536 B.R. 197
E.D. Mich.2015Background
- Miller Parking Company, LLC (Miller Detroit) filed Chapter 7 in Oct. 2009; Bruce H. Miller filed his own Chapter 7 shortly thereafter. Basil T. Simon was trustee for Bruce Miller’s estate.
- Multiple creditors filed claims in the Miller Detroit bankruptcy; James N. Miller and related trusts (JNM Trust) filed a claim in Nov. 2009.
- In Oct. 2011 Trustee Simon (for Bruce Miller) filed Claim No. 16 in the Miller Detroit case for $8,113,552.80 asserting an alter-ego theory tying Bruce Miller to Miller Detroit; the claim lacked supporting documentation initially.
- The JNM Trust objected in July 2013; Simon amended the claim to allege alter-ego liability so that Bruce Miller’s creditors could recover from Miller Detroit’s assets.
- Bankruptcy court sustained the objection and disallowed Claim 16, holding Simon (as Bruce Miller trustee) was not a "creditor" of Miller Detroit and lacked authority to file a claim on behalf of Bruce Miller’s creditors; the court also found much of the claim duplicative of existing creditor claims.
- District court affirmed: Simon lacked standing to appeal; substantively, the Bankruptcy Code’s definition of creditor and Michigan alter-ego law preclude a trustee filing derivative claims for another estate’s creditors; substantive consolidation (not cross-claims) is the available—but rare—remedy where estates are inextricably intertwined.
Issues
| Issue | Plaintiff's Argument (Simon) | Defendant's Argument (JNM Trust) | Held |
|---|---|---|---|
| Whether a Chapter 7 trustee may file a proof of claim in another debtor’s bankruptcy on behalf of the trustee’s creditors | Simon: As trustee for Bruce Miller, he may file a claim in Miller Detroit to protect Bruce Miller’s creditors and pursue alter-ego recovery | JNM Trust: The trustee is not a "creditor" of Miller Detroit; only a creditor may file a proof of claim and creditors have already filed their own claims | No — trustee is not a creditor under 11 U.S.C. §101(10)(A) and cannot file such a claim |
| Whether individual creditors (like JNM Trust) may object to another creditor’s proof of claim | Simon: A creditor cannot object to another creditor’s claim within the same class (invoking limits on multiple creditors objecting) | JNM Trust: Creditors are "parties in interest" and may object to potentially fraudulent or duplicative claims; courts may regulate but not bar such objections | Yes — a creditor who filed a proof of claim is a party in interest and may object; bankruptcy court properly entertained the objection |
| Whether prior rulings (CH Holding) or judicial estoppel permit Simon’s claim or bar JNM Trust’s position | Simon: CH Holding supports trustee-only authority to pursue alter-ego/fraudulent transfer theories and precludes creditors from pursuing such claims | JNM Trust: CH Holding was limited to trustee authority to sue on behalf of the debtor’s estate and does not authorize a trustee to assert derivative claims for another estate’s creditors | CH Holding does not authorize a trustee to file derivative claims for other creditors; it addressed trustee authority to pursue claims of the debtor’s own estate, not cross-estate claims |
Key Cases Cited
- Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565 (6th Cir. 2008) (bankruptcy finality reviewed more pragmatically; standards for appealability)
- In re Morton, 298 B.R. 301 (6th Cir. BAP 2003) (order overruling objection to claims can be final if it disposes of discrete dispute)
- Melamed v. Lake Cnty. Natl. Bank, 727 F.2d 1399 (6th Cir. 1984) (trustee stands in shoes of bankrupt, not of its creditors)
- In re RCS Engineered Prods. Co., Inc., 102 F.3d 223 (6th Cir. 1996) (alter-ego doctrine is applied for benefit of third parties, not for the corporation or its shareholders; subsidiary cannot assert alter-ego claim against parent)
- In re Cyberco Holdings, Inc., 734 F.3d 432 (6th Cir. 2013) (discusses substantive consolidation as an extraordinary equitable remedy)
- In re Baker & Getty Fin. Servs., Inc., 974 F.2d 712 (6th Cir. 1992) (frames factors and justification for substantive consolidation)