In Re Tbr Usa Inc., No. 06-60429 jpk.

• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Indiana
• Writing for the Court: J. PHILIP KLINGEBERGER
• Citation: 429 B.R. 599
• Parties: In re TBR USA, INC., Debtor.
• Docket Number: No. 06-60429 jpk.
• Decision Date: 07 January 2010

429 B.R. 599

In re TBR USA, INC., Debtor.

No. 06-60429 jpk.

United States Bankruptcy Court,
N.D. Indiana,
Hammond Division.

Jan. 7, 2010.

429 B.R. 600

COPYRIGHT MATERIAL OMITTED

429 B.R. 601

COPYRIGHT MATERIAL OMITTED

429 B.R. 602

COPYRIGHT MATERIAL OMITTED

429 B.R. 603

Gordon E. Gouveia, Catherine Molnar-Boncela, Gouveia & Associates, P.C., Merrillville, IN, for Worstell Business Trust, John Worstell and Diane Worstell.

Stacia L. Yoon, Genetos, Retson, Yoon & Molina, LLP, Merrillville, IN, for Chapter 7 Trustee. MEMORANDUM AND DECISION CONCERNING DISPUTED ELECTION J. PHILIP KLINGEBERGER, Bankruptcy Judge.

This matter is before the court for a final decision concerning the disputed election of a Chapter 7 Trustee. On March 15, 2006, the debtor, TBR USA, Inc. (“TBR”), filed a petition for relief under Chapter 11

429 B.R. 604

of the United States Bankruptcy Code. Subsequently, on November 3, 2006, the court granted TBR's motion to convert this case from a case pending under Chapter 11 to a case under Chapter 7 of the United States Bankruptcy Code. The § 341 meeting of creditors was scheduled to take place on December 5, 2006, and Stacia L. Yoon was appointed as the Chapter 7 Interim Trustee (“Trustee”). On November 27, 2006, the Interim Trustee and counsel for TBR agreed to continue the § 341 meeting to January 4, 2007.¹

On January 4, 2007, creditors John Worstell, Diane Worstell, the Worstell Business Trust and Langer & Langer, P.C. (“Creditors”) appeared by proxy at the § 341 meeting; requested the election of a trustee; and sought to elect Daniel L. Freeland as the Trustee in this case. On that same day, but prior to the § 341 meeting, counsel for the Creditors had filed a document entitled, “Statement Pursuant to Rule 2006(e) Concerning Proxies”. Attached as exhibits to this statement were separate documents for each entity entitled, “Proxy and Special Power of Attorney for Meeting of Creditors and Election of Trustee”. The ostensible purpose of this document was twofold: first, to appoint the firm of Gouveia & Associates as attorney in fact for that specific creditor; second, to authorize Gouveia & Associates to attend the meeting of creditors and vote for the appointment of Daniel L. Freeland as Chapter 7 Trustee.

At the § 341 meeting, a number of ballots were presented to Trustee Yoon. ² The first ballot was a vote for Daniel L. Freeland cast on behalf of the creditor Langer & Langer. The ballot was signed by Gordon E. Gouveia as proxy and indicated that this entity filed claim # 5-2 on March 29, 2006 and claimed an unsecured debt in the amount of $1,071.75. The second ballot was a vote for Daniel L. Freeland and was cast on behalf of three different creditors-John Worstell, Diane Worstell and the Worstell Business Trust. This ballot represented claim # 2-3 filed by John and Diane Worstell on November 17, 2006; claim # 3-2 filed by John Worstell on August 30, 2006; claim # 4-4 filed by the Worstell Business Trust on November 17, 2006; and claim # 27-2 filed by John Worstell on December 12, 2006. The ballot disclosed unsecured debt in the amount of $877,099.52 and was signed by Gordon E. Gouveia, Esq. as attorney for these particular creditors. Finally, the last ballot was a vote for Stacia L. Yoon and was cast on behalf of the law firm Baker & Daniels, L.L.P. This ballot represented claim # 30-1 and was submitted and signed by Kathryn E. Anderson, Esq. as attorney for the creditor. At the final evidentiary hearing, the Trustee conceded that Baker & Daniels, L.L.P. was ineligible to vote in the election due to the fact that it holds an administrative claim.³ The following is a summary of the voting claims in dispute by the Interim Trustee:

429 B.R. 605

On February 7, 2007, the United States Trustee filed a document, entitled “United States Trustee's Report of Disputed Election”, which raised several issues concerning the validity of the election, as follows:

At the § 341 Meeting, Trustee Yoon objected to the election request of all of the parties listed in Table A. Trustee Yoon objected to the eligibility of these parties to vote in an election, to the solicitation of Langer & Langer's proxy, and to the proxies themselves. In general, Trustee Yoon contends that the Worstells and the Worstell Business Trust are disqualified from requesting or voting in an election because their claims are secured, disputed, not fixed, not liquidated. Trustee Yoon further argues that the Worstells and the Worstell Business Trust are disqualified because they have interests that are materially adverse to other unsecured creditors-because their claims are secured, because they may have a preference resulting from a pre-petition, pre-judgment attachment lien against property of the Debtor, and because there is litigation pending in the U.S. District Court for the Northern District of Indiana between the Debtor, the Worstells, and the Worstell Business Trust. According to the Trustee, this litigation includes a counter-claim that the Debtor, now the bankruptcy estate, has against John Worstell and the Worstell Business Trust. According to the Trustee, because of this lawsuit, the Worstells and the Worstell Business Trust have competing and materially adverse interests to the unsecured creditors.

