467 B.R. 44
S.D.N.Y.2012Background
- Grocery Haulers, Inc. (GHI) sought to challenge the automatic stay to permit filing a third-party claim against Pathmark’s former parent, A&P, in a New Jersey action arising from Pathmark’s bankruptcy.
- Pathmark Stores, Inc. was acquired by The Great Atlantic & Pacific Tea Company, Inc. (A&P) in 2007; GHI had long provided trucking under a 1997 Trucking Agreement with Pathmark.
- C&S Wholesale Grocers, Inc. (C&S) handled Pathmark’s procurement and supply; A&P and C&S integrated contracts but the Trucking Agreement with GHI remained in place.
- In 2011, Pathmark rejected the Trucking Agreement under § 365, prompting significant layoffs and WARN Act exposure for GHI due to the pre-petition breach treated as pre-petition by the bankruptcy process.
- Local 863 filed a New Jersey action in March 2011 alleging WARN Act violations; GHI moved in the Bankruptcy Court for relief from the stay to pursue a third-party claim against A&P.
- The Bankruptcy Court denied relief, holding the claims arose from pre-petition rejection and were stayed; the district court affirmed, leading to this appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did WARN Act and tortious interference claims arise pre-petition? | GHI argued they post-petition claims not barred by stay. | Appellees contended claims flowed from pre-petition rejection of the Trucking Agreement and were stayed. | Yes; claims arose from pre-petition rejection and were stayed. |
| Whether the A&P claim is a contribution claim or primary liability under WARN Acts | GHI treated as joint/controlling-employer liability; sought relief to determine status. | Bankruptcy court properly categorized as contribution to be resolved in bankruptcy court. | Contribution theory; appropriate to adjudicate in bankruptcy court. |
| Whether relief from the automatic stay was appropriate under Sonnax factors | Relief would avoid inconsistent judgments and centralize issues in New Jersey. | Bankruptcy court has better position to adjudicate and avoid prejudice to creditors; centralization favorable to estate. | No; Sonnax factors weighed against lifting the stay. |
| Authority to enter final judgment on the third-party claims after Stern | Stem/Stern considerations raise potential limits on core proceedings and final judgments. | Bankruptcy court has core authority; claims arise in administration of the estate and may be resolved in bankruptcy court. | Bankruptcy court had authority to decide and could enter final judgment; no abuse of discretion. |
Key Cases Cited
- Sonnax Indus., Inc. v. Tri-Component Prod. Corp., 907 F.2d 1286 (2d Cir. 1990) (twelve-factor test for stay-relief decisions)
- In re Park, 275 B.R. 253 (Bankr.E.D.Va. 2002) (breach timing after petition treated as pre-petition for stay purposes)
- In re Old Carco LLC, 424 B.R. 633 (Bankr.S.D.N.Y. 2010) (rejection of executory contracts and post-petition effects)
- In re Salander O’Reilly Galleries, 453 B.R. 114 (Bankr.S.D.N.Y. 2011) (core/related-concept distinctions and Stem guidance)
- In re DBSI, Inc., 409 B.R. 720 (Bankr.D. Del. 2009) (rejection of leases; administration of estate; core proceedings)
- Stern v. Marshall, 131 S. Ct. 2594 (U.S. 2011) (constitutional limits on final judgments in certain bankruptcy contexts)
- NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984) (rejection authority as essential to bankruptcy restructuring)