THOMASVILLE FURNITURE INDUSTRIES v. Elder-Beerman Stores

• Decision Date: 28 September 1998
• Docket Number: No. C-3-97-183. Bankruptcy No. 95-33643. Adversary No. 96-3047.,C-3-97-183. Bankruptcy No. 95-33643. Adversary No. 96-3047.
• Citation: 250 BR 609
• Parties: THOMASVILLE FURNITURE INDUSTRIES, INC., Appellant, v. THE ELDER-BEERMAN STORES, CORPORATION, Appellee.
• Court: U.S. District Court — Southern District of Ohio

250 B.R. 609 (1998)

THOMASVILLE FURNITURE INDUSTRIES, INC., Appellant, v. THE ELDER-BEERMAN STORES, CORPORATION, Appellee.

No. C-3-97-183. Bankruptcy No. 95-33643. Adversary No. 96-3047.

United States District Court, S.D. Ohio, Western Division.

September 28, 1998.

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William B. Sullivan, Winston-Salem, NC, for Thomasville Furniture Industries Inc., appellants.

Richard Alan Chesley, Jones Day Reavis & Pogue-2, Columbus, for Elder-Beerman Stores Corporation, appellees.

DECISION AND ENTRY AFFIRMING IN PART AND REVERSING IN PART THE DECISION AND JUDGMENT OF THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF OHIO, WESTERN DIVISION, DATED FEBRUARY 12, 1997, AWARDING LOST PROFIT DAMAGES AND ATTORNEY'S FEES AS COMPENSATORY CIVIL CONTEMPT DAMAGES FOR VIOLATION OF THE AUTOMATIC STAY; CAPTIONED CAUSE REMANDED TO THE UNITED STATES BANKRUPTCY COURT; TERMINATION ENTRY

RICE, Chief Judge.

Pending before the Court is an appeal of a decision and judgment by the United States Bankruptcy Court for the Southern District of Ohio, dated February 12, 1997, awarding lost profits and attorney fees to Elder-Beerman Stores Corp. ("Elder-Beerman") as compensatory civil contempt damages for violation of the automatic stay by Thomasville Furniture Industries, Inc. ("Thomasville"). The Chapter 11 debtor in this case is Elder-Beerman, a department store chain and, significant to this appeal, a long-time vendor of furniture by Thomasville. Prior to arriving in this Court, the parties involved have litigated a number of issues before the Bankruptcy Court. Accordingly, this Court will briefly set forth the procedural history of this case before addressing the substance of the appeal before it.

I. Background

Elder-Beerman and Thomasville had an on-going business relationship for a period of time in excess of thirty-five years. Elder-Beerman was the primary retailer of Thomasville furniture in the Dayton area, and Thomasville was the manufacturer of the principal furniture line sold by Elder-Beerman. The two companies had an at-will contract, providing that either party might terminate their relationship at any time.

On October 17, 1995, Elder-Beerman filed a Petition for Bankruptcy in the United States Bankruptcy Court for the Southern District of Ohio. Elder-Beerman immediately notified Thomasville of the filing. Thomasville responded by suspending shipment of all orders until it received $300,000 from Elder-Beerman to secure post-Petition credit sales. The suspension lasted until November 10, 1995. Following the filing of the bankruptcy, the relationship between Elder-Beerman and Thomasville deteriorated. The extent and result of this change was the focus of the proceeding leading to this appeal. In January, 1996, Thomasville notified Elder-Beerman that it was terminating their relationship, effective sixty days from that date.

On March 14, 1996, Elder-Beerman initiated the Adversary Proceeding at issue, No. 96-3047 (Bankr.S.D.Ohio), seeking injunctive relief to prevent Thomasville from terminating its supply contract. (R. 1, 2) Elder-Beerman later modified the proceeding to include claims for breach of contract and money damages. A hearing on the request for injunctive relief was held on April 19, 1996. In its decisions, dated May 3, 1996, the Bankruptcy Court, found that Thomasville had violated the automatic stay, Elder-Beerman Stores Corp. v. Thomasville Furniture Indus., Inc., 195 B.R. 1019 (Bankr.S.D.Ohio 1996), and denied Thomasville's motion to annul the stay, In re Elder-Beerman Stores Corp., 195 B.R. 1012 (S.D.Ohio 1996).¹ Stating that Thomasville's attempt to terminate the contract should be treated as void ab initio, Elder-Beerman's request for an injunction was denied as moot. 195 B.R. at 1025. As for damages for the violation of the automatic stay, the Bankruptcy Court concluded, on June 19, 1996, that a corporate debtor, such as Elder-Beerman, was not entitled to damages. Elder-Beerman Stores Corp. v. Thomasville Furniture Indus., Inc., 197 B.R. 629 (Bankr.S.D.Ohio 1996). However, the court concluded that it may award civil contempt damages to Elder-Beerman under its statutory contempt power, pursuant to 28 U.S.C. § 1481 and 11 U.S.C. § 105(a). Because the issue of the amount of damages caused by the violation of the automatic stay had not been litigated during the April 19, 1996, hearing, the Bankruptcy Court reserved that issue for a subsequent hearing.

