Hejmanowski v. Bykowicz et al

Filing 32

ORDER granting 5 defendant's Motion to Dismiss; denying 11 plaintiff's cross motion. Clerk of Court is directed to terminate defendants Universal Tool & Stamping Co., Inc., Dura Operating Corp. and Dura Automotive Systems, Inc. and to amend the caption accordingly. The case will remain open as against defendants Paul Bykowicz and Trisha Bykowicz. Signed by Hon. Richard J. Arcara on 1/13/2010. (JMB)

UNITED STATES DISTRICT COURT W E S T E R N DISTRICT OF NEW YORK

R IC H A R D HEJMANOW S K I, P la in tiff, D E C IS IO N AND ORDER 0 9 -C V -9 1 5 A v.

PAUL BYKOW IC Z , TRISHA BYKOW IC Z , U N IV E R S A L TOOL & STAMPING CO., INC., DURA OPERATING CORP., and D U R A AUTOMOTIVE SYSTEMS, INC., D e fe n d a n ts .

IN T R O D U C T IO N D e fe n d a n ts Universal Tool & Stamping Co., Inc., Dura Operating Corp., a n d Dura Automotive Systems, Inc. (the "Dura Defendants") have made a motion (D k t. No. 5) to dismiss plaintiff's complaint. The Dura Defendants have argued th a t the commencement of this case against them violates orders of the United S ta te s Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") that e n jo y injunctive protection under the Bankruptcy Code. In response, plaintiff m a d e a cross-motion (Dkt. No. 11) for a continuance pursuant to Rule 56(f)(2) of th e Federal Rules of Civil Procedure ("FRCP"). At oral argument on January 8, 2 0 1 0 , plaintiff asserted that litigation against the Dura Defendants should c o n tin u e to determine their liability for purposes of seeking payment from their

excess insurance carrier. For the reasons below, the Court will grant the Dura D e fe n d a n ts ' motion and deny plaintiff's cross-motion. B AC K G R O U N D T h is case is a personal injury case that began in state court. Plaintiff is a c itiz e n of Ohio. The individual defendants are citizens of New York. The Dura D e fe n d a n ts do business in New York. According to the complaint, plaintiff was in ju re d on October 7, 2006 when a "scissors jack," i.e., the type of jack often in s ta lle d with spare tires in cars (see Dkt. No. 13-2 at 5-6), broke and a car tire fe ll on his right hand. Plaintiff filed his complaint on September 24, 2009 in New Y o rk State Supreme Court, Erie County. The complaint included allegations of n e g lig e n c e against the individual defendants and of defective design, m a n u fa c tu re , assembly, specification, distribution, testing, inspection, warnings, a n d instructions against the Dura Defendants. The pending motions stem from events involving the Dura Defendants that o c c u rre d between the time of the accident and the filing of plaintiff's complaint. On October 30, 2006, the Dura Defendants and a number of their affiliates and s u b s id ia rie s filed for Chapter 11 bankruptcy reorganization. On February 23, 2 0 0 7 , the Bankruptcy Court entered an order establishing a deadline for the filing o f proofs of claim against the Dura Defendants. This deadline or "General Bar D a te " was May 1, 2007 at 6:00 p.m. Pacific Time. The General Bar Date was p u b lis h e d in The Wall Street Journal on March 6, 2007; in the Detroit News and 2

Free Press on March 5, 2007; in Automotive News on March 12, 2007; in the F in a n c ia l Times in London, Frankfurt, Paris, Tokyo, Sweden, Madrid, and Hong K o n g on March 6, 2007; and in The New York Times on March 5, 2007. On May 1 3 , 2008, the Bankruptcy Court entered a final order approving and confirming th e Dura Defendants' Reorganization Plan in its entirety. Article IX(F) of the R e o rg a n iz a tio n Plan contained an injunction that prohibited the commencement o r continuation of any claims against the Dura Defendants as of June 27, 2008, th e effective date of that plan. Plaintiff has not alleged that the Dura Defendants c o u ld have known about his accident at any time during the bankruptcy p ro c e e d in g s . Plaintiff also has not alleged that, in the nearly three years between h is accident and the filing of his complaint, he conducted research on the Dura D e fe n d a n ts that was reasonably calculated to uncover the bankruptcy p r o c e e d in g s . O n October 27, 2009, the Dura Defendants removed this case to this Court w ith the consent of the individual defendants. On October 29, 2009, the Dura D e fe n d a n ts made the pending motion to dismiss pursuant to FRCP 12(b)(6). In s u p p o rt of the motion, the Dura Defendants argued that their bankruptcy d is c h a rg e operates as a complete bar to this case as against them. In opposition to the motion to dismiss and in support of his own cross-motion for a continuance, p la in tiff argued that the case should be allowed to proceed only to determine lia b ility as against the Dura Defendants. Plaintiff cited to cases holding that 3

