Opinion ID: 602805
Heading Depth: 3
Heading Rank: 3

Heading: The Substance of the Trustee's Complaint

Text: 13 The Bank contends that the substance of the Trustee's complaint exclusively raises bankruptcy law issues regarding, for instance, the automatic stay and the procedure for converting a Chapter 11 proceeding to a Chapter 7 case. While Bankruptcy Code provisions may be implicated here, the essence of the Trustee's allegations is that CNB's actions were inconsistent with its role as the debtor's primary lender and that as a consequence the debtor's business was destroyed. 14 The Trustee does not charge CNB with violating any Bankruptcy Code provision. By accusing CNB of undertaking to exercise control of the debtor, he does not thereby accuse CNB of violating the automatic stay, 11 U.S.C. § 362, no matter how broadly that provision is construed; instead, he accuses CNB of threatening to violate the stay in order to put undue pressure on the debtor. Similarly, the Trustee complains that CNB used the threat of forcing conversion of the case to exert influence over the debtor. It is the threat that constitutes CNB's alleged misconduct, not any cognizable violation of a Bankruptcy Code provision. CNB also believes that the Trustee has challenged the Bank's right to participate in the bankruptcy proceedings and to support a competing reorganization effort. However, on this record the Trustee never disputed that CNB could submit a competing plan or participate in the proceedings like any other creditor. Instead, he challenged CNB's efforts to maintain the Tisdales in office through threats and coercion and to encourage the formation of a new corporation--a corporation to be formed allegedly not for the purpose of assisting in any reorganization plan, but in order to take over the debtor's assets. These are actions that are neither in violation of nor in compliance with the Bankruptcy Code, but are independent of and outside the reach of the bankruptcy process. 15 Without reviewing every attempt by CNB to recharacterize the Trustee's complaint, we observe that while some Bankruptcy Code provisions may be implicated, the form, substance and spirit of the complaint are all grounded in lender liability. The Trustee's action here is 16 quintessentially [a] suit[ ] at common law that more nearly resemble[s] state-law contract [and tort] claims brought by a bankrupt corporation to augment the bankruptcy estate than [it does] creditors' hierarchically ordered claims to a pro rata share of the bankruptcy res. 17 Granfinanciera, 492 U.S. at 56, 109 S.Ct. at 2797. 18 We now turn to CNB's main arguments.