Alithochrome Corp. v. Collectors' Guild Ltd. (In re Alithochrome Corp.)
Docket: Bankruptcy No. 82 B 10335-36; Adv. No. 82 5783A
Court: District Court, S.D. New York; June 9, 1983; Federal District Court
Alithochrome Corporation, the debtor, filed a motion to compel Collectors’ Guild Ltd. to respond to interrogatories and document requests, citing Federal Rules of Civil Procedure Rule 37(a)(2), and sought sanctions under Rule 37(d) for noncompliance. The dispute arises from Alithochrome’s claim for $91,736.05 for catalogs sold between July and October 1981 and Collectors’ Guild’s counterclaim for $119,400 plus $2,500,000 in damages for breach of contract and warranty. The case was initially filed in New York State Supreme Court in January 1982, removed to bankruptcy court following Alithochrome’s Chapter 11 petition in February 1983. Despite serving interrogatories in November 1982, Collectors’ Guild did not respond, asserting the bankruptcy court lacked jurisdiction based on a prior Supreme Court decision (Northern Pipeline Construction Co. v. Marathon Pipe Line Co.) and questioning the validity of the local emergency rule. The bankruptcy court noted that Collectors’ Guild had not sought a protective order regarding discovery. The court's jurisdiction was reaffirmed as the Southern District of New York had been adjudicating bankruptcy cases under a Uniform Emergency Rule effective December 25, 1982, which was upheld by other court decisions. The debtor's motion to compel was granted.
Judge Altemari affirmed the district court's jurisdiction over bankruptcy matters as established by Sections 404 and 405 of the Bankruptcy Reform Act of 1978 and 28 U.S.C. 1471(a) and (b). The Kaiser Court validated the district court's referral authority to bankruptcy judges under the Emergency Rule. The Fifth Circuit, in In Matter of Braniff Airways, upheld the district court's bankruptcy jurisdiction, as did the Sixth Circuit in White Motors Corporation v. Citibank, N.A., affirming that the interim rule complies with constitutional standards and does not conflict with the Supreme Court’s Northern Pipeline ruling. The court clarified that district courts maintain primary jurisdiction, with bankruptcy courts holding only derivative jurisdiction.
In the current case, since the action is related to a Title 11 case, it falls under the district court's jurisdiction per 28 U.S.C. 1471(b), and has been correctly referred to the bankruptcy court as a related proceeding. Bankruptcy judges cannot issue final judgments in related proceedings unless the parties consent; they can only provide findings and proposed judgments to the district judge. The court assessed whether Alithochrome is entitled to compel Collectors’ Guild to respond to interrogatories and document demands, which is governed by Federal Rules of Civil Procedure. Alithochrome served its demands properly, and as of January 7, 1983, Collectors’ Guild had not responded, entitling Alithochrome to a compulsion order under FRCivP 37(a). The court can impose sanctions for the noncompliance, and the reasonable expenses incurred by Alithochrome will be evaluated in a future hearing. Collectors’ Guild's motion to dismiss for lack of jurisdiction is denied.
Alithochrome’s motion to compel the opposing party to answer interrogatories and respond to document requests is granted. An evidentiary hearing regarding potential sanctions will be scheduled. The emergency rules in the Fifth and Sixth Circuits align closely with the emergency rule in the Second Circuit. Under 28 U.S.C. § 1471, district courts have original but not exclusive jurisdiction over civil proceedings related to Title 11 bankruptcy cases. The Emergency Rule specifies that all Title 11 cases and related civil proceedings are referred to bankruptcy judges, with related proceedings defined as those that, absent a bankruptcy petition, could be brought in district or state court.
Federal Rules of Civil Procedure (FRCivP) Rule 33 allows any party to serve written interrogatories that must be answered under oath within specified timeframes, with provisions for objections. Similarly, FRCivP Rule 34 permits requests for document production, requiring responses within 30 or 45 days, with options for objections. FRCivP Rule 37 outlines the procedures for compelling answers or responses when parties fail to comply with these discovery rules, emphasizing that noncompliance cannot be justified by objections unless a protective order has been sought under Rule 26(c).
