International Nutronics, Inc., In re
| Decision Date | 27 June 1994 |
| Docket Number | No. 91-15253,91-15253 |
| Citation | 28 F.3d 965 |
| Parties | , 1994-2 Trade Cases P 70,709, 29 Fed.R.Serv.3d 572, 25 Bankr.Ct.Dec. 1381 In re, INTL NUTRONICS, INC., Debtor. Jerome ROBERTSON, Trustee; Chapter 7 Trustee of International Nutronics, Inc., Plaintiff-Appellant, v. ISOMEDIX, INC., a Delaware corporation; Radiation Sterilizers, Inc., a California corporation individually and as joint venturers, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Jeffrey J. Parish and Andrea J. Ingram, Rosenblum, Parish & Bacigalupi, San Francisco, CA, for plaintiff-appellant.
Peter J. Busch, Howard, Rice, Nemerovski, Canady, Robertson, Falk & Rabkin, San Francisco, CA, Ian N. Feinberg, and Gray
Cary Ware & Freidenrich, Palo Alto, CA, for defendants-appellees.
Appeal from the United States District Court for the Northern District of California.
Before: CANBY, and BRUNETTI, Circuit Judges, and WILSON *, District Judge.
Opinion by Judge CANBY.
The petition of appellees for rehearing is granted. The case is re-decided on the petition for rehearing, the response thereto, and the briefs and record previously filed in this court. The opinion of this court reported at 3 F.3d 306 is hereby withdrawn, and the attached opinion is hereby adopted.
In this case, we must decide whether bid-rigging and antitrust claims brought by a trustee on behalf of a bankrupt estate are barred by the res judicata effect of a bankruptcy court's sale order.
International Nutronics, Inc., the estate in bankruptcy, was in the business of sterilizing medical instruments and other equipment by gamma radiation. The sterilization process involved the use of cobalt-60, an isotope of cobalt. Cobalt-60 is expensive and difficult to acquire. It is highly radioactive, decaying rapidly and losing its value as a source of gamma radiation. It poses significant health risks.
At the time it filed for bankruptcy, Nutronics was in possession of two quantities of partially decayed cobalt-60. One was located at Nutronics' facility in Irvine, California; the other, at Nutronics' facility in Palo Alto, California.
In November 1987, plaintiff-appellant Robertson, Nutronics' Trustee in bankruptcy, solicited bids for the cobalt-60. Defendant-appellees Isomedix and Radiation Sterilizers, Inc. (RSI), competitors in the radiation sterilization business, submitted separate bids. Isomedix offered to pay seventy cents per curie, 1 or about $600,000, for the Irvine cobalt-60. RSI offered to buy the Irvine cobalt-60 for sixty-five cents per curie, curies to be measured by the isotope's radioactivity at the time of delivery three months later. RSI subsequently amended its bid, offering to pay 102% of the amount any competing bidder offered. Neither Isomedix nor RSI offered to purchase the Palo Alto cobalt-60.
Robertson rejected both offers. He subsequently asked Isomedix and RSI to extend new bids. Having learned that they had been the only bidders, Isomedix and RSI then notified Robertson that they had formed a joint venture to purchase and remove both supplies of cobalt-60 for $350,000. After Robertson rejected this bid, Isomedix and RSI increased their joint bid by $14,000.
Robertson accepted the joint bid and sought from the bankruptcy court an order approving the sale. In neither his letter of acceptance nor his request for a bankruptcy sale order did Robertson express objections to the joint venture. The court issued an order unconditionally confirming the sale.
About twenty-two months later, Robertson filed an adversary proceeding in the bankruptcy court, Isomedix and RSI as codefendants. The parties agreed to withdraw the reference to bankruptcy court, and the proceeding returned to district court. Alleging that the joint venture constituted an unlawful combination, the complaint sought relief under 11 U.S.C. Sec. 363(n) and sections 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1 & 2.
The defendants moved for summary judgment, asserting that the claims were barred under the doctrine of res judicata. The district court granted the motion.
Robertson challenges the district court's grant of summary judgment, contending that the doctrine of res judicata does not foreclose him from seeking damages under 11 U.S.C. Sec. 363(n) or from bringing an action under sections 1 and 2 of the Sherman Act.
