Petition for Writ of Certiorari — Trendi Sportswear, Inc. v. Bank of India, 124 S. Ct. 934 (2003) (No. 03-541)

1) one”

93 S416 op

In the

Supreme Court of the Hnited States

- TRENDI SPORTSWEAR, INC.,

Petitioner,

BANK OF INDIA, INDU CRAFT, INC.,

The BANK OF BARODA,

Respondents.

Petition for a Writ of Certiorari to the

United States Court of Appeals for the Second Circuit

PETITION FOR A WRIT OF CERTIORARI

Krishnan Chittur, Esq.

Counsel of Record

Chittur & Associates, P.C.

The Lincoln Building

60 East 42™ Street 1501

New York, NY 10165

(212) 370-0447

Attorneys for Petitioner

CURRY & TAYLOR @ WASH D.C. ¢ (202) 223-3160 @ USSCINFO.COM

J

i

QUESTIONS PRESENTED

May a bankruptcy court’s judgment against the

debtor entered pursuant to a reorganization plan,

which judgment and plan have become final and

binding, be held to be unenforceable? Is such a

decision, which unravels the entire

reorganization plan, an impermissible collateral

attack on the bankruptcy court’s decisions and so

far a departure from the accepted and usual

course of judicial proceedings as to call for the

exercise of this Court’s supervisory power?

Are the lower Courts’ decisions - that a

defendant third party plaintiffs assertion of.

direct claims against a fourth-party defendant

under Rule 14, Fed. R. Civ. P., do not relate back

to the commencement of the fourth-party action

although they arise out of the same transactions —

in direct conflict with the decision of New York’s

highest Court in Duffy v. Horton Memoriai

Hospital, 66 N.Y.2d 473, 497 N.Y.S.2d 890, 488

N.E.2d 820 (1985)?

Can a third-party plaintiffs claims against a

fourth-party defendant under Rule 14, Fed. R. Civ.

P., be held to accrue on 3 different dates for

purposes of statute of limitations depending on

whether such claims were (a) not formally

asserted, or (b) asserted in an amendment to the

existing third-party complaint, or (c ) asserted in

a separate pleading in the same _ proceeding,

although the claims arise out of the same

transactions underlying the timely fourth party

complaint? Is this an important question of

federal law that has not been, but should be,

a Se

ii

settled by this Court?

ili

PARTIES TO THE PROCEEDING

Trendi Sportswear, inc. (“Trendi”) and Indu

Craft, Inc. (“Indu Craft”) are both New York

corporations, with no parent or subsidiary corporations.

No publicly held corporations own 10 percent or more

of the stock of either corporation.

Bank of Baroda (“Baroda”) is a bank organized

under the laws of India. It is owned and controlled by

the Government of India.

PL TN A LS SOL APL oe Anca aE S l

REASONS FOR GRANTING. THE WRIT ..............ceecccesecccesececcecees 8

Ce csiticticnibinehadiditeiccaantinckacaonienatactindete ers 30

iv

TABLE OF CONTENTS

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TABLE OF AUTHORITIES

CASES

ACEQUIA, INC. Vv. CLINTON (IN RE ACEQUIA,

INC.), 34 F.3D 800, 808 (9TH Cir. | NAA 10

ARNOLD V MAYAL REALTY Co., 299 NY 57

Pe a Fe aiinieabedna Melt 8 23

BANK OF AM. NAT'L TRUST & Sav. ASS'N Vv, 203

N. LASALLE ST. P'sHIP, 526 U.S. 434, 441

CPD ishsccrenuinlainsatiliitidlehinitiiattiadiabiee aha take ined 15

BERNHARDT V. POLYGRAPHIC Co. OF AMERICA,

Me OEE, BD CI sidan sectscoosevsiecacestsenessracceserceessees. 25

BROWN V. GERDES, 321 U.S. 178, 183-84

OIE sinistlseiasoneciaebassdicatdianiipusiemiaiai aged eet on 18

CAREY V. SAFFOLD, 536 U.S. 214, 202 (2002)........... acme 30

CFR., 131 MAIN ST. ASSOCS. V. MANKO, 897 F.

Supp. 1507, 1521 (S.D.N.Y. | EL ET: 28

CITICORP ACCEPTANCE Co. Vv. ROBISON (IN RE

SWEETWATER), 884 F2p 1323, 1327 (10TH

RT ST II Se MERON Roe dimcensiiabaies 9

COCKE V. HALSEY, 41 U.S. 71, 87 5 REEDED CSTR 19

CORBETT V. MACDONALD MOVING SERVICES,

INC., 124 F.3D 82 (2ND Cir. 5 aa 12,13

DUVOISIN V. EAST TENN. EQUITY LTD. (IN RE

SOUTHERN INDUS. BANKING Corp.), 59

BANKR. 638, 642 (BANKR. E.D. TENN.

Pp cvtinsnied esi dudelotiatantientonnagcii a Att 9

vi

DYSART V. MARRIOTT Corp., 103 FR.D. 15

~ CEB, File Bd enticnisctatieniscincnidalaseanincceciamnannsonnimiininial 28

FALLS INDUS., INC. V. CONSOLIDATED CHEM.

INDUS., INC., 258 F.2D 277, 287 (5TH CIR.

IEEE) cvcuincecesetsecsevissiecssbecensccunabaddanmrdiaaislaiaieintiniaibinlane 26

FCC v. NEXTWAVE PERS. COMMUNS., INC.,

Be Ch Be COE iareincreceserssenionsiciessinermeninbenenens 14

GASPERINI V. CENTER FOR HUMANITIES, INC.,

G16 UB. QL, GOB CRIB) sssacsiccessvescsnncsnccesssssevouncoonvonaneess 25

GEKAS V. PIPIN (IN RE MET-L-WOOD CORP. ),

861 F2p 1012, 1018 (7TH Cir. 1988), CERT.

DENIED, 490 U.S. 1006 (1989) .............scccsssssssssesssscsssones 14

GUARANTY TRUST Co. OF N.Y. V. YORK, 326

Uk I, Fie CRD cechnesnncinnicindeenrnisianeaneteuisduieiiarcaaiiann 25

HARRIS V. HARDEMAN, 55 U.S. 334 (1853) ....... ce eeeeeeeeeees 19

HENDRICK V. AVENT, 891 F.2D 583, 587 (5TH

CIR. ), CERT. DENIED, 498 U.S. 819 (1990).............. ee 13

IN RE HERRON, 60 B.R 82 (BANKR. W.D.LaA.

IN RE CLIPPER INTERNATIONAL CORP., 154

F.3D 565, 568 (6TH CIR. 1998) .....ccssceccsssescssescesseecsseeceseees 21

IN RE JUSTICE OAKS II, LTD., 898 F.2D 1544,

LOGO CL UTE CMR. 1GDIY) ...cerccerereccossrasnenecevssnccennocasossnencnssnns 13

IN RE LAWRENCE, 293 F.3D 615, 625 (2ND CIR.

IN RE PARADISE VALLEY COUNTRY CLUB, 31

De: SER CRAIEO. TI i citnaitsiantincenieannmiiainnd 18

vii

IN RE PETTIBONE Corp., 134 B.R. 349, 351-

352 (BANKR. N.D. ILL. 1991) oooceecccccecccececccecececececececeeeeee..

IN RE ST. LOUIS FREIGHT LINES, INC., 45 B.R.

546 551 (BANKR. E.D. MICH. 1984)........cccccccccscsoccscoseeees.

