, including Ms. Betty Campbell ("Defendant" or "Campbell"). The Committee alleges as to this defendant that, within 90 days prior to its filing in bankruptcy, Schwinn paid Campbell $470,000.00 to settle a civil lawsuit she filed against Schwinn pre-petition in state court in Kansas. The Committee asserts that the settlement payment was preferential, and thus recoverable, under 11 U.S.C. §§ 547 and 550.
On February 22, 1995, Campbell answered Plaintiff's Complaint, asserted a counterclaim against the Committee whereby she sought damages for Schwinn's alleged breached of their settlement agreement, and demanded jury trial on all issues for which such right is available. The Committee responded on March 17, 1995, by moving to strike her jury demand on the asserted basis that, by filing a counterclaim which seeks to recover damages from the bankruptcy estate, Campbell placed herself within this Court's equitable jurisdiction and consequently lost her right to a jury trial or either the Committee's preference claim or her counterclaim.
For reasons stated herein, the Committee's motion to strike Campbell's jury demand is by separate order granted.
Schwinn Bicycle Company was a corporation engaged in the business of manufacturing bicycles and bicycle components. In 1987, several years prior to Schwinn's filing in bankruptcy, Betty Campbell filed suit against Schwinn in Kansas state court alleging that Schwinn's negligence caused the death of her husband. Rather than proceed to trial, Schwinn and Campbell subsequently entered into a settlement agreement. Pursuant to terms of that agreement, Schwinn paid Campbell $470,000.00 and Schwinn and Campbell executed a confidentiality agreement ("Confidentiality Agreement") under which Campbell agreed to maintain strict confidentiality concerning her husband's death, seal court files, and relinquish possession of certain pieces of evidence pertaining to the civil suit.
On October 7, 1992, Schwinn filed petitions for relief under Chapter 11 of the Bankruptcy Code. As of the date of filing, Campbell held no claim against Schwinn and thus was not listed as a creditor in Schwinn's bankruptcy schedules.
An order was entered on June 6, 1994, confirming Schwinn's liquidating Plan. The Schwinn Plan Committee was established pursuant to Article IX of the Plan to perform various tasks involving plan implementation. Pursuant to § 9.2 of the Plan and ¶ 34 of the Confirmation Order, the Committee was authorized to prosecute any proceedings which could be brought on behalf of Schwinn or Schwinn's estate and to recover any transfers to which Schwinn might be entitled under the Bankruptcy Code.
On October 3, 1994, the Committee filed the instant Adversary Complaint against 49 pre-petition creditors, including Campbell, seeking to avoid and recover various alleged preferential transfers under 11 U.S.C. §§ 547(b) and 550. The Committee alleges with respect to Campbell that Schwinn paid her $470,000.00 within 90 days prior to its filing in bankruptcy to settle the civil suit that she had filed in Kansas state court.
On February 2, 1995, Campbell filed her Answer both denying some critical allegations in Plaintiff's Complaint and asserting a counterclaim against the estate for, inter alia, damages resulting from Schwinn's alleged breach of their settlement agreement. She contends that Schwinn breached the Confidentiality Agreement when the Committee made the $470,000.00 settlement payment a subject of this preference action. Campbell's Answer also contained a jury demand "on all issues triable of right by jury." She did not, however, file a corresponding motion to withdraw the reference with our local district court. She asserts that the issue of her right to trial by jury will become ripe for decision only "if and when Campbell files a motion to withdraw the reference and/or the case becomes ready for trial." Def.'s Resp. at 6.
The Committee has moved to strike Campbell's jury demand and seeks a ruling now.
This Court has subject matter jurisdiction over this matter under 28 U.S.C. § 1334(b) as a matter arising in a bankruptcy case. Venue lies under 28 U.S.C. § 1409. Thus, this matter is properly before this Court pursuant to 28 U.S.C. § 157 and Local General Rule 2.33(A) of the Northern District of Illinois. This matter constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(F).
