Texas Extrusion Corp., Matter of

Decision Date12 May 1988
Docket Number87-1077,84-1449,Nos. 84-1326,87-1074 and 87-1076,87-1075,84-1387,s. 84-1326
Citation844 F.2d 1142
CourtU.S. Court of Appeals — Fifth Circuit
Parties, Bankr. L. Rep. P 72,285 In the Matter of TEXAS EXTRUSION CORP., Debtor. TEXAS EXTRUSION CORP., Plaintiff-Appellant, v. LOCKHEED CORP., and Lockheed Finance Corp., et al., Defendants-Appellees. In the Matter of Richard W. PICKENS, Debtor. Richard W. PICKENS, et al., d/b/a Gold Sun Aluminum, Inc., Plaintiffs- Appellants, v. LOCKHEED CORP., Daniel C. Stewart, Trustee of Texas Extrusion Corp. & Disbursing Agent, the Official Creditors Committee of Texas Extrusion Corp., Lockheed Finance Corp., and Lockheed California Co., et al., Defendants- Appellees. In the Matter of PICKENS INDUSTRIES, INC., Debtor. PICKENS INDUSTRIES, INC., Plaintiff-Appellant, v. LOCKHEED CORPORATION, et al., Defendants-Appellees. In the Matter of Louise PICKENS, Debtor. Louise PICKENS d/b/a Gold Sun Aluminum, Inc., Plaintiff-Appellant, v. LOCKHEED CORPORATION, et al., Defendants-Appellees.

Emil Lippe, Jr., Edward A. Galloway, Michael D. Mosher, Lippe & Lay, Dallas, Tex., for plaintiffs-appellants in Nos. 84-1326, 84-1387 and 84-1449.

Emil Lippe, Jr., Lippe & Associates, Dallas, Tex., for plaintiffs-appellants in Nos. 87-1074 to 87-1077.

James B. Harris, Sam P. Burford, Debra D. McCullough, Thompson & Knight, Dallas, Tex., for Lockheed, et al.

Stephen A. McCartin, Gardere & Wynn, Dallas, Tex., for official creditors.

David W. Elmquist, Daniel C. Stewart, Winstead, McGuire, Sechrist & Minick, Dallas, Tex., for trustee in Nos. 84-1326, 84-1387 and 84-1449.

Davis W. Elmquist, Winstead, McGuire, Sechrist & Minick, Dallas, Tex., for trustee in Nos. 87-1074 to 87-1077.

Appeals from the United States District Court for the Northern District of Texas.

Before WILLIAMS and HIGGINBOTHAM, Circuit Judges, and SANDERS *, District Judge.

JERRE S. WILLIAMS, Circuit Judge:

This case involves the consolidated appeals of the confirmation of a joint plan of reorganization by the four debtors subject to the plan. The four debtors also raise numerous ancillary matters in their various appeals. We affirm.

I. Factual Background and Prior Proceedings

Texas Extrusion Corporation was a manufacturer of hard alloy aluminum extrusions commonly used in aircraft frames. Richard and Louise Pickens, husband and wife, together owned more than 80% of the stock of Pickens Industries, Inc., which in turn owned 100% of the stock of Texas Extrusion. Richard Pickens was the principal operating officer of Texas Extrusion.

In 1979, Texas Extrusion established a contractual relationship with Lockheed Corporation and several of Lockheed's affiliates. Under this arrangement, Lockheed committed itself to purchase certain quantities of hard alloy aluminum extrusions from Texas Extrusion which Texas Extrusion committed itself to produce. Lockheed Finance Corporation, a Lockheed affiliate, loaned Texas Extrusion $5.0 million to modify existing equipment and plant facilities to manufacture the hard alloy aluminum extrusions for the Lockheed contract. Prior to this, Texas Extrusion had manufactured mainly soft alloy extrusions. 1

Numerous disputes soon arose between Texas Extrusion and Lockheed. Apparently Lockheed's demand for aluminum extrusions from Texas Extrusion decreased substantially. Since the revenues of Texas Extrusion at that time were derived primarily from the Lockheed contract, Texas Extrusion defaulted on its repayment of the $5.0 million loan from Lockheed Finance. In September 1981, Texas Extrusion and Lockheed executed a second group of contracts in an attempt to resolve their disputes. 2 Additional money was loaned to Texas Extrusion by Lockheed. Despite this attempt at reconciliation, Lockheed was unable to increase its demand for aluminum extrusions from Texas Extrusion or find alternative purchasers, and Texas Extrusion once again defaulted on the repayment of its loan from Lockheed Finance. Texas Extrusion and its parent corporation, Pickens Industries, Inc., filed voluntary petitions for bankruptcy in the Northern District of Texas under Chapter 11 on March 24, 1982. At this point, Texas Extrusion owed Lockheed Finance $7,140,000 in principal and accrued interest on the loans which was secured by liens in substantially all of the assets of Texas Extrusion. Texas Extrusion also had unsecured indebtedness of approximately $4,354,000.

Texas Extrusion, as debtor-in-possession, immediately filed adversary proceedings in the bankruptcy court on March 26, 1982, against Lockheed and Lockheed Finance, alleging fraud, fraudulent conveyances, and breach of contract. Texas Extrusion sought actual damages of $40 million and punitive damages of $80 million. 3

Richard Pickens filed for personal bankruptcy under Chapter 11 on January 3, 1983, and Louise Pickens filed for personal bankruptcy under Chapter 11 on November 21, 1983. The Pickenses had personally guarantied a portion of the loans from Lockheed Finance. Lockheed had filed suit in federal district court against the Pickenses on December 14, 1982, to recover on the personal guaranties they had executed on the Lockheed loans. The Pickenses also filed a lawsuit as individuals against Lockheed and several of its affiliates (the "individual lawsuit"), on November 15, 1983. This "individual lawsuit" alleged many of the same matters set forth in the "corporate lawsuit" and alleged additionally that Lockheed's conduct had forced the Pickenses to lose personal assets and file for personal bankruptcy. The suit alleged misrepresentation and breach of contract by Lockheed. The Pickenses sought actual and punitive damages of at least $15.5 million. 4

On September 9, 1983, the United States Trustee for the Northern District of Texas 5 and the Official Creditors' Committee of Texas Extrusion 6 filed an application for the appointment of a trustee for Texas Extrusion in its bankruptcy proceedings. This application was allegedly brought about by Texas Extrusion's actions as debtor-in-possession of accumulating substantial unpaid post-petition liabilities of nearly $1 million. On October 28, 1983, the bankruptcy court granted the application, and on October 31, 1983, the United States Trustee appointed Daniel Stewart as Bankruptcy Trustee for Texas Extrusion. On November 21, 1983, Trustee Stewart informed the bankruptcy court that he believed Texas Extrusion could not be operated at a profit and would continue to incur further unpaid post-petition liabilities unless there was an infusion of new capital into the corporation. The bankruptcy court thereupon ordered the cessation of the operations of Texas Extrusion.

On November 23, 1983, Lockheed, which was Texas Extrusion's largest secured creditor, and the Official Creditors' Committee of Texas Extrusion filed a joint plan of reorganization for Texas Extrusion, Pickens Industries, and Richard Pickens. None of these three debtors had filed a plan of reorganization prior to this. Amended plans were later filed on December 23, 1983, and on January 25, 1984, which included the bankruptcy estate of Louise Pickens. 7 The original disclosure statement for the joint plan of reorganization was filed on December 23, 1983, by Lockheed and the Creditors' Committee. The bankruptcy court granted a motion by Lockheed and the Creditors' Committee to shorten the time for objections to the disclosure statement and set a date for the hearing on the disclosure statement for January 13, 1984. After the hearing, during which over 40 objections by the Pickenses to the disclosure statement were considered by the bankruptcy court, the court approved a First Amended Disclosure Statement which incorporated many of the changes requested by the Pickenses. Also on January 13, 1984, Lockheed moved to reduce Louise Pickens' 120-day exclusive time period to file a plan of reorganization and to make the disclosure statement applicable to her estate. On January 24, 1984, the bankruptcy court signed an order terminating Louise Pickens' exclusive time to file a plan as of 5:00 p.m. that day. The court then included Louise Pickens' case in the joint reorganization and applied the disclosure statement to her estate. The Second Amended Joint Plan of Reorganization ("the Plan") and the approved First Amended Disclosure Statement (the "Disclosure Statement") were filed on January 25, 1984. The bankruptcy court ordered all objections to the Plan be filed by February 17, 1984, and all votes on the Plan be completed by February 21. The court set a hearing on the confirmation of the Plan for February 22, 1984.

One week prior to the scheduled confirmation hearing on the Plan, the debtors retained additional counsel, Barlow & Lippe. 8 The debtors, through attorney Emil Lippe, then instituted a flurry of activity in the bankruptcy proceedings, including: (1) on February 13, 1984, Richard Pickens, through Emil Lippe, mailed a letter to all the creditors in all four bankruptcy proceedings seeking their rejection of the Plan; 9 (2) on February 15, 1984, Louise Pickens converted her bankruptcy proceeding from Chapter 11 to Chapter 7; 10 (3) on February 15, 1984, the debtors filed a motion to allow Pickens Industries to intervene in the corporate lawsuit; (4) on February 16, 1984, the debtors filed a motion to disqualify Lockheed's counsel (Thompson & Knight) from further participation in the proceedings; (5) on February 16, 1984, the debtors filed notices of 3 depositions; (6) on February 17, 1984, Richard and Louise Pickens filed their objections to the confirmation of the Plan; and (7) on February 21, 1984, the debtors filed motions for leave to amend the corporate and individual lawsuits to advance several new theories of recovery including various anti-trust claims against Lockheed and Cressona Aluminum Company 11 and to increase substantially the requested damages.

The hearing on the confirmation of the...

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