The opinion of the court was delivered by: Honorable Margaret M. Morrow Anel Huerta N/a
Present: The Honorable MARGARET M. MORROW ANEL HUERTA N/A
Deputy Clerk Court Reporter
Attorneys Present for Plaintiffs: Attorneys Present for Defendants:
Proceedings: Order Referring Case to Bankruptcy Court
On December 15, 2011, Friedman Corporation commenced this action
against Universal Molding Company ("UMC"), Universal Molding Extrusion
Company, Inc. ("UMEX"), and certain fictitious defendants.*fn1
Friedman asserts claims for copyright infringement,
contributory infringement, vicarious infringement, breach of contract,
conversion, unjust enrichment, quantum meruit, and unfair business
practices. All claims are based on defendants' alleged use of
Friedman's copyrighted software.
Friedman's primary business is developing, maintaining, and licensing software for the "window, door, cabinet, and furniture industries."*fn2 The company has created a software program called "Frontier," for which it possesses federally registered copyrights. Friedman licensed the use of Frontier to International Aluminum Corporation ("IAC") under a licensing agreement. The agreement contemplated regular payments to Friedman, and gave Friedman the right to terminate the license in the event of breach, failure to pay, or a bankruptcy filing by the licensee.
In the spring of 2011, IAC failed to make payments under the license agreement, and also filed a Chapter 7 bankruptcy petition. Shortly thereafter, defendant Universal Molding Company ("UMC") purchased IAC's assets from the trustee. Friedman's chief financial officer, Eric Herrmann, asserts that the company did not receive notice that the trustee had sold IAC's license to a buyer. In the "summer [of] 2011," Friedman learned that UMC and its affiliates/subsidiaries were using Frontier.*fn3 Herrmann contacted Dominick Baione, UMC's chief executive officer, and told him the company was not authorized to use Frontier. Thereafter, Friedman and UMC began to discuss a possible license agreement. The breakdown of those negotiations and defendants' continued use of Frontier led to this lawsuit.
Although Friedman has not asserted a claim against the bankruptcy trustee or the bankruptcy estate, defendants contend that the bankruptcy court possesses post-confirmation jurisdiction to interpret and enforce its own orders.*fn4 Their attorney, James Jackson, has submitted a declaration stating that his clients advised him "that the subject software was included in the assets purchased from the Bankruptcy Trustee."*fn5 Appended to the declaration is a June 29, 2011 bankruptcy court order entered by United States Bankruptcy Judge Richard M. Neiter in a case captioned In re Int'l Architectural Group, LLC, Case Nos. 2:11-bk-30486-RN, 2:11-bk-30496-RN, 2:11-bk-30504-RN, 2:11-bk-30507-RN. The order approved the sale of certain property "free and clear of all liens, claims or interests."*fn6 A notice of sale of estate property, filed June 7, 2011, is also attached to Jackson's declaration; the property listed for sale includes IAC's "intellectual property" and "software."*fn7 Lots 1 and 2 of the property include "trade names and brand names and any other intellectual property owned by the Debtor," while Lot 6 includes "software."*fn8 Finally, defendants proffer a proof of service issued by the bankruptcy court; Friedman is listed as an unsecured creditor that received notice on the proof of service.*fn9
As a result, defendants contend that the subject of this litigation concerns their rights and obligations as purchasers of IAC's assets at the trustee's sale, and that Friedman's claims should be decided by the bankruptcy court.
A district court may refer to the bankruptcy court all proceedings arising under title 11 and or in or related to a case under title 11, 28 U.S.C. § 157(a). The bankruptcy court may determine cases arising under title 11 and all "core" proceedings arising ...