Grocery Haulers, Inc. v. Great Atlantic & Pacific Tea Co. (In re Great Atlantic & Pacific Tea Co.)

467 B.R. 44
CourtDistrict Court, S.D. New York
DecidedJanuary 30, 2012
DocketNo. 11-CV-3558 (CS)
StatusPublished
Cited by17 cases

This text of 467 B.R. 44 (Grocery Haulers, Inc. v. Great Atlantic & Pacific Tea Co. (In re Great Atlantic & Pacific Tea Co.)) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Grocery Haulers, Inc. v. Great Atlantic & Pacific Tea Co. (In re Great Atlantic & Pacific Tea Co.), 467 B.R. 44 (S.D.N.Y. 2012).

Opinion

OPINION AND ORDER

SEIBEL, District Judge.

Before the Court is the appeal of Grocery Haulers, Inc. (“GHI” or “Appellant”) from the Bankruptcy Court’s Order (“Final Order”)1 denying GHI’s motion seeking a ruling that the automatic stay does not bar litigation that GHI sought to bring in New Jersey district court against the Debtors or, in the alternative, that good cause existed to grant relief from the automatic stay. For the reasons stated below, the Bankruptcy Court’s Final Order is AFFIRMED.

1. BACKGROUND

Appellant first gained a role in the grocery store operations of The Great Atlantic & Pacific Tea Company, Inc. (“A & P”) and certain of its affiliates (collectively “Appellees” or “Debtors”) when A & P acquired Pathmark Stores, Inc. (“Path-mark”) in 2007. (See Bankr. Doc. 671 Ex. 1 ¶ 4.)2 From 1997 until the acquisition in 2007, Appellant provided all trucking services to Pathmark-bannered supermarkets through a contract with Pathmark dated September 15, 1997 (the “Trucking Agreement”). (See Bankr. Doe. 660 ¶¶ 7-8; Bankr. Doc. 660 Ex. 1 ¶ 7; Bankr. Doc. 671 Ex. 1 ¶4.) Pathmark had previously run its own trucking operations, but under the Tracking Agreement, for nominal consideration, it transferred the equipment and trucking business to Appellant, retaining control over wages and other terms of employment of Appellant’s employees who serviced Pathmark stores. (See Bankr. Doc. 660 ¶ 7; Bankr. Doc. 1163 ¶¶ 9-15.) Concurrent with the Trucking Agreement, Pathmark also entered into an agreement with C & S Wholesale Grocers, Inc. (“C & S”), whereby C & S agreed to handle the majority of Pathmark’s merchandise procurement and to manage Pathmark’s sup[48]*48ply chain. (See Bankr. Doc. 660 ¶ 15; Bankr. Doc. 671 Ex. 1 ¶ 3.)

At the time that A & P acquired Path-mark, A & P had its own separate supply and logistics contract with C & S, so A & P and C & S entered into a new agreement to integrate the two contracts. (See Bankr. Doc. 660 ¶ 15; Bankr. Doc. 671 Ex. I ¶¶3, 5.) The new agreement, however, left the legacy Trucking Agreement between Pathmark and Appellant in place. (Bankr. Doc. 671 Ex. 1 ¶ 5.) Separately, C & S had its own trucking contract with Appellant (the “C & S Contract”), pursuant to which Appellant delivered merchandise to other of C & S’s non-Pathmark customers, including A & P. (Id.) C & S’s warehouse facilities located near Wood-bridge, New Jersey (the “Woodbridge Facilities”) were an integral part of Appel-lees’ supply base, and held the bulk of merchandise that C & S procured and GHI transported for Pathmark-branded stores. (See Bankr. Doc. 660 ¶¶ 15, 17; Bankr. Doc. 660 Ex. 1 ¶ 7; Bankr. Doc. 671 Ex. 1 ¶¶ 2, 5.)

