In re Uni-Marts, LLC
Decision Date | 28 April 2009 |
Docket Number | Bankruptcy No. 08-11037 (MFW).,Adversary No. 08-51864 (MFW). |
Citation | 405 B.R. 113 |
Parties | In re UNI-MARTS, LLC, et al., Debtors. Kesar, Inc., Plaintiff, v. Uni-Marts, LLC and Henry D. Sahakian, Defendants. |
Court | U.S. Bankruptcy Court — District of Delaware |
Eric M. Sutty, Esquire, Fox Rothschild LLP, Wilmington, DE, Charles J. Ferry, Esquire, Robert J. Tribeck, Esquire, William C. Boak, Esquire, Kathryn D. Sallie, Esquire, Rhoads & Sinon LLP, Harrisburg, PA, for Henry D. Sahakian.
Robert J. Dehney, Esquire, Thomas F. Driscoll III, Esquire, Chad A. Fights, Esquire, Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE, Tyler P. Brown, Esquire, Michael G. Wilson, Esquire, Jason W. Harbour, Esquire, Henry P. Long, III, Esquire, Hunton & Williams LLP, Richmond, VA, for the Debtor.
Rafael X. Zahralddin-Aravena, Esquire, William M. Kelleher, Esquire, Neil R. Lapinski, Esquire, Elliott Greenleaf, Wilmington, DE, for Kesar, Inc.
Before the Court are the Defendants' Motions to Dismiss the Complaint filed by Kesar, Inc. (the "Plaintiff"). For the reasons set forth below, the Court will grant these motions.
The Plaintiff is a Pennsylvania corporation. Defendant Uni-Marts, LLC (the "Debtor") is a Pennsylvania limited liability company with its principal place of business in State College, Pennsylvania, which operates a chain of company-owned and franchise-operated convenience stores throughout the northeastern United States. Defendant Henry D. Sahakian ("Sahakian") is a manager and president of the Debtor.
On May 29, 2008, the Debtor, and some of its affiliates,2 filed chapter 11 petitions for relief under the Bankruptcy Code. Earlier, in late 2004, the Debtor offered for sale a number of its convenience stores. The Plaintiff expressed interest in a store located in Dillsburg, Pennsylvania (the "Store") and received a Property Specific Package ("PSP") containing relevant financial information about the Store. On December 6, 2004, the Plaintiff executed a Purchase and Sale Agreement ("PSA") for the Store.
Before closing on the sale of the Store, the Debtor provided the Plaintiff with "Financial Update Information" purporting to reflect the Store's "actual operating results" for calendar year 2003. On April 19, 2005, the Plaintiff purchased the Store and acquired the Store's operating assets, as well as the real property on which the Store is located. In addition, the Plaintiff and the Debtor executed a Trademark Licensing Agreement, Fuel Supply Agreement, Commodity Schedule, and Collateral Deposit Agreement (collectively, the "Contracts").
In early 2007, a number of entities and individuals who had purchased convenience stores from the Debtor filed a class action complaint (the "Class Action") against the Debtor alleging, inter alia, that the Debtor had omitted and misrepresented material facts in connection with the sale of its convenience stores. The Plaintiff was a member of the Class Action. On November 16, 2007, the state court approved the Amended Settlement Agreement and entered a Final Judgment and Order resolving all issues in the Class Action (the "Class Action Order"). (See Final J. & Order, Nov. 16, 2007, ¶¶ 3, 4, 13, 14.) The Class Action Order provides that it (as well as the Release provisions of the Amended Settlement Agreement) expressly and permanently enjoins all Class Members from filing, prosecuting, or continuing all claims against the Defendants that are based upon or related to the claims asserted in the Class Action. (See Final J. & Order, Nov. 16, 2007, ¶¶ 9, 13, 14, 18, 20.) The Class Action Order also provides that it binds all Class Members, except those who properly and timely excluded themselves from the settlement. (Id. ¶¶ 7, 8.) Those Class Members who opted out of the settlement are listed on an exhibit attached to the Class Action Order, which does not list the Plaintiff. (See Ex. to Final J. & Order, Nov. 16, 2007.)
On December 4, 2008, the Plaintiff filed this adversary proceeding alleging that the Debtor and Sahakian induced the Plaintiff to purchase the Store and to enter into the Contracts through either fraud or negligent misrepresentation. In the adversary complaint, the Plaintiff seeks rescission of the Contracts, damages from Sahakian and the Debtor resulting from a breach of good faith and fair dealing, and a declaration that either the Debtor's estate has no interest in any insurance covering the Plaintiff's claims or an equitable allocation of any insurance in which the Debtor has an interest.