IN RE UNION LEAGUE CLUB OF CHICAGO, 203

F.2D 381, 386 (7 CIR. 1958) oo. .eeccscececssccseesesececeeecececeees,

IN RE WALTERS, 868 F.2D 665 (4TH CIR. a

IN RE XOFOX INDUSTRIES LTD, 241 B.R. 541-

543 (BANKR. E.D MICH. 1999)........cccccccseccccsssececececocccecee.

KOAL INDUS. Corp. V. ASLAND, S.A., 808 F:

SUPP. 1143, 1157 (S.D.N.Y. 1992) .o.cccccccccccccsscsccsseseseseee.

LEVINSON V. DEUPREE, 345 U.S. 648, 653

TE setinainsibetenssnsilediideeaeintbeiiteiellcen te

MCFARLAND V. LEYH (IN RE TEXAS GEN.

PETROLEUM Corp. ), 52 F.3D 1330 (5TH Cir.

UTP \schilstnnipicseapeuiipiiinatnicapntslidigidadidabechitacsiasaseanesaacaiins.

MEREDITH V. UNITED STATES, 41 FR.D. 34

SN NNO I aisha ns

MITCHELL V. HELMS, 530 U.S. 793, 818 | RE

MURPHY V. JOHN HOFMAN Co., 211 U.S. 562

tS NEFA nO WAS RIT OC CeO ECOL

NEW HORIZON V. JACOBS, 231 F3p 143, 152

IN Mindat tebe Ne.

NICHOLS V. ALKER, 231 F.2D 68, 76 (2ND Cir.

Paap hekeniitiapusausinentartaninancclaitesansiatikncatesceconusccsed. 2

Vili

NIXON V. ADMINISTRATOR OF GENERAL

SERVICES, 433 U.S. 425, 516 (1977)..........ccccccsssssssesssseeees 23

NORTHBROOK NATIONAL VENDING Co. V. J &

R. VENDING CorP., 167 F.R.D. 643

EERE t UE clacnascnnissiainnninmannnaintiiel 27, 28

OFFICIAL COMM. OF UNSECURED CREDITORS

OF CYBERGENICS CORP. EX REL.

CYBERGENICS Corp. V. CHINERY, 330 F.3D

I Se cacasbteantbentvcbitsinicttiakcntseinremaernmnns 10

ORIEL V. RUSSELL, 278 U.S. 358 (1929) ...........ccesssssscceeeeees 12

PATTERSON V. SHUMATE, 504 U.S. 753, 766

POWER FIVE V. GMC (IN RE AUTOMOTIVE

ARMATURE CO.) 219 BR 513 (S.D.IND.

PREMIUM POINT PARK ASSN. V. POLAR BAR,

306 N.Y. 507, 511, 119 N.E.2p 360 (N.Y.

PROJECT HOPE V. M/V IBN SINA, 250 F.3D 67,

Fe FC Ce, Se Pircencireetnsiacchiciessinatvninkentatnbtnianstiieniiinbiien 26

RAGAN V. MERCHANTS TRANSFER &

WAREHOUSE Co., 337 U.S. 530, 533 (1949)... 25

REPUBLIC SUPPLY Co. V. SHOAF, 815 F.2D 1046

ee Te teceneneiseniehteisaiininhaciacenitaitaicdaaniinsidansiahiattiniinns 13

ROBERTSON V. ISOMEDIX, INC. (IN RE

INTERNATIONAL NUTRONICS, INC.), 28 F.3D

965, 969-71 (9TH CIR.), CERT. DENIED, 513

Ee ee iactesslansicseeie secs eaiabibccstensaeiisdbientecinsanbiclttinacickonie 13

ix

RONNEN V. AJAX ELEC. MoToR Corp., 88

N.Y.2D 582, 590, 648 N.Y.S.2p 422, 425,

671 N.E.2p 534, 537 (N.Y. 1996)...

ROSENBAUM V DUTTON, 203 F 838 (8TH Cir.

Pb stkttidentiitat cea ee

SECOND CIRCUIT, BANK OF INDIA V. TRENDI

SPORTSWEAR, INC., 239 F.3D 428 (2ND Cir.

ee natuataninineniinitisiaiiiinica. ssianabianinadesnenis

SMITH V. BARRY, 502 U.S. 244, 248 (1992)......

SOUTHMARK PROPERTIES V. CHARLES HOUSE

Corp., 742 F.2D 862, 870-72 (5TH Cir.

EA ae

eT riiicslitssiaiphseiidaianiidebiiniaiacsitisbeunsirstinininn

TENNESSEE WHEEL & RUBBER CO. V.

CAPTROL Corp. AIR FLEET (IN RE

TENNESSEE WHEEL & RUBBER Co.), 64

BANKR. 721, 727 (BANKR. M.D. TENN.

NE SISSON Oe EO

TRACE X CHEMICAL, INC. Vv. GULF OIL

CHEMICAL Co., 724 F:2p 68 (8TH Cir.

1983), CERT DENIED, 469 U.S. 1160 ( 1985)

UNITED STATES FIDELITY & GUARANTY CO. V.

BRAY, 225 U.S. 205 (1912).......cccccccesesesesseees

UNITED STATES SUPREME COURT, CELOTEX

Corp. V. EDWARDS, 514 U.S. 300 (1995)...

VILLINES Vv. GMC, 324 F.3D 948 (8TH Cir.

PE letetnbaaibae casei ecibicias sake iss cabal

sesensnehlatndgenonses 9

>, 4

WASIK V. BoRG, 423 F.2D 44, 46 (2ND CIR.

I ee cosdsslins deltas ia-aasaesdidicanonndiledeanleibdeiiniuniete'sttenenniebnnioecateisoconn 26

WASTAK V. LEHIGH VALLEY HEALTH NETWORK,

ee te BA Ca GN, BI ees vnsssssesenesssiessesenssnsiossessene 15

WEGNER V. GRUNEWALDT, 821 F-:2D 1317,

ES BIE Bk sib econiacedcunbbndennrensiniensensdnanenenns 19, 20

WILLIAMS V UNITED STATES, 405 F2D 234,

SESTIITEE: clsinidsiseuhihteinhiasdapieapuiinislanasniniandatinabiesinietsennsibcesies 24

Woons V. INTERSTATE REALTY CO., 337 U.S.

a nivinveiihtieiastvieck tebieicicniiansinianinintoaiennicineieelindes 11

Statutes

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Se a OT iisiidibcoseadicaicchiesnininleni sebdeep-ieinekssunisonanbidionecntianidiihdans 8

]

OPINIONS BELOW

CITATIONS OF OFFICIAL AND UNOFFICIAL

REPORTS OF OPINIONS AND ORDERS ENTERED IN

THE CASE

Bank of India v. Trendi Sportswear, Inc., 64 Fed.

Appx. 827, 2003 U.S. App. LEXIS (2™ Cir. May 15, 2003),

A-la.

Bank of India v. Trendi Sportswear, Inc., 2002

U.S. Dist. LEXIS 894 (S.D.N.Y. Jan. 18, 2002), A-18a

(“January 18" Order”)

Bank of India v. Trendi Sportswear, Inc., 2002

U.S. Dist. LEXIS 14801 (S.D.N.Y. Aug. 12, 2002), A-7a

(“August 12" Order”).

JURISDICTION

This Court’s jurisdiction is invoked pursuant to

28 U.S.C. §1254(1). The United States Court of Appeals

for the Second Circuit entered its decision on Trendi’s

and Indu Craft’s appeals on May 15, 2003. Trendi and

Indu Craft petitioned that Court separately for

rehearing, and rehearing en banc. Both petitions were

denied by orders entered on July 7, 2003. This petition

is filed within 90 days of the date of entry of those

orders denying rehearing, and is hence, timely. Rule

13.1, Sup. Ct. R.

