CDX Liquidating Trust Ex Rel. CDX Liquidating Trustee v. Venrock Associates

389 B.R. 76, 2008 U.S. Dist. LEXIS 38482, 2008 WL 2035787
CourtDistrict Court, N.D. Illinois
DecidedMay 12, 2008
Docket04 C 7236
StatusPublished
Cited by3 cases

This text of 389 B.R. 76 (CDX Liquidating Trust Ex Rel. CDX Liquidating Trustee v. Venrock Associates) is published on Counsel Stack Legal Research, covering District 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
CDX Liquidating Trust Ex Rel. CDX Liquidating Trustee v. Venrock Associates, 389 B.R. 76, 2008 U.S. Dist. LEXIS 38482, 2008 WL 2035787 (N.D. Ill. 2008).

Opinion

MEMORANDUM OPINION AND ORDER

MORTON DENLOW, United States Magistrate Judge.

This case comes before the Court on an emergency motion by the CDX Liquidating Trustee (“Plaintiff’) to set a discovery cut-off for damage discovery and to consolidate liability and damage issues for trial. Institutional Defendants (Venrock Associates, Venrock Associates II, L.P., Hambrecht & Quist California, H & Q Employee Venture Fund 2000, L.P., Access Technology Partners Brokers Fund, L.P., H & Q Cadant Investors, L.P., Chase Equity Associates, L.L.C., and J.P. Morgan Partners (BHCA) L.P.) and Individual Defendants 1 (Eric Copeland, C.H. Randolph Lyon, Stephan Oppenheimer, and Charles Walker) oppose the motion. For the reasons stated in open court on May 7, 2008, and as discussed below, Plaintiffs motion is denied and the parties are directed to submit their final pretrial order on August 25, 2008 on the issues of liability.

I. PROCEDURAL HISTORY

A. PROCEEDINGS BEFORE JUDGE WEDOFF THROUGH MAY 2005

This matter was originally filed by Plaintiff as an adversary proceeding on June 16, 2004 in the U.S. Bankruptcy Court for the Northern District of Illinois. Dock. No. 1, Nov. 9, 2004. Plaintiff is the Liquidating Trustee for CDX Corporation (“CDX”), formerly known as Cadant, Inc. (“Cadant”), which was in the business of providing cable modem systems for home computer high-speed internet access. Opinion and Order, Dock. No. 45, June 4, 2007, at 1-2. Plaintiff alleges in its complaint that “from January 2000 until May 2001, all or most of the Defendants spurned legitimate third-party financing in order to engage in self-dealing bridge loans on terms highly unfavorable to Ca-dant.” Id. at 2. Plaintiff alleges that the rejection of these offers was predicated on continued assurances from certain Defendants that they would support the company with fair and equitable financing, and that subsequent to gaining control of Ca-dant through bridge loans, Defendants sold Cadant in a conflicted transaction to Arris Group, Inc. (“Arris”) at a fire sale price. Id. The shareholders allegedly received nothing from this sale, but the Defendant bridge lenders recovered funds. Id.

Following the sale, CDX filed a petition under Chapter 11 of the Federal Bankruptcy Code in June 2002. Id. Judge Eugene R. Wedoff, presiding in the United States Bankruptcy Court for the Northern District of Illinois, approved a reorganization plan in November 2002. Id. On November 1, 2004, Judge Wedoff closed all bankruptcy proceedings related to CDX, and thus all that remains of the case is this adversary proceeding. Id.

On January 6, 2005, Judge Wedoff granted in part Defendants’ motion to dismiss. Inst. Def. Resp., Ex. J. Plaintiffs remaining claims include the Trustee’s claims for breach of fiduciary duty, aiding and abetting breaches of fiduciary duty, *79 civil conspiracy to breach fiduciary duties, and equitable subordination. Id.

At the time of filing in July 2004, Plaintiff included a jury demand in its adversary complaint. Motion To Withdraw, Ex. A, at 64, Dock. No. 19, Oct. 19, 2006. On November 5, 2004, Defendants filed a Motion to Withdraw Reference to the Bankruptcy Court. Dock. No. 1, Nov. 5, 2004. In its motion, Defendants argued that because not all parties consented to a jury trial before the Bankruptcy Court, the jury trial should be held before the District Court. Id.

Meanwhile, in March of 2005, Judge Wedoff suggested bifurcating the case for separate trials on issues of liability first and then, if necessary, damages. Inst. Def. Resp., Ex. C. Judge Wedoff stated that bifurcation may limit the time required for discovery, the expenses incurred by both parties, and the amount of time required of the court to try the matter. Id. In his discussion, however, Judge Wedoff appeared to contemplate this idea in the context of conducting a bench trial, rather than a jury trial. 2 Id. On May 10, 2005, Judge Wedoff entered an agreed “Order For Bifurcated Trial,” (“Bifurcation Order”) requiring all fact and expert discovery be conducted on liability issues first. Inst. Def. Resp., Ex. B.

B. PROCEEDINGS BEFORE JUDGE GUZMAN THROUGH AUGUST 2005

On August 10, 2005, District Court Judge Ronald A. Guzman denied Defendants’ Motion to Withdraw Reference to the Bankruptcy Court. Dock. No. 17, August 10, 2005. Judge Guzman determined that the Trustee’s claims were appropriate for a jury trial in the District Court, but that the withdrawal of reference was not appropriate at that time. Id. Judge Guzman further ordered that the Bankruptcy Court should preside over all pre-trial matters through the close of discovery. Id. Based on the May 2005 Bifurcation Order, all fact and expert discovery over the past 2)& years has been limited to liability issues.

C.PROCEEDINGS BEFORE JUDGE WEDOFF THROUGH OCTOBER 2006

In March 2006, Judge Wedoff discussed with the parties how to proceed with discovery in light of the ruling that the case should be tried by a jury. Inst. Def. Resp., Ex. A. During this discussion, Plaintiff brought to the attention of Judge Wedoff its concern over whether “the remaining discovery [would] continue as to liability in accordance with the Court’s earlier ruling on the bifurcation.” Inst. Def. Motion, Ex. A at 8. Judge Wedoff indicated that although he did not think his Bifurcation Order would be binding on the District Court, he did think the District Court would agree with him that “it does[ not] make a great deal of sense to have the discovery on damages proceed before there’s a determination of liability.” Id. Plaintiff expressed its desire to have the same jury decide liability and damages, at which time Judge Wedoff told Plaintiff it needed to bring that issue before the District Court Judge in its motion for withdrawal of reference. Id. at 9.

In October 2006, Plaintiff filed a Motion to Withdraw Reference to the Bankruptcy *80 Court. Dock. No. 19, Oct. 19, 2006. In its motion, Plaintiff discussed the jury demand in the case, but did not mention the Bifurcation Order or its desire to have that order reversed. Id. While the motion was being assigned to the appropriate district court judge, Defendants filed a motion in the Bankruptcy Court to strike Plaintiffs jury demand, along with a motion to withdraw their own jury demand. Opinion and Order, at 3, Dock. No. 45, June 4, 2007. Judge Wedoff granted Defendants’ motion to withdraw their jury demand, but denied the motion to strike Plaintiffs jury demand. Id. Subsequently, Individual Defendant C.H. Randolph Lyon filed a motion for summary judgment, which Judge Wedoff denied. Id. at 3^4.

D. PROCEEDINGS BEFORE JUDGE NORGLE THROUGH NOVEMBER 2007

On June 4, 2007, District Judge Charles R. Norgle granted Plaintiffs Motion to Withdraw Reference, and ordered a jury trial to take place in the District Court.

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389 B.R. 76, 2008 U.S. Dist. LEXIS 38482, 2008 WL 2035787, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cdx-liquidating-trust-ex-rel-cdx-liquidating-trustee-v-venrock-associates-ilnd-2008.