On December 30, 2008, the Debtor filed a Motion to Dismiss the Complaint. On January 2, 2009, Sahakian filed a Motion to Dismiss the Complaint. The Plaintiff opposes both motions. The matters have been fully briefed and are ripe for decision.
This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334, 157(b)(2)(A), (B), (G), (O), & (c)(1) (2006).
Sahakian moves for dismissal of Count II of the Plaintiff's Complaint (Damages against Sahakian) on several grounds. First, he argues that the claim is barred by the Class Action Order. Second, he argues that the Plaintiff has failed to state a claim against him, pursuant to Rule 12(b)(2) and (6) of the Federal Rules of Civil Procedure, which are incorporated by Rule 7012(b) of the Federal Rules of Bankruptcy Procedure. Third, he argues that this Court lacks personal jurisdiction over him. Fourth, he asserts that the claim was filed beyond the statute of limitations. Finally, Sahakian asks the Court, utilizing its powers under section 105(a) of the Bankruptcy Code, to extend the automatic stay under section 362(a) of the Bankruptcy Code to bar the suit against him.
The Debtor also moves for dismissal of the claims against it on the ground that these claims are barred by the Class Action Order. In addition, the Debtor claims that the Complaint was filed beyond the statute of limitations. Lastly, the Debtor argues that the Complaint violates the automatic stay and therefore should be dismissed.
Sahakian moves to dismiss the Complaint against him for lack of personal jurisdiction. Fed.R.Civ.P. 12(b)(2).
"[W]hen the court does not hold an evidentiary hearing on the motion to dismiss, the plaintiff need only establish a prima facie case of personal jurisdiction and . . . is entitled to have its allegations taken as true and all factual disputes drawn in its favor." Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004). The Court held no evidentiary hearing on the motion to dismiss. Thus, it will base its decision on the allegations in the Plaintiff's Complaint.
Rule 7004(f) of the Federal Rules of Bankruptcy Procedure provides that:
If the exercise of jurisdiction is consistent with the Constitution and laws of the United States, serving a summons or filing a waiver of service in accordance with this rule or the subdivisions of Rule 4 F.R. Civ. P. made applicable by these rules is effective to establish personal jurisdiction over the person of any defendant with respect to a case under the Code or a civil proceeding arising under the Code, or arising in or related to a case under the Code.
Rule 4(k)(1)(A) of the Federal Rules of Civil Procedure generally limits in personam jurisdiction of the federal courts over non-resident defendants to that which a court of general jurisdiction in the forum state would have. However, this limitation does not apply where extra-territorial service of process is "authorized by a federal statute." Fed.R.Civ.P. 4(k)(1)(C). Bankruptcy Rule 7004(d), which allows nationwide service of process in bankruptcy cases, is just such a statute. Nordberg v. Granfinanciera, S.A. (In re Chase & Sanborn Corp.), 835 F.2d 1341, 1344 (11th Cir.1988) (), rev'd on other grounds, 492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989).
The Fifth Amendment Due Process Clause does circumscribe in personam jurisdiction of the federal courts. Id. at 1344. It imposes "a general fairness test incorporating International Shoe's requirement that certain minimum contacts exist between the non-resident defendant and the forum such that maintenance of the suit does not offend traditional notions of fair play and substantial justice." Max Daetwyler Corp. v. Meyer, 762 F.2d 290, 293 (3d Cir.1985) (quotations omitted) (citing International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).
However, in bankruptcy cases "the forum" is the United States in general, not the particular forum state. Klingher v. SALCI (In re Tandycrafts, Inc.), 317 B.R. 287, 289 (Bankr.D.Del.2004). Accordingly, the Court will apply a "national contacts" standard, and not merely a "Delaware contacts" standard, in determining whether the Court's exercise of personal jurisdiction over Sahakian is proper.
Where a non-resident defendant "purposefully directed his activities at residents of the forum," his contacts with the forum are sufficient to support personal jurisdiction in any "litigation [that] results from alleged injuries that arise out of or relate to those activities." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (quotations omitted). A single transaction with the forum by the plaintiff will suffice. See McGee v. Int'l Life Ins. Co., 355 U.S. 220, 223, 78...
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