RELEVANT PROVISIONS

11 U.S.C. §§ 524 (a)(1), (e); 1123(b)(3)(B);

1129(a)(7)(A) (ii); Rule 14, Fed. R. Civ. P.

2

STATEMENT

Trendi petitions for a writ of certiorari to review

and reverse the decision of the United States Court of

Appeals for the Second Circuit which affirmed, by a

Summary Order, the Judgment of the United States

District Court for Southern District of New York (Hon.

John S. Martin, Jr., J.), entered April 11, 2002, A-129a,

and the two underlying orders, January 18, 2002, A-18a,

and August 12, 2002, A-7a, which dismissed Indu Craft’s

Amended Fourth-Party Complaint, and Trendi’s Second

Third Party Complaint respectively. The Second Circuit

gave no reasons of its own, but simply affirmed

“largely for the reasons stated in the opinions of the

District Court,” A-6a (emphasis added).

The Underlying Action, 1990 Verdi inst

Baroda For Bad Faith Lender Liability in the 1987 Action

BOI (Baroda’s sister bank)’, brought the

underlying action against Trendi in September 1989

based on Trendi’s alleged default on its financial

obligations to BOI. Trendi in turn asserted third party

claims against its supplier and then-sister corporation,

Indu Craft, asserting that Trendi’s default was caused by

Indu Craft’s failure to supply Trendi with ladies’

garments as contracted for. Indu Craft impieaded

Baroda in a fourth party complaint, asserting derivative

claims for bad faith lender liability.

The District Court stayed this action in 1990, at

Baroda’s instance, pending conclusion of Indu Craft’s

‘BOI has not participated in any proceedings herein for

several years, and is accordingly, not a party to these proceedings.

3

earlier action against Baroda (“the 1987 Action”).

Eventually, Indu Craft prevailed in the 1987 Action, a

Manhattan jury holding that Baroda had acted

maliciously and in bad faith in connection with Indu

Craft’s credit facility. After further proceedings and

appeals, when it came time to pay that judgment,

Baroda acted in concert with BOI to keep those funds

from Indu Craft and to deposit them in Court, which led

to a slew of claims against Indu Craft and forced it into

bankruptcy. Meanwhile, in this action, Baroda’s sister

bank BOI obtained judgment against Trendi for over

$2.4 million in 1991. That judgment remains unsatisfied.

The Bankruptcy Proceedings: Reorganization Plan

Confirmed Based Substantially On Recovery On Fourth

Party Claims Herein

In Indu Craft’s Bankruptcy proceedings, it

submitted a reorganization plan to the Bankruptcy

Court on March 24, 1999. That plan clearly

contemplated prosecution of Indu Craft’s fourth party

claims herein, and payment to creditors from any

recovery therefrom:

Trendi, ANZ and Hemant Mehta, the

holders of Claims in Class 5, shall

receive their net proceeds of any

recovery in Baroda II [i.e., the fourth

party claims in this action], after

deduction for the reimbursement to Tze

Wong Consultants, Ltd., of its funding of

the Plan, the funding of the Baroda IT

litigation pursuant to a future agreement,

legal fees, costs and disbursements.

A-87a-88a 95.2. It also proposed toe discharge Indu Craft

4

from all liability “except as otherwise provided under

the Plan,” A-77a 49.1.

Trendi agreed to that plan on the express

condition that (a) Indu Craft consented to entry of

judgment in Trendi’s favor in the amount adjudicated by

the Bankruptcy Court, and (b) Trendi “shall receive” the

net proceeds of any recovery in the fourth party claims

in this action, Al03a-104af 1.

Five days later, on March 29, 1999, a

modification agreed to between all the creditors and

Indu Craft, and accepted by the Bankruptcy Court (“so

ordered”) provided that

a. a “new loan” of $600,000 would be made to

Indu Craft for, inter alia, “the prosecution

of post-Effective Date claims, including

but not limited to,” the fourth party claims

herein A-85a { 1.37;

b. Indu Craft would issue promissory note

and security interest in all its property,

“including but not limited to, the proceeds

generated from [the fourth party claims in

this action],” A-87af c);

Cc. For repayment of the “new loan”, “Tze

Wung shall receive the first proceeds, in

the amount of $500,000, generated by the

successful prosecution or settlement of

[the fourth party claims in this action]. . .”

A-87a J(d);

d. Indu Craft “agrees to consent to judgment

being entered against it in the third party

action in Baroda Il [i.e., this action] for the

amount of Trendi’s claim as determined by

_ the Bankruptcy Court,” A-88a 95.2;

5

e. Indu Craft “shall utilize” the new capital

loan for paying creditors and the balance

for the prosecution of claims “including

but not limited to [the fourth party claims

in this action]”, A-88a 4 12(b).

The Bankruptcy Court confirmed the proposed

reorganization plan as modified on the same day, A-

10la. It made the requisite factual findings required by

the Bankruptcy Code, and also entered the usual order

that “Except as otherwise provided in the Modified Plan

or a Final Order of the Bankruptcy Court,” any judgment

on a discharged debt was “null and void and of no force

and effect”, A-96a J F(1)( c).

Thereafter, the Bankruptcy Court adjudicated

Trendi’s claims against Indu Craft as required under the

Plan. About ten months later, on January 18,

2000, that Court entered judgment in favor of

Trendi against Indu Craft in the amount of’

$21,101,348.47, A-45a (“Bankruptcy Judgment”).

_While Baroda participated in Indu Craft’s

bankruptcy proceedings, A-105a-106a, disputed

payments, A-11la-116a, and received notices even

concerning the Reorganization Plan, A-108a-112a, it

never disputed the Bankruptcy Court’s findings or

raised any issue concerning the Plan.”

“Bankruptcy law requires any party in interest to object toa

proof of claim or be forever bound by it. 11 U.S.C. §502(a);

Rosenbaum v Dutton, 203 F 838 (8" Cir. 1913) (Parties in interest"

include all persons who have interest in res which is to be

administered); Power Five v GMC (/n re Automotive Armature

Co.) 219 BR 513 (S.D.Ind. 1998).

6

Proceedings Before the District Court, Trendi's Direct

Claims Against Baroda

Meanwhile, in this action, the District Court lifted

the 1990 stay, and awarded summary judgment to

Baroda against Indu Craft based on res judicata. Upon

reversal of that order by the Second Circuit, Bank of

India v. Trendi Sportswear, Inc., 239 F.3d 428 (2™ Cir.

2000), Indu Craft amended its complaint as of right to

assert RICO claims based upon evidence unearthed in

criminal proceedings in India. Separately, Trendi served

a Second Third Party Complaint asserting direct claims

against Baroda based upon the same transactions.

Baroda moved for dismissal of Indu Craft’s

Fourth Party Complaint based on Indu Craft’s alleged

“discharge” under the Plan. By its January 18" Order,

the District Court granted this motion, holding that

“since Indu Craft had been discharged [by the

Bankruptcy Court’s order approving the Plan in March

1999] of its obligation to pay Trendi the [subsequent]

judgment entered against it in the Bankruptcy

proceeding and Trendi is barred from seeking to enforce

that judgment against Indu Craft, Indu Craft’s action for

indemnification cannot succeed, as a matter of law, and

must be dismissed,” A-25a. Accordingly, it entered final

judgment after dismissing Indu Craft’s claims.

