In re U.S. Office Products Co. Securities Litig.
| Decision Date | 03 August 2004 |
| Docket Number | MDL No. 1271.,Civil Action No. 3:99CV-636-H. |
| Citation | 313 B.R. 73 |
| Parties | In re U.S. OFFICE PRODUCTS CO. SECURITIES LITIGATION. Edward C. Dulworth, et al., Plaintiffs, v. U.S. Office Products Co., et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Andrew L. Barroway, David Kessler, Schiffrin & Barroway, LLP, Bala Cynwd, PA, Daniel S. Sommers, Cohen Milstein Hausfeld & Toll, PLLC, Burton H. Finkelstein, Finkelstein, Thompson & Loughran, Washington, DC, Jules Brody, Aaron L. Brody, Stull, Stull, & Brody, Lester L. Levy, Wolf Popper, LLP, Laura M. Perrone, Law Offices of Laura M. Perrone, New York, NY, Michelle Rago, Lowey Dannenberg Bemporad & Selinger, P.C., Richard B. Dannenberg, Jill Rosell, Lowey Dannenberg Bemporad & Selinger, White Plains, NY, Ann H. Rubin, Carmody & Torrance, LLP, New Haven, CT, Rock Allen Wood, Dickinson Wright, PLLC, Grand Rapids, MI, Victor B. Maddox, Tachau Maddox Hovious & Dickens, PLC Louisville, KY, David Edwin Wright Leagre Chandler & Millard, LLP, Scott D. Matthews, Ice Miller, Indianapolis, IN, Elizabeth M. Boyle, Gulfcoast Legal Services, Inc., Civil Legal AID-LSC Funded, Sarasota, FL, Richard E. Castiglioni Diserio Martin O'Connor & Castiglioni, Stamford, CT, for Plaintiffs.
James Linwood Quarles, III, Wendy Anderson Terry, Hale & Dorr, John C. Keeney, Hogan & Hartson, LLP, Christopher Paul Simkins, U.S. Department of Justice, Counterespionage Section, Criminal Division, David Patrick Donovan, Wilmer, Cutler & Pickering Hale & Dorr, John Quinn Rounsaville, Jr., Wilmer, Cutler & Pickering Washington, DC, Ira S. Meyerowitz, Richard A. Roth, Littman Krooks Roth & Ball, P.C., New York, NY, Charles W. Croscup, Wiley E. Mayne, Denver, CO, for Defendants.
This case comes before the court on the defendants' motion for summary judgment. Pursuant to a bankruptcy court order, the plaintiffs — creditors of the bankrupt defendant — were required to file proofs of claim with the bankruptcy court to preserve their claims against the defendants' estate. The defendants assert that the plaintiffs failed to file proper proofs of claim in the bankruptcy proceedings. As a threshold matter, the court concludes that it has jurisdiction to adjudicate the defendants' motion for summary judgment. The court further holds that the plaintiffs did not file adequate proofs of claim for three reasons: first, five of the plaintiffs did not individually file proofs of claim at all; second, the other five plaintiffs filed proofs of claim unrelated to the subject of this litigation; third, the Dulworth Family Limited Partnership ("the Partnership") could not file proofs of claim on behalf of the plaintiffs. Accordingly, because the plaintiffs failed to preserve their allegations through valid proofs of claim filed with the bankruptcy court, the court grants the defendants' motion for summary judgment.
In February 1995, U.S. Office Products Company ("USOP") held its initial public offering and subsequently grew by either purchasing or merging with small companies. Defs.' Mem. in Supp. of Mot. for Summ. J. ( ) at 3. One such company was Dulworth Office Furniture Company ("DOF"). Id. In October 1997, USOP merged with DOF (collectively, "the defendants"), a company formerly owned by members of the Dulworth family. Id.
On September 3, 1999, ten parties — Jack Dulworth, Joseph Dulworth, Chan Milton, Edward Dulworth, Thomas Dulworth, Mary Dulworth, Jack Dulworth Trust, Joseph Dulworth Trust, Thomas Dulworth Trust, and Chan Milton Trust (collectively, "the plaintiffs") — filed an initial Verified Complaint ("Initial Compl.") in Kentucky state court, asserting claims of common law fraud, defamation, and breach of contract. Id. at 4; Defs.' Mot. for J. on the Pleadings at 2. The plaintiffs named as defendants both USOP, a Delaware corporation, and DOF, a Kentucky corporation which was by then a wholly-owned subsidiary of USOP. Defs.' Mot. for J. on the Pleadings at 2. In this Initial Complaint, however, the plaintiffs only asserted claims against USOP. Defs.' Mot. at 4. The defendants then removed the case to federal court in Kentucky, and the district court denied the plaintiffs' motion to remand, holding that the plaintiffs had fraudulently joined DOF to defeat diversity. Id.
