Schwinn Cycling & Fitness, Inc. v. Benonis (In Re Schwinn Bicycle Co.)

210 B.R. 747, 1997 Bankr. LEXIS 469, 1997 WL 395687
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedMarch 7, 1997
Docket19-00323
StatusPublished
Cited by18 cases

This text of 210 B.R. 747 (Schwinn Cycling & Fitness, Inc. v. Benonis (In Re Schwinn Bicycle Co.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy 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
Schwinn Cycling & Fitness, Inc. v. Benonis (In Re Schwinn Bicycle Co.), 210 B.R. 747, 1997 Bankr. LEXIS 469, 1997 WL 395687 (Ill. 1997).

Opinion

MEMORANDUM OPINION ON DEFENDANTS’ MOTION TO DISMISS

JACK B. SCHMETTERER, Bankruptcy Judge.

This adversary proceeding was filed as assertedly related to bankruptcy proceedings filed by Schwinn Bicycle Co. and various related entities (collectively “Debtors”), all consolidated under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et seq. Debtors’ liquidating Plan of reorganization was confirmed on January 6, 1994. A year earlier, on January 19, 1993, the entity since succeeded to by Schwinn Cycling & Fitness Inc. (“New Schwinn”) purchased Debtor’s assets related to production.

On April 18, 1996, Defendants Daniel Benonis, Robert Benonis, William Benonis, and Nancy Benonis (collectively with Guy’s Bicycles Inc. “Defendants”) filed a products liability action in Pennsylvania state court against Debtor Schwinn Bicycle Co., New Schwinn, the other adversary plaintiffs herein, and also George Benonis, and Guy’s Bicycles. On July 30, 1996, New Schwinn and the state court defendants (but not Debtor Schwinn Bicycle Co.) George Benonis, and Guy’s Bicycles (collectively “Plaintiffs”) filed this adversary complaint against the Defendants here seeking declaratory and injunctive relief against Defendants’ attempts in state court to impose liability asserted here against these Plaintiffs as Debtors’ purported successors for an injury that occurred January 28, 1995, involving equipment manufactured or sold by Debtors in 1992 prior to the bankruptcy filing here.

Defendants moved to dismiss this adversary proceeding, arguing that Plaintiffs can prove no set of facts in support of their allegations that would permit them to prevail on their claim. For reasons stated below, *751 Defendants’ motion to dismiss the adversary complaint is allowed, and the adversary proceeding will be dismissed.

BACKGROUND AND FACTS PLEADED

Schwinn Cycling & Fitness Inc. (“New Schwinn”), Scott USA Inc., and Scott Sports Group, Inc. are Delaware corporations. Schwinn Bicycle and Fitness Limited Partnership (“Schwinn Bicycle L.P.”) was an Illinois limited partnership which was dissolved. SSG (Europe) S.A. is a corporation organized and existing under the laws of Switzerland.

The Debtor Schwinn Bicycle Company was formerly engaged in the business of designing, engineering, manufacturing, marketing and distributing bicycles, including exercise bicycles, éxercise products, and related products. On October 7, 1992, Schwinn Bicycle Company and eight related affiliates (collectively, “Debtors”) filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. Debtors’ cases were consolidated and jointly administered. Debtors remained in possession of their assets and continued in the management and operation of their businesses as debtors-in-possession.

With court approval (the “Sale Order”), Schwinn Bicycle L.P. purchased certain Acquired Assets of the Debtors under terms and conditions of an Asset Purchase Agreement dated January 19, 1993 (“Asset Purchase Agreement”). The Asset Purchase Agreement was executed by and between Debtors and Zell/Chilmark Fund L.P., a Delaware limited partnership. Pursuant to an Assignment dated January 19, 1993, Zell/Chilmark Fund L.P. assigned its rights and obligations as purchaser under the Asset Purchase Agreement to Bicycle and Fitness Limited Partnership, which changed its name to Schwinn Bicycle L.P. The sales transaction was consummated on January 20, 1993 (“Closing”). Following Closing of the sales transaction, the Debtor Schwinn Bicycle Company changed its name to S.B. Liquidating, Inc. Under its confirmed liquidating Plan, its assets have been liquidated, claims disputes resolved, and its cash assets have since been partly, though not entirely, distributed.

The general partner of Schwinn Bicycle L.P. was Bike G.P., Inc. On July 15, 1993, Bike G.P., Inc., an Illinois corporation, merged with and into New Schwinn. The surviving corporation after the merger was New Schwinn. On or about July 15, 1993, Schwinn Bicycle L.P. was dissolved and the Acquired Assets and other assets of the limited partnership were distributed to New Schwinn.

The Assumption Agreement

As a condition of the sales transaction, the Debtors and Schwinn Bicycle L.P. 1 executed an assumption agreement dated January 20, 1993 (“Assumption Agreement”). The Assumption Agreement was approved pursuant to the Sale Order. As part of consideration paid for the Acquired Assets, and as set forth in the Assumption Agreement, Schwinn Bicycle L.P. agreed to assume certain liabilities and obligations of the Debtors (“Assumed Liabilities”). The Assumption Agreement also provided that specified liabilities were retained by the Debtors. The liabilities of the Debtors that Schwinn Bicycle L.P. did not contractually assume and which were expressly retained by Debtors included any personal injury liability of Debtors and any product liability claim arising out of the conduct of Debtors’ businesses prior to Closing. The non-assumption by Schwinn Bicycle L.P. of those liabilities retained by Debtors (“Retained Liabilities”) is alleged to have been a material term of the sales transaction that was reflected in the consideration paid for the Acquired Assets.

The Sale Order

On January 5,1993, Debtors filed a motion with this Court seeking approval of the sale of the Acquired Assets to Schwinn Bicycle L.P. The sale was approved pursuant to an order dated January 19, 1993 (the “Sale Order”). Before approving the asset sale, the Court heard testimony of the extensive ef *752 forts made by Debtors to sell the assets. The offer to purchase was “the only offer of which the debtors [were] aware.” The Order found that the asset sale was in the best interest of the Debtors’ estates, creditors, and non-creditors with interests in the bankruptcy. Sale of the Acquired Assets to Schwinn Bicycle L.P. was to be free and clear of any and all claims against such Assets, with all claims to attach to the proceeds. The Sale Order provided for such sale, free and clear of claims pursuant to Section 363 of the Bankruptcy Code.' The Sale Order also stated that Schwinn Bicycle L.P. was not a successor in interest to Debtors.

Pursuant to the Sale Order, consideration to be paid for the Acquired Assets was approved, which consideration included the assumption of certain defined Assumed Liabilities and the retention by the Debtors of the Retained Liabilities. Schwinn Bicycle L.P. paid the consideration for the Acquired Assets to the Debtors, assumed the Assumed Liabilities, and complied with all of the other provisions of the Asset Purchase Agreement. Plaintiffs allege that, in doing so, the purchaser relied on terms of the Asset Purchase Agreement and related agreements, and on the benefits and protection of the Sale Order. As stated, Schwinn Bicycle L.P. was later dissolved, and the Acquired Assets, and other assets of the dissolved limited partnership, were distributed to New Schwinn.

Confirmation of the Plan

Debtors filed their Second Amended Joint Liquidating Plan (“Plan”) on December 30, 1993. The Plan was confirmed on January 6, 1994.

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Cite This Page — Counsel Stack

Bluebook (online)
210 B.R. 747, 1997 Bankr. LEXIS 469, 1997 WL 395687, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schwinn-cycling-fitness-inc-v-benonis-in-re-schwinn-bicycle-co-ilnb-1997.