Trendi sought to vacate the final judgment

because its direct claims against Baroda were still

pending and unanswered. The District Court sought

briefing on two specific issues: whether Trendi’s claims

against Baroda were time barred; and whether Trendi’s

impleader of Indu Craft was proper. After due briefing,

by its August 12" Order, the District Court dismissed

Trendi’s direct claims against Baroda as time-barred.

7

According to the District Court, Trendi could assert

direct claims against Baroda under Rule 14, Fed. R. Civ.

P., in a separate pleading, but those claims were time-

barred because the underlying actions took place in

1987. Moreover, Trendi’s claims could not relate back

because Trendi had to reopen the Bankruptcy Judgment

against Indu Craft (presumably in the Bankruptcy

Court) to assert a claim directly against Baroda in this

action. Trendi had not done so, and could not do so

now; hence, Trendi’s claims could not relate back under

Rule 15( c), Fed. R. Civ. P., and were untimely. Trendi

appealed but the Second Circuit affirmed both opinions

“largely” for the District Court’s reasons.

Trendi petitions for a writ of certiorari. First, the

District Court’s January 17" Order unravels the entire

Reorganization Plan approved by the Bankruptcy Court,

and is an impermissible collateral attack on the Plan.

This radical and unprecedented departure from well-

settled law and practice was sanctioned by the Second

Circuit. Second, the District Court’s August 7" Order

refusing to relate back Trendi’s direct claims against

Baroda based upon the same transactions as Indu

Craft’s claims is in direct conflict with the decision of

the New York Court of Appeals in Duffy, 66 N.Y.2d 473,

497 N.Y.S.2d 890, 488 N.E.2d 820. Third, the time when a

third party plaintiff's direct claim against a fourth party

defendant accrues is an important issue of federal law

_ which should be settled by this Court. The lower

Courts’ decisions make this depend entirely on the form

in which the claim is raised, if it is asserted at all.

Original Jurisdiction of the United States District

Court for the Southern District of New York was based

upon diversity of citizenship, 28 U.S.C. §1332. Bank of

India, the original plaintiff, was a citizen of India, while

EEE “Ol

8

Trendy was a citizen of New York, and the amount in

controversy exceeded $75,000. Jurisdiction over the

third-party and fourth party claims was based upon

supplementary jurisdiction, 28 U.S.C. §1367, and Rule

14, Fed. R. Civ. P.

REASONS FOR GRANTING THE WRIT

I. The Courts’ Decisions Unraveled the Entire

Reorganization Plan Duly Confirmed by the

Bankruptcy Court and Which Plan Had Become

Final and Binding

The lower Courts’ decisions used one clause of

the Bankruptcy Court’s order which confirmed the Plan

to eviscerate that very Plan, and to render meaningless a

judgment entered pursuant to the express terms of that

Plan by the Bankruptcy Court itself. As detailed below,

this is so radical a departure from settled law and

practice that, to borrow Justice Scalia’s words, “the

phenomenon calls into question whether . . . it any

longer makes sense to talk of ‘a government of laws, not

of men.” Patterson v. Shumate, 504 U.S. 753, 766 (1992)

A. The Plan’s Central Plank Was The

Contin Pro tion of, and Potenti

Recovery From, Indu Craft’s Fourth Party

Claims Herein

No serious question can exist that Indu Craft’s

asset — its fourth party -laim against Baroda herein —

was pivotal to the Plan. Trendi and other creditors

agreed to the Plan relying on this asset, and the orders

of the Bankruptcy Court thereon. The lower Courts’

decisions hold, in effect, that the Bankruptcy Court took

away with one hand what it gave with the other.

9

Extremely telling, the Bankruptcy Court’s Order

required another creditor, Tze Wung, to advance new

funds ($500,000) to finance prosecution of Indu Craft’s

claims here. A-87a 45.1(c). This order was clearly

within its jurisdiction, and within the express terms of

the bankruptcy statute. 11 U.S.C. §1123(b)(38)(B) ("a

plan may .. . provide for. . . the retention and

enforcement by the debtor, by the trustee, or by a

representative of the estate appointed for such purpose,

of any . . . claim or interest"); Citicorp Acceptance Co. v.

Robison (In re Sweetwater), 884 F.2d 1323, 1327 (10"

Cir. 1989); Duvoisin v. East Tenn. Equity Ltd. (In re

Southern Indus. Banking Corp.), 59 Bankr. 638, 642

(Bankr. E.D. Tenn. 1986) ("[The] aim [of section

1123(b)(3)(B)] was to make possible the formulation

and consummation of a plan before completion of the

investigation and prosecution of causes of action...

Thus, the statute was in furtherance of the purpose of

preserving all assets of the estate while facilitating

confirmation of a plan.").

Indeed, if such post-confirmation prosecution of

claims was proscribed by the very confirmation of the

Plan, as the Ninth Circuit observed,

debtors undoubtedly would delay filing

plans of reorganization until completing

all potential litigation, a result that would

contravene the Bankruptcy Code's goal of

quick and equitable reorganization. Cf.

Tennessee Wheel & Rubber Co. v. Captrol

Corp. Air Fleet (In re Tennessee Wheel &

Rubber Co.), 64 Bankr. 721, 727 (Bankr.

M.D. Tenn. 1986) ("Defendants' theory

would not permit the administration of

bankruptcy estates in the common

10

situation ... where the general unsecured

claimholders have accepted cash soon

after confirmation, but other classes of

creditors and interestholders await

payment for months or years after

confirmation. .. . [That result would

conflict with] Chapter 11[, which]

provides debtors with great flexibility in

the design and execution of plans of

reorganization."), aff'd, 75 Bankr. 1 (M.D.

Tenn. 1987)

Acequia, Inc. v. Clinton (In re Acequia, Inc.), 34 F.3d 800,

808 (9" Cir. 1994). Accord, Official Comm. of Unsecured

Creditors of Cybergenics Corp. ex rel. Cybergenics

Corp. v. Chinery, 330 F.3d 548 (3™ Cir. 2003); McFarland

v. Leyh (In re Texas Gen. Petroleum Corp.), 52 F.3d 1330

(5" Cir. 1995). While the lower Courts held that Indu

craft was not bound to prosecute these claims here, A-

25a, and that Trendi “may have made an ill-advised

agreement, which did not take account of New York law

regarding indemnification,” A-14a, it didn’t explain why

the Bankruptcy Court ordered Tze Wung to finance this

litigation.

So also, much after the discharge, the

Bankruptcy Court held hearings, quantified Indu Craft’s

liability to Trendi, and entered judgment thereon about

10 months later. The lower Courts’ decision now hold

that the Bankruptcy Judgment was a worthless piece of

paper. -

11

B. The Reorganization Plan Was Not Subject

to Selective Nullification by the lower

Courts

The District Court was exercising its Diversity

Jurisdiction under 28 U.S.C. §1332. As such, the District

Court was "in effect, only another court of the State

{where it sits]... ." Woods v. Interstate Realty Co., 337

U.S. 535, 538 (1949) (citations omitted); accord,

Levinson v. Deupree, 345 U.S. 648, 653 (1953). The

District Court was not sitting in appeal under 28 U.S.C.

§158 over the Bankruptcy Court’s decisions; that

appellate jurisdiction lies only when the mandated

procedure is followed with prescribed filings. See Smith

v. Barry, 502 U.S. 244, 248 (1992) (appellate court’s rules

concerning notice of appeal “are jurisdictional in nature,

and their satisfaction is a prerequisite to appellate

review.”).

