Hassett v. Citicorp North America, Inc. (In Re CIS Corp.)

188 B.R. 873, 1995 U.S. Dist. LEXIS 16470, 1995 WL 653366
CourtDistrict Court, S.D. New York
DecidedNovember 7, 1995
Docket95 Civ. 5563(CSH)
StatusPublished
Cited by12 cases

This text of 188 B.R. 873 (Hassett v. Citicorp North America, Inc. (In Re CIS Corp.)) 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
Hassett v. Citicorp North America, Inc. (In Re CIS Corp.), 188 B.R. 873, 1995 U.S. Dist. LEXIS 16470, 1995 WL 653366 (S.D.N.Y. 1995).

Opinion

MEMORANDUM OPINION AND ORDER

HAIGHT, Senior District Judge:

Citicorp North America, Inc. (“CNA”) moves to withdraw the reference of an adversary proceeding to the bankruptcy court for the Southern District of New York. For reasons discussed below, the motion is denied.

*875 BACKGROUND

The Dispute

CIS Corporation (“CIS”) is in the business of marketing and managing computer equipment. CNA is a non-bank subsidiary of Citi-corp, a bank holding company. On January 13, 1989, CIS and eleven of its affiliates (collectively the “Debtors”) each filed petitions for relief under Chapter 11 of the Bankruptcy Code. The Debtors’ Chapter 11 cases were assigned to Bankruptcy Judge Prudence B. Abram. On July 31, 1990, the Debtors’ trustee in bankruptcy, James P. Hassett (the “Trustee”), commenced an adversary proceeding in bankruptcy court against CNA.

The issues presented in the adversary proceeding arise from a series of ten transactions between CNA and CIS occurring in December 1987. The position of the Trustee is that these transactions constituted financing by CNA of certain computer equipment which had been initially purchased by CIS and leased to third parties (the “Leases”). As part of the transactions, each Lease was assigned to CNA, which thereby became entitled to each quarterly lease payment. In connection with these transactions, CIS and CNA also entered into an agreement in which CIS was appointed as the exclusive agent to remarket the equipment upon expiration of each Lease (the “Remarketing Agreement”). Pursuant to the Remarketing Agreement, CIS received a fee from the proceeds of any subsequent sale or lease of the equipment.

CNA’s position is that the transactions were sales transactions pursuant to which CIS sold the equipment to CNA. Therefore, rather than financing the equipment, CNA became the purchaser and legal titleholder to the equipment.

The complaint in the adversary proceeding states three causes of action against CNA. The First Claim seeks a declaratory judgment recharacterizing the transactions as financing transactions and declaring CIS the lawful owner of the equipment subject to the agreements. The Second Claim seeks a declaration that the Trustee may avoid, pursuant to 11 U.S.C. § 544, any unperfected security interest claimed by CNA in the equipment. The Third Claim seeks a declaration that the Trustee may use, sell, or lease the equipment pursuant to 11 U.S.C. § 363.

Prior Proceedings

In May 1990, CNA filed a motion in the bankruptcy court for an order compelling the Trustee to assume or reject the Remarketing Agreement pursuant to 11 U.S.C. § 365(d)(2) with respect to certain of the equipment, and pursuant to that same section filed an order to show cause with respect to different equipment in February 1991. In February 1991 CNA also filed a motion in the district court to withdraw the reference of the adversary proceeding. In response to the motion to withdraw the reference, in April 1991 Judge Edelstein remanded the case to the bankruptcy court for an initial determination of the core/non-core nature of the proceeding.

In August 1991, after discovery was complete, the Trustee filed a motion for summary judgment before Judge Abram. Soon thereafter, CNA filed a cross-motion for summary judgment. Neither motion was decided, however, before Bankruptcy Judge Abram decided, in February 1992, that the recharacterization proceeding was core within the meaning of 28 U.S.C. § 157(b). CNA then immediately filed a proceeding in this Court, moving to withdraw the reference to bankruptcy court and to review Judge Abram’s designation of the recharacterization proceeding as core. In September 1994, I held that the adversary proceeding was non-core and that CNA was entitled to a trial by jury of disputed issues of material fact with respect to the issue of title to the equipment. I denied CNA’s motion to withdraw the ease at that time, however, because I felt that judicial efficiency and uniformity would be promoted by allowing the bankruptcy court already familiar with the underlying action to manage the proceedings until the case became ready for trial, at which time removal to the district court would be required.

The parties then-returned to the bankruptcy court for completion of pretrial proceedings. At a status conference on April 24, 1995, the parties agreed to resubmit their cross-motions for summary judgment, given the four-year hiatus since the motions had *876 originally been filed. The motions were resubmitted, and Judge Abram held a hearing on those motions on July 12, 1995.

Because the preparation for and the events that took place at the July 12 motions hearing are critical to CNA’s motion to withdraw, I will discuss them in detail.

Resubmission of the Summary Judgment Motions

In May 1995, CNA submitted the affidavit of Stephen T. Dixon, a principal Citicorp officer, and numerous background documents in support of its summary judgment motion. CNA also filed a statement of material facts pursuant to Local Bankruptcy Rule (“LBR”) 13(h); this 13(h) filing was identical in all significant ways to a 13(h) statement filed by CNA in 1991 to accompany its original motion for summary judgment. The Trustee submitted, along with its May 1995 summary judgment motion, the 1991 affidavit of former employee Andrew Cvitanov, and its 1991 13(h) statement. The Trustee chose not to update these statements and affidavits because it believed that the underlying facts at issue were unchanged since 1991. Plaintiffs Mem. at 9. CNA then filed a new response to the Trustee’s 13(h) statement; the Trustee did not file a response, but relied instead upon its 1991 response, having deemed CNA’s new 13(h) statement to be virtually identical to its 1991 filing.

The July 12 Hearing

The July 12, 1995 hearing before Judge Abram was dominated by an extended and contentious discussion of the propriety of Judge Abram’s instructions to the parties to submit to her a joint statement of undisputed facts. Judge Abram repeatedly stated at the hearing that since the parties had cross-moved for summary judgment, it should be feasible for them to submit to her a joint 13(h) statement containing the facts not in dispute. Counsel for CNA objected to this instruction. Judge Abram specifically told counsel that “I am not asking you to agree on anything you don’t agree on. I am asking that the parties sit down and try to agree-” Transcript of July 12, 1995 Motion Hearing before Judge Abram (“Tr.”) at 16. When counsel for CNA asked “What happens if there is a disagreement as to what the dispute is?” Judge Abram responded simply “You put it down.” Tr. at 14.

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Cite This Page — Counsel Stack

Bluebook (online)
188 B.R. 873, 1995 U.S. Dist. LEXIS 16470, 1995 WL 653366, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hassett-v-citicorp-north-america-inc-in-re-cis-corp-nysd-1995.