In moving to strike Campbell's jury demand, the Committee asserts that, by filing a counterclaim which seeks to recover damages from the estate, she placed herself squarely within this Court's equitable jurisdiction and consequently lost her right to jury trial on either the Committee's preference claim or her counterclaim. Campbell's response is three-fold: (1) the Committee's motion to strike is procedurally improper and should therefore be denied; (2) if procedurally proper, the motion is nevertheless premature; and (3) she is entitled to a jury trial on the Committee's preference claim and her counterclaim notwithstanding her filing of a compulsory counterclaim.
Fed.R.Civ.P. 12(f), as applicable here under Rule 7012(b), governs motions to strike. Rule 12(f) provides in pertinent part:
upon motion made by a party before responding to a pleading ... or upon the court\'s own initiative at any time, the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.
Fed.R.Civ.P. 12(f) (1995). Campbell asserts that her jury demand does not constitute a "defense" and further argues that the Committee has not shown her demand to be "redundant, immaterial, impertinent or scandalous." However, because Campbell lost her right to jury trial on the Committee's preference claim by filing her counterclaim, see infra, her jury demand is immaterial. Numerous other courts have at least implicitly found motions to strike to be proper procedural vehicles by which to question the merits of a litigant's jury demand and have entered similar relief. See, e.g., Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 250, 112 S.Ct. 1146, 1147-48, 117 L.Ed.2d 391 (1992); Atlantic Computer Sys., Inc. v. Mut. of Omaha Ins. Co. (In re Atlantic Computer Sys., Inc.), 165 B.R. 781, 782 (Bankr.S.D.N.Y. 1994); Martino v. Weisman (In re Elegant Equine, Inc.), 155 B.R. 189, 190 (Bankr. N.D.Ill.1993) (Ginsberg, J.); Martinson v. Towe (In re Towe), 151 B.R. 262, 263 (Bankr. D.Mont.1993); Unsecured Creditors' Committee v. Banque Paribas (In re Heartland Chems., Inc.), 103 B.R. 1018, 1019 (Bankr. C.D.Ill.1989); Kraus-Thomson Org., Ltd. v. McCorhill Publishing, Inc. (In re McCorhill Publishing, Inc.), 90 B.R. 633, 634 (Bankr. S.D.N.Y.1988); In re Financial Partners, Ltd., 1985 WL 58842 (Bankr.N.D.Ill.) (McCormick, J.) ().
Campbell further asserts, in the event the Committee's motion to strike is held to be an appropriate procedural device by which to challenge her jury demand, that the pending motion was made prematurely. She contends that her jury demand is not ripe for adjudication essentially because she has not yet moved before the local district court to withdraw the reference and may never do so. She asserts, correctly, that the only means by which a party can currently implement a Seventh Amendment right to trial by jury in any bankruptcy proceeding is by filing a motion in district court to withdraw the reference from the bankruptcy court.1 Campbell has failed to demonstrate, however, why this Court should refrain from considering the propriety of pleadings now before it while she ponders whether to file a motion to withdraw the reference and all the while Plaintiff is forced to prepare for trial based on pleadings burdened with an immaterial procedural request. Moreover, a consolidated trial of this and three other Adversary cases has been set for trial next month on factual issues common to the four cases and severed for that trial. Since Campbell has not sought to have the District Court withdraw the reference to the proceeding against her, this Court must pass on the jury trial issue before the start of that trial.
Campbell argues that a ruling on her jury demand at this stage is premature because "virtually all" of the courts that have considered the merits of a jury request have done so upon a defendant's motion to withdraw the reference and not upon a motion to strike. However, due to the imminence of trial on certain issues in this and other cases, a ruling now can hardly be "premature." None of the cases cited by Campbell stand for the proposition that this Court should refrain from deciding a motion to strike an immaterial issue...
To continue reading
Request your trial