Indisputably, the decisions of a court of -

competent jurisdiction must be respected in all

collateral proceedings. As the Fourth Circuit cbserved

in a marginally different context,

The problem with the reasoning of New

Horizon is that it ignores the fact that the

order of the bankruptcy court of February

6, 1997 was a final order because it was

not appealed from on or before 10 days

thereafter pursuant to 28 U.S.C. § 158(a)

and § 158(c) and Rule 8002 of the

Bankruptcy Rules. See also Bankruptcy

Rule 9020 and In re Walters, 868 F.2d 665

(4" Cir. 1989). Thus, the claim in the

complaint in this case that jurisdiction is

established under 28 U.S.C. § 1334(b) as a

12

related to case under Title 11 because of

its claim that the defendants were guilty of

civil contempt of the Bankruptcy Court

depends for its success on a collateral

attack on a final order of the bankruptcy

court, which two opinions of the United

States Supreme Court, Celotex Corp. v.

Edwards, 514 U.S. 300 (1995), and Oriel v.

Russell, 278 U.S. 358 (1929), have decided

is not permissible.

New Horizon v. Jacobs, 231 F.3d 143, 152 (4" Cir. 2000)

Finality of orders concerning reorganization

plans is particularly significant, given the third party

interests at stake. As the Court observed in Corbett v.

MacDonald Moving Services, Inc., 124 F.3d 82 (2™ Cir.

1997),

These finality interests are

particularly important in the

bankruptcy context, where numerous

contending claims and interests are

gathered, jostle/d], and are

determined and released. . . Thus

MacDonald's contribution did confer a

benefit on the unsecured creditors, and

MacDonald cannot be extricated from

the Plan without impairing the rights

of the unsecured creditors. In any

event, it cannot be denied that a

judgment in favor of the Trustees in

this case would "impair, destroy,

challenge, or invalidate the

enforceability or effectiveness" of the

Reorganization Plan at least insofar

13

us that Plan settles the amount,

source and payment schedule of the

obligation that is the subject of this

lawsuit. See Sure-Snap [Corp. v. State

Street Bank & Trust Co.], 948 F.2d [869] at

870 [(2™ Cir. 1991)](claims "whose timely

bringing may have affected the parameters

of a bankruptcy repayment schedule

cannot be re-litigated another day in

another court").

124 F.3d at 91-92 (emphasis added). See also Sure-Snap,

948 F.2d at 872-73 (2™ Cir. 1991) (order confirming

reorganization plan has preclusive effect under doctrine

of res judicata); In re Justice Oaks II, Ltd., 898 F.2d 1544,

1550 (11" Cir. 1990) ("This issue has been settled for

some time: a bankruptcy court's order confirming a plan

of reorganization is given the same effect as any district

court's final judgment on the merits."); Republic Supply

Co. v. Shoaf, 815 F.2d 1046 (5" Cir. 1987) (creditor was

barred from attacking the legality of confirmation in a

collateral proceeding).

By nullifying the Bankruptcy Judgment and other

portions of the Plan, the lower Courts effectively voided

the entire Reorganization Plan, and Trerdi’s and other

creditors’ consideration for having agreed thereto. Such

nullification in collateral proceedings is unheard of, and

contrary to well-settled practice. Robertson v.

Isomedix, Inc. (In re International Nutronics, Inc.), 28

F.3d 965, 969-71 (9th Cir.), cert. denied, 513 U.S. 1016

(1994) (res judicata bars antitrust claim by debtor

against purchasers of debtor's property pursuant to sale

approved by order of bankruptcy court); Hendrick v.

Avent, 891 F.2d 583, 587 (5th Cir.), cert. denied, 498 U.S.

819 (1990) (dismissing RICO and fraud claims where

ee ee

14

"the determination by the bankruptcy court [was] the

final authorization of the transfer of title and the

subsequent adversary proceeding [was] a direct

challenge to that transfer of title" because "the proper

medium for a challenge to the original bankruptcy

court's order is through a direct challenge of that

order"); Gekas v. Pipin (In re Met-L-Wood Corp.), 861

F.2d 1012, 1018 (7th Cir. 1988), cert. denied, 490 U.S.

1006 (1989) (affirming dismissal of fraud suit as

impermissible collateral attack on bankruptcy court's

order and "hold[ing] that confirmed sales—which are

final judicial orders—can be set aside only under rule

60(b)"); Southmark Properties v. Charles House Corp.,

742 F.2d 862, 870-72 (5th Cir. 1984) (res judicata barred

breach of contract claims asserted by bankruptcy seller

against purchaser of real estate pursuant to court-

approved sale); FCC v. NextWave Pers. Communs., Inc.,

537 U.S. 293 (2003) (upholding bankruptcy court’s

decision which voided FCC’s cancellation of spectrum

licenses).

The Lower Courts Negated Several Factual

_ Findings By the Bankruptcy Court In An impermissible

Collateral Attack on a Confirmed Plan

For approving the Plan, the Bankruptcy Court

made several findings of fact, which it was statutorily

required to do. The lower Courts’ decisions effectively

negated several of these findings:

:. The Bankruptcy Court expressly found that each

creditor or interested party had “accepted” the Plan or

would “receive or retain” more than liquidation value, A-

93a 911.

15

The lower Courts negated both prongs of this

finding. First, Trendi’s (and other creditors’)

acceptance was obviously conditioned on viability of

the fourth party claims herein and if those claims were

nullified, their acceptance is void for mutual mistake of

an extremely material item. Wastak v. Lehigh Valley

Health Network, 333 F.3d 120 (3™ Cir. 2003); Villines v.

GMC, 324 F.3d 948 (8" Cir. 2003).

Second, Trendi and other creditors would

certainly have received a much higher value if Indu

Craft were to be liquidated under Chapter 7, and, the

lower Courts made the Plan fail the "best interest of

creditors test." Bank of Am. Nat'l Trust & Sav. Ass'n v.

203 N. Lasalle St. P'ship, 526 U.S. 434, 441 (1999); 11

U.S.C. §1129(a)(7)(A)Gii). Indisputably, Indu Craft

would not have been discharged in a Chapter 7

liquidation, 11 U.S.C. § 727(a)(1), and would have

continued to be liable to Trendi, whereupon Indu Craft

could have recovered upon its claims against Baroda.

The Bankruptcy court also ordered

2. That a creditor, Tze Wung, give Indu Craft a loan

of $500,000, which loan was secured by, inter alia, the

proceeds herein, A-87a 75.1( c);

3. That Tze Wung “shall receive the first proceeds”

of $500,000 from any recovery herein, A-87a] (d);

4. That Trendi, and other class 5 holders “shall

receive their net proceeds of any recovery” herein, after

reimbursing Tze Wung for loans for pursuing the claims

herein, A87a-88af 5.2;

5. That Indu Craft’s liability to Trendi would be

determined by the Bankruptcy Court, and judgment

would be entered in that amount, id.

6. Indu Craft “shall utilize the proceeds” of the New

16

Capital loan to pay for this litigation, A88af 12.

Every one of the above provisions was effectively

voided by the lower Courts’ decisions. Moreover, the

Bankruptcy Court also found that

7. That the Plan “complied with all applicable

provisions of the Bankruptcy Code,” A-92a, 44;

9. That the Plan had been proposed “in good faith

and not by any means forbidden by law and viewed in

the light of the totality of circumstances, . . . will fairly

achieve a result consistent with the objectives and

purposes of the Bankruptcy Code,” A-92a, 95; and

10. That the Plan is “consistent with the interests of

creditors and equity holders and with public policy,” A-

92a 9;

Each of the above findings were rendered

baseless by the lower Courts. This is manifestly

inconsistent with settled law and practice.’

