Micro-Time Management Systems, Inc., In re
| Decision Date | 12 January 1993 |
| Docket Number | 91-2261,MICRO-TIME,Nos. 91-2260,s. 91-2260 |
| Citation | 983 F.2d 1067,1993 WL 7524 |
| Parties | NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. In reMANAGEMENT SYSTEMS, INC., Debtor. MANAGEMENT SYSTEMS, INC.; Otis Kirkland, Individually and on behalf of all other Creditors, (91-2261), Plaintiffs-Appellants, and Creditors of Micro-Time Management Systems, Inc., (91-2260), Plaintiffs-Appellants, v. ALLARD & FISH, P.C.; David W. Allard, Jr.; and Deborah L. Fish, Jointly and Severally, Defendants-Appellees. ALLARD & FISH, P.C.; David W. Allard, Jr.; and Deborah L. Fish, Third-Party Plaintiffs, v. LAWRENCE J. STOCKLER AND ASSOCIATES, P.C.; Lawrence J. Stockler, Jointly and Severally; Schafer & Weiner, P.C.; Arnold S. Schafer, Individually, Jointly and Severally, Third- Party Defendants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Before NATHANIEL R. JONES and SILER, Circuit Judges, and JOHN W. PECK, Senior Circuit Judge.
Micro-Time Management Systems, Inc. ("MTMS", "Debtor"), Otis Kirkland, individually and on behalf of all other creditors, and "Creditors of MTMS" (hereinafter collectively referred to as "Plaintiffs") appeal an order dismissing, under the doctrine of res judicata, their complaint alleging that Allard & Fish, P.C., David Allard, Jr., and Deborah Fish (hereinafter collectively referred to as "Allard & Fish"), counsel for MTMS' trustee in bankruptcy, committed malfeasance by failing to investigate a potential conflict of interest on the part of the trustee. 1 For the reasons stated herein, we affirm.
On February 19, 1988, MTMS filed its petition in bankruptcy court pursuant to Chapter 11 of the Bankruptcy Code. Motions for the appointment of a trustee for MTMS were filed by Comerica Bank ("Comerica"), a major secured creditor of MTMS, and by Roaring Springs Blank Book Company ("Roaring Springs"), the chair of the Unsecured Creditors Committee. In late April or early May, 1988, Arnold S. Schafer of Schafer & Weiner, P.C., bankruptcy counsel for MTMS, contacted John C. Bohl, Jr., and informed him that a trustee was being sought and inquired whether Bohl would be able to serve as trustee.
In May 1988, Schafer again contacted Bohl. Bohl acknowledged his interest but advised Schafer that he, as a general partner of RGB Associates, had provided consulting services to Comerica on a totally unrelated foreclosure matter which was winding down. Schafer told Bohl that the relationship did not represent a conflict of interest.
On May 20, 1988, Bohl met Kirkland, the owner of MTMS, and representatives of Comerica and Roaring Springs. As a result of this meeting, the parties stipulated to the court's appointment of Bohl as trustee.
On May 24, 1988, prior to his retention of counsel, Bohl filed an "Affidavit of Disinterested Person" which did not set out any contemporaneous relationships with Comerica Bank. On that same date, Bohl was appointed trustee.
On June 29, 1988, an order was entered appointing David Allard, Jr., as counsel for the trustee. Bohl states that he did not discuss the issue of the alleged conflict with Comerica with Allard or with Deborah Fish, who at that time was an associate attorney in Allard's office working on the case. The Plaintiffs contend that is not true because the order authorizing the appointment of Allard as counsel states that Allard was to inquire into a Comerica claim on behalf of the estate.
In a letter to the bankruptcy court dated October 6, 1988, Kirkland sought to bring Bohl's alleged conflict of interest to the bankruptcy court's attention because Kirkland was suspicious of dealings between the Bohl and Comerica. In his letter, Kirkland referred the court to Bohl's relationship with Comerica, and questioned Bohl's loyalty to the Debtor's estate in light of that relationship.
On October 11, 1988, the court sent a letter to Kirkland and a separate letter to Marion Mack, the Assistant U.S. Trustee. In the letter, the judge instructed that the matter should be handled by the U.S. Trustee because he is responsible for overseeing trustees. Also on October 11, 1988, at a hearing in the Debtor's case, the court handed out copies of the Kirkland letter and the court's response to all parties.
Meanwhile, with MTMS', Kirkland's, Schafer's, the bankruptcy court's, the U.S. Trustee's, and the Unsecured Creditors Committee's knowledge of the alleged conflict, the bankruptcy proceedings continued to the apparent satisfaction of all interested parties. For example, on October 18, 1988, Comerica and MTMS reached a settlement which Kirkland approved. Schafer approved this settlement agreement. This agreement was then noticed for hearing before the Court and no objections were filed by any interested party. On November 10, 1988, an order approving the settlement with Comerica was entered.
On February 1, 1989, with Bohl as trustee and Allard & Fish as its attorneys, MTMS filed its Third Amended Disclosure and Third Amended Plan of Reorganization ("plan"). There was no explicit mention of potential causes of action relating to Bohl's relationship with Comerica or any alleged errors of omissions of Allard & Fish. At a hearing held on that date, the bankruptcy court ordered Bohl to disclose his connection to Comerica in the form of an affidavit, which he did on March 6, 1989.
