Filed: Mar. 03, 2009
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 2009 Decisions States Court of Appeals for the Third Circuit 3-3-2009 In Re: Cone Mills Co Precedential or Non-Precedential: Non-Precedential Docket No. 08-1755 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2009 Recommended Citation "In Re: Cone Mills Co " (2009). 2009 Decisions. Paper 1786. http://digitalcommons.law.villanova.edu/thirdcircuit_2009/1786 This decision is brought to you for free and open access by the Opinions of t
Summary: Opinions of the United 2009 Decisions States Court of Appeals for the Third Circuit 3-3-2009 In Re: Cone Mills Co Precedential or Non-Precedential: Non-Precedential Docket No. 08-1755 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2009 Recommended Citation "In Re: Cone Mills Co " (2009). 2009 Decisions. Paper 1786. http://digitalcommons.law.villanova.edu/thirdcircuit_2009/1786 This decision is brought to you for free and open access by the Opinions of th..
More
Opinions of the United
2009 Decisions States Court of Appeals
for the Third Circuit
3-3-2009
In Re: Cone Mills Co
Precedential or Non-Precedential: Non-Precedential
Docket No. 08-1755
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2009
Recommended Citation
"In Re: Cone Mills Co " (2009). 2009 Decisions. Paper 1786.
http://digitalcommons.law.villanova.edu/thirdcircuit_2009/1786
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2009 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 08-1755
_______
IN RE: CONE MILLS CORPORATION, et al,
Debtors
CROMPTON COLORS INC.; CROMPTON CORPORATION,
Appellants
On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 1-05-cv-00232)
District Judge: Honorable Gregory M. Sleet
Argued January 12, 2009
Before: SLOVITER and BARRY, Circuit Judges,
and POLLAK * , District Judge
(Filed : March 03, 2009 )
_____
John M. Armstrong, Esq.
Schnader Harrison Segal & Lewis
220 Lake Drive East
Woodland Falls Corporate Park
Cherry Hill, N.J. 08002
Gerard S. Catalanello , Esq. (Argued)
WolfBlock
250 Park Avenue
New York, N.Y. 10177
*
Hon. Louis H. Pollak, Senior Judge, United States District
Court for the Eastern District of Pennsylvania, sitting by
designation.
Virginia L. Hogben, Esq.
WolfBlock
1650 Arch Street
22 nd Floor
Philadelphia, PA l9l03
Attorneys for Appellants
Michael R. Lastowski, Esq. (Argued)
Duane Morris
1100 North Market Street
Suite 1200
Wilmington, DE 19801
Attorney for Appellee
_____
OPINION
SLOVITER, Circuit Judge.
Crompton Colors Corporation (now known as “Chemtura”),1 appeals the District
Court’s order affirming the Bankruptcy Court’s ruling that Chemtura is bound by the
order authorizing the sale (“Sale Order”) of substantially all of the assets of Cone Mills
Corporation (“Cone Mills”), a chapter 11 debtor in bankruptcy proceedings, to the
predecessors of International Textile Group (“ITG”). Cone Mills had operated a dye and
chemical manufacturing facility at the property that it sold more than thirty years ago to a
predecessor of Chemtura. Chemtura claims that it had known environmental litigation
1
On July 1, 2005, Crompton Corporation changed its name
to Chemtura Corporation.
2
claims against Cone Mills before the bankruptcy proceedings and that its claims were not
extinguished by the sale because Cone Mills allegedly failed to provide Chemtura with
constitutionally adequate notice. On this basis, Chemtura sought to bring successor
liability claims against ITG, which succeeded the companies that purchased Cone Mills’
assets. ITG moved the Bankruptcy Court to enforce the Sale Order against Chemtura.
The Bankruptcy Court granted ITG’s motion, ruling that Chemtura received proper notice
of the sale and that the bankruptcy sale barred future successor liability claims against
ITG.
I.
The parties are familiar with the factual and procedural background and we will
not repeat them here, except for the brief factual statement underlying this opinion.
On September 24, 2003, Cone Mills filed a voluntary petition for bankruptcy under
chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District
of Delaware. Thereafter, Cone Mills filed a motion for an order “authorizing the sale of
substantially all of [its] assets . . . free and clear of liens, claims, encumbrances, and
interests.” Supp. App. at 1453.
On November 7, 2003, the Bankruptcy Court approved Cone Mills’ motion, and
scheduled a sale hearing for February 9, 2004. The Bankruptcy Court ordered Cone Mills
to serve notice of the sale hearing on certain parties, including “all persons with potential
claims against the Debtor of at least $ 100,000 (based on filed proofs of claim or [Cone
3
Mills’] schedules or books and records).” Supp. App. at 1428. The Bankruptcy Court
also ordered service of the notice of the sale hearing on “parties to all unexpired leases,
license agreements and executory contracts” (“Cure Amount Notice”) so that such parties
could make objections to “cure” any additional amounts due or in default. Supp. App. at
1422. The Bankruptcy Court also required notice by publication. The Bankruptcy Judge
approved Cone Mills’ proposed form of notice for each set of parties and attached the
forms of notices as exhibits to the order.
After the sale hearing on February 9, 2004, “at which time all interested parties
were offered an opportunity to be heard with respect to” the proposed sale, Supp. App. at
1540, the Bankruptcy Court issued the order authorizing the sale of substantially all of
Cone Mills’ assets to ITG’s predecessors (hereafter “Buyers”). The Sale Order provided
that the Buyers would acquire the assets “free and clear of liens, claims, encumbrances,
and interests.” Supp. App. at 1539. The Sale Order also incorporated a finding of fact
that the Buyers would not have agreed to the Asset Purchase Agreement (“APA”) if the
sale “was not free and clear of all Interests of any kind or nature whatsoever, or if [ITG]
would, or in the future could, be liable for any of the Interests.” 2 Supp. App. at 1544.
