2009 Chapter 11 Recent Developments (Part I)

Reasoning:

The trustee is not entitled to an inference that, because Agripool did not produce certain emails, Agripool applied pressure on the debtor. The presumption of adverse interest rule is not mandatory and the bankruptcy court did not violate its discretion in not drawing such an inference here when it found that it did not believe that the emails would have revealed that Agripool applied pressure for payment. And, in any event, collection practices alone are not sufficient to defeat the ordinary course of business defense.

(2)

The defendant's expert speculated in certain portions of his testimony with regard to industry standards and the testimony was not grounded on reliable data. Thus, the defendant failed to carry its burden as to industry standards and the bankruptcy court erred in finding that the defendant met § 547(c)(2)(C).

b. Jury Trials

Gecker v. Marathon Fin. Ins. Co. (In re Automotive Professionals, Inc.), 389 B.R. 621 (Bankr. N.D. Ill. 2008)

Facts: Gecker, the chapter 11 trustee (the "Trustee"), of Automotive Professionals, Inc. ("API") filed an adversary proceeding against Marathon Financial Insurance Co., Inc., RRG ("Marathon"). In the complaint, Gecker asserted six counts based on misrepresentations to API and fraudulent acts in connection with Marathon's insurance policies. Marathon filed an answer in which it asserted the affirmative defense of 'contribution,' and a jury demand and a motion to withdraw the reference based on the jury demand. The Trustee concedes that three of the six claims are legal in nature; however, she argues that the remaining three claims - Count I (fraud in the inducement), Count IV (breach of contract), and Count VI (unjust enrichment) - are equitable claims and not subject to a jury trial. Additionally, the Trustee argues that because Marathon asserted a contribution claim, it waived its right to a jury trial.

Issues:

(1)

Whether Count I, IV, and VI are subject to a jury trial.

(2)

Whether Marathon waived its right to a jury trial in asserting the affirmative defense of contribution.

Rules:

(1)

Under Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989), the court "must first decide whether the remedy sought is legal or equitable in nature, and second, if it is legal, whether Congress has withdrawn jurisdiction by courts of law over the action and assigned it exclusively to a court, such as the bankruptcy court, in which jury trials are unavailable." "The actual remedy sought on each count will determine whether it is legal or equitable for purposes of the Seventh Amendment... If the plaintiff seeks a money judgment based on an equitable claim, the claim is generally considered legal in nature."

(2)

By filing a claim against a bankruptcy estate, a creditor waives its right to a jury trial. Counterclaims and defenses filed in adversary proceedings seeking affirmative relief from a bankruptcy estate also waive a jury trial. But, a court is required to look into the substance of any asserted defenses to determine whether they seek relief from the bankruptcy estate.

Holding: Counts I, IV, and VI are all subject to a jury trial. Marathon did not waive its right to a jury trial by asserting an affirmative defense.

Reasoning: The breach of contract and fraud in the inducement claims seek money damages and are legal claims that are brought in courts of law. As for the unjust enrichment claim, although restitution