In re Glosser Bros., Inc.

100 B.R. 268, 1989 Bankr. LEXIS 801, 1989 WL 55590
CourtDistrict Court, W.D. Pennsylvania
DecidedMay 24, 1989
DocketBankruptcy No. 89-0752; Motion No. 89-3138M; Adv. No. 89-0186
StatusPublished
Cited by2 cases

This text of 100 B.R. 268 (In re Glosser Bros., Inc.) is published on Counsel Stack Legal Research, covering District Court, W.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Glosser Bros., Inc., 100 B.R. 268, 1989 Bankr. LEXIS 801, 1989 WL 55590 (W.D. Pa. 1989).

Opinion

MEMORANDUM OPINION

BERNARD MARKOVITZ, Bankruptcy Judge.

Before the Court is a request for a Mandatory Injunction by Conrad Wholesale, Inc. (“Conrad”), a creditor in this case.1 Conrad seeks to have this Court order the Debtor to keep its Johnstown department store location open and operating while an investment group is created to purchase same. A hearing was granted and held eight (8) days after the injunction was filed. Testimony was offered and the parties argued their respective positions.

The issue we now decide is of great moment to the Johnstown community. Federal and state governmental leaders have expressed concern and prevailed upon us to do what we can to assist their constituency. We feel great deference to honor their request; however, the law in this matter does not so allow, and it is with profound reluctance that we reach our present decision. Based.upon the testimony received and the law on the issue, we find that Conrad has not met the substantial burden required to obtain a mandatory injunction.

FACTS

Debtor is a corporation which operates numerous retail and discount outlets. The particular store in question, Glosser Bros. Store, is located in downtown Johnstown. This was originally the flagship location, but in recent years has been responsible for only five percent (5%) of Debtor’s total revenues.

During the years just prior to the bankruptcy filing Debtor expended in excess of $2,000,000.00 in an effort to revitalize the Johnstown store. During this same time period, some of the Debtor’s seventy-five (75) other stores were also demonstrating a lack of profitability, with little indication of a reversal in the future trend. Just prior to the bankruptcy filing, Debtor determined that several of the unprofitable retail and discount outlets would be closed in order to concentrate efforts on those outlets which still appeared viable.

This was not the first time that Debtor had closed outlets, nor was it expected to be the last. Debtor’s President testified that the opening of new outlets and the closing of those which do not meet expectations is a part of business for a retailer [269]*269and/or discounter of Debtor’s size. He also testified that over the course of the last twelve (12) years, Debtor has closed fifteen (15) facilities. An additional eleven (11) stores are either slated for closure during 1989 or have already been closed this year. This witness further advised that business decisions regarding store closings throughout the industry are made on the basis of profitability and future potential. No rebuttal testimony was offered.

The Debtor’s bankruptcy filing occurred on March 24, 1989. The very next day Debtor announced the closing of the Johns-town store. Six (6) weeks passed before Conrad filed this emergency action. In substance, Conrad seeks to stop the Debtor from allowing the Johnstown store lease to be rejected by operation of law, and in fact is trying to force Debtor to maintain the status quo — keep the store open and operating — through September of this year. Conrad, without substantiation, asserts that business will be strong this summer, anticipating substantial tourist interest as a result of the centennial observance of “The Johnstown Flood”. Conrad further avers that during said time frame a group of investors may be put together to purchase the store and continue its operation without interruption of the business.

Debtor’s President testified that to remain open through September would cost the estate an additional $600,000.00 in losses. Specifically, the inventory has been thoroughly depleted, and it would be several months before the stock could be replenished. He also testified that he was having some difficulty obtaining inventory for his highly productive stores, and felt it would be almost impossible to properly restock these shelves. The testimony further showed that Debtor has tried, albeit unsuccessfully, to sell the business at the Johns-town location to other prospective operators. The management has gone so far as to offer to sell the business, including the fixtures, for the consideration of $1.00. No one has accepted this offer.

Conrad’s legal argument avers that the closing of the store is an action outside the ordinary course of Debtor's business, and should not be permitted without prior notice and hearing. Debtor’s counsel has argued that the decision to close was made prepetition and that the opening and closing of locations is very much in the ordinary course of this Debtor’s business, and in fact, is in the ordinary course of business for the industry as a whole.

ANALYSIS

The moving party on a request for a preliminary injunction must generally show: (1) a reasonable probability of ultimate success on the merits of the litigation; and (2) that the movant will be irreparably harmed if relief is not granted. Additionally, the Court must take into account (3) the possibility of harm to other interested parties from the grant or denial of the injunction and (4) the public interest. When the request is directed at providing mandatory relief, the burden on the movant is particularly heavy. Punnett v. Carter, 621 F.2d 578 (3rd Cir.1980); United States v. Spectra Foods Corp., 544 F.2d 1175 (3rd Cir. 1976). This heavy burden has not been met. To the contrary, Debtor has offered substantial proof in opposition to the requested relief.

I. Probability Of Success On The Merits

Under Chapter 11 of the Bankruptcy Code, a debtor in possession generally has the rights and duties of a trustee. 11 U.S.C. § 1107(a). Under § 1108, the debtor in possession is authorized to operate its business. One of the rights which can be exercised by the debtor in possession is the authority to use, sell, or lease estate property. 11 U.S.C. § 363. The requirement therein, imposing due process considerations, depends upon the classification of the particular transaction:

§ 363 Use, sale, or lease of property
(b)(1) The trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate.
[270]*270(c)(1) If the business of the debtor is authorized to be operated under section ... 1108, ... of this title, and unless the court orders otherwise, the trustee may enter into transactions, including the sale or lease of property of the estate, in the ordinary course of business, without notice or a hearing, and may use property of the estate in the ordinary course of business without notice or hearing.

The key issue in this injunction matter is whether the closing of the Johnstown store is in the ordinary course of this Debtor’s business. There are no cases directly on point to this issue. Therefore we analyze the concept of “ordinary course of business” and apply our present facts to the law. The term “ordinary course of business” can be examined from two standpoints: they have been denominated the “vertical” test and the “horizontal” test. In re Hanson Industries, Inc., 90 B.R. 405 (Bankr.D.Minn.1988); In re Waterfront Companies, Inc., 56 B.R. 31 (Bankr.D. Minn.1985).

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Bluebook (online)
100 B.R. 268, 1989 Bankr. LEXIS 801, 1989 WL 55590, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-glosser-bros-inc-pawd-1989.