11. The actual discharge clause itself expressly

provided that “Except as otherwise provided in the

Modified Plan or a Final Order of the Bankruptcy

Court,” any judgment on a discharged debt was “null

and void and of no force.and effect”, A-96a F(1)( c)

(emphasis aded). The specific provisions for funding

the fourth party litigation herein, the security interests

created, and the disbursements of proceeds therefrom,

detailed above were clearly such clauses which

provided “otherwise” — which provisions were negated

by the decisions at issue.

Moreover, the confirmed Plan was a binding

agreement between all parties, 11 U.S.C. § 1141(a); Inre

Pettibone Corp., 134 B.R. 349, 351-352 (Bankr. N.D. Ml.

17

~1991) (“A plan of reorganization is a contract which

binds a debtor and its creditors.”).’ As such, it is well-

settled that a contract which confers certain rights or

benefits in one clause will not be construed in other

provisions completely to undermine those rights or

benefits

C.

Ronnen v. Ajax Elec. Motor Corp., 88 N.Y.2d 582,

590, 648 N.Y.S.2d 422, 425, 671 N.E.2d 534, 537

(N.Y. 1996) (citing Two Guys from Harrison- N.Y.

V.S.F.R. Realty Assocs., 63 N.Y.2d 396, at 405, 482

N.Y.S.2d 465, 472 N.E.2d 315 (N.Y. 1994);

Premium Point Park Assn. V. Polar Bar, 306 N.Y.

507, 511, 119 N.E.2d 360 (N.Y. 1954). The lower

Courts’ decisions effectively negated months of

strenuous negotiations between creditors and

debtor, and nullified the clear and

demonstrable intent of the empty « court

and the parties.

The significance of this petition can hardly

be overemphasized, given the massive

bankruptcy filings currently pending involving

such multibillion dollar giants as Enron,

Worldcom, and Adelphia. Each of these

bankruptcies presumably involve tens of

thousands of claims, creditors, and choses-in-

action.’ Permitting a court to re-interpret a

Bankruptcy Court’s considered, clear decisions

and to unravel a duly confirmed reorganization

plan is an invitation to chaos.

18

Where a Bankruptcy Court’s Judgment Against a

Debtor Is in Apparent Conflict with its Own Prior

Order Approving the Reorganization Plan, That

Apparent Conflict Must Be Resolved By the

Same Bankruptcy Court In the First Instance

Indisputably, the bankruptcy court’s jurisdiction

over a debtor’s properties “is paramount and exclusive.”

Brown v. Gerdes, 321 U.S. 178, 183-84 (1944) (citing

Gross v. Irving Trust Co., 289 U.S. 342 (1933))°. As this

*“(C]onfirmation of a plan of reorganization discharges the

debtor firm all claims arising prior to the date of confirmation,

subject to the following exceptions: .. .

To the extent that the plan or order of confirmation

provides for payment of a claim, such claim is not discharged”.

Collier on Bankruptcy, {1141.01 (15th ed. 1994)).

‘In re Ernst, 45 B.R. 700, 702 (Bankr. D. Minn. 1985) (“The

plan is essentially a new and binding contract, sanctioned by the

court, between the debtor and his preconfirmation creditors.”);

accord, In re Xofox Industries Ltd, 241 B.R. 541-543 (Bankr. E.D

Mich. 1999); In re Herron, 60 B.R 82 (Bankr. W.D.La. 1986); In re St.

Louis Freight Lines, Inc., 45 B.R. 546 551 (Bankr. E.D. Mich. 1984);

In re Paradise Valley Country Club, 31 B.R. 613 (D.Colo. 1983).

"Bankruptcy filings have increased from 312,335 in the first

quarter of 2000 to 440,257 in the second quarter of 2003.

http://www.abiworld. org/stats/newstatsfront.html. (American

Bankruptcy Institute).

“Accord, In re Union League Club of Chicago, 203 F.2d 381,

386 (7 Cir. 1953) (reorganization decree conclusive on questions

which might have been raised as well as to those litigated); Murphy

v. John Hofman Co., 211 U.S. 562 (1909) (De facto verdict for

creditor in replevin action to obtain goods of debtor after

bankruptcy was filed reversed because the action was an unlawful

invasion of the bankruptcy court's jurisdiction which could not be

disturbed by another court); United States Fidelity & Guaranty Co.

v. Bray, 225 U.S. 205 (1912) (surety company’s claims against

19

Court held-over 160 years ago,

In every instance in which a tribunal has

decided upon a matter within its regular

jurisdiction, its decision must be

presumed proper, and is binding until it

shall be regularly reversed by a superior

authority; and cannot be affected, nor the

rights of persons dependent upon it be

impaired, by any collateral proceeding.

Cocke v. Halsey, 41 U.S. 71, 87 (1842); accord, Harris v.

Hardeman, 55 U.S. 334 (1853).

For example, in Wegner v. Grunewaldt, 821 F.2d

1317, 1320 (8th Cir. 1987), Wegner agreed to a buyout of

his interest in BLT, and consented to BLT’s transfer of

its liquor license to a new corporation BLT II. His dues

were secured by a security interest in BLT’s liquor

license. Meanwhile, Valley National Bank financed BLT

II and took a security interest in the same assets. In

bankruptcy proceedings of BLT and BLT II, the

Bankruptcy Court held that Wegner’s security interest,

although filed prior in time, was subordinate to Valley

National’s because (a) under 9-306(2) of South Dakota’s

UCC, he authorized and consented to the transfer; and

(b) as a BLT officer, he did not inform Valley National of

his security interest, and hence, his interest was

equitably subordinated. 821 F.2d at 1319-20. On appeal,

the District Court rejected these findings, and held that

Wegner authorized the sale on condition that he retain

his security interest, and state law permitted the

debtor's estate were “subjects for proceedings in bankruptcy and

therefore fell within the exclusive jurisdiction of the court of

bankruptcy”)

security interest to cont.) ‘= une transferred asset.

821 F.2d at 1320. On appeal, the Eighth Circuit reversed:

If the bankruptcy court's factual findings

are silent or ambiguous as to an outcome

determinative factual question, the district

court may not engage in its own

factfinding but, instead, must remand the

case to the bankruptcy court for the

necessary factual determination.

Wegner, 821 F.2d at 1320 (citing In re Walker, 726 F.2d

452, 454-55 (8" Cir. 1984); In re Neis, 723 F.2d 584, 588-90

(7° Cir. 1983).

-Moreover, the issue there presented a serious

inconsistency remarkably similar to the one here. As

the Eighth Circuit explained, 821 F.2d at 1321:

Yet, if we accepted the bank's argument,

we would be forced to inconsistently

conclude that when a secured party and a

debtor agree that the debtor may sell the

secured property and also agree that the

security interest shall continue in the sold

property, the first agreement is valid, the

second is meaningless, and, despite the

parties' manifestations, the secured party

loses his property interest in the sold

property. Not only would such an

interpretation ignore the parties'

intentions, it would also be at odds with

section 9-306(2)'s policy of extending, not

limiting, the protections Article 9 affords a

secured party.

Clearly, the interpretation of reorganization

21

plans, and the fate of specific claims or the debtors’

properties therein, remains exclusively with the

Bankruptcy Court. See, e.g., In re. Clipper International

Corp., 154 F.3d 565, 568 (6" Cir. 1998) (only bankruptcy

court could direct disbursement of dividend distribution

from overpayment of premiums made pre-petition, and

Michigan court’s orders “cannot be accorded

deference”); cf. Nichols v. Alker, 231 F.2d 68, 76 (2™ Cir.

