The opinion of the court was delivered by: RICARDO URBINA, District Judge
GRANTING THE DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
This case comes before the court on the defendants' motion for
summary judgment. Pursuant to a bankruptcy court order, the
plaintiffs creditors of the bankrupt defendant were required
to file proofs of claim with the bankruptcy court to preserve
their claims against the defendants' estate. The defendants
assert that the plaintiffs failed to file proper proofs of claim
in the bankruptcy proceedings. As a threshold matter, the court
concludes that it has jurisdiction to adjudicate the defendants'
motion for summary judgment. The court further holds that the
plaintiffs did not file adequate proofs of claim for three
reasons: first, five of the plaintiffs did not individually file
proofs of claim at all; second, the other five plaintiffs filed
proofs of claim unrelated to the subject of this litigation;
third, the Dulworth Family Limited Partnership ("the
Partnership") could not file proofs of claim on behalf of the
plaintiffs. Accordingly, because the plaintiffs failed to
preserve their allegations through valid proofs of claim filed
with the bankruptcy court, the court grants the defendants' motion for
In February 1995, U.S. Office Products Company ("USOP") held
its initial public offering and subsequently grew by either
purchasing or merging with small companies. Defs.' Mem. in Supp.
of Mot. for Summ. J. ("Defs.' Mot.") at 3. One such company was
Dulworth Office Furniture Company ("DOF"). Id. In October 1997,
USOP merged with DOF (collectively, "the defendants"), a company
formerly owned by members of the Dulworth family. Id.
On September 3, 1999, ten parties Jack Dulworth, Joseph
Dulworth, Chan Milton, Edward Dulworth, Thomas Dulworth, Mary
Dulworth, Jack Dulworth Trust, Joseph Dulworth Trust, Thomas
Dulworth Trust, and Chan Milton Trust (collectively, "the
plaintiffs") filed an initial Verified Complaint ("Initial
Compl.") in Kentucky state court, asserting claims of common law
fraud, defamation, and breach of contract. Id. at 4; Defs.'
Mot. for J. on the Pleadings at 2. The plaintiffs named as
defendants both USOP, a Delaware corporation, and DOF, a Kentucky
corporation which was by then a wholly-owned subsidiary of USOP.
Defs.' Mot. for J. on the Pleadings at 2. In this Initial
Complaint, however, the plaintiffs only asserted claims against
USOP. Defs.' Mot. at 4. The defendants then removed the case to
federal court in Kentucky, and the district court denied the
plaintiffs' motion to remand, holding that the plaintiffs had
fraudulently joined DOF to defeat diversity. Id.
On January 17, 2000, the plaintiffs filed an Amended and
Substitute Verified Complaint ("Am. Compl."), which listed claims
against DOF and new claims against USOP. The complaint listed eight counts in total: two for common law and securities
fraud arising out of the merger between USOP and DOF, and six
counts based on defamation, invasion of privacy, failure to
return pledged assets, breach of contract, a declaration of
rights regarding non-competition agreements, and punitive
damages, allegedly arising from events occurring in 1998 or 1999.
Am. Compl. at 2. Because the plaintiffs brought the new
securities fraud claim against USOP under the Securities Act of
1933 and thus provided an independent basis for federal
jurisdiction, the Kentucky District Court again denied the
plaintiffs' renewed motion to remand Id. at 4. The case was
then transferred to this court. Id.
On May 26, 2000, the Partnership filed a separate lawsuit in
Kentucky state court against the defendants based on claims of
fraud, breach of contract, and promissory estoppel. Dulworth
Family Ltd. P'ship v. Dulworth Office Furniture Co., No.
00CI03437 (Jefferson Ky. Cir. Ct. May 26, 2000) ("State Compl.").
The Partnership includes Edward Dulworth, Mary Dulworth, Jack
Dulworth, Joseph Dulworth, and Chan Milton, who are also
plaintiffs in the instant suit. Defs.' Statement of Undisputed
Facts ("Defs.' Statement") ¶ 7. The other five plaintiffs in this
suit Thomas Dulworth, Jack Dulworth Trust, Joseph Dulworth
Trust, Thomas Dulworth Trust, and Chan Milton Trust are not in
the Partnership. Id.
