ORDER
PHILIP BRIMMER, District Judge
This matter is before the Court on the parties' statement regarding the status of the case [Docket No. 25] and its attached proposed Stipulated Order. On November 16, 2010, Magistrate Judge Kristin L. Mix accepted defendant's stipulation to the injunctive relief requested by plaintiff [Docket No. 23]. On November 17, 2010, this Court denied plaintiff's motion for injunctive relief as moot [Docket No. 24]. The Court ordered the parties to show cause on or before November 29, 2010 why this case should not be stayed and administratively closed, pursuant to D.C.COLO.LCivR 41.2, pending arbitration. Parties' stipulated order states that the parties have conferred and agree to injunctive relief and to the case being stayed and administratively closed pending arbitration.
Pursuant to the stipulated order, the parties agree to forego an expedited injunctive hearing pursuant to FINRA Rule 13804(b)(1) and will proceed to a final hearing on the merits of the parties' non-injunctive claims before the FINRA panel appointed to this case consistent with a schedule to be set by the panel. Each party and any potentially impacted non-party reserves its and/or his right to request or oppose any and all discovery in connection with the FINRA arbitration.
Through this Order and the parties' stipulated order, the parties have resolved the parties' injunctive relief claims without prejudice to any argument or position taken by any party in this civil action or the related arbitration relating to the parties' damages claims. The parties have agreed that nothing contained in the stipulated order shall be construed as a concession of liability on the remaining claims for damages in the related arbitration action and that nothing contained therein shall be construed as an admission of wrongdoing.
Accordingly, it is
ORDERED that, pursuant to the parties' Stipulated Order [Docket No. 25, Attach. A], defendant Franklin Portillo is enjoined from:
(A) soliciting or inducing any employee or contingent worker of Charles Schwab Co., Inc. ("Schwab") to leave his or her employment with Schwab; and
(B) destroying, erasing, or otherwise making unavailable for further proceedings in this matter or the related arbitration, any records or documents (including data or information maintained in computer files or other electronic storage media) in Portillo's possession or control which relate to any of the events alleged in the complaint in this action. It is further
ORDERED that the stipulation set forth above shall remain in effect through and until 11:59 p.m. on December 1, 2011, at which time it shall expire and be of no further force or effect. Any continuing obligations defendant may have pursuant to terms of any contracts with plaintiff will not be affected by the expiration of the injunction. The Court shall retain jurisdiction with respect to any of its Orders. It is further
ORDERED that the case is STAYED. It is further
ORDERED that this case shall be administratively closed, pursuant to D.C.COLO.LCivR 41.2, with leave to be reopened for good cause shown. If no action is taken to reopen this case before December 1, 2011, the case will be dismissed without prejudice without any further notice to either party.
DATED November 30, 2010.
e asserted under the UFTA that would have enabled it to avoid the obligations it incurred in that document.
But when the Debtor filed its bankruptcy petition, the Bankruptcy Code authorized it to pursue some claims it previously had no right to make. Section 1107(a) authorized the Debtor as the debtor-in-possession in its bankruptcy case to exercise certain powers of a Chapter 11 trustee, such as to try to avoid transfers under § 544(a). Claims like that were not available to the Debtor before it filed for bankruptcy. Furthermore, in its capacity as the debtor-in-possession, the Debtor is not the same "quality of person" it was when it was acting only on its own behalf in the state court litigation.
Essentially the same analysis applies to the Debtor's claims to avoid the final development plan and the final plat for Mission Corner under § 544(a)(3). K.S.A. 58-2223 specifically provides that an unrecorded document affecting real estate is still valid with respect to the parties to the document. In the state court lawsuit, the Debtor had no claim to invalidate the plan and plat on the ground they had not been recorded. It can make that claim now only because the Bankruptcy Code authorizes it to assert the rights a hypothetical bona fide purchaser of the Mission Corner real property would have to defeat the plan and plat because they were not recorded. The Debtor had no right to assert such claims before it filed for bankruptcy. In addition, the Bankruptcy Code made the Debtor a debtor-in-possession, a capacity it did not have before filing for bankruptcy.
In short, under Kansas claim preclusion law, the state court judgment does not preclude the Debtor from asserting the claims it is making in this proceeding. Since the judgment has no claim-preclusive effect, the Court need not consider whether anything else in federal law makes an exception to the Full Faith and Credit Statute for the Debtor's claims.
5. Issue preclusion
As was true for claim preclusion, the federal Full Faith and Credit Statute requires the Court to apply the issue preclusion law of Kansas, the state in whose courts the judgment was rendered, to determine the judgment's effect in this case. But if Kansas law says that the judgment would have a preclusive effect here, the Court must then determine whether something else in federal law makes an exception to the Full Faith and Credit Statute for purposes of the Plaintiff's claim. Also, as indicated in discussing claim preclusion, the fact the Debtor's appeal of the state court judgment is still pending does not, under Kansas law, prevent the judgment from precluding relitigation of specific issues decided by the state court. Under Kansas law,
28 U.S.C.A. § 1738.
Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 379-86 (1985); Matsushita Electric Industrial Co., Ltd., v. Epstein, 516 U.S. 367, 373-75 (1996).
