502 B.R. 819
Bankr. N.D. Ill.2013Background
- Pierport Development & Realty, Inc. filed for chapter 7 bankruptcy; its related Arenson Parties were found by arbitration to be bound by the CBA and jointly liable with Pierport for CBA violations.
- The Union obtained an arbitration award against Pierport; post-judgment collection led to claims against the Arenson Parties for veil-piercing/alter ego theories.
- Arenson Parties contested the arbitration board’s authority and the scope of claims, leading to district court activity and stay issues in bankruptcy court.
- The bankruptcy trustee and Arenson Parties negotiated a settlement to transfer assets to Arenson and release certain estate claims; the Union objected, resulting in revised settlement language.
- The Union sought to pursue its counterclaims in district court to enforce the arbitration award, while the Arenson Parties and Trustee debated standing and ownership of those claims; the Court considered the Union’s motion to dismiss and the effect of prior orders on stay and standing.
- The current adversary proceeding seeks declaratory and injunctive relief to bar or limit the Union’s counterclaims in the district court case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Union’s counterclaims are personal to the Union or belong to the estate | Union argues its claims are personal under Teknek and Koch. | Arenson Parties argue claims are general/estate claims suitable for Trustee. | Union’s counterclaims are partly personal and partly estate; Count I enforcement claims are personal to Union, Count II alter ego claims belong to Trustee. |
| Whether the Trustee has standing to release or settle claims the Union asserts | Trustee may release only estate claims, not Union’s personal claims. | Trustee cannot release claims personal to a creditor; settlement cannot extinguish Union’s claims. | Trustee cannot release Union’s personal claims; settlement releases only claims within Trustee’s power; Union’s personal claims remain to be pursued by Union. |
| Whether the Union’s enforcement of the arbitration award against Arenson Parties is stayed by the bankruptcy stay | Actions against Arenson Parties may proceed if not stayed; older orders allowed certain actions. | Automatic stay applies to Debtor’s estate, not to Union’s personal remedies; stay remains pertinent. | Union’s enforcement claims against Arenson Parties fall outside the stay where they are personal to Union; but overall relief limited by the stay order. |
| Whether the Trustee alone may pursue alter ego/veil-piercing claims on behalf of the estate | Trustee represents all creditors; alter ego claims belong to Trustee. | Union may pursue alter ego claims if injury is to Union and not to the estate; otherwise Trustee acts for estate. | Trustee has sole standing to pursue alter ego/veil-piercing claims on behalf of the estate; Union may not pursue those in the district court. |
Key Cases Cited
- Steinberg v. Buczynski, 40 F.3d 890 (7th Cir. 1994) (trustee cannot enforce creditor’s veil-piercing claims; personal to creditor)
- Koch Refining v. Farmers Union Central Exchange, Inc., 831 F.2d 1339 (7th Cir. 1987) (trustee may pursue debtor’s alter ego; creditors have personal claims)
- Teknek, LLC v. Teknek, Inc., 563 F.3d 639 (7th Cir. 2009) (distinguishes general vs. personal claims; trustee vs. creditor standing for alter ego claims)
- In re Cent. Ill. Energy, LLC, 406 B.R. 371 (Bankr. C.D. Ill. 2008) (trustee may release only claims within power; personal claims require creditor standing)
- Fisher v. Apostolou, 155 F.3d 876 (7th Cir. 1998) (general vs. personal claims; creditor injury analysis)