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Seitz v. Paul T. Freund Corp.

April 15, 2009

GARY F. SEITZ, CHAPTER 7 TRUSTEE OF THE BANKRUPTCY ESTATE OF CONTINENTAL PAPER BOX COMPANY, INC., PLAINTIFF,
v.
PAUL T. FREUND CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: David G. Larimer United States District Judge

DECISION AND ORDER

Plaintiff Gary F. Seitz ("Seitz"), Chapter 7 trustee of the bankruptcy estate of Continental Paper Box Company, Inc. ("Continental"), brings this action against defendants alleging violations of defendants contractual obligations pursuant to an agreement between the parties.

Defendants now move for summary judgment dismissing the complaint, on the grounds that defendants' non-performance is excused by plaintiff's failure to assume the contract after Continental was placed into bankruptcy (Dkt. #34). For the reasons that follow, defendants' motion for summary judgment is granted, and the complaint is dismissed.

FACTUAL AND PROCEDURAL BACKGROUND

The material facts in this matter are not in dispute.

On or about July 1, 2002, Continental entered into a Manufacturing, Marketing and Services Agreement ("Agreement") with Paul T. Freund Corporation ("Freund") and Continental Freund LLC ("Continental Freund") (collectively, "defendants"). The Agreement provided that Continental would continuously market defendants' products, and would refer a minimum of $2,000,000 in business to defendants over the course of its one-year term. In exchange, defendants would pay Continental certain specified commissions, and promise not to compete with Continental by manufacturing a similar product for a period of eighteen months after the expiration of the Agreement.

On January 31, 2003, Continental Paper was involuntarily placed into bankruptcy pursuant to Chapter 7 of the Bankruptcy Code. As of that date, the parties were six months into their year-long Agreement, and Continental had referred $862,268.76 in customer orders to the defendants, $710,934.89 of which had been collected. Defendants had also paid a $65,000.00 cash advance to Continental, and had sold certain materials to Continental for which Freund was owed $45,514.27.

Section 365 of the Bankruptcy Code provides that, in certain circumstances, a bankruptcy trustee may opt to assume the obligations of an executory contract of the debtor. 11 U.S.C. §365. It is undisputed that the trustee for Continental did not assume the Agreement, and as of January 31, 2003, Continental ceased to do business, ended all of its customer relationships, and stopped referring customer orders to the defendants.

On February 7, 2007, plaintiff, as trustee of Continental's bankruptcy estate, commenced the instant action, alleging that defendants owed Continental unpaid commissions, and that defendants had breached the Agreement's restrictive covenant by soliciting Continental customers.

DISCUSSION

I. Summary Judgment

Summary judgment will be granted if the record demonstrates that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). (2000). In determining a motion for summary judgment, the Court's role is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id. When considering a motion for summary judgment, the Court must construe all inferences from underlying facts in the light most favorable to the non-movant. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986), citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962).

While granting Continental the favorable inferences due to it as a non-movant, I find that Continental has failed to raise a material question of fact concerning its entitlement to unpaid commissions, or the executory nature of the Agreement, ...


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