Marresse, 470 U.S. at 379-86; see also National Union Fire Ins. Co. v. Boyovich (In re Boyovich), 126 B.R. 348, 350 (Bankr. W.D. Wash. 1991) (Marresse approach applies in bankruptcy proceedings).
The requirements of collateral estoppel [also known as issue preclusion] are: (1) a prior judgment on the merits which determined the rights and liabilities of the parties on the issue based upon the ultimate facts as disclosed by the pleadings and judgment; (2) the parties must be the same or in privity; and (3) the issue litigated must have been determined and necessary to support the judgment. [Citation omitted.]
The claims the Debtor is pursuing now concern the rights and powers a judicial lien or judgment creditor would have had against it on the day it filed for bankruptcy, and the rights and powers a hypothetical bona fide purchaser of real property from it would have had on that same day. For the most part, none of those rights and powers were litigated in the state court suit between the Debtor and Village.
To the extent, however, that the Debtor's own obligations to Village under the various transactions involved in the state court suit were determined in that suit, creditors of or purchasers from the Debtor would be bound by the state court's rulings. Most of the rights such creditors or purchasers could assert against Village would derive directly from the Debtor, and the Bankruptcy Code does not give them any additional right to assert claims the Debtor could properly assert in the state court suit. For example, the state court's determination that the Lot 4 sale agreement obliged the Debtor to build the infrastructure required for Village to be able to build on Lot 4 precludes the Debtor from arguing now on behalf of its creditors and purchasers, as it did in state court on its own behalf, that the agreement did not impose such an obligation on the Debtor. Similarly, the Debtor cannot properly argue in this proceeding that the infrastructure for the Mission Corner development included the underground parking garages that were included in some of the development plans. In other words, with respect to the obligations the state court determined the Debtor had to develop Mission Corner, the Debtor's creditors or purchasers are in privity with the Debtor so that the state court's rulings preclude them from disputing the obligations that court found the Debtor's transactions with Village imposed on it. The Debtor has not suggested anything in federal law would except these findings from the Full Faith and Credit Statute, and the Court is not aware of any applicable exception.
In paragraph 29 of its first amended complaint in this proceeding, the Debtor alleged the inclusion of the underground parking garages showed the Final Site Development Plan, the Final Plat, and the Declaration of Covenants and Restrictions were infeasible and uneconomic. Dkt. no. 9, at 6.
On the other hand, while Village argues appraisals and other evidence of the value of Mission Corner and Lot 4 were presented to the state court, Village does not identify any findings the court made about those values, or any claim for relief the Debtor asserted or could have asserted in the state court case that raised the question whether it received reasonably equivalent value in return for Lot 4. Under Kansas law, the sufficiency of the consideration required for a contract to be enforceable between the parties who make it is largely up to them. Some years ago, in In re Estate of Shirk, the Kansas Supreme Court determined the consideration a daughter gave was sufficient to make an enforceable contract for her mother to give her one-third of the mother's estate upon death, saying:
Generally speaking, consideration is not insufficient merely because it is
inadequate. To be sufficient, the consideration agreed upon must be a legal benefit or detriment, and need not be a thing of pecuniary value or reducible to such value. . . . Nor does the legal sufficiency of a consideration for a promise depend upon the comparative economic value of the consideration and of what is promised in return, for the parties are deemed to be the best judges of the bargains entered into. The value of all things contracted for is measured by the appetite of the contractor. . . . Where a party contracts for the performance of an act which will afford him pleasure, gratify his ambition, please his fancy, or express his appreciation of a service another has rendered him, his estimate of value must be left undisturbed, unless there is evidence of fraud. . . . In the class of cases mentioned, if there is any legal consideration for a promise, it is sufficient. If this were not the case, the result would be that the courts would be substituting their own judgment for the promisor's, and in so doing, make a new contract for the parties.
So long as contracting parties each gave some consideration, the relative equivalence of the value of the exchanges they bargained for is not relevant to the enforceability of the contract in a lawsuit between them. The $600,000 Village gave the Debtor for Lot 4 was certainly sufficient to make the sale contract enforceable against the Debtor. The degree of equivalence of the consideration becomes relevant only when creditors of one of the parties (or their representative, such as the debtor-in-possession in a bankruptcy case) claim the contract amounted to a fraudulent transfer that the creditors can avoid under state law, the Bankruptcy Code, or a combination of the two. Village has not shown that the state court's judgment precludes the Debtor from claiming it received less than reasonably equivalent value in its transactions with Village.
Conclusion
For these reasons, the Court concludes Village's motion for summary judgment must be denied.
SO ORDERED.
SIGNED this 30 day of November, 2010.