In re World Mktg. Chi., LLC
Decision Date | 26 April 2018 |
Docket Number | Case No. 15bk32968 (Jointly Administered) |
Parties | IN RE: WORLD MARKETING CHICAGO, LLC, et al., Debtors. |
Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
Mark S. Melickian, Elizabeth B. Vandesteeg and, Michael A. Brandess, Sugar, Felsenthal, Grais &, Helsinger LLP, Chicago, IL, Attorneys for Norman B. Newman, not individually but solely as Liquidating Trustee, of the World Marketing Liquidating Trust
Shelly A. DeRousse and Elizabeth L. Janczak, Freeborn & Peters LLP, Chicago, IL, Attorneys for Robert W. Kraft, Blue Streak, Holdings, Inc., and World Marketing, Holdings, LLC
This matter comes before the court on the Motion for Leave to File Counterclaims Against Trustee for Breach of Fiduciary Duty and Breach of Trust [Dkt. No. 901]2 (the "Motion") filed by Robert W. Kraft, Blue Streak Holdings, Inc., and World Marketing Holdings, LLC (together, the "Kraft Parties"), seeking to file counterclaims against Norman B. Newman, Liquidating Trustee of the World Marketing Liquidating Trust (the "Trustee") in the Adversary.
The federal district courts have "original and exclusive jurisdiction" of all cases under title 11 of the United States Code, 11 U.S.C. § 101 et seq. (the "Bankruptcy Code"). 28 U.S.C. § 1334(a). The federal district courts also have "original but not exclusive jurisdiction" of all civil proceedings arising under the Bankruptcy Code, or arising in or related to cases under the Bankruptcy Code. 28 U.S.C. § 1334(b). District courts may, however, refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).
A bankruptcy judge to whom a case has been referred may enter final judgment on any proceeding arising under the Bankruptcy Code or arising in a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(1). Bankruptcy judges must therefore determine, on motion or sua sponte , whether a proceeding is a core proceeding or is otherwise related to a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(3). As to the former, the court may hear and determine such matters. 28 U.S.C. § 157(b)(1). As to the latter, the bankruptcy court may hear the matters, but may not decide them without the consent of the parties. 23 U.S.C. §§ 157(b)(1), (c). Instead, the bankruptcy court must "submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected." 28 U.S.C. § 157(c)(1).
This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), as a motion for leave to file counterclaims against a liquidating trustee is a matter which concerns the administration of the estate, and as such, this court may determine the matter. 28 U.S.C. § 157(b)(1). Further, all parties have consented to the court's adjudication of the Motion. Wellness Int'l Network, Ltd. v. Sharif , ––– U.S. ––––, 135 S.Ct. 1932, 1939, 191 L.Ed.2d 911 (2015) ; Richer v. Morehead , 798 F.3d 487, 490 (7th Cir. 2015) ( ).
Accordingly, the court has the jurisdiction and the constitutional authority to hear and determine the Motion.
In addition to reviewing the Motion, the court has considered the arguments of the parties at the hearing on February 14, 2018 (the "Hearing"). The court has also reviewed and considered the following filed documents relating to the Motion:
The court has also taken into consideration all exhibits submitted in conjunction with the foregoing. Though these items do not constitute an exhaustive list of the filings in the Bankruptcy Case, the court has taken judicial notice of the contents of the docket in this Adversary and the Bankruptcy Case. See Levine v. Egidi , Case No. 93C188, 1993 WL 69146, at *2 (N.D. Ill. Mar. 8, 1993) ( ); In re Brent , 458 B.R. 444, 455 n.5 (Bankr. N.D. Ill. 2011) (Goldgar, J.) (recognizing same).
The facts relevant to deciding the issue in the Motion are simple. World Marketing Chicago, LLC, World Marketing Dallas, LLC, and World Marketing Atlanta, LLC (collectively, the "Debtors"), were subjected to a WARN Act class claim, as described by this court in its previous decision in this case, In re World Mktg. Chicago, LLC , 564 B.R. 587 (Bankr. N.D. Ill. 2017) (Barnes, J.) (the "WARN Opinion").3 As set forth in the WARN Opinion, the Trustee asserted only one possible defense to the WARN claim and attempted to reserve other defenses to be asserted at a later time. Id. at 593 n.4. This court found that the Trustee, in doing so, waived the right to propound any further defenses, as any further potential defenses were neither asserted nor was the reservation of these defenses sought by leave of the court. Id.