The order further provided that those interest-holders who had not objected to the sale
were deemed to have consented to the sale, and that the Buyers are not the successor to
2
The Sale Order defines “Interests” very broadly to include
“liabilities, demands . . . [and] claims . . . arising under doctrines of
successor liability.” Supp. App. at 1544.
4
Cone Mills “by reason of any theory of law or equity” and shall not be responsible for any
of its liabilities or obligations, including environmental claims. Supp. App. at 1545.
In August 2004, the New Jersey Department of Environmental Protection
(“NJDEP”) brought environmental remediation claims against Chemtura and ITG in state
court, and Chemtura cross-claimed against ITG for contribution and unjust enrichment.
On December 13, 2004, Chemtura filed a proof of claim, asserting what are essentially
successor liability claims against ITG. ITG filed a motion with the Bankruptcy Court to
direct the NJDEP and Chemtura to comply with the Sale Order, arguing that these
successor liability claims violated the terms of that order. Chemtura responded that the
sale should not be enforced against it because Cone Mills failed to provide it with notice
that its “environmental/successor liability claims . . . would be eliminated because of the
asset sale.” App. at 1013.
Chemtura alleges that it was not served with the “auction and sale notice,” or the
many other forms of notice it claims it should have received, and alleges that it was “left
off of all service lists related to the notice of sale, the motion to approve the sale, the
proposed order and the Sale Agreement.” Appellant’s Br. at 14-15. It concedes that it
received the Cure Amount Notice on November 25, 2003, but contends that because that
notice was not addressed to a particular person in the corporation, the notice was sent to
the credit department which had no information on Cone Mills and placed the Cure
Amount Notice in an “inactive, ‘dead’ file.” App. at 1026. As a result, the document was
5
not “discovered” until February 16, 2005, shortly before a hearing on February 28, 2005,
before the Bankruptcy Court on ITG’s motion to enforce the sale.
Following an evidentiary hearing, the Bankruptcy Court delivered an oral ruling
finding for ITG, holding that the notice was provided in accordance with Rule 2002 of the
Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”) and that, because Chemtura
also had actual notice, it was “precluded from now attacking the sale order.” App. at
1334. Chemtura appealed this decision to the District Court, which affirmed the
Bankruptcy Court. Chemtura timely filed this appeal.3
II.
Chemtura was a general unsecured creditor of Cone Mills. The District Court held
that as a matter of law it was not entitled to the same notice of an asset sale authorized
under 11 U.S.C. § 363(f) as that which must be given to lienholders under Bankruptcy
Rules 6004(c), 9014 and 7004. In reviewing (and affirming) the order of the Bankruptcy
3
The District Court had jurisdiction to review the
Bankruptcy Court order under 28 U.S.C. § 158(a), and this court
has jurisdiction under 28 U.S.C. § 158(d). “In reviewing the
bankruptcy court’s determinations, we exercise the same standard
of review as the district court, that is, we review the bankruptcy
court’s legal determinations de novo, its factual findings for clear
error and its exercise of discretion for abuse thereof.” Interface
Group-Nevada, Inc. v. Trans World Airlines, Inc. (In re Trans
World Airlines, Inc.), 145 F.3d 124, 131 (3d Cir. 1998) (internal
quotations and citations omitted).
.
6
Court, the District Court stated that it was “undisputed that notice of the sale was sent to
Chemtura at the address: Crompton Corporation, Benson Road, Middlebury, CT 06749”
and it was then placed in a “‘dead’ file.” App. at 6. The Court agreed with the
Bankruptcy Court’s conclusion that Rule 6004(a) and Rule 2002(a)(2) controlled the
notice of service aspect of this case. The District Court stated that “Rule 6004 governs
the use, sale, or lease of property,” and that subdivision (a) of that rule “specifically
addresses notice requirements” and only requires that notice of a proposed “free and
clear” sale of assets be “given pursuant to Rule 2002(a)(2).” App. at 7-8.
Under Rule 2002, notice of a sale order to be given to general unsecured creditors
(such as Chemtura) that have not designated an alternate address is to be directed to the
creditor’s address that is found in the debtor’s records. The notice to Chemtura was sent
to its business address in Middlebury, Connecticut. Following a lengthy hearing, the
Bankruptcy Court concluded that Chemtura received the notice required under Rule
2002(a) and that it had actual notice of the sale.
Chemtura argues that pursuant to Rule 6004(c) the notice should have been
directed to one of its officers or other authorized agents. The Bankruptcy Court, in
reasoning that the District Court approved, rejected Chemtura’s argument, noting that
Chemtura’s interpretation “would eliminate Rule 2002(a)(2) and 6004(a).” App. at 1333.
We are persuaded by the District Court’s conclusion. In short, Chemtura was not
entitled to any heightened form of notice. The sale notice that Chemtura received
7
referred to the motion to approve the sale, described the assets to be sold, stated the
manner in which the APA could be obtained, stated the date and time of the sale hearing
and the deadline to object to the sale. Thus Chemtura received all the notice that was due.
The failure of its credit department to forward the notice to the legal department was its
responsibility. The District Court also agreed with the Bankruptcy Court’s conclusion
that Chemtura is bound by the Sale Order because it had actual notice of the sale.
Chemtura does not deny that it received such actual notice.
As a result, Chemtura has no basis to assert its claims against ITG which acquired
Cone Mills’ assets free and clear. Of course, Chemtura retains its claim against Cone
Mills as an unsecured creditor. For the reasons set forth, we will affirm the District
Court’s order.
8