Appellees commenced their bankruptcy case on December 12, 2010 by filing a voluntary petition for relief under chapter II of the Bankruptcy Code. (Bankr. Doc. 1.) After analyzing their finances at that time, Appellees felt that they were burdened by high costs. (See Bankr. Doc. 671 ¶¶ 1-2; Bankr. Doc. 671 Ex. 1 ¶¶7-9.) Specifically, Appellees maintained that they were paying substantially more for services under the Trucking Agreement than they could negotiate with other vendors in the marketplace, because it was a “cost-plus” contract under which Appellees were covering both operational and administrative costs. (See Bankr. Doc. 671 Ex. 1 ¶¶ 6-9.) Additionally, in early 2011, C & S publicly announced its intention of closing the Woodbridge Facilities as of February 6, 2011, which would have required the supply and distribution volume previously handled for Appellees there to be moved hundreds of miles from the bulk of Appel-lees’ stores, further increasing costs under the Trucking Agreement. (See Bankr. Doc. 660 ¶¶ 17-18; Bankr. Doc. 671 Ex. 1 ¶8.) As a result, Appellees conducted a bidding process, which included Appellant, C & S, and a few other vendors, for a contract to take over the services previously covered under the Trucking Agreement. (See Bankr. Doc. 660 ¶¶ 20-22; Bankr. Doc. 671 Ex. 1 ¶¶ 9-10.) At the same time, in the alternative, Appellees attempted — without success — to negotiate with Appellant for changes to the Trucking Agreement. (See Bankr. Doc. 660 ¶ 19.) Ultimately, C & S submitted a proposal to Appellees that was less expensive and more favorable than Appellant’s best bid, especially because it included the transportation services that Appellant had previously provided under the C & S Contract. (See Bankr. Doc. 671 Ex. 1 ¶¶ 10-15.)

On January 18, 2011, Appellees moved pursuant to Section 365 of the Bankruptcy Code to reject the Trucking Agreement (the “Rejection Motion”). (See Bankr. Doc. 545.) Appellant objected to the Rejection Motion on January 28, 2011, and argued that if the Trucking Agreement was terminated, Appellant would be forced to lay off hundreds of employees without being able to provide proper sixty-day notice under the federal Worker Adjustment and Retraining Notification Act (“WARN Act”), 29 U.S.C. §§ 2101-2109, and the Millville Dallas Airmotive Plant Job Loss Notification Act, N.J. Stat. Ann. §§ 34:21-1-21-7, (collectively “WARN Acts”). (See Bankr. Doc. 660.) On February 2, 2011, the Bankruptcy Court heard oral argument on the Rejection Motion from Appellant, Appellees, Appellees’ Official Committee of Unsecured Creditors, C & S, and Local 863 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen [49]*49and Helpers of America (“Local 863”), the union that represents some of Appellant’s employees. (See Bankr. Doc. 988 at 83:24-129:16.) The Bankruptcy Court granted the Rejection Motion and stated its reasons on the record. (See id. 124:25-129:4.)

On February 3, 2011, prior to the Bankruptcy Court’s entry of its order on the Rejection Motion (the “Rejection Order”), GHI filed a notice of appeal and emergency motion to stay the entry of the Rejection Order (the “Emergency Stay Motion”). (See Bankr. Doc. 714.) At a telephonic hearing held on February 4, 2011, the Bankruptcy Court denied the Emergency Stay Motion, (see Bankr. Doc. 989 at 33:18-45:9), and on the same day entered the Rejection Order, (see Bankr. Doc. 721), authorizing Appellees to reject the Trucking Agreement, after finding that rejection was within Appellees’ sound business judgment and in their best interest, (see id. at 2; Bankr. Doc. 988 at 125:18-129:4).

On February 6, 2011, the rejection of the Trucking Agreement became effective, Ap-pellees commenced their replacement transportation arrangement with C & S, and C & S terminated a portion of the C & S Contract under which Appellant delivered perishable foods to A & P and Wald-baum’s stores operated by Appellees. (See Bankr. Doc. 1387 ¶ 11.) As a result of the Rejection Order, Appellant was forced to lay off more than 220 hourly and salaried employees, including employees represented by Local 863, without providing sixty-day notice of termination of the Trucking Agreement to those employees as required by the WARN Acts.3 (Bankr. Doc. 1163 ¶ 1; see Bankr. Doc. 660 Ex. 1 ¶ 18; Bankr. Doc. 660 Ex. 2 ¶ 6.)

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Cite This Page — Counsel Stack

Bluebook (online)
467 B.R. 44, Counsel Stack Legal Research, https://law.counselstack.com/opinion/grocery-haulers-inc-v-great-atlantic-pacific-tea-co-in-re-great-nysd-2012.