Opposition Brief — Good Hope Chemical Corp. Creditors' Committee v. Koerver, 105 S. Ct. 2328 (1985) (No. 84-1498)

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En the

Supreme Court of the United States

Ocroser Team, 1984

In RE

GOOD HOPE CHEMICAL CORPORATION,

DEBTOR,

GOOD HOPE CHEMICAL CORPORATION

CREDITORS COMMITTEE,

PETITIONER,

KOERVER & LERSCH,

RESPONDENT.

On Petition for Writ of Certiorari to

the United States Court of Appeals for the First Circuit

BRIEF IN OPPOSITION

TO PETITION FOR CERTIORARI

Gerornce MARSHALL Moriarty

(Counsel of Record)

Cuaaces P. NornMANDIN

Cuenyi A. LaFLevr

Rores & Gray

225 Franklin Street

Boston, Massachusetts 02110

(617) 423-6100

Counsel for Respondent,

Koerver & Lersch

BEST AVAILABLE COPY

Question Presented

Should this Court review the decision of the Court of

Appeals that Section 63c of the now repealed Bankruptcy Act

(11 U.S.C. 103(c)) does not affect the date for converting a

particular creditor's claim in this Chapter XI proceeding from

foreign currency to dollars?

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TABLE OF CONTENTS

Page

ere latin csdevavoscerssevaes I

ES ar 2

Reasons for Denying the Writ....................... 3

I. The Committee’s Petition Presents No Question

of Federal Law Which Requires Resolution by

ee i eke keke sees 3

II. There Is No Conflict Between the Decision of

the Court of Appeals in This Case and Any

Decision of Any Other Court of Appeals or of

tk Sarg A Asn ia'h a anne who sot fs 4

A. The Court of Appeals’ Interpretation of

Section 63c Does Not Conflict With

Workman or Bildisco.................. 4

B. The Decision of the Court of Appeals Cor-

rectly Interprets, and Does Not Conflict

With, Hicks v. Guinness............... 5

SS EDISI NEEDS EY ie Be ee a 6

TABLE Or AUTHORITIES

Cases

Deutsche Bank Filiale Nurnberg v. Humphrey. 272 U.S.

eee ia ies aie WkD «pe s.0 0 650 ee 5 n.3

Hicks v. Guinness, 269 U.S. 71 (1925)........ 2,.5&n.3.6

Miller v. Meinhard-Commercial Corp. . 462 F.2d 358 (5th

ee et bua ay a dekicaw Akane bss 5n.3

NLRB v. Bildisco and Bildisco. 104S.Ct. 1188 (1984)... 4.5

Workman v. Harrison, 282 F.2d 693 (10th Cir. 1960)... 4,5

Statutes

Bankruptcy Act of 1898, §63c, 11 U.S.C. §103(c) (1976)

EES IPS RAL FRE OU ee nrg I, 2, 3, 4, 6

Bankruptcy Act of 1898, §367(1), 11 U.S.C. §767(1) (1976)

OP OE Se ee ay a 5n.3

Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, § 401,

ei he cokes so hb ukvescvesece 2n.2

_ Bankruptcy Reform Act of 1978, Pub.L. No. 95-598,

I Ns WE MII oo vise ene e cc nscene 2n.2

In the

Supreme Court of the United States

Ocroser TERM, 1984

No. 84-1498

IN RE |

GOOD HOPE CHEMICAL CORPORATION,

DEBTOR,

GOOD HOPE CHEMICAL CORPORATION

CREDITORS’ COMMITTEE,

PETITIONER,

KOERVER & LERSCH,

RESPONDENT.

On Petition for Writ of Certiorari to

the United States Court of Appeals for the First Circuit

BRIEF IN OPPOSITION TO

PETITION FOR CERTIORARI

The respondent Koerver & Lersch submits this brief in

opposition to the petition of the Good Hope Chemical Corpo-

ration Creditors’ Committee (the “Committee”) for a writ of

certiorari to the United States Court of Appeals for the First

Circuit.

Statement of the Case

Koerver & Lersch is a West German manufacturing con-

cern! whose claim in the Chapter XI proceeding of Good Hope

Chemical Corporation (“Chemical”) is the subject of this case.

The issue before the United States Court of Appeals for the

First Circuit was the proper exchange rate to be used in con-

verting the allowed claim of Koerver & Lersch from West Ger-

man marks to United States dollars. The Court of Appeals,

applying the “breach day rule” of Hicks v. Guinness, 269 U.S.

