Northview Motors Inc. v. Chrysler Motors Corp.

• Decision Date: 18 June 1999
• Citation: 186 F.3d 346
• Parties: (3rd Cir. 1999) NORTHVIEW MOTORS, INC. v. CHRYSLER MOTORS CORPORATION JOSEPH P. NIGRO, TRUSTEE NORTHVIEW MOTORS, INC.; <A HREF="#fr1-*" name="fn1-*">* FRANK P. CUDA; <A HREF="#fr1-*" name="fn1-*">* JOANN CUDA APPELLANTS NO. 98-3387
• Court: U.S. Court of Appeals — Third Circuit

Page 346

186 F.3d 346 (3rd Cir. 1999)

NORTHVIEW MOTORS, INC. v. CHRYSLER MOTORS CORPORATION JOSEPH P. NIGRO, TRUSTEE

NORTHVIEW MOTORS, INC.;^*FRANK P. CUDA; ^*JOANN CUDA APPELLANTS

NO. 98-3387

U.S. Court of Appeals, Third Circuit

Argued February 8, 1999

Decided June 18, 1999

On Appeal From the United States District Court For the Western District of Pennsylvania (D.C. Civil Action No. 93-cv-01722) District Judge: Honorable William L. Standish

Robert G. Sable Sable, Pusateri, Rosen, Gordon & Adams 7th Floor, Frick Building Pittsburgh, PA

Thomas M. Ferguson (Argued) Blumling & Gusky 1200 Koppers Building Pittsburgh, PA 15291 Attorneys for Appellants

Mark F. Kennedy Christopher J. Meyer (Argued) Wheeler, Trigg & Kennedy 1801 California Street, Suite 3400 Denver, CO 80202 Attorneys for Appellee

Before: Sloviter, Stapleton and Roth, Circuit Judges

OPINION OF THE COURT

Stapleton, Circuit Judge

Appellants Northview Motors, Inc. ("Northview") and Frank P. and Joann Cuda ("the Cudas"), principals and secured creditors of Northview, appeal from the order of the United States District Court for the Western District of Pennsylvania enforcing an agreement purporting to settle Northview's claims against Appellee Chrysler Motors, Inc. ("Chrysler"). While administering these claims for the benefit of Northview's bankrupt estate, the Trustee entered into this agreement with Chrysler.

Northview and Chrysler were parties to an automobile dealership franchise agreement, which Chrysler terminated in 1991. On September 20, 1991, Northview filed a voluntary bankruptcy petition in the United States Bankruptcy Court for the Western District of Pennsylvania under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §1101 et seq. The bankruptcy was subsequently converted to a Chapter 7 proceeding and a trustee of the bankrupt estate was appointed.

On October 20, 1993, Northview, without the knowledge of the Trustee, filed the instant civil action against Chrysler.¹ The complaint asserted five claims: (1) violation of the federal Automobile Dealer's Day in Court Act, 15 U.S.C. §§1221-1225 (the "ADDCA"); (2) violation of the Pennsylvania Board of Motor Vehicles Act, 63 Pa.C.S. §§818.1-818.28; (3) tortious interference with contract; (4) breach of the Uniform Commercial Code; and (5) breach of contract. After learning of this suit, the Trustee took possession of it for the benefit of Northview's bankrupt estate. On May 15, 1996, the Trustee agreed to settle Northview's claims in exchange for Chrysler's agreement to pay Northview $115,000 and to withdraw its claims against the bankrupt estate totaling $35,659.97. The settlement agreement expressly provided that it was "subject to bankruptcy court approval." (21a)

Following the settlement, the District Court entered an order administratively closing the action. This order acknowledged that "the only matters remaining to be completed are the approval of the settlement by the bankruptcy court and the submission of a stipulation for dismissal under Fed.R.Civ.Proc. 41(a)." (12a) Furthermore, the order specified that "nothing contained in this order shall be considered a dismissal or Disposition of this action, and that should further proceedings therein become necessary or desirable, either party may initiate the same in the same manner as if this order had not been entered." (12a) Thereafter, the Trustee filed a motion to approve the settlement in the Bankruptcy Court.

In response to the Trustee's motion for approval, Northview and the Cudas filed an objection to the settlement. In their objection, Northview and the Cudas asserted that the settlement amount was inadequate, and thus was not in the best interest of the estate. Additionally, Northview and the Cudas filed a motion pursuant to 11 U.S.C. §554 to compel the Trustee to abandon the litigation on the grounds that the claims were of inconsequential value to the estate. In support of their motion, they alleged that: (1) the Cudas were the owners and subrogees of a secured claim against all the assets of Northview as a result of the Cudas' satisfaction of a secured claim of Mellon Bank against Northview in the amount of $610,123.25; and (2) because the settlement amount was less than this secured claim, the claim would not provide for any distribution to unsecured creditors and thus was "of no value or benefit to the estate." (97a)