On January 17, 2000, the plaintiffs filed an Amended and Substitute Verified Complaint ("Am.Compl."), which listed claims against DOF and new claims against USOP. The complaint listed eight counts in total: two for common law and securities fraud arising out of the merger between USOP and DOF, and six counts based on defamation, invasion of privacy, failure to return pledged assets, breach of contract, a declaration of rights regarding non-competition agreements, and punitive damages, allegedly arising from events occurring in 1998 or 1999. Am. Compl. at 2. Because the plaintiffs brought the new securities fraud claim against USOP under the Securities Act of 1933 and thus provided an independent basis for federal jurisdiction, the Kentucky District Court again denied the plaintiffs' renewed motion to remand. Id. at 4. The case was then transferred to this court. Id.
On May 26, 2000, the Partnership filed a separate lawsuit in Kentucky state court against the defendants based on claims of fraud, breach of contract, and promissory estoppel. Dulworth Family Ltd. P'ship v. Dulworth Office Furniture Co., No. 00CI03437 ("State Compl."). The Partnership includes Edward Dulworth, Mary Dulworth, Jack Dulworth, Joseph Dulworth, and Chan Milton, who are also plaintiffs in the instant suit. Defs.' Statement of Undisputed Facts ( ) ¶ 7. The other five plaintiffs in this suit — Thomas Dulworth, Jack Dulworth Trust, Joseph Dulworth Trust, Thomas Dulworth Trust, and Chan Milton Trust — are not in the Partnership. Id.
On March 5, 2001, the defendants filed for Chapter 11 Bankruptcy in the United States Bankruptcy Court for the District of Delaware ("the Bankruptcy Court"). Id. ¶ 1. The next day, the defendants notified the plaintiffs of their bankruptcy filings. Id. On May 10, 2001, the Bankruptcy Court set a July 16, 2001 deadline for persons with claims against the defendants to file proofs of claim against the bankruptcy estate.1 Id. ¶ 2. Subsequently, the Bankruptcy Court extended the deadline to September 17, 2001 ("the Bar Date"). Id. In both of these orders, the Bankruptcy Court stated that all "creditors ... must file proofs of claim" or be "forever barred, estopped and enjoined from asserting claims." Bankr.Ct. Order dated May 10, 2001; Bankr.Ct. Order dated Aug. 6, 2001. The defendants notified all of the plaintiffs of the Bar Date, provided instructions for filing proofs of claim, and informed them of the relevant deadlines. Defs.' Statement ¶ 3.
On December 13, 2001, and while the federal and state cases were pending, the Bankruptcy Court entered an Order, that confirmed USOP's Joint Liquidating Plan of Reorganization (collectively, "the Plan and Order"). Bankr.Ct. Order dated Dec. 13, 2001; First Am. Plan of Reorganization dated Nov. 5, 2001. The reorganization plan stated specifically that holders of "Class 7 Insured Litigation Claims" had the right to prosecute against USOP for any claims covered by liability insurance. First Am. Plan of Reorganization dated Nov. 5, 2001 at 19-20. The plaintiffs in this case contend that six of their eight counts (excluding defamation and invasion of privacy) are "Class 7 Insured Litigation Claims" as defined by the reorganization plan, because they have "claim[s] against a debtor that are the subject of litigation pending in a court of competent jurisdiction." Id. at 9-10. In addition, for a holder of a claim to proceed against the defendants' estate, that holder's claim must be "Allowed" by the Bankruptcy Court. Id. at 3. As specified by the reorganization plan, one means by which a creditor's claim becomes "allowed" comes into play when that creditor files a proof of claim with the Bankruptcy Court by the Bar Date. Id. The Bankruptcy Court's confirmation order states, in part, that Class 7 Insured Litigation Claims are "deemed to have accepted the [reorganization] plan." Bankr.Ct. Order dated Dec. 13, 2001 at 4. Therefore, as holders of Class 7 Insured Litigation Claims who accepted the reorganization plan, the plaintiffs had to file timely proofs of claim with the Bankruptcy Court in order for their claims to be "allowed." Bankr.Ct. Order dated May 10, 2001; Bankr.Ct. Order dated Aug. 6, 2001. In addition, the Plan and Order stated that all matters arising out of, and related to the Chapter 11 Cases were referred to the Bankruptcy Court's jurisdiction. Bankr.Ct. Order dated Dec. 13, 2001; First Am. Plan of Reorganization dated Nov. 5, 2001.
Five of the plaintiffs — Jack Dulworth, Joseph Dulworth, Chan Milton, Edward Dulworth, and Thomas Dulworth — timely filed ten proofs of claim, concerning accrued vacation pay in the amounts of $5,000 or $9,999. Defs.' Statement ¶ 4. The other five plaintiffs — Mary Dulworth, Jack Dulworth Trust, Joseph Dulworth Trust, Thomas Dulworth Trust, and Chan Milton Trust — did not file individual proofs of claim. Id. ¶ 5.
The Partnership, a named party in the state suit but not in this suit, timely filed two proofs of claim with the Bankruptcy Court. Id. ¶ 8. The first addressed rent, insurance paid and maintenance in the amount of $13,834.97. Id. The second pertained to two leases dated October 17, 1997 as well as a claim for "Fraud, as a Plaintiff in the `Multi-District' fraud litigation." Id. The partnership physically attached the Partnership's Kentucky state court complaint to the second proof of claim. Id.
The case was stayed due to the bankruptcy proceedings. Subsequently, the defendants filed a motion for...
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