Opposition Brief — Pyburn Enterprises, Inc. v. Bird

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No. 90-441 JOSEPH F. SPANIOL a

3n the 2a

Supreme Court of the Gnited States

October Term, 1990

IN RE: NWFX, INC.

PYBURN ENTERPRISES, INC............... Petitioner

Vv.

ALLEN W. BIRD, I

AS TRUSTEE FOR NORTHWEST

FINANCIAL EXPRESS, INC., NWFX, INC.,

AND GOLD FINANCIAL

a NE a Respondents

ON WRIT OF CERTIORARI FROM

THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

CHARLES W. BAKER

ROSE LAW FIRM

120 East Fourth Street

Little Rock, Arkansas 72201

Telephone (501) 375-9131

Attorney for Respondent

——eEl—eEe=EeE=hESEEEEEEEaan=={Ea2aaa=E==E__=_=_=_=_”_ —

No. 90-441

3n the

Supreme Court of the United States

October Term, 1990

IN RE: NWFX, INC.

PYBURN ENTERPRISES, INC. .............. Petitioner

V.

ALLEN W. BIRD, II

AS TRUSTEE FOR NORTHWEST

FINANCIAL EXPRESS, INC., NWFX, INC.,

AND GOLD FINANCIAL

aa kaa 6.0 nanics.00ect.oa Respondents

ON WRIT OF CERTIORARI FROM

THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

SUMMARY OF ARGUMENT

The decision below affirmed a district court decision

which reached the correct result, is fair to all the creditors

of the debtor, NWFX, and preserves the principle of

equality of distribution amongst creditors in bankruptcy.

The Petition for Writ of Certiorari does not meet any of the

enumerated circumstances in Rule 10 of the: Rules of

Supreme Court for the granting of Certiorari. Nor does the

Petition set for any other special or important reason for

the granting of Writ in this case.

2

ARGUMENT

I.

THERE IS NO CONFLICT BETWEEN THE TWO

PRIOR DECISIONS OF THE EIGHT CIRCUIT COURT OF

APPEALS THAT NEEDS TO BE RESOLVED.

There is no conflict between the two prior decisions of

the Eighth Circuit Court of Appeals because the factual

findings are different. Petitioner asserts that they present

“similar circumstances” and that may well be true.

However, the cases do have different facts which do account

for the different results.

In the case of In re NWFX, Inc., 864 F.2d 558, 590 (8th

Cir. 1988) [hereinafter “NWFX I”] the bankruptcy and

district court found and the Court of Appeals agreed that

“... the bankruptcy court was correct in finding that the

parties had not entered into an agreement for the sale of

noninsured many orders.” (A-43)

In the case of Jn re NWFX, Inc., 864 F.2d 593, 594 (8th

Cir. 1989) [hereinafter the “NWFX II”] the “... amounts

were held in trust for the debtors pursuant to written trust

agreements between the debtors and their agents.” (A-33)

An agreement versus no agreement makes all the

difference in the world and explains why one dealer was

allowed to retain the money order proceeds and the other

dealer was not.

NWFX I was decided on November 30, 1988. NWFX II

was decided on January 5, 1989. The NWF*X II panel had to

know about the prior decision of the NWFX I panel and yet

it did not mention the prior decision. That is because of the

significant factual difference. That factual difference caused

the issues that were argued and decided to be vastly

different. Even a cursory review of the two decisions

3

reveals that the legal issues were markedly different. The

difference in the lega! issues flows from the presence versus

the absence of an agreement between the debtors and the

dealers.

In this case, there was a fact finding by the bankruptcy

court and the district court that there was a Trust

Agreement between the parties (A-23). Consequently those

courts correctly followed the precedent of NWFX II.

This court has recently stated that it “... cannot

undertake to review concurrent findings of fact by two

courts below in the absence of a very obvious and

exceptional showing of error.” Goodman v. Lukens Steel

Co., 482 U.S. 656, 107 S.Ct. 2617, 2623, 96 L.Ed.2d 572 (1987).

II.

THERE ARE NO IMPORTANT FEDERAL LAW

QUESTIONS, UNANSWERED OR OTHERWISE,

PRESENTED BY THIS CASE.

Petitioner set forth four “Questions Presented for

Review” on page i of its Petition and asserts on page 8 that

they are “... important and unsettled questions of federal

law.” The four questions simply do not present questions of

federal law whether important, unsettled or otherwise.

The first question’ is a choice of law question. Choice of

law is a question of state law. In addition, the Petitioner did

not plead in the bankruptcy court or the district court that

Texas law should be applied. Neither did Petitioner argue

Is a contract between debtor, a seller of money orders, and its

agent, governed by Texas law, where the agreement was executed and

performed in Texas and where Texas had a substantial interest in

protecting its citizens; or is it governed by Arkansas law, where the

debtor is an Arkansas corporation and filed for bankruptcy protection in

the state of Arkansas?

4

on appeal to the Eighth Circuit that Texas law should be

applied until after the panel opinion was handed down.

The Eighth Circuit panel decision, which was vacated,

recognized that neither party had asked for the application

of Texas law when it said “... (the parties’ repeated

reference to Arkansas law in their briefs suggests that they

assume that Arkansas law controls the interpretation of the

NWFX-Pyburn agreement.” (A-12) In re NWFX, Inc., 881

F.2d 530, 535 (8th Cir. 1989).

The second question? is a breach of contract question.