liability can be determined in spite of a bankruptcy discharge where any damages w o u ld be paid entirely by an insurance carrier and not the debtor. The Dura D e fe n d a n ts responded to plaintiff's cross-motion by providing their insurance p o lic y information voluntarily. At oral argument, the Dura Defendants argued that th e policy information makes clear that they are self-insured up to $750,000, and th a t the insurance policy that they hold is an excess policy only. The Dura D e fe n d a n ts argued that any duty to defend or to indemnify under the excess p o lic y does not begin without at least a reasonable possibility of a damages a w a rd over $750,000, and that a damages award of that size is virtually im p o s s ib le under the facts of this case. Under these circumstances, the Dura D e fe n d a n ts argued, they should not have to bear the costs of litigating a case w ith no reasonable possibility of triggering the excess coverage, because in c u rrin g those costs would contravene the purpose of the bankruptcy discharge. D IS C U S S IO N P la in tiff's Cross-Motion for Continuance / Conversion T h ro u g h its cross-motion for a continuance, plaintiff has asked the Court to c o n ve rt the Dura Defendants' motion to dismiss into a motion for summary ju d g m e n t. Plaintiff seeks this conversion to permit discovery and also because th e Dura Defendants have submitted extensive documentation outside the four c o rn e rs of the complaint. "Our review [of a motion to dismiss] is generally limited to the facts and allegations that are contained in the complaint and in any 4

documents that are either incorporated into the complaint by reference or a tta c h e d to the complaint as exhibits. But we may also look to public records, in c lu d in g complaints filed in state court, in deciding a motion to dismiss." Blue T re e Hotels Inv. (Canada), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 3 6 9 F.3d 212, 217 (2d Cir. 2004) (citations omitted). Here, the orders and a s s o c ia te d documents from the Dura Defendants' case before the Bankruptcy C o u rt are public documents, and the Court may consider them without the need fo r conversion. There is only one other fact outside of the complaint and the p u b lic records that the Court finds relevant to the resolution of the pending m o tio n s : the basic fact, apart from any details of the excess coverage policy, that th e Dura Defendants are self-insured up to $750,000. "Federal courts have c o m p le te discretion to determine whether or not to accept the submission of any m a te ria l beyond the pleadings offered in conjunction with a Rule 12(b)(6) motion, a n d thus complete discretion in determining whether to convert the motion to one fo r summary judgment; [t]his discretion generally will be exercised on the basis of th e district court's determination of whether or not the proffered material, and the re s u ltin g conversion from the Rule 12(b)(6) to the Rule 56 procedure, is likely to fa c ilita te the disposition of the action." Carione v. U.S., 368 F. Supp. 2d 186, 191 (E .D .N .Y . 2005) (alteration in the original) (citation omitted). Plaintiff did not c o n te s t the presence of self-insurance at oral argument. Since there is no d is p u te about the presence or the amount of self-insurance, conversion will not 5

accomplish anything more relative to that fact. Accordingly, the Court declines to u s e its discretion to convert the motion to dismiss and denies plaintiff's crossm o tio n . M o tio n to Dismiss "O n a motion to dismiss or for judgment on the pleadings we must accept a ll allegations in the complaint as true and draw all inferences in the non-moving p a rty's favor." Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 300 (2d Cir. 2 0 0 3 ) (internal quotation marks and citation omitted). Bearing in mind that all of p la in tiff's allegations are deemed true for purposes of this motion, the Court now w ill address the issue of the Dura Defendants' bankruptcy discharge. Central to a re s o lu tio n of the pending motion to dismiss is what effect, if any, the bankruptcy d is c h a rg e has on plaintiff's ability to litigate against the Dura Defendants. "E xc e p t as otherwise provided in this subsection, in the plan, or in the order c o n firm in g the plan, the confirmation of a [reorganization] plan . . . discharges the d e b to r from any debt that arose before the date of such confirmation . . . ." 11 U .S .C . § 1141(d)(1)(A). "A discharge in a case under this title (1) voids any ju d g m e n t at any time obtained, to the extent that such judgment is a d e te rm in a tio n of the personal liability of the debtor with respect to any debt d is c h a rg e d under section . . . 1141 . . . of this title, whether or not discharge of s u c h debt is waived; [and] (2) operates as an injunction against the c o m m e n c e m e n t or continuation of an action, the employment of process, or an 6