On March 5, 2001, the defendants filed for Chapter 11
Bankruptcy in the United States Bankruptcy Court for the District
of Delaware ("the Bankruptcy Court"). Id. ¶ 1. The next day,
the defendants notified the plaintiffs of their bankruptcy
filings. Id. On May 10, 2001, the Bankruptcy Court set a July
16, 2001 deadline for persons with claims against the defendants
to file proofs of claim against the bankruptcy estate.*fn1
Id. ¶ 2. Subsequently, the Bankruptcy Court extended the
deadline to September 17, 2001 ("the Bar Date"). Id. In both of
these orders, the Bankruptcy Court stated that all "creditors
. . . must file proofs of claim" or be "forever barred, estopped
and enjoined from asserting claims." Bankr. Ct. Order dated May
10, 2001; Bankr. Ct. Order dated Aug. 6, 2001. The defendants
notified all of the plaintiffs of the Bar Date, provided
instructions for filing proofs of claim, and informed them of the
relevant deadlines. Defs.' Statement ¶ 3.
On December 13, 2001, and while the federal and state cases
were pending, the Bankruptcy Court entered an Order, that
confirmed USOP's Joint Liquidating Plan of Reorganization
(collectively, "the Plan and Order"). Bankr. Ct. Order dated Dec.
13, 2001; First Am. Plan of Reorganization dated Nov. 5, 2001.
The reorganization plan stated specifically that holders of
"Class 7 Insured Litigation Claims" had the right to prosecute
against USOP for any claims covered by liability insurance. First
Am. Plan of Reorganization dated Nov. 5, 2001 at 19-20. The
plaintiffs in this case contend that six of their eight counts
(excluding defamation and invasion of privacy) are "Class 7
Insured Litigation Claims" as defined by the reorganization plan,
because they have "claim[s] against a debtor that are the subject
of litigation pending in a court of competent jurisdiction."
Id. at 9-10. In addition, for a holder of a claim to proceed
against the defendants' estate, that holder's claim must be
"Allowed" by the Bankruptcy Court. Id. at 3. As specified by
the reorganization plan, one means by which a creditor's claim
becomes "allowed" comes into play when that creditor files a
proof of claim with the Bankruptcy Court by the Bar Date. Id. The Bankruptcy Court's confirmation order
states, in part, that Class 7 Insured Litigation Claims are
"deemed to have accepted the [reorganization] plan." Bankr. Ct.
Order dated Dec. 13, 2001 at 4. Therefore, as holders of Class 7
Insured Litigation Claims who accepted the reorganization plan,
the plaintiffs had to file timely proofs of claim with the
Bankruptcy Court in order for their claims to be "allowed."
Bankr. Ct. Order dated May 10, 2001; Bankr. Ct. Order dated Aug.
6, 2001. In addition, the Plan and Order stated that all matters
arising out of, and related to the Chapter 11 Cases were referred
to the Bankruptcy Court's jurisdiction. Bankr. Ct. Order dated
Dec. 13, 2001; First Am. Plan of Reorganization dated Nov. 5,
Five of the plaintiffs Jack Dulworth, Joseph Dulworth, Chan
Milton, Edward Dulworth, and Thomas Dulworth timely filed ten
proofs of claim, concerning accrued vacation pay in the amounts
of $5,000 or $9,999. Defs.' Statement ¶ 4. The other five
plaintiffs Mary Dulworth, Jack Dulworth Trust, Joseph Dulworth
Trust, Thomas Dulworth Trust, and Chan Milton Trust did not
file individual proofs of claim. Id. ¶ 5.
The Partnership, a named party in the state suit but not in
this suit, timely filed two proofs of claim with the Bankruptcy
Court. Id. ¶ 8. The first addressed rent, insurance paid and
maintenance in the amount of $13,834.97. Id. The second
pertained to two leases dated October 17, 1997 as well as a claim
for "Fraud, as a Plaintiff in the `Multi-District' fraud
litigation." Id. The partnership physically attached the
Partnership's Kentucky state court complaint to the second proof
of claim. Id.
The case was stayed due to the bankruptcy proceedings.
Subsequently, the plaintiffs filed a motion for summary judgment.
The court ...