Arenson v. Administrative District Counsel 1 (In re Pierport Development & Realty, Inc.)

502 B.R. 819, 2013 WL 4067943, 2013 Bankr. LEXIS 3333, 196 L.R.R.M. (BNA) 2920, 58 Bankr. Ct. Dec. (CRR) 86
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedAugust 9, 2013
DocketBankruptcy No. 12 B 09546; Adversary No. 13 A 00225
StatusPublished
Cited by2 cases

This text of 502 B.R. 819 (Arenson v. Administrative District Counsel 1 (In re Pierport Development & Realty, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arenson v. Administrative District Counsel 1 (In re Pierport Development & Realty, Inc.), 502 B.R. 819, 2013 WL 4067943, 2013 Bankr. LEXIS 3333, 196 L.R.R.M. (BNA) 2920, 58 Bankr. Ct. Dec. (CRR) 86 (Ill. 2013).

Opinion

MEMORANDUM OPINION ON ADMINISTRATIVE COUNCIL 1 MOTION TO DISMISS

JACK B. SCHMETTERER, Bankruptcy Judge.

This matter relates to the chapter 7 bankruptcy case of Pierport Development & Realty, Inc. (“Debtor” or “Pierport”). Pierport is one of several businesses owned by Peter Arenson (“Arenson”). Prior to bankruptcy, Pierport entered into a collective bargaining agreement (“CBA”) with the Administrative District Council 1 of Illinois of the International Union of Bricklayers and Allied Craftworkers, AFL-CIO (the “Union”). An arbitration board later found that the other businesses owned by Arenson and Arenson individually (“the Arenson Parties”)1 were bound by the CBA and jointly liable with Pierport for violations of that agreement. After Pierport filed for bankruptcy protection, the Arenson Parties filed this adversary proceeding seeking declaratory and injunc-tive relief to prevent the Union from pursuing certain counterclaims now pending in a related District Court case. The Union filed a Motion to Dismiss this adversary proceeding. It was briefed by the [821]*821Plaintiffs and Union, but not by the Chapter 7 Trustee. For reasons stated below, the Union’s Motion will be granted in part and denied in part by separate order.

BACKGROUND

Prior to bankruptcy, an arbitrator found Pierport liable for $178,181.33, payable to the Union, several Union members, and several fringe benefit trust funds identified in the CBA. A District Judge for the Northern District of Illinois subsequently enforced the arbitration award and entered judgment against Pierport.

The Union initiated post-judgment collection proceedings and determined it had a basis for a claim against Arenson personally and several of his other businesses for binding themselves to the CBA through their course of conduct. The Union informed the Arenson Parties of its claim and scheduled that claim for presentation to the arbitration board. The Arenson Parties communicated their belief that the arbitration board had no authority over them and did not participate in the hearing. The case went forward without them and the arbitrators ruled that the Arenson Parties were bound to the CBA. Accordingly, the arbitrators ruled that the Aren-son Parties were liable for all violations by themselves, each other, and Pierport. The arbitration decision stated:

After hearing the charges, arguments, testimony and evidence ... the Joint Arbitration Board rendered its decision and finds that [the Arenson Parties] are bound to the collective bargaining agreement signed on behalf of Pierport Development and Realty, Inc., and have been bound to that collective bargaining agreement since it was signed on October 5, 2009 ... For that reason, [the Arenson Parties] are found to be jointly responsible ... for violations of the [CBA], including the violations that the Joint Arbitration Board previously found [Pierport] committed, and [the Arenson Parties] are jointly liable for all damages and amounts due as a result of violations, including the damages and other obligations imposed by the judgment order issued by the federal court against [Pierport] on September 27, 2011.
Based on our conclusions in this ruling, the Joint Arbitration Board finds that [the Arenson Parties] must satisfy all obligations that already exist, must comply with the [CBA] when performing any further work within the geographic and craft jurisdiction of [the Union] until making all payments required and satisfying all other obligations.

(Ex. E to Complaint)

The Arenson Parties filed suit in the United States District Court, seeking to vacate the arbitration award. After Pier-port filed its bankruptcy petition the suit in District Court was held in abeyance on the Union’s motion. The Union later sought to return that suit to active status and the District Judge granted that request. The Union filed an Answer and Counterclaim seeking to enforce the arbitration award or, in the alternative, seeking an order piercing Pierson’s corporate veil and holding the Arenson Parties liable for Pierport’s obligations under the original arbitration award against Pierport. The Arenson Parties then filed this adversary complaint, twice amended, seeking to obtain a declaratory judgment here that the Defendant is barred from asserting certain counterclaims it filed in the District Court lawsuit. This adversary complaint also seeks to enjoin the Union from pursuing those counterclaims. The Union has now moved to dismiss Plaintiffs Second Amended Complaint.2

[822]*822On September 27, 2011, a U.S. District Court Judge in the Northern District of Illinois entered a judgment order in favor of the Union against the debtor in District Court Case No. 10 C 7800, Pierport Development & Realty, Inc. (“Pierport” or “Debtor”), awarding the Union $238,534.84 plus post-judgment interest on the unpaid balance (the “Judgment Award”). (Objection to Claim Ex. 1, at 5-6.) To collect on its judgment, the Union instituted a supplementary proceeding in that case under 735 ILCS 5/2-1402, and a Citation to Discover Assets (the “Citation”) was issued. That was served on Pierport on October 12, 2011. On December 16, 2011, Pier-port’s sole shareholder, Peter Arenson, appeared for examination in that supplementary proceeding. Under Illinois law, discussed below, service of the Citation on Pierport gave the Union a statutory lien on all unencumbered property interests that Pierport held or thereafter acquired (the “Citation Lien”).

On March 12, 2012 (the “Petition Date”), the Debtor filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code, 11 U.S.C. §§ 101, et seq. The chapter 7 trustee (“Trustee”) conducted an investigation of the assets and liabilities of the bankruptcy estate (the “Estate”) and determined that as of the petition date, Debtor’s assets that could potentially be liquidated for benefit of all creditors consisted of certain equipment and vehicles, the value of which to the Estate was estimated at $30,350.00. In addition, the Trustee identified as part of the Estate three potential fraudulent transfer claims against various entities (the “Fraudulent Transfer Claims”), including payments to Debtor’s sole shareholder Peter Arenson, and to certain affiliated businesses (together with Arenson, the “Arenson Parties”).

Negotiations between the Trustee and the Arenson Parties resulted in a proposed settlement agreement, wherein the Arenson Parties would pay a total of $325,000 to the Trustee, and in exchange the Trustee would assign to Arenson the estate’s interest in any and all machinery, equipment and vehicles, all other tangible assets, the name and any trademarks of Pierport, and any cemetery plots or properties (the “Transferred Assets”). The settlement also included a mutual release, whereby the Trustee would agree to release all Estate claims against the Arenson Parties arising out of “alter ego, piercing of the corporate veil, preference avoidance, fraudulent transfer avoidance, or other such theories.... ” The Trustee sought Court approval of the original proposed settlement agreement, but the Union objected on ground that the agreement purported to release not only the Trustee’s claims but also any third-party claims against the Arenson Parties.

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502 B.R. 819, 2013 WL 4067943, 2013 Bankr. LEXIS 3333, 196 L.R.R.M. (BNA) 2920, 58 Bankr. Ct. Dec. (CRR) 86, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arenson-v-administrative-district-counsel-1-in-re-pierport-development-ilnb-2013.