act, to collect, recover or offset any such debt as a personal liability of the debtor, w h e th e r or not discharge of such debt is waived . . . ." 11 U.S.C. § 524(a). Here, th e Dura Defendants duly filed a bankruptcy petition within weeks of plaintiff's a c c id e n t. The public records available from the Bankruptcy Court indicate that th e Dura Defendants gave the best notice that they could to any creditors whose id e n titie s were reasonably ascertainable. For entirely unknown creditors such as p la in tiff, the Dura Defendants reasonably gave constructive notice in multiple n a tio n a l and international publications in accordance with directions from the B a n k ru p tc y Court. Cf. In re U.S.H. Corp. of N.Y., 223 B.R. 654, 658 (Bankr. S .D .N .Y . 1998) ("W h e n a creditor is unknown to the debtor, publication notice of th e claims bar date may satisfy the requirements of due process . . . . [A]ctual n o tic e is necessary only as to known creditors while constructive notice is s u ffic ie n t for unknown creditors.") (citations omitted). The bankruptcy p ro c e e d in g s concluded without incident, with final confirmation of the R e o rg a n iz a tio n Plan that the Dura Defendants submitted to the Bankruptcy Court. The injunctive protection of Sections 1141 and 524 thus apply to the Dura D e fe n d a n ts . The injunction exception provided in Section 524(e) will not apply here b e c a u s e of the presence of self-insurance. Generally, "discharge of a debt of the d e b to r does not affect the liability of any other entity on, or the property of any o th e r entity for, such debt." 11 U.S.C. § 524(e). This exception has formed the 7

basis for rulings that have allowed determinations of liability against debtors w h o s e insurance carriers will bear the full cost of any judgments entered against th e m . See, e.g., Green v. Welsh, 956 F.2d 30, 35 (2d Cir. 1992) ("[W ]e believe th a t § 524 permits a plaintiff to proceed against a discharged debtor solely to re c o ve r from the debtor's insurer."); Cantor v. Am. Banknote Corp., No. 06 Civ. 1 3 9 2 , 2007 W L 3084966, at *7 (S.D.N.Y. Oct. 22, 2007) ("As Plaintiff is p ro c e e d in g only to recover any available liability insurance proceeds, [the d e b to r's ] discharge would not bar her claim . . . ."). Here, however, there is no d is p u te that the Dura Defendants are self-insured up to $750,000. In any ju d g m e n t issued against the Dura Defendants in this case, that money would h a ve to be used first. There is no way to construe any excess policy, any finding o f liability, or any judgment to avoid this basic point.1 Cf. DePippo v. Kmart Corp., 3 3 5 B.R. 290, 298 (S.D.N.Y. 2005) ("Kmart does not maintain primary liability in s u ra n c e . Its only insurance provides coverage above a two-million-dollar s e lf-in s u re d retention. Therefore, because Kmart's debt has been discharged in b a n k ru p tc y , there is no money to cover plaintiff's claim. Moreover, if the action a g a in s t Kmart were permitted to proceed, it would have to pay litigation costs, w h ic h is contrary to the fresh start policy of the Bankruptcy Code.") (citations o m itte d ); In re Columbia Gas Transmission Corp., 219 B.R. 716, 720 (S.D.W . Va.

For this reason, the Court considers irrelevant how large a damages a w a rd could be. 8

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1998) ("The instant case differs markedly from [Green among other cases]. First, in s te a d of a primary insurer, only an excess insurer is available, one whose lia b ility is not triggered until [the debtor] is `legally obligated to pay' a sum. [The d e b to r] argues it will never be legally obligated to pay a sum in this case, because P la in tiff's claim was discharged in bankruptcy. Moreover, [the debtor], not a p rim a ry insurer, is responsible for the defense of the lawsuit.") (citation omitted). As a result, there is no way to allow a determination of liability to proceed without vio la tin g Section 524(a)(2). Any judgment entered against the Dura Defendants in this case, regardless of plaintiff's intent not to collect against them directly, w o u ld be void ab initio under Section 524(a)(1). Under these circumstances, c o n tin u in g this case as against the Dura Defendants would be an expensive a c a d e m ic exercise that would serve no purpose. Granting the motion to dismiss w ill avoid this waste.

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CONCLUSION F o r all of the foregoing reasons, the Court hereby grants the Dura D e fe n d a n ts ' motion to dismiss (Dkt. No. 5). Plaintiff's cross-motion (Dkt. No. 11) is denied. The Clerk of the Court is directed to terminate defendants Universal T o o l & Stamping Co., Inc., Dura Operating Corp., and Dura Automotive Systems, In c ., from this case and to amend the caption accordingly. This case will remain o p e n as against defendants Paul Bykowicz and Trisha Bykowicz. SO ORDERED.

s/ Richard J. Arcara
HONORABLE RICHARD J. ARCARA UNITED STATES DISTRICT JUDGE DATED: January 13, 2010

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