71 (1925), held that the exchange rate to be used was that in

effect on May 9, 1980, the date on which Chemical’s contract

with Koerver & Lersch was rejected by confirmation of

Chemical’s Plan of Arrangement. See Opinion of the Court of

Appeals, reprinted in Appendix to the Committee’s Petition

for Certiorari, at A-14. The Plan of Arrangement specified

that Chemical’s executory contracts would be rejected effec-

tive as of confirmation. (A-12 n. 7).

The Court of Appeals rejected the Committee’s contention

that now repealed Section 63c of the Bankruptcy Act of 1898,

11 U.S.C. §103(c) (1976)* (hereinafter “Section 63c”), re-

quired that the date of breach relate back to October 31, 1975,

the date on which Chemical filed its Chapter XI petition.

(A-12-14). The Court of Appeals held that the rationale of the

“relation back” rule of Section 63c “has no applicability to the

conversion rate issue.” (A-13-14). The Committee now asks

this Court to review the applicability of Section 63c to the facts

of Koerver & Lersch’s claim.

! Koerver & Lersch is not a corporation.

* The Bankruptcy Act of 1898 was repealed by Bankruptcy Reform Act of

1978, which enacted the Bankruptcy Code. Pub. L. No. 95-598, § 401, 92

Stat. 2549, 2682 (1978). The Bankruptcy Act of 1898, however, continues to

govern all cases commenced thereunder, which “shall be conducted and

determined under such Act as if [the Code] had not been enacted.” Pub. L.

No. 95-598, § 403(a), 92 Stat. 2549, 2683 (1978). The instant case, which

was commenced in 1975, is governed by the Bankruptcy Act.

Reasons for Denying the Writ

I. THe Commorrreze’s Perrrion Presents No QuESTION OF

FeperaL Law Wuicnh Regumes Reso.ution sy THis

Court.

The only issue presented for review in the Committee’s peti-

tion is the Court of Appeals’ decision that a particular section

of the Bankruptcy Act was inapplicable to the calculation of

Koerver & Lersch’s claim in this proceeding. In reaching this

decision, the Court of Appeals relied on the factual back-

ground of Chemical’s Chapter XI proceeding, noting that

“{hjere the breach was complete, and the compensable loss

incurred, only when the contract was rejected on May 9, 1980,

not before.” (A-13). The Court of Appeals made no ruling as to

the applicability or interpretation of Section 63c in any other

context. Nor does the Committee suggest any universality to

the underlying fact pattern, so as to commend this case to this

Court's attention. Indeed, the Committee has cited no other

case raising the exchange rate issue in the context of a Chapter

XI proceeding, nor is respondent aware of any.

In any event, Section 63c itself has since been repealed. The

Bankruptcy Reform Act of 1978, which repealed the Bank-

ruptcy Act and replaced it with the new Bankruptcy Code, see

note 2, supra, does not carry forward the wording of Section

63c which was before the Court of Appeals in this case. While

certain provisions of the Bankruptcy Code may be similar to

Section 63c, see Petition at 7, those provisions differ in

language and legislative history and were not addressed by the

Court of Appeals herein.

II. THere Is No Conruicr BETWEEN THE DECISION OF THE

Court oF APPEALS IN THIS CASE AND ANY DECISION OF ANY

OTHER Court OF APPEALS OR OF THIS CouRT.

The basis of the Committee’s petition is a claimed conflict

between the decision of the Court of Appeals for the First Cir-

cuit in this case and the decisions of other federal courts.

However, examination of the cases relied upon by the

Committee readily reveals that no such conflict exists.

A. The Court of Appeals’ Interpretation of Section 63c

Does Not Conflict With Workman or Bildisco.

The Committee suggests that the First Circuit’s interpreta-

tion of Section 63c somehow conflicts with the decision of the

Tenth Circuit in Workman v. Harrison, 282 F.2d 693 (10th

Cir. 1960), and with the decision of this Court in NLRB v.

Bildisco and Bildisco, 104 S.Ct. 1188 (1984). However, those

cases in no way conflict with the Court of Appeals’ decision; in

fact, they are simply not pertinent to the issue in this case.

