                                                                                                                           Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


9-26-2007

In Re: Blake Chicago
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-2280




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Recommended Citation
"In Re: Blake Chicago " (2007). 2007 Decisions. Paper 373.
http://digitalcommons.law.villanova.edu/thirdcircuit_2007/373


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NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT
                                __________

                                    No. 06-2280
                                    __________

                       IN RE: BLAKE OF CHICAGO CORP.
                        f/k/a A.B. DICK COMPANY, et. al.,
                                               Debtor,

             *EXECUTIVE SOUNDING BOARD ASSOCIATES, INC.,
               AS TRUSTEE OF THE BLAKE CREDITOR TRUST,
                                          Appellant,

                  *(Substituted per the Clerk’s Order dated 12/19/06


                                    __________

                   On Appeal from the United States District Court
                             For the District of Delaware
                                  (No. 04-CV-1566)
                      District Judge: Honorable Kent A. Jordan
                                     __________

                           Argued on September 19, 2007
                                   ___________

              Before: SLOVITER, SMITH and GARTH, Circuit Judges.

                            (Filed: September 26, 2007)

Patricia K. Smoots (Argued)
Richard J. Mason, P.C.
Michael M. Schmahl
McGuireWoods LLP
77 W. Wacker Drive, Suite 4100
Chicago, IL 60601-1681
       Attorneys for Appellant
James M. Sullivan (Argued)
Stephen B. Selbst
Gary O. Ravert
McDermott Will & Emery LLP
340 Madison Avenue
New York, NY 10173
      Attorneys for Appellee
                                        __________

                                         OPINION

                                        __________

GARTH, Circuit Judge.

       We review an order of the district court for the District of Delaware entered on March

9, 2006, affirming the November 17, 2004 order of the bankruptcy court as amended

November 23, 2006. Our review is plenary. Our jurisdiction stems from a final order. 28

U.S.C. § 1291.

       A brief description of the issue follows. (The parties being familiar with the entire

proceeding, the details need not be specified here). A.B. Dick Company had pre-paid $2.546

million for certain inventory (plates) on order from Mitsubishi Imaging, Inc. Pursuant to an

Asset Purchase Agreement (“APA”), amended twice and approved by the bankruptcy court.

Appellee Presstek, Inc. then paid $40 million to acquire substantially all of A.B. Dick’s

assets, and in particular, A.B. Dick’s inventory. The issue in contention is whether Presstek

retains the $2.546 million in inventory purchased in pre-paid deposits by Presstek, or

whether this amount was retained by the debtors’ estate, and therefore should inure to the

benefit of the appellant Official Committee of Unsecured Creditors.

                                             -2-
       The Official Committee contends that Presstek did not acquire the $2.546 million pre-

paid inventory because: 1. A.B. Dick had not acquired title to the on-order product from

Mitsubishi prior to the bankruptcy court’s approval of the sale, and therefore A.B. Dick could

not sell the product