1956) (“the express grant of such power to an enforcing

court under the P.U.H.C.A., like the similar provisions in

the Bankruptcy Act, strongly suggests Congressional

intent to immunize enforcement decrees from such

attack.”).

Indeed, even where a bankruptcy court’s decision

is directly at issue in appeal before the District Court,

settled law and practice requires that the District Court

defer to the opinions of the Bankruptcy Court as the

court of first instance. In re Lawrence, 293 F.3d 615, 625

(2™ Cir. 2002) ((emphasis added) (“discretion was

constrained by an obligation to consider the views of

the court that entered the original order. ")

Here, the Bankruptcy Court approved a

reorganization plan that indisputably did not intend to

discharge Indu Craft of its liability to Trendi. The

validity of the Plan or the enforceability of any orders

entered therein were never at issue before the District

Court. Nevertheless, the lower courts ran roughshod

over the Bankruptcy Court by holding that orders

confirming the Plan and discharging Indu Craft rendered

meaningless parts of that very order, as well as the

subsequent judgment in favor of Trendi. This re-

interpretation impermissibly intruded on the exclusive

jurisdiction of the Bankruptcy Court herein, and are a

remarkable departure from usual course of judicial

~

EE EE'’~ OO

22

proceedings.

B. The Decision Creates an Unprecedented

Concept in Law, a Schizophrenic

Judgment Which Is Valid as Against the

Judgment Creditor And Void Against the

Judgment Debtor

The lower Courts held that the Bankruptcy

Judgment in favor of Trendi against Indu Craft was

valid, so that Trendi must have that Judgment vacated

in order to assert claims against Baroda.

Simultaneously, they also held that the same Judgment

was not “collecti[ble]” from Indu Craft, A-14a

(emphasis in original).

in other words, according to this proposition, a

judgment could be valid as against the judgment-

creditor but void as against the judgment-debtor. The

lower Courts did not cite or expiain (and we could not

find) any legal basis for such a schizophrenic judgment.

This is a dangerous precedent for an unheard of concept

with tremendous potential for mischief.

Axiomatically, a judgment must be either valid

and enforceable, or invalid and unenforceable, as

against both, the judgment-creditor and the

judgment-debtor. Holding it valid against one but

invalid against the other converts it into a weapon for

perverse legal consequences. Thus, if a judgment is

invalid only as against the judgment-creditor, then a

claim can be the subject of repeated litigation against

the judgment debtor. And if the judgment is invalid

only as against the judgment-debtor, then the judgment-

creditor is left with a worthless piece of paper.

Of course, judgments are occasionally

23

uncollectible practically for want of assets. But to

hold a judgment to be legally uncollectible is the same

as holding it to be void, and the District Court’s

attempted distinction between “vcid” and

“uncollectible” is “sheer sopiiistry”, to borrow this

Court’s characterization in Nixon v. Administrator of

General Services, 433 U.S. 425, 516 (1977).

IL. The lower Courts’ Decision Concerning Trendi’s

Direct Claims Against Baroda Directly Conflicts

with the New York A ision in

Duffy V. Horton Memorial Hospital

Duffy, 497 N.Y.S.2d 890, involved a

medical malpractice action brought in August 1979

against the ospital in New York State court. In

June 1981, the hospital brought a timely third-party

action against Dr. Greenberg. After Dr.

Greenberg’s deposition was taken in October 1982,

that plaintiff sought to amend the complaint to

assert direct claims against him. Rejecting a

challenge based on the statute of limitations, New

York’s highest court reasoned that if the “new

defendant has been a complete stranger to the suit

up to the point of the requested amendment,” the

Claim might be barred. 497 N.Y.S.2d at 893, citing

Arnold v Mayal Realty Co., 299 NY 57 (N.Y. 1949);

Bringing in Party — Limitations, Ann., 8 A.L.R.2d 6,

§§ 53, 58). However, where, within the statutory

period, a potential defendant is fully aware that a

claim is being made against him with respect to the

transaction or occurrence involved in the suit, and

is, in fact, a participant in the litigation, permitting

an amendment to relate back would not

necessarily be at odds with the policies underlying

the Statute of Limitations ( Boyd v United States

SS"

24

Mtge. & Trust Co., 187 N.Y. 262, 270, [79 N.E. 999

[1907]]; cf. Williams v United States, 405 F2d 234,

236-237 [5" Cir. 1968]).

497 N.Y.S.2d at 893. Since Dr. Greenberg had been

served with the third party complaint and “all prior

pleadings in the action,” he had “actual notice of

the plaintiff's potential claim” when he was first

brought in as a third party defendant by the

original defendant, the hospital. 497 N.Y.S.2d at

893. Consequently, Dr. Greenberg had to “gather

evidence and vigorously prepare a defense. There

is no temporal repose.” Hence, the New York

Court of Appeals declared categorically:

a direct claim [could be] asserted against the third-

party defendant, which, for the purposes of

computing the Statute of Limitations period,

relates back to the date of service of the third-party

complaint.

497 N.Y.S.2d at 893 (citations omitted).

Here,. Baroda had “actual notice” of

Trendi’s claims when Baroda was impleaded

herein in 1990. It has been served with all

pleadings herein, it knew that it had to gather

evidence (and did so), and had to prepare a

defense. Indisputably, Baroda has done so, and

launched a vigorous defense. Thus, no serious

question can exist that had this case proceeded in

New York courts, Trendi’s claim would have been

upheld as timely. Nevertheless, the lower Courts

held otherwise, and refused to relate them back.

25

The District Court was exercising

Diversity Jurisdiction here. Indisputably, as such,

it was “in effect, only another court of the State”

which could not “substantially affect the

enforcement of the right as given by the State.”

Guaranty Trust Co. of N.Y. v. York, 326 U.S. 99, 109

(1945); accord, Bernhardt v. Polygraphic Co. of

America, 350 U.S. 198 (1956). As this Court

declared categorically,

[Where a federal court is exercising jurisdiction

solely because of the diversity of citizenship of the

parties, the outcome of the litigation in the federal

court should be substantially the same, so far as

legal rules determine the outcome of a litigation, as

it would be if tried in a State court."

erini v. rforH ities, Inc., 518 U.S.

Gasperini v. Center for Humanities, Inc.

415, 428 (1996) (quoting Guaranty Trust Co. of

N.Y., 326 U.S. at 109 and citing Ragan v. Merchants

_ Transfer & Warehouse Co., 337 U.S. 530, 533

(1949). See also Bernhardt v. Polygraphic Co. of

America, 350 U.S. 198, 202 (1956) (Even “Congress

does not have the constitutional authority to make

the law that is applicable to controversies in

diversity of citizenship cases”). The lower Courts’

refusal to relate back Trendi’s direct claims against

Baroda (the Second Third Party Complaint) was

directly in conflict with Duffy.

The Lower Courts’ Decision Creates Three

Diff S f Limitati ; he Sa

Claim under Rule 14, Depending Entirely on

Whether The Claims Are Formally Asserted, and If

So, How

ES”

Bas)

A third party plaintiff may recover from the

fourth party defendant in 3 ways. Firstly, it need not

assert such a claim formally, but may still recover.

Project Hope v. M/V Ibn Sina, 250 F.3d 67, 76-77 (2™ Cir.