The Bankruptcy Court ordered the Trustee to abandon the lawsuit to the Cudas. The Bankruptcy Court entered this order because it found: (1) that Mellon held a perfected security interest in Northview's claim against Chrysler prior to the filing of the petition; (2) that the Cudas were subrogated to that security interest when they satisfied Northview's $610,123.25 obligation to Mellon; (3) that the Cudas' interest exceeded the value of the lawsuit; and (4) that the lawsuit thus would not generate any funds for unsecured creditors. In re Northview Motors, Inc., 202 B.R. 389 (Bankr. W.D. Pa. 1996). The District Court affirmed this order, and the parties do not challenge before us the propriety of the order requiring abandonment to the Cudas. Because of its order regarding abandonment, the Bankruptcy Court never approved the proposed settlement agreement between the Trustee and Chrysler. Instead, the Bankruptcy Court denied Chrysler's motion for approval as moot.

Chrysler then advised Northview and the Cudas that Chrysler was willing to complete the settlement agreement by forwarding a check to Northview in the amount of $115,000. Northview and the Cudas rejected the offer and demanded $3,500,000 to settle the action. In response, Chrysler filed a motion to enforce the settlement agreement. Northview, joined by the Cudas in their capacity as Northview's principals and secured creditors, opposed the motion. The District Court granted Chrysler's motion to enforce, concluding that court "approval [of the settlement agreement] became unnecessary when the abandonment occurred." Slip. Op. at 351-52. Northview and the Cudas now appeal. We have jurisdiction pursuant to 28 U.S.C. §1291. Chrysler has moved to dismiss the Cudas as appellants.

I.

As an initial matter, we must decide whether the Cudas have standing to appeal the order of the District Court granting Chrysler's motion to enforce the settlement agreement. Ordinarily, those who were not parties to the proceeding below may not appeal an order of a district court.² See Caplan v. Felheimer Eichen Braverman & Kaskey, 68 F.3d 828, 836 (3d Cir. 1995). However, this Court has recognized that a nonparty may bring an appeal when three conditions are met: (1) the nonparty has a stake in the outcome of the proceedings that is discernible from the record; (2) the nonparty has participated in the proceedings before the district court; and (3) the equities favor the appeal. See id.

The first requirement is clearly satisfied. Because the Bankruptcy Court ordered the Trustee to abandon Northview's claims against Chrysler to the Cudas, the Cudas will be the recipients of any payment made by Chrysler in satisfaction of these claims. Thus, the Cudas have a substantial stake in the outcome of these proceedings. See Binker v. Commonwealth of Pennsylvania, 977 F.2d 738, 745 (3d Cir. 1992) (potential recipients of settlement agreement have substantial stake in litigation).

Turning to the second requirement, we note that the Cudas filed a brief in the district court opposing Chrysler's motion to enforce the settlement agreement. We have previously held that this level of participation is sufficient to satisfy the second requirement. See Krebs Chrysler-Plymouth Inc. v. Valley Motors, Inc., 141 F.3d 490, 496 (3d Cir. 1998) (nonparty's filing of brief and arguing in support of a party's position satisfied participation requirement). Additionally, we note that the Cudas participated significantly in the related abandonment proceedings before the Bankruptcy Court.

Finally, we address the equities of allowing this appeal. The Cudas have an interest in litigating whether or not the settlement agreement signed by the Trustee is binding. If the settlement agreement is not binding, the Cudas may litigate the claims on remand or pursue a higher settlement amount than that agreed to by the Trustee. To the extent that the Cudas' secured debt is satisfied by this recovery from Chrysler, Northview and its other creditors are better off.

Chrysler's argument that the equities favor denying the Cudas an opportunity to pursue this appeal rests primarily on its contention that the Cudas have taken inconsistent positions as to the value of the claims. In support of this contention, Chrysler points to the following positions:

"1. In objecting to the proposed settlement, the Cu das indicated that their attorney, who has extensive experience in litigating actions between franchisers and dealers, was prepared to testify that the settlement was inadequate by several hundred thousand dollars.

2. In their motion for abandonment, Northview and the Cudas asserted that "[b]ecause the proposed settlement is significantly less that the secured claim [in the amount of $610,123.25] owed to Movants Frank P. Cuda and Joann Cuda, there is no equity in said claim which would provide for any distribution to unsecured creditors. The estate therefore has no interest in said property and said claim should be abandoned." (97a)

3. In responding to Chrysler's offer to consummate the settlement, the Cudas insisted that their claim had a value of $3.5 million."

As the parties moving for abandonment, the Cudas had the burden of showing that Northview's claims against Chrysler were of inconsequential value to the estate in light of their own security interest. Given the size of that security interest, the Cudas' assertion that the claims would not provide for distribution to unsecured creditors' position is consistent with their representation that the settlement was inadequate by several hundred...