On September 27, 2017, the Trustee filed the Adversary against the movants, the Kraft Parties, and several other entities [Adv. Dkt. No. 1]. The sixteen-count complaint alleges various torts and liability claims against the Kraft Parties and the other entities. In response, the Kraft Parties sought to countersue the Trustee in the Adversary for breach of fiduciary duty and breach of trust, based on the Trustee's defense of the WARN claim. Anticipating the application of the so-called " Barton doctrine," discussed below, the Kraft Parties brought the Motion under consideration for leave to sue the Trustee, to which the Trustee objected.
The matter has been fully briefed and subsequently argued at the Hearing and has been taken under advisement. Except as otherwise expressly stated herein, this Memorandum Decision resolves all the matters under advisement in relation to the Motion.
As noted above, the central question before the court is that of the Barton doctrine and its application to the matter at bar. The Kraft Parties submit two principal arguments as to why, as a threshold matter, the Barton doctrine does not apply to the claims the movants seek to file. First, the Kraft Parties assert that the Barton doctrine is inapplicable when the party seeks to file a claim against a trustee in an adversary proceeding in the bankruptcy court which appointed the trustee. Second, the movants argue that the Barton doctrine does not apply to counterclaims against a trustee when the trustee begins the suit, even if the suit is filed in a non-appointing forum. This case also raises the issue as to whether the Barton doctrine extends just to statutory trustees or covers trustees appointed pursuant to a bankruptcy plan.
As will be shown below, the Motion may be resolved by answering the first question. As a result, the court need not examine the latter two. In order to answer the first question, the court must consider the nature of the Barton doctrine itself, its relation to jurisdiction and immunity and its application to matters brought before the bankruptcy court itself.
Id. at 217–18 (footnotes omitted).
Better known, however, as it is the case upon which the doctrine draws its name, is Barton v. Barbour , 104 U.S. 126, 26 L.Ed. 672 (1881). In Barton , the Court was asked to determine the propriety of a lawsuit against a state court-appointed receiver of all rights and property of a railroad company. Id. at 127. The receiver had been appointed by a Virginia state court, which had authorized him to defend all actions brought against him as the receiver and declared that he would not incur personal liability while conducting business of the railroad. Id. That was tested when the plaintiff, injured by the railroad during the receivership, brought suit against the receiver in the Supreme Court of the District of Columbia. Id. at 128. No permission from the Virginia state court had been obtained prior to the bringing of the suit. Id.
The Barton Court relied on Gray and determined that the plaintiff should have first sought leave of the appointing court before bringing her personal injury suit against the receiver. Id. at 136–37. The Court reasoned that the plaintiff's suit would, in effect, take money from the trust without...
To continue reading
Request your trial-
In re Highland Capital Mgmt.
...the "appointing" court of Seery. [251] 678 F.3d 218 (3d Cir. 2012). [252] Id. at 232-233 (cleaned up). [253] In re World Mktg. Chi., LLC, 584 B.R. 737, 743 (Bankr. N.D.Ill. 2018) (cleaned up; collecting cases). [254] Leighton Holdings, Ltd. v. Belofsky (In re Kids Creek Partners, L.P.), 200......
-
In Re Christensen
...is no dispute that Fabian VanCott is entitled to the protections of Barton as Jubber's general counsel.11 In re World Mktg. Chicago, LLC , 584 B.R. 737, 745 (Bankr. N.D. Ill. 2018).12 See In re J & S Props., LLC , 545 B.R. at 98 ("[A] bankruptcy court may, but is not required to, consider w......
-
In re Bednar
...the administration of the estate, and as such, falls within this Court's jurisdiction to finally determine. In re World Mktg. Chicago, LLC, 584 B.R. 737, 740 (Bankr. N.D. Ill. 2018) (citing 28 U.S.C. § 157(b)(1) ). Additionally, all parties have consented to this Court's adjudication of the......
-
McKillen v. Wallace (In re Irish Bank Resolution Corp.), Bankr. Case No. 13-12159-CSS
...is cited herein as "B.D.I. ___." 2. Appellants cite In re Qimonda AG, 482 B.R. 896 (Bankr. E.D. Va. 2012), and In re World Mktg. Chicago, LLC, 584 B.R. 737 (Bankr. N.D. Ill. 2018), but neither case resolves this issue. In Qimonda AG, the bankruptcy court declined to apply the Barton doctrin......