Bohl also petitioned for fees on February 1, 1989. Objections were filed by attorney Lawrence Stockler on behalf of MTMS. At a hearing held on April 4, 1989, the question of Bohl's fees was taken under advisement.
On April 18, 1989, a hearing was held on confirmation of the plan and the voting was reported. The plan was confirmed by a confirmation order on May 4, 1989.
On June 23, 1989, the bankruptcy court issued a memorandum opinion and order which denied Bohl's fee applications in their entirety, vacated the orders appointing Bohl as trustee, and disqualified Bohl and his accounting firm from any further involvement as trustee or accountant. The court found a potential, if not actual conflict of interest, which gave rise to an appearance of impropriety, and which should have been disclosed in Bohl's original "Affidavit of Disinterested Person."
In late August 1989, MTMS and Kirkland, represented by Stockler, filed two causes of action against Bohl seeking damages resulting from Bohl's alleged breach of fiduciary duty as trustee and accountant in the alleged failure to disclose the Comerica relationship. In July 1990, a jury returned a verdict against Bohl based on damages arising from the Comerica settlement and the sale of the Devonshire property (a property disposed of in the plan). The jury verdict against Bohl was vacated by the bankruptcy court in its July 26, 1991 order because of newly discovered evidence, pursuant to Rule 60 of the Federal Rules of Civil Procedure.
After the filing of the MTMS claim against Bohl, but before the trial on the matter, MTMS filed a motion to modify the plan on October 16, 1989. The court entered its order modifying the plan on December 19, 1989.
In May 1990, Allard & Fish filed its second and final application for attorney fees. This application was objected to by Stockler, Kirkland, and MTMS. On August 14, 1990, after the jury verdict in the Bohl case, the court considered the Allard & Fish fee application. The court awarded Allard & Fish $25,000.00 out of a requested $66,381.19.
On November 14, 1990, Stockler filed a motion to reopen the case. The motion requested that the Unsecured Creditors Committee be allowed to pursue causes of action against Allard & Fish for alleged legal malpractice based on its representation of Bohl as the MTMS trustee. That motion was denied by the bankruptcy court.
On January 8, 1991, this action against Allard & Fish was filed by MTMS and Kirkland, in his individual capacity and on behalf of all other creditors. Stockler was counsel for MTMS and Kirkland. Among numerous other allegations, the complaint alleged legal malpractice by Allard & Fish based on alleged errors and omissions in its representation of Bohl. The action was removed to the district court. Pursuant to the Federal Rules of Civil Procedure, Allard & Fish moved to dismiss the case under Rule 12(b)(6) or for summary judgment under Rule 56. On September 30, 1991, the district court dismissed the lawsuit against Allard & Fish. The basis of the district court's ruling was that the May 4, 1989 order confirming the plan barred the present action under the doctrine of res judicata. From this order, the Plaintiffs appeal.
The Plaintiffs argue that their present action is not barred by the principles of res judicata. They argue that the alleged cause of action against Allard & Fish could not have been brought prior to the entry of the confirmation order because they were not aware of the extent or depth of Bohl's conflict of interest until the jury returned a verdict in the Bohl litigation and therein set forth a specific dollar amount of damages.
Allard & Fish contend that Plaintiffs' potential alleged cause of action against Allard & Fish was in place prior to the date of the entry of the confirmation order. Because the claims were not asserted, Allard & Fish contends that the claims are barred by the principle of res judicata.
A district court's dismissal of a case on res judicata grounds is reviewed de novo by this court. Sanders Confectionary Products, Inc. v. Heller Fin., Inc., 973 F.2d 474, 480 (6th Cir.) (citing Gargallo v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 918 F.2d 658, 660 (6th Cir.1990)), petition for cert. filed, 61 U.S.L.W. 3403 (U.S. Nov. 16, 1992) (No. 92-853).
The doctrine of res judicata, also called claim preclusion, means a final judgment on the merits of an action precludes the parties or their privies from relitigating...
To continue reading
Request your trial
-
In re Tippins
...plan contained a blanket reservation of rights clause. In a lengthy and well-reasoned opinion, the Seventh Circuit held: The problem in Micro-Time, as in this case, was not that the reservation was not in writing, but that the claim sought to be reserved was not identified in the reservatio......
-
In re John Richards Homes Bldg. Co., L.L.C.
...or series of transactions." The latter is enough for the fourth element of claim preclusion. See Micro-Time Mgmt. Sys., Inc. v. Allard & Fish, P.C., 983 F.2d 1067 (6th Cir.1993) (noting that a claim is identical if "the claims arose out of the same transaction or series of transactions," or......
-
In re Value Music Concepts, Inc.
...ed. rev.2005). 9. E.g., Browning v. Levy, 283 F.3d 761 (6th Cir.2002); Micro-Time Management Systems, Inc. v. Allard & Fish, P.C. (In re Micro-Time Management Systems, Inc.), 983 F.2d 1067 (6th Cir.1993) (unpublished); Slone v. M2M International, Inc. (In re G-P Plastics, Inc.), 320 B.R. 86......
-
In re John Richards Homes Bldg. Co., L.L.C.
...or series of transactions." The latter is enough for the fourth element of claim preclusion. See Micro-Time Mgmt. Sys., Inc. v. Allard & Fish, P.C., 983 F.2d 1067 (6th Cir.1993) (noting that a claim is identical if "the claims arose out of the same transaction or series of transactions," or......