This second question is a question of state law. Indeed all

four of the “Questions Presented for Review” are questions

of state law. “... (S)tanding alone, a challenge to state law

determinations by the court of appeals will rarely constitute

an appropriate subject of this Court’s review.” Haring v.

Prosise, 462 U.S. 306, 314 n. 8, 103 S.Ct. 2368, 2373 n. 8, 76

L.Ed.2d 595 (1983).

The third question’ is an inaccurate statement of the

issue that was tried and argued below. The Trustee’s

Complaint against the dealer was for breach of contract, not

for turnover of property of the estate. Please note the last

paragraph on page 3 of Petitioner’s own “Statement of the

Case”, the first paragraph of the Proposed Findings of Fact

and Conclusions of Law Regarding the Entitlement of

Prejudgment Interest from Pyburn Enterprises, Inc. by

bankruptcy judge Fussell (A-26) and the vacated panel

decision which recognized that “... (t)he trustee sought

damages for Pyburn’s alleged breach of contract ...” (A-6)

In re NWFX, Inc., 881 F.2d 530, 533 (8th Cir. 1989).

Did the debtor breach its agency contract when it became insolvent

and filed a bankruptcy, resulting in the dishonor of its money orders

nationwide?

’Were refunds made by the agent to purchasers of the debtor's

dishonored money orders, property of the debtor's estate, and subject to

turnover to the bankruptcy trustee?

*

es *_ ==

5

The fourth question‘ is, on its face, a question of the

assessment of pre-judgment interest when a breach of

contract has been found. That is a question of damages and

not of bankruptcy and is certainly not a federal question.

This question was decided by two lower courts (the

bankruptcy court and the district court), both of which deal

on a daily basis with the question of pre-judgment interest.

This court has previously said that “ ... federal judges who

deal regularly with questions of state law in their

respective districts and circuits are in a better position than

we to determine how local courts would dispose of

comparable issues.” Butner v. United States, 440 U.S. 48,

58, 99 S.Ct. 914, 919, 59 L.Ed.2d 136 (1979).

III.

THE DECISION BELOW REACHED THE CORRECT

DECISION ON THE LAW AND THE RESULT IS

EQUITABLE.

The Petitioner entered into a written trust agreement

with NWFX in which it agreed to hold all proceeds from the

sale of money orders, after deducting a service charge, for

the exclusive benefit of and to pay them over to NWFX.

The Petitioner breached the trust agreement when, instead

of paying the proceeds to NWFX, it paid the proceeds to

Petitioner’s customers.

If the Petitioner’s defense is upheld, the effect will be

that creditors of NWFX, who happened to be customers of

Petitioner, would have their claims paid in full, while other

creditors of NWFX, who are similarly situated, will not be

paid in full and indeed will not even receive an equal pro

rata share of the assets of NWFX. That is because the

assets of NWFX would be diminished by the amounts

retained by the Petitioner. Such an outcome violates “...

‘Should prejudgment interest be assessed against the debtor's

agent as a matter of law when to do so would be inequitable?

6

the prime bankruptcy policy of equality of distribution

among creditors of the debtor.” H. Rept. No. 95-595, pp. 178,

95th Cong., Ist Sess. (1977).

IV.

THIS CASE DOES NOT PRESENT QUESTIONS

THAT ARISE FREQUENTLY OR INVOLVE LARGE

NUMBERS OF PEOPLE OR AMOUNTS OF MONEY.

This case arises from the bankruptcy of a corporation

that sold money orders. None of the decisions below cited

any controlling cases involving bankrupt money order

sellers. There are very few bankruptcy cases reported that

involve money order sellers in any way, shape, form or

fashion.

The decision in this case will only decide the rights

between the Petitioner and the Trustee of NWFX. While it

is true that there are many other purchasers of money

orders and creditors of NWF X whose dividend will be less if

the Trustee losses, nevertheless, the amount of difference

on an individual basis will be trivial.

The outcome of tlis case is not going to affect many

people in the future because this kind of case does not

happen very often. Even if it did, the only questions are

questions of contract, damages and choice of law.

7

CONCLUSION

The decision below was correct on the law, reached an

equitable result and does not leave the decisions of the

Eighth Circuit in conflict. No special or important reason

exists for granting the Petition because there is no conflict

between the circuits, or decision of a state court of last

resort or question of federal law.

Respectfully submitted,

CHARLES W. BAKER

ROSE LAW FIRM

120 East Fourth Street

Little Rock, Arkansas 72201

Telephone (501) 375-9131

Attorney for Respondent

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CERTIFICATE OF SERVICE

I, Charles Wayne Baker, do hereby certify that a copy

of the above and foregoing has been mailed by ordinary mail

with sufficient postage affixed thereon, on this 4th day of

October, 1990 to:

United States Court of Appeals

For the Eighth Circuit

U.S. Court & Customs House

1114 Market Street

St. Louis, Missouri 63101 & be

The Honorable H. Franklin Waters

United States District Court

Federal Building ‘

Fayetteville, Arkansas 72701

The Honorable Robert F. Fussell

U.S. Bankruptcy Court

P.O. Box 2381

Little Rock, Arkansas 72203-2381

Allen Bird, II, Esq.

120 E. Fourth Street

Little Rock, Arkansas 72201

Mark A. Colbert

P.O. Box 1300

Little Rock, Arkansas 72203-1300

Ms. Caroline Scott

Assistant Attorney General of Texas

P.O. Box 12548

Austin, Texas 78711-2548

CHARLES WAYNE BAKER