KAISER AEROSPACE v. Teledyne Industries, Inc.
| Decision Date | 12 January 1999 |
| Docket Number | Bankruptcy No. 91-31884-BKC-RAM,No. 98-540-CIV-GOLD,97-702-BKC-RAM-A.,98-540-CIV-GOLD |
| Citation | 229 BR 860 |
| Parties | KAISER AEROSPACE AND ELECTRONICS CORP. and PAQ, Inc., Appellants/Cross-Appellees, v. TELEDYNE INDUSTRIES, INC., Appellee/Cross-Appellant. |
| Court | U.S. District Court — Southern District of Florida |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Oscar R. Cantu, Bruce Berman, Weil, Gotschal & Manges LLP, and Chris Frank, Miami, Florida, for Kaiser Aerospace & Electronic Corporation.
Calvin B. Brown, Collins, Brown, Caldwell, et al., Vero Beach, Florida, for The New Piper Aircraft, Inc.
Eugene Stearns, Betty Chang Rowe, Stearns Weaver Miller et al., Miami, Florida, for Teledyne Industries, Inc.
ORDER AFFIRMING BANKRUPTCY COURT'S FINAL JUDGMENT
THIS CAUSE comes before the Court upon cross appeals from the Final Judgment entered in the adversary action which arose during the pendency of a Chapter 11 proceeding. The Final Judgment and underlying Order Granting in Part and Denying in Part Cross Motions for Summary Judgment were entered January 16, 1998 by United States Bankruptcy Judge for the Southern District of Florida, Robert A. Mark, pursuant to Judge Mark's Oral Ruling on January 14, 1998. The issue raised by Appellant and Cross-Appellant as grounds for these appeals is the preclusive effect of a bankruptcy court's ruling on an action filed in state court, which action derives from a contractual relationship formed within the context of the reorganization process.
The Bankruptcy Court found that the doctrine of res judicata precludes the equitable relief Appellant seeks, but does not bar the claims for legal remedies. Appellant contends that neither cause of action is barred. Conversely, Appellee urges that the decision of the Bankruptcy Court is res judicata as to all actions that arose out of the factual and procedural bases upon which the Chapter 11 proceedings progressed to confirmation of the reorganization plan.
Jurisdiction of this Court is invoked pursuant to 28 U.S.C. § 158(a). The Court has carefully reviewed the record in these appeals, the transcripts of the hearings before the Bankruptcy Court designated in the record on appeal, the parties' briefs, the orders entered by the Bankruptcy Court, and the relevant law. An evaluation of the Bankruptcy Judge's application of the law to the factual findings and circumstances reveals no error on the part of the Bankruptcy Court. Therefore, this Court finds the Order Granting in Part and Denying in Part Motions for Summary Judgment and the Final Judgment rendered thereon should be affirmed.
The events giving rise to these appeals derive from a Chapter 11 proceeding filed by Piper Aircraft Corporation ("Debtor") on July 1, 1991. Appellee/Cross-Appellant, Teledyne Industries, Inc. ("Teledyne") was one of Debtor's largest creditors, holding a judgment of approximately $5,875,000 at the time of the Chapter 11 filing. Accordingly, Teledyne was the only singular unsecured creditor granted exclusivity to participate in the preparation and submission of reorganization plans. Thus, only Teledyne, the Creditors' Committee, and Debtor were permitted to file Chapter 11 reorganization plans for consideration and confirmation by the Bankruptcy Court.
Over the course of the Chapter 11, several plans were submitted for confirmation. The first plan significant to the instant matter was filed by Debtor and the Creditors' Committee on October 13, 1994. That plan contemplated the issuance of stock, cash, and notes to a trust for the benefit of creditors. The plan did not provide for the sale of Debtor's assets.
Several offers to purchase Debtor's assets were proposed to Debtor and the Creditors' Committee. All such offers were rejected. It became apparent that a sale plan could only be effectuated through cooperation and participation with Teledyne, the only other party entitled to file a plan.
Consequently, Teledyne entered into a Cooperation and Shareholders Agreement (the "Agreement") with Kaiser Aerospace and Electronics Corporation ("Kaiser") on November 4, 1994. The Agreement provided that Teledyne and Kaiser would act as coproponents of a sale plan. Under this plan, a newly formed entity, Piper International Corporation ("PIC"), of which Kaiser and Teledyne would emerge as the sole shareholders, would purchase substantially all of Debtor's assets (the "PIC Plan"). Kaiser was to be the majority shareholder, holding 65% of the stock, while Teledyne was expected to hold 35%. Pursuant to the PIC Plan, PIC proposed to purchase Debtor's assets for $32 million in cash, a $20 million junior secured note, and would assume certain liabilities. In exchange, Teledyne would voluntarily subordinate its claims against Debtor's estate.
The PIC Plan was submitted to the Bankruptcy Court over the objections of Debtor and the Creditors' Committee. Thus, the Bankruptcy Court had two competing plans before it for consideration. A hearing was held on December 15, 1994 to consider approval of the respective disclosure statements. After the hearing, the court concluded that neither plan was viable.1
From the time of the hearing through March 1995, formulation of a joint consensual plan was negotiated. Debtor, the Creditors' Committee, Teledyne, Kaiser, and PIC actively participated in the negotiations to achieve consensus on a confirmable plan.
In early-March 1995, the Creditors' Committee and Teledyne agreed on a plan that provided for the acquisition of Debtor's assets. However, Teledyne was no longer aligned with Kaiser.2 Instead, Teledyne joined with Dimeling, Schreiber & Park ("DS & P") to submit the proposed plan. Subsequently, on March 31, 1995, Debtor, the Creditors' Committee, and Teledyne and DS & P filed an agreed upon joint plan in the Bankruptcy Court.
The relevant portions of the joint plan provided that a new entity, New Piper, would acquire substantially all of Debtor's assets. Primary ownership of New Piper would be held by Teledyne and DS & P. An irrevocable trust, set up to obtain the sale and other proceeds to be paid by New Piper, would be formed to make distributions to Debtor's creditors. Under the joint plan, DS & P would hold 48% of the shares of New Piper, while the Trust and Teledyne would each hold 24%.3 However, Teledyne was given an option to call the shares owned by the Trust. These provisions were included in the Shareholders' Agreement and incorporated into the joint plan.
In exchange for its rights under the joint plan, Teledyne waived all of its claims against Debtor, including the $5,875,000 liquidated judgment claim it had acquired prepetition. Because of the size of this claim, its waiver materially and substantially increased the distributions available for other creditors and interest holders. Teledyne made these concessions and acquired the stock and stock options in reliance on, and pursuant to, the provisions of the joint plan.
Following two days of confirmation hearings, the Bankruptcy Court entered its order confirming the joint plan on July 11, 1995. Although Kaiser received formal notice and attended the confirmation hearing, it did not file or express any objections to the joint plan at the hearing. Nor did it appeal the confirmation order. Not hearing objection and finding that the joint plan was feasible, the plan submitted by Debtor, the Creditors' Committee, Teledyne, and DS & P was ordered confirmed on July 11, 1995.
Upon learning of the Teledyne/DS & P deal, but prior to the filing of the joint plan, Kaiser filed an action in state court two weeks before the confirmation hearing. Significantly, neither Kaiser nor Teledyne informed the Bankruptcy Court of the pending state court action, in which Kaiser sought damages for Teledyne's alleged breach of contract.
In its original complaint, filed March 20, 1995, Kaiser sought damages from Teledyne for breach of the Cooperation Agreement and for breach of a fiduciary duty. The complaint also sought damages against DS & P for its alleged participation in Teledyne's fiduciary breach and for tortious interference with an advantageous business arrangement. One and a half years after confirmation, Kaiser amended its complaint on December 10, 1996. The amended complaint sought to invoke a constructive trust over the issued and outstanding stock held by Teledyne and DS & P, which stock would have been held by Kaiser under the defunct PIC Plan. Kaiser asked the state court to order Teledyne and DS & P to execute documents transferring the New Piper stock to Kaiser.
Teledyne proceeded through the confirmation process without concern over the state court action, believing that res judicata would resolve the issue and bar the relief requested of the state court. However, Teledyne became concerned that a constructive trust would directly and dramatically affect the provisions and distributions of the Confirmed Plan. Initially, Teledyne challenged Kaiser's state court action by moving to enforce the Confirmation Order within the context of Chapter 11. Eventually, at the Bankruptcy Court's urging, Teledyne filed an adversary proceeding on July 8, 1997, in which it sought declaratory injunctive relief. Specifically, Teledyne asked the Bankruptcy Court to delineate the rights of the parties and to enjoin Kaiser from interfering with the distributions and interests provided by the Confirmed Plan.
Teledyne filed a motion for summary judgment in the adversary proceeding. Kaiser opposed the motion and filed a cross-motion for summary judgment. Following the October 27, 1997 oral argument on the cross motions, the Bankruptcy Court took the matter under advisement. Subsequently, on January 14, 1998, the Bankruptcy Court made an oral ruling from the bench. This oral ruling contained an extensive recitation of the facts and circumstances that led to the dispute and...
To continue reading
Request your trial
-
In re Hunter
... ... business entities, to-wit Steve\'s Electronics, Inc. ("Steve\'s") and Certified Aviation, Inc. ("Certified") ... ...