Section 363 of the Bankruptcy Code defines the trustee's rights and powers of sale over the assets of the bankrupt estate. Subsection (n) provides:
The trustee may avoid a sale under this section if the sale price was controlled by an agreement among potential bidders at such sale, or may recover from a party to such agreement any amount by which the value of the property sold exceeds the price at which such sale was consummated, and may recover [attorney fees and expenses].
11 U.S.C. Sec. 363(n) (1993). The statute also provides that the court may award punitive damages against any party who enters a sale price agreement "in willful disregard of this subsection." Id.
We agree with Trustee Robertson that the bankruptcy court's sale order does not bar him from asserting a claim under section 363(n). In In re Intermagnetics America, Inc., 926 F.2d 912 (9th Cir.1991), we held that section 363(n) is a "statutory exception to the finality of bankruptcy sale orders for res judicata purposes." 2 Id. at 917. The Intermagnetics holding recognizes that to rule that the res judicata effect of a sale order forecloses the trustee from asserting a claim under section 363(n) "would render meaningless the ability of the bankruptcy trustee to 'avoid a sale' under Sec. 363(n)." Id. 3
The bankruptcy and Article III courts have traditionally possessed the authority to set aside sale orders in bankruptcy cases where the sale is "tinged with fraud, error, or similar defects which would in equity affect the validity of any private transactions" and when "compelling equities outweigh the interests in finality." In re CADA Invs., Inc., 664 F.2d 1158, 1162 (9th Cir.1981). By giving the Trustee the right to avoid a sale if the sale price was arrived at through bid-rigging, section 363(n) supplements the general powers of the court to avoid a sale. 2 Lawrence P. King, et al., Collier on Bankruptcy, p 363.14 (Lawrence P. King, ed. 15th ed. 1993).
Section 363(n) is not, however, a wholly independent exception to the rules of finality. The Federal Rules of Bankruptcy Procedure provide that--with certain exceptions not applicable here--Rule 60 of the Federal Rules of Civil Procedure governs cases under the Bankruptcy Code. Fed.R.Bankruptcy P. 9024, 11 U.S.C. Sec. (1984); see also id. advisory committee's note ( that "all orders of the bankruptcy court are subject to Rule 60 Fed.R.Civ.P."); CADA, 664 F.2d at 1161 ().
Rule 60(b) provides six sets of circumstances under which a district court may relieve a party from a final judgment or order. The Trustee's claim under section 363(n) can be characterized only as a motion under clause 3 of Rule 60(b), permitting relief for "fraud ... misrepresentation, or other misconduct of an adverse party." Rule 60(b) imposes a one-year limitations period on such motions. The Trustee did not file a Sec. 363(n) claim until twenty-two months after the bankruptcy court issued the sale order; therefore, the claim is time-barred.
Accordingly, while we reject the district court's determination that the res judicata effect of the bankruptcy court's sale order barred the Trustee from bringing a claim under section 363(n), we affirm the district court's dismissal of the Sec. 363(n) claim.
The doctrine of res judicata bars a party from bringing a claim if a court of competent jurisdiction has rendered final judgment on the merits of the claim in a previous action involving the same parties or their privies. In re Jenson, 980 F.2d 1254, 1256 (9th Cir.1992). "Res judicata bars all grounds for recovery that could have been asserted, whether they were or not, in a prior suit between the same parties on the same cause of action." Clark v. Bear Stearns & Co., 966 F.2d 1318, 1320 (9th Cir.1992) (emphasis added).
The Trustee argues that the antitrust claims could not have been asserted in the sale order proceeding, because antitrust actions do not fall within the bankruptcy court's jurisdiction. The bankruptcy court has jurisdiction to entertain cases arising under the Bankruptcy Code and "core proceedings arising under title 11." 28 U.S.C. Sec. 157 (Supp.1993). Core proceedings are "matters concerning the administration of the estate" and rights created by title 11. Id.; see also In re Mankin, 823 F.2d 1296, 1299-1307 (9th Cir.1987) (), cert. denied, 485 U.S. 1006, 108 S.Ct. 1468, 99 L.Ed.2d 698 (1988). The Trustee contends that the antitrust action against Isomedix and RSI could not, by these standards, be a core proceeding. Isomedix and RSI, on the other hand, contend that the antitrust claim would qualify as "core" because it arose out of a post-petition contract entered by the trustee in the course of administering the debtor's estate. See, e.g., In re Arnold Print Works, Inc., 815 F.2d 165, 168 (1st Cir.1987); cf. In re Eastport Associates...
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