429 B.R. 606

Trustee Yoon further contends that John Worstell should be disqualified because the Trustee claims that he is an insider of the Debtor. As to Langer & Langer, Trustee Yoon contends that this creditor may not request an election by proxy, or vote by proxy, because this creditor was improperly solicited. According to the Trustee, creditors who are disqualified from requesting an election are prohibited from soliciting other creditors to request an election. Finally, Trustee Yoon contends that the proxy forms are, themselves, deficient and/or invalid and that requests for an election via proxy should not be allowed.⁸

On February 8, 2007, the Interim Trustee filed a Motion for Resolution of Dispute, requesting that the court resolve the disputed election; and a Motion to Enforce Restrictions on Solicitation, alleging that Diane Worstell, John Worstell and the Worstell Business Trust (the “Worstells”) violated the restrictions on solicitation as provided for by Fed.R.Bankr.P.2006. On February 20, 2007, counsel for the Worstells filed a response to each of the foregoing motions and to the report filed by the United States Trustee, taking the position that the election was valid, and that Daniel L. Freeland had been elected as the Trustee in this case. The court held a preliminary pretrial conference on March 22, 2007, and on April 20, 2007 entered an order setting an evidentiary hearing for April 26, 2007 on the United States Trustee's report, the Interim Trustee's Motion for Resolution of Dispute and Motion to Enforce Restrictions on Solicitation, and on all of the responses filed thereto.

On April 23, 2009, the parties filed a joint statement regarding the witnesses, exhibits and issues to be presented at the final evidentiary hearing. At the conclusion of the final hearing, prior to the close of evidence, counsel for the Worstells orally moved that the court conditionally allow claim # 3-2, filed by John and Diane Worstell, for purposes of voting. The claim was originally filed on August 30, 2006, and was objected to by TBR on September 11, 2006. As of the final hearing the claim objection had not yet been resolved, and the court denied the motion to conditionally allow the claim. On May 14, 2007, the Worstells filed a Motion for Leave to Appeal this decision. On March 12, 2009, the District Court for the Northern District of Indiana affirmed this court's ruling which denied Worstells' motion to conditionally allow claim # 3-2 for the purpose of voting in the election of a Chapter 7 Trustee and remanded the matter back for further proceedings. ⁹ On April 29, 2009 the court held a status conference, at which time it was determined that the record before the court for the final disposition of all pending matters ¹⁰ is comprised of the following: the Statement Regarding Hearing Procedures filed on April 23, 2007; the record of the hearing held on April 26, 2007; the legal memorandum filed by the Chapter 7 Trustee on May 14, 2007; and the legal memorandum filed by John and Diane Worstell, and the Worstell Business Trust on May 14, 2007.

429 B.R. 607

At the final evidentiary hearing, the Worstells entered the following exhibits into evidence:

Proof of Claim # 4-4 filed by the Worstell Business Trust-Worstell Exhibit # 1

Proof of Claim # 2-3 filed by John and Diane Worstell-Worstell Exhibit # 2

Proof of Claim # 3-2 filed by John and Diane Worstell-Worstell Exhibit # 3

Proof of Claim # 27-2 filed by John Worstell-Worstell Exhibit # 4

Motion for Relief from Stay filed by ALF Operating Partners-Worstell Exhibit # 5

Letter from Gordon Gouveia to Langer & Langer, P.C.-Worstell Exhibit # 6

Equipment Lease between John A. Worstell and TBR-Worstell Exhibit # 7

Commercial Lease between the Worstell Business Trust and TBR-Worstell Exhibit # 8

The Interim Trustee entered the following exhibits into evidence:

Unanimous Consent of Directors of TBR USA, Inc.-Interim Trustee's Exhibit A

Stockholder Agreement-Interim Trustee's Exhibit B ¹¹

Stock Certificates-Interim Trustee's Exhibit C

Employment Agreement-Interim Trustee's Exhibit D

Allocation Schedule-Interim Trustee's Exhibit E

Unanimous Consent of Directors of TBR USA, Inc.-Interim Trustee's Exhibit F

Corporate Resolution-Interim Trustee's Exhibit G

Minutes of TBR's Board Meeting, dated August 6, 2004-Interim Trustee's Exhibit H-1

Minutes of TBR's Board Meeting, dated November 1-Interim Trustee's Exhibit H-2 ¹²

Minutes of TBR's Board Meeting held April 7-8 (2005)-Interim Trustee's Exhibit H-3 ¹³

Minutes of TBR's Board Meeting held July 28-29 (2005)-Interim Trustee's Exhibit H-4 ¹⁴

Cash Requirement Listing-Interim Trustee's Exhibit I ¹⁵

Group of several emails-Interim Trustee's Exhibit J-1 through J-8 ¹⁶

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