2001) (“a formal amendment of a plaintiff's complaint

asserting causes of action against a party impleaded

under Rule 14(a) is unnecessary if the third-party is

effectively on notice that it will be held liable on the

plaintiff's claims and the two proceed against one

another in an adverse manner”); accord, Wasik v. Borg,

423 F.2d 44, 46 (2™ Cir. 1970); Falls Indus.., Inc. v.

Consolidated Chem. Indus., Inc., 258 F.2d 277, 287 (5"

Cir. 1958).

Here, Baroda was “effectively on notice” since

i990 that it would be held liable for Trendi’s claims.

Baroda and Trendi have always proceeded against one

another in an adverse manner, right from Baroda’s

motion for stay or dismissal in 1990.’ Thus, Baroda

could be held directly liable to Trendi even if Trendi had

not asserted a claim directly.” No question of statute of

‘For example, Trendi filed papers in opposition, and argued

against, Baroda’s motion for dismissal of Indu Craft’s fourth party

complaint. Trendi has appealed against the January 17” decision,

and Baroda has sought dismissal of that appeal in this Court.

Trendi filed direct claims against Baroda, A621.70, which are at

issue. Similarly, earlier, Trendi had appealed against the lower

Court’s order granting Baroda’s motion for summary judgment on

grounds of res judicata. Baroda moved for dismissal of that appeal,

and to strike Trendi’s brief. In fact, Trendi and Baroda have always

been on opposing sides in this action, whose thrust was always the

recovery from Baroda of damages suffered by Trendi.

“No serious question can exist that Baroda had all the

evidence concerning Trendi’s damages, had conducted discovery

concerning the same, and had bent over backwards to prevent

litigation on the merits or recovery thereon. As the Second Circuit

27

limitations could arise at all.

Secondly, the third party plaintiff may formally

assert a direct claim against the fourth party defendant

without amending its pleading, Rule 14, Fed. R. Civ. P.

In such case, as a corollary to settled law permitting

direct recovery by a plaintiff against an impleaded third

party, courts have related back such claims to the .

original impleader of the fourth ; arty. For example, in

T _V. , 724

F.2d 68 (8" Cir. 1983), cert denied, 469 U.S. 1160 (1985),

Trace X sued Gulf Oil in January 1978 for the supply of

defective TNT. Gulf asserted third party claims against

its supplier, CIL, on July 18, 1980, but these claims were

dismissed for want of personal jurisdiction. On March

12, 1981, Trace X asserted direct claims against CIL,

which were beyond the 4-years prescribed under statute

of limitations. However, the District Court held, the

complaint against CIL was not time-barred because

Trace X's claims against CIL “related back to the date of

its January 26, 1978, complaint” against Gulf Oil. 724

F.2d at 70. The Eighth Circuit upheld this ruling. Id.

So also, Northbrook National Vendin Co. v. J &

R. Vending Corp., 167 F.R.D. 643 (E.D.N.Y. 1996),

involved a diversity subrogation action for damages

resulting from a fire on premises of N orthbrook’s

insured (Tiffen) on April 2, 1993. Northbrook sued J &

R, and, after 4 derivative claims in series, sought to

assert claims against the fifth party defendant

Robertshaw directly. Like Trendi here, Northbrook

asserted “a direct claim against the third-party

itself previously held, Trendi’s damages had been deprived of a day

in court, Baroda Bank Of India v. Trendi Sportswear, Inc., 239 F.3d

428 (2™ Cir. 2000).

28

defendant in a new pleading,” 167 F.R.D. at 647.

Robertshaw opposed Northbrook’s claims on grounds

of statute of limitations. The Court rejected this on

grounds that, inter alia, an otherwise time barred claim

could survive based on the "relation back" doctrine. As

here, New York law applied to those claims, and New

York law permitted such relation back. 167 F.R.D. at

648 (citing Duffy, 497 N.Y.S.2d 890, and Hemmings v. St.

Mark Housing Association. L.P., N.Y.L.J. May 31, 1996 p.

28 cols. 3-4 (N.Y. Sup. Ct. Kings Co. 1996)). Since

Robertshaw could demonstrate no prejudice,

Northbrook’s claims were not time-barred. 167 F.R.D. at

648."

Here, Trendy formally asserted direct claims

against Baroda based upon the same transactions as

Indu Craft. However, the lower courts held that such a

direct claim can be asserted only before the statute of

limitations had run on Trendi’s direct claims themselves,

although Indu Craft’s claims were timely. A-12a."°

"See also Meredith v. United States, 41 F.R.D. 34 (S.D. Cal.

1966); Dysart v. Marriott Corp., 103 F.R.D. 15 (E.D. Pa. 1984); 6 C.

Wright & A. Miller, Federal Practice & Procedure § 1498 (1971).

Cfr., 131 Main St. Assocs. v. Manko, 897 F. Supp. 1507, 1521

(S.D.N.Y. 1995) (“Given that the added plaintiffs' claims in this case

are identical to those of the original plaintiffs, defendants have not

been prejudiced in their ability to mount a defense. The claims of

the late-comer plaintiffs are therefore timely”); Koal Indus. Corp, v.

Asland, S.A., 808 F. Supp. 1143, 1157 (S.D.N.Y. 1992) ("plaintiffs

have been allowed to add or substitute parties where there is an

extremely close corporate or other relationship between the

original and the added defendant," (quoting 3 J. Moore, Moore's

Fed. Practice, 415.08[5] (1992)).

10

This despite the Court acknowledging that Rule 14 (a) “does not

impose a time limit within which the plaintiff must assert any

claims that it may have against the third-party defendant.” A-12a.

29

Third, a third-party defendant may amend the

third-party complaint to assert a direct claim against the

fourth party defendant. This option is clear from the

advisory committee’s notes:

(T]he plaintiff may, if he desires, assert

directly against the third-party defendant

either by an amendment or by a new

pleading any claim he may have against

him arising out of the transaction or

occurrence that is the subject matter of

the plaintiff's claim against the third-party

plaintiff. |

Rule 14, Advisory Committee’s Notes, 1946 Amendment

(emphasis supplied).

- Here, the lower courts held that Trendy could not

amend its third-party complaint in this action because of

the Bankruptcy Judgment. That Judgment precluded

amendment, and thence, the applicability of Rule 15 ( c);

hence, the Doctrine of Relation Back would not apply,

according to the lower Courts.

Simply put, by the lower Courts’ decisions, a

third party’s direct claims under Rule 14 against a fourth

party defendant would be time-barred depending

entirely on the form in which the claims were asserted:

1. If the claims were not asserted formally at all,

they would not be time-barred in view of the fourth

party claims;

2. If they were asserted by way of an amendment to

the third party complaint, they would relate back to the

fourth party complaint; but

3. If they were asserted by way of a direct pleading,

30

they would have to be independently timely.

This applicability of statutes of limitations is an

important question off a federal law which should be

settled by this court. The decisions at issue elevate form

over substance, directly contrary to this Court’s

repeated admonition that “federal courts must not

privilege form over substance." Carey v. Saffold, 536

U.S. 214, 202 (2002); accord, Mitchell v. Helms, 530 U.S.

793, 818 (2000).

CONCLUSION

For the foregoing reasons, Trendi’s Petition for a

Writ of Certiorari should be granted.

Dated: New York, NY |

October 6, 2003

Chittur & Associates, P.C.

By: Krishnan Chittur, Esq.

The Lincoln Building

60 East 42™ Street 1501

New York, NY 10165

Tel: (212) 370-0447

Fax: (212) 370-0465

Email: kchittur@chittur.com

Attorneys for Trendi

Sportswear, Inc.

@

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