In re: Revstone Industries, LLC, et al

Filing 12

MEMORANDUM ORDER, The Bankruptcy Court's January 12, 2018 Memorandum Order Granting ZF Chassis' Cross-Motion for Summary Judgment (D.1. 1-1) is VACATED and the case is REMANDED for further clarification. ***Civil Case Terminated. Signed by Judge Colm F. Connolly on 6/24/2019. (fms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
In re:
REVS TONE INDUSTRIES, LLC, et al.,

Chapter 11
Case No. 12-13262 (BLS)
(Jointly Administered)

Debtors.
GREENWOOD FORGINGS, LLC.,
Adv. No. 15-50053 (BLS)
Plaintiff/Appellant,

v.

Civ. No. 18-151 (CFC)

ZF CHASSIS COW>ONENTS, LLC, et al.,
Defendants/Appellees.

MEMORANDUM ORDER
Greenwood Forgings, LLC ("Greenwood") has appealed a final order issued
by the United States Bankruptcy Court granting ZF Chassis Components, LLC's
("ZF") cross-motion for summary judgment and denying Greenwood's motion for
summary judgment and motion to strike ZF's cross-motion. See D.I. 1-1
(Memorandum Order Granting ZF Chassis ' Cross-Motion for Summary Judgment)
(the "Order"). This Court has jurisdiction over this timely appeal pursuant to 28
U.S.C. §§ 158(a) and 1334(a).
Greenwood's first argument on appeal is procedural. Greenwood faults the
Bankruptcy Court for considering and basing its decision on an accord and
satisfaction affirmative defense that ZF first raised in its cross-motion for summary

judgment. Greenwood argues that ZF was required to plead this defense in its
answer to the Second Amended Complaint under Federal Rule of Civil Procedure
8(c), made applicable in bankruptcy by Federal Rule of Bankruptcy Procedure
7008(a).
The Bankruptcy Court found that because Greenwood learned many months
before ZF's cross-motion about the transactions and settlement agreement
underlying ZF's accord and satisfaction defense, "[t]he circumstances do not
warrant a determination by this Court that ZF waived (or is estopped from) the
ability to assert" that defense. D.I. 1-1 at 117. The Bankruptcy Court, however,
did not address specifically in the Order whether Greenwood was prejudiced by
ZF's failure to plead the accord and satisfaction defense in its answer.
Under Rule 8(c)(l), "[i]n responding to a pleading, a party must
affirmatively state any avoidance or affirmative defense, including: accord and
satisfaction ...." Notwithstanding the explicit mandate of Rule 8(c)(l), failure to
plead an affirmative defense does not always result in a waiver of the defense.

Charpentier v. Godsil, 937 F.2d 859, 863 (3d Cir. 1991). In Charpentier, the Third
Circuit held that "a defendant does not waive an affirmative defense if [h]e raised
the issue at a pragmatically sufficient time, and [the plaintiff] was not prejudiced in
its ability to respond." Id. (internal quotation marks and citation omitted)
(alterations in original).

2

When confronted with an argument that a defendant has waived an
affirmative defense by not pleading it, "the Court must inquire whether the
defendant[ ] violated any scheduling orders in raising the defense for the first time
in their summary judgment motions, whether [it] delayed asserting the defense for
tactical purposes or any improper reason, and, most important, whether the delay
prejudiced the plaintiffs case." Eddy v. V.l Water & Power Auth., 256 F.3d 204,

210 (3d Cir. 2001) (emphasis added). In this case, I am unable to determine
definitively from the Order whether or to what extent the Bankruptcy Court
considered in its decision how ZF's delay in raising its accord and satisfaction
defense prejudiced Greenwood. 1 Accordingly, I will remand the case so that the
Bankruptcy Court can clarify whether and, if so, to what extent Greenwood
suffered prejudice because of ZF's delay.
A remand for clarification will have the added benefit of enabling the
Bankruptcy Court to bring its considerable expertise to bear in the first instance on
Greenwood's arguments on appeal that the transactions underlying ZF's accord
and satisfaction defense were setoffs prohibited under sections 548 and 553 of the
Bankruptcy Code.

1

In fairness to the Bankruptcy Court, I note that although Greenwood stated in its
motion to strike ZF's cross-motion for summary judgment that ZF's delay was
"prejudicial," D.I. 8 at GF659, it did not elaborate on this assertion or explain in its
motion how it was prejudiced.

3

WHEREFORE, at Wilmington on this Twenty-fourth day of June 2019, IT
IS HEREBY ORDERED that the Bankruptcy Court's January 12, 2018

Memorandum Order Granting ZF Chassis' Cross-Motion for Summary Judgment

(D.1. 1-1) is VACATED and the case is REMANDED for further clarification.

!STRICT JUDGE

4