Koch Refining v. Farmers Union Cent. Exch., 85 C 6745.
| Decision Date | 23 December 1985 |
| Docket Number | No. 85 C 6745.,85 C 6745. |
| Parties | KOCH REFINING, et al., Plaintiffs, v. FARMERS UNION CENTRAL EXCHANGE, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Laurence H. Levin, Steven B. Teplinsky, Latham & Watkins, Chicago, Ill., for plaintiffs.
H. Blair White, David M. Schiffman, Sidley & Austin, Chicago, Ill., Nathan P. Eimer, Sidley & Austin, New York City, for defendants.
This matter comes before the court on the defendants' motion to dismiss. For the following reasons, the motion will be granted.
This action is one of many stemming from the insolvency of Energy Cooperative, Inc. (ECI). The plaintiffs in this lawsuit are a number of oil companies which have been sued in separate litigation by the trustee in bankruptcy to recover alleged preferences under the Bankruptcy Code. The oil companies here seek a declaratory judgment that the defendants, the memberowners of ECI, operated ECI as their alter ego and are therefore jointly and severally liable for all of ECI's debts. The plaintiffs also seek a declaration that, should the trustee prevail in his preference actions against the plaintiffs, the member-owners are liable to the plaintiffs for any amounts recovered thereby.
This lawsuit is before this court following a finding of relatedness between this case and one brought by the trustee against the member-owners, referred to by the parties here as "the member-owner litigation." In the member-owner litigation, the trustee is seeking to impose joint and several liability on the member-owners in such amounts as might be necessary to pay all obligations of ECI. The complaint alleged that ECI should be viewed as the alter ego and agent of the member-owners and that the member-owners should be held jointly and severally liable to ECI by virtue of facts that warrant "piercing of the corporate veil." In essence, the allegations are the same as those made by the plaintiffs here. Seven unsecured creditors then intervened as plaintiffs, forcing the court to decide whether the unsecured creditors or the trustee could properly bring this action. The court ruled:
After careful consideration of the issues, the court agrees with the trustee and the intervening plaintiffs that the cause of action . . . properly belongs to and should be prosecuted by the trustee, rather than the intervening plaintiffs. . . . A trustee of a bankrupt corporation represents creditors and is the proper party to bring suit against directors and stockholders for mismanagement, misappropriation of assets, or breach of fiduciary duty.
Energy Cooperative, Inc. v. Farmers Union Central Exchange, Inc., 58 B.R. 132, 136 (N.D.Ill. 1985).
The member-owners have now moved to dismiss the complaint in this case on the grounds that the plaintiffs lack standing to bring this claim, that the complaint essentially seeks indemnity and as such fails to state a claim upon which relief can be granted, and that the suit will not ripen into a justiciable case or controversy unless and until the plaintiffs are found liable to the estate. I need only address the first of these arguments.
The plaintiffs assert that they have standing to sue the member-owners for breach of fiduciary duty and misuse of the corporate form because t...
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