Markus v. Fried (In re Geneva Steel)
PUBLISHED
The Chapter 11 trustee brought an adversary proceeding against certain members of Geneva's Board of Directors alleging breach of duty of care, breach of duty of good faith, breach of duty of loyalty and breach of fiduciary duty. Two of the defendants filed a motion with the Court to have the trustee's causes of action declared as "non-core" matters under 28 U.S.C. § 157(b)(3). Both of the moving directors had filed proofs of claim in the Geneva bankruptcy proceeding. An element of the Director's proofs of claim included an indemnity claim asserting claimant's rights to be indemnified, defended, or held harmless by Geneva for any liability that may arise from the Director's service on the Board of Directors. Upon being served with the trustee's complaint, both directors filed a counterclaim in the adversary proceeding asserting their indemnification rights. The Court ruled that the causes of action in the trustee's adversary proceeding against the directors were a compulsory counterclaims to the director's proofs of claim and the Court ruled that the director's counterclaims were compulsory counterclaims to the causes of action brought by the trustee in the adversary proceeding. The Court held that under 28 U.S.C. § 157(b)(2)(C), and 28 U.S.C. § 157(b)(2)(O), the causes of action asserted by the trustee are "core" matters.