In Re International Endoscope Manufacturers, Inc.

79 B.R. 620, 1987 Bankr. LEXIS 1837
CourtUnited States Bankruptcy Court, E.D. Pennsylvania
DecidedNovember 24, 1987
Docket16-17779
StatusPublished
Cited by15 cases

This text of 79 B.R. 620 (In Re International Endoscope Manufacturers, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.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 International Endoscope Manufacturers, Inc., 79 B.R. 620, 1987 Bankr. LEXIS 1837 (Pa. 1987).

Opinion

MEMORANDUM OPINION

DAVID A. SCHOLL, Bankruptcy Judge.

Before us in both of the instant related bankruptcy cases are identical Motions filed in each case by DR. JAMES A. HARRINGTON (hereinafter referred to as “Harrington”) and COOPER LASERSON-ICS, INC. (hereinafter referred to as “Cooper”) (collectively Harrington and Cooper are referred to hereinafter as “the Mov-ants”) seeking a declaration that certain of the claims which they seek to assert in their respective proposed Counterclaims in the pending actions brought against them by INTERNATIONAL ENDOSCOPE MANUFACTURERS, INC. (hereinafter referred to as “IEM”) are not subject to the automatic stay or, if determined to be so subject, to obtain relief from the automatic stay to assert these Counterclaims. We shall deny the Motions because we believe that it is extremely doubtful that these Counterclaims are compulsary or in the nature of setoffs and hence they assert no more than common unsecured claims. Relief from the automatic stay to assert “common unsecured claims” will be granted only if the “balance of hardships” tips in the movants’ favor, which we fail to find here.

Much of the history of the IEM Bankruptcy and the disputes therein with Harrington were related in our denial of a Motion to dismiss this case and another case, reported in a consolidated Opinion as In re Smith, 77 B.R. 496, 498-99 (Bankr.E.D.Pa.1987), and will not be repeated. Harrington is a scientist whose departure from the employ of the Debtors has set off numerous proceedings, including both these Debtors’ bankruptcies. Cooper employed Harrington immediately after he left the employ of the Debtors.

As we indicated in the Smith Opinion, IEM has instituted six separate actions against Harrington and/or Cooper, id. at 498, although only two of these are presently pending, one a consolidated action against Harrington and Cooper removed from this court to the District Court, where it is presently before Chief Judge John P. Fullam; and the other in the Superior Court of Los Angeles, California, against Cooper only.

Cooper, having previously answered both Complaints, now seeks, in the instant motion, relief from the automatic stay for *621 permission to amend its Answer to plead the following Counterclaims: 1

1. Declaratory relief against both Debtors relating to the substance of the claims brought against it.

2. Damages for institution of “vexa-cious litigation” against the Debtors’ counsel for filing the six lawsuits in issue.

3. Damages for abuse of process against IEM, its principal Walter Brittle (hereinafter referred to as “Brittle”), and the Debtors’ counsel, also based upon the Debtors’ multiple filings against it.

In his proposed Counterclaim Harrington recites fourteen (14) separate Counts, One, Thirteen, and Fourteen of which, coincide respectively, with Cooper’s three proposed Counterclaims recited above. The additional eleven Counts include claims for indemnity as to any successful claims asserted as to him by one Coherent Corporation against IEM & Brittle (Count Two); damages for intentional and negligent misrepresentations against IEM & Brittle (Counts Three and Four); damages for securities violations against IEM & Brittle (Count Five); damages for wrongful termination of his employment contract, breach of that contract, and tortious breach of the covenants of good faith in dealings concerning that contract against both Debtors (Counts Six, Seven, and Eight); and claims and damages for intentional interference with a contractual relationship, intentional infliction of emotional distress, breach of fiduciary duty, and violation of the Racketeer Influenced and Corrupt Organizations Act against Brittle only (Counts Nine, Ten, Eleven, and Twelve).

The parties appeared at a hearing scheduled on the Motions on November 5, 1987. No witnesses were called, but numerous documents, most of which were copies of filings in these bankruptcy cases and the actions in which the Movants sought to file the Counterlaims were admitted into evidence. Arguments extending for nearly one hour were presented, but none of the parties indicated a desire to submit any Briefs in support of their respective positions.

The principal arguments of the Movants are as follows:

1. Their Counterclaims, or at least some of them, were compulsary under Bankruptcy Rule (hereinafter referred to as “B.Rule”) 7013 and Federal Rule of Civil Procedure (hereinafter referred to as “F.R. Civ.P.”) 13(a), which factor is, in itself, claimed to be sufficient to justify relief on the basis of the holding in In re Zweygardt, 51 B.R. 214 (D.Colo.1985).

2. Judicial economy would be served by allowing litigation of all matters inter-related with IEM’s claims against the Movants together in a single forum.

However, we must observe, at the outset, that there are two principles which would be sacrificed if we granted these motions. One is the concept that all creditors of a particular debtor must share equally in realizing claims against the debt- or’s estate, which caused us to suggest that asserting a setoff by way of a counterclaim and the concomitant right of a creditor to obtain relief from the automatic stay to assert such a counserclaim and setoff must be carefully analyzed in Lessig, supra, 67 B.R. at 440-45. Accord, In re New York City Shoes, Inc., 78 B.R. 426, 431 (Bankr.E.D.Pa.1987); and In re Windsor Communications Group, Inc., Windsor Communications Group, Inc. v. Havertown Printing Co., Bankr. No. 82-03714K, Adv. No. 83-1971K, slip op. at 15, 22 n. 6 (Bankr.E.D.Pa., Report and Opinion filed Jan. 21, 1987), approved, 79 B.R. 210 (E.D.Pa.1987).

The other principle is that the automatic stay is a most fundamental and significant protection to a debtor, see In re Clark, 69 *622 B.R. 885, 889-90 (Bankr.E.D.Pa.1987), relief from which can be accorded to an unsecured creditor only when it is established that the “balance of hardships” tips in the creditor's favor. See In re Ziets, 79 B.R. 222, 226-27 (Bankr.E.D.Pa.1987); In re Cherry, 78 B.R. 65, 72-74 (Bankr.E.D.Pa.1987); In re Ronald Perlstein Enterprises, Inc., 70 B.R. 1005, 1010 (Bankr.E.D.Pa.1987), appeal dismissed, C.A. No. 87-2364 (E.D.Pa. June 25, 1987); and In re Stranahan Gear Co., 67 B.R. 834, 837-38 (Bankr.E.D.Pa.1986). One of the considerations in this balance is conserving the resources and energies of the Debtor which would be otherwise expended in litigating claims in other forums. See Perlstein, supra, 70 B.R. at 1009; and Stranahan Gear, supra, 67 B.R. at 838.

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