RSM Richter, Inc. v. Behr America, Inc.

Summarized by Timothy Brink , Meltzer Purtill & Stelle LLC
12 years 5 months ago

Citation:

RSM Richter, Inc., as Trustee for Aleris Aluminum Canada, L.P. v. Behr America, Inc., Case No. 12-2429 (6th Cir. September 5, 2013)

Tag(s):

Ruling:

In an opinion recommended for publication, the Sixth Circuit reversed the district court’s order denying the debtor’s motion to reopen the debtor’s district court case against a customer, and remanded the case for adjudication of the customer’s setoff defense against the debtor. In so doing, the Sixth Circuit held that the mere pendency of the customer’s state court case was an invalid basis for Colorado River abstention, and that rather than justifying abstention international comity was a reason for the district court to adjudicate the customer’s setoff defense.

Procedural context:

The debtor appealed from the district court’s order denying the debtor’s motion to reopen the debtor’s district court case against a customer. The court of appeals reviewed the order as one appealable under the collateral order doctrine. Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 713 (1996).

Facts:

The debtor, Aleris, supplied aluminum worth $2.6 million under a requirements contract to a customer, Behr, for which Behr did not pay. When Aleris ceased operations, Behr was forced obtained aluminum from other suppliers, increasing its costs by $1.5 million. Behr sued Aleris in state court to recover its “cover” costs. When Aleris filed bankruptcy, Behr’s state court case was stayed. After Behr amended its complaint to name Aleris’s Canadian affiliate, the trustee in Aleris’s Canadian bankruptcy filed a notice of bankruptcy and the state court again stayed the case. Meanwhile, Aleris sued Behr in district court to recover the $2.6 million owed by Behr. Behr asserted defenses and counterclaims based on its “cover” costs, and moved for dismissal of the district court case, arguing that the district court should abstain in favor of Behr’s pending state court case. The district court denied Behr’s motion as to Aleris’s claim against Behr, but held that it would abstain from adjudicating Behr’s counterclaims on two grounds, the Colorado River abstention doctrine, and abstention based on international comity with respect to the Canadian bankruptcy proceeding. Thereafter, the district court granted summary judgment for Aleris on its claim against Behr, and while the district court refused to adjudicate Behr’s counterclaim, it entered partial judgment in favor of Aleris in the amount of $1.1 million, which was the difference between the amounts of Aleris’s claim and Behr’s counterclaim.

Judge(s):

Keith, Clay, and Kethledge, Circuit Judges

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