In Workman v. Harrison, 282 F.2d 693 (10th Cir. 1960), the

Tenth Circuit was called upon to determine the rights of a

shopping center promoter against the bankruptcy estate of a

corporate financier who had orally agreed with the promoter

to provide financing in exchange for certain services. The

court found that the oral agreement was a valid contract

whose rejection by the trustee in bankruptcy constituted a

breach and entitled the promoter to assert a claim against the

estate. Id. at 699. However, the court rejected the promoter’s

claim to the land on which the shopping center was to have

been built, holding that under Section 63c the promoter’s

claim was instead limited to the value of his contract at the

time of the filing of the bankruptcy petition. Jd. at 699.

NLRB v. Bildisco and Bildisco, i104 S.Ct. 1188 (1984), did

not involve Section 63c at all. There this Court considered the

issues of whether a collective bargaining agreement was an

executory contract subject to rejection in a case under Chapter

11 of the new Bankruptcy Code, and whether such a rejection

constituted an unfair labor practice under the National Labor

Relations Act. The Court ruled that a collective bargaining

agreement was an executory contract which could be rejected

by a debtor in possession, and that the rejection would relate

back to the date immediately preceding the date of filing. See

id. at 1198-99.

In both Workman and Bildisco, the “relation back” issue

was peripheral and did not directly bear on the primary ques-

tions presented. Neither case any conflict with the deci-

sion of the Court of Appeals herein, which found the “relation

back” rationale irrelevant to’the factual circumstances and

legal issue before it. (A-12-14).

B. The Decision of the Court of Appeals Correctly

Interprets, and Does Not Conflict With, Hicks v.

Guinness.

Nor does the Court of Appeals’ decision, as the Committee

would suggest, conflict with the decision of this Court in Hicks

v. Guinness, 269 U.S. 71 (1925). In that case, this Court con-

sidered the conversion of damages from foreign currency to

dollars in a breach of contract case. The Court held that a

* The Court of Appeals chose the so-called “breach day rule” of Hicks v.

Guinness over the “judgment day rule” of Deutsche Bank Filiale Nurnberg v.

Humphrey, 272 U.S. 517 (1926), because Koerver & Lersch’s claim against

Chemical arose under American law. (A-6-12). However, the Court of

Appeals’ decision that the controlling exchange rate is that in effect on May

9, 1980, is correct under either rule: May 9, 1980, the aate of confirmation of

the Plan of Arrangement, which the Court of Appeals correctly recognized as

the date of breach, can also be viewed as the date of judgment. See Miller v.

Meinhard-Commercial Corp., 462 F.2d 358, 360 (Sth Cir. 1972) (confirma-

tion of plan of arrangement by bankruptcy court “has the effect of a judg-

ment rendered b; a district court”). The Plan of Arrangement provided that

executory contracts would be rejected effective as of confirmation. (A-12

n. 7). This and other provisions of the Plan of Arrangement, upon confirma-

tion, became binding upon all creditors of Chemical, as well as upon

Chemical itself. See Bankruptcy Act of 1898, § 367(1), 11 U.S.C. § 767(1!

(1976).

claim of an American creditor against a German debtor should

be converted from marks to dollars as of the date of breach,

the date “upon which. . . liability becomes absolute as fixed by

law.” Jd. at 80.

The Court of Appeals in the instant case correctly applied

the Hicks decision to the factual circumstances of Chemical’s

Chapter XI proceeding. As the Court of Appeals noted,

Chemical refused to reject its contract with Koerver & Lersch,

anc to relieve Koerver & Lersch of its obligations thereunder,

until May 9, 1980, the date on which the contract was rejected

upon confirmation of Chemical’s Plan of Arrangement.

(A-3-4, 13). Thus, the first date on which Chemical had an en-

forceable obligation to Koerver & Lersch was May 9, 1980.

Therefore, the Court of Appeals ruled that, under Hicks v.

Guinness, the date as of which Koerver & Lersch’s claim

should be converted from marks to dollars was May 9, 1980.

(A-12-14). Section 63c of the Bankruptcy Act did not affect

this conclusion, since a “fictional” relation back of the breach

date by operation of Section 63c did not give rise to any en-

forceable obligation before May 9, 1980. (A-12-13). This

analysis is wholly consistent with the principles articulated by

this Court in Hicks v. Guinness.

Conclusion

For the foregoing reasons, the petition for writ of certiorari

should be denied.

Respectfully submitted,

Gerornce MansHaLtt Moriarty

(Counsel of Record)

CuHaaes P. NonMANDIN

Cuenvi A. LaFieva