Jackson v. Olam West Coast Inc., E.D. Cal., No. 1:12-cv-00791 (LJO), 10/12/12
An action for copyright infringement and other related claims was dismissed for lack of subject matter jurisdiction and referred to the bankruptcy court Oct. 11 by the U.S. District Court for the Eastern District of California (Jackson v. Olam West Coast Inc., E.D. Cal., No. 1:12-cv-00791 (LJO), 10/12/12).
Judge Lawrence J. O'Neill found that the plaintiff's claims arose in the context of a defendant's bankruptcy and therefore the bankruptcy court was better suited to address the action.
In May 2009, SK Foods filed for Chapter 11 protection in California and a trustee was appointed and assumed control of the company. After the trustee had been appointed but before bankruptcy schedules had been filed, Jackson provided SK Foods with proposals to install new software at various SK Foods facilities.
On June 5, 2009, SK Foods filed bankruptcy schedules but did not list Jackson as a creditor, nor did it list the software systems and licenses as assets. On June 26, 2009, the bankruptcy court approved the trustee's motion to sell substantially all of SK Foods's assets to Olam West Coast Inc. and Olam Tomato Processors Inc. (collectively “Olam”).
Shortly after the sale order had been entered, SK Foods instructed Jackson to install the new software. According to Jackson, the “Legacy System” referred to in the purchase agreement included the new software he installed after SK Foods had filed for bankruptcy protection.
On May 14, 2012, Jackson filed a suit in the district court for copyright infringement and related claims. He argued that SK Foods did not have the right to transfer title of the pre-petition software systems to Olam. He also argued that he completed the installation of the new software with the understanding that a license agreement would be negotiated with Olam after closing.
The trustee for SK Foods moved to dismiss the suit due to lack of subject matter jurisdiction because Jackson had failed to seek leave of the bankruptcy court before bringing the action. Olam joined in the motion to dismiss.
Jackson argued that his claims were against “SK Foods for its post-petition conduct, not against the Chapter 11 [t]rustee for acts in furtherance of his official duties.” The defendants argued that the trustee was acting within the scope of his duties when he sold SK Foods's assets to Olam, and that Jackson's claims arose out of this transaction.
The district court agreed with the defendants that the “transaction giving rise to the complaint's claims was the transfer of the Jackson software systems to Olam which arose during [the trustee's] liquidation and administration of SK Foods's bankruptcy estate.” Therefore, the court found that Jackson's claims were subject to the Barton doctrine and that Jackson should have first sought leave of the bankruptcy court.
“Holding Mr. Jackson to the bar date would serve only to promote SK Foods's questionable conduct in failing to disclose the Jackson software system,” the court said. “Defendant's point to no relevant authority that Mr. Jackson's limited, unconfirmed knowledge subjects him to the bar date to preclude his claim arising from events near the time of and after the sale of SK Foods's assets to Olam.”
Finding there was no “legal or factual support” for holding Jackson to the bar date, the court did not grants the defendants a judgment on the pleadings.
The defendant's argued that Jackson's claims arose out of the bankruptcy court's approval of the sale to Olam and that the action's outcome will have a “conceivable effect” on the bankruptcy estate . The court said that Jackson “raise[d] no meaningful opposition to bankruptcy referral.”
“At a minimum, the complaint's claims arise in the context of SK Foods's bankruptcy to warrant referral to the bankruptcy court,” the court said. Accordingly, the court dismissed Jackson's complaint without prejudice and referred the action to the bankruptcy court.
By Stephanie M. Acree
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)