Following the April, 1996, hearing, the parties proceeded with discovery, and a trial date was set on the issues of breach of contract, violation of the automatic stay, causation and damages. Prior to trial, Judge Clark ordered a settlement conference between the parties with Bankruptcy Judge Burton Perlman. As a result of that conference, Elder-Beerman and Thomasville entered into an Agreed Order (R. at 62), which was signed by Judges Perlman and Clark and entered on September 26, 1996. Under the Agreed Order, it was assumed, for the purposes of the Adversary Proceeding only and without constituting an admission by Thomasville, that Thomasville had breached its contract with Elder-Beerman by failing to provide discounts, promotional incentives and sales support, and by stopping shipments of furniture until Thomasville received $300,000 from Elder-Beerman to secure post-Petition credit sales ("Assumed Breaches"). To recover damages for the Assumed Breaches, Elder-Beerman had to prove causation and damages. Potential damages were limited to the amount, if any, caused by Thomasville's violation of the automatic stay and for the time period between October 17, 1995, and July 31, 1996 ("Damages Period").² Furthermore, damages were limited to lost profits from the loss of Thomasville furniture sales, non-Thomasville furniture sales, ancillary sales, and credit card carrying charges. Elder-Beerman released and waived all other claims against Thomasville.³

On October 24 and 25, 1996, the Bankruptcy Court held a hearing on the issue of causation and damages. At that trial, Elder-Beerman asserted a claim for lost profits damages in the amount of $650,005.00.⁴ On February 12, 1997, the trial court entered judgment against Thomasville and awarded Elder-Beerman a sum of $593,164.57 in civil contempt damages, representing $428,414.57 in lost profits and $164,750.00 in attorneys' fees, plus interest.⁵

On April 18, 1997, Thomasville filed a notice of appeal with this Court.⁶ Its brief in support of its appeal was filed with this Court on June 9, 1997. Elder-Beerman responded to Thomasville's brief on July 15, 1997. Thomasville replied, by means of a reply memorandum, on August 12, 1997.

II. Issues on Appeal

In its Statement of Issues on Appeal, filed March 6, 1997, with the Bankruptcy Court,⁷ Thomasville enumerated thirty-six separate alleged errors by the Bankruptcy Court during the October, 1996, hearing. In its memorandum in support of its appeal, Thomasville consolidated and summarized these errors as follows:

(1) Did the Trial Court err in concluding that Elder-Beerman carried its burden of proving lost profit from lost sales of Thomasville furniture with reasonable certainty, such that the damages were not remote or speculative, as required by Ohio law?

(2) Did the Trial Court err in concluding that Elder-Beerman carried its burden of proving with reasonable certainty that the Assumed Breaches, as defined in the Agreed Order, were the actual proximate cause of Elder-Beerman\'s purported lost sales of Thomasville Furniture and lost profits thereon, as required by Ohio Law?

(3) Did the Trial Court err in failing to consider evidence of facts and circumstances, other than the Assumed Breaches, that could have caused a decline in Elder-Beerman\'s sales and profits?

(4) Did the Trial Court err, when it calculated Elder-Beerman\'s purported lost profits, by ignoring evidence in the record of incremental costs that Elder-Beerman would have incurred if it had realized the sales that it purportedly lost?

(5) Did the Trial Court err in concluding that Elder-Beerman adequately mitigated its damages, as required by Ohio law, despite the fact that it suspended all advertising of Thomasville furniture during the relevant Damages Period defined by the Agreed Order?

(6) Did the Trial Court err in speculating that Elder-Beerman\'s sales of Thomasville furniture would have accelerated after Elder-Beerman filed its bankruptcy petition, thus substantially overstating Elder-Beerman\'s purported lost sales and lost profits?

(7) Did the Trial Court err in understating its own calculation of the effect that Elder-Beerman\'s bankruptcy filing had on Elder-Beerman\'s sales of Thomasville furniture?

(8) Did the Trial Court err in concluding that the decline in Elder-Beerman\'s sales of Thomasville furniture actually and proximately caused a decline in Elder-Beerman\'s sales of non-Thomasville furniture?

(9) Did the Trial Court err in awarding Elder-Beerman damages for lost income from all Elder-Beerman retail credit facilities, when both parties had consensually agreed that Elder-Beerman\'s damages for lost credit income would be limited to "credit card carrying charges"?

(10) Did the Trial Court err in concluding that Elder-Beerman carried its burden of proving that (I) profits from non-Thomasville furniture and (ii) profits from credit card carrying charges were within the contemplation of the parties at the time they made their contract, as required by Ohio law?

(11) Did the Trial Court err in calculating the amount of attorneys\' fees to which Elder-Beerman is entitled under the terms of the Agreed Order?

As noted by Elder-Beerman in its Brief, Thomasville's arguments are not organized in accordance with either their eleven summaries of the assignments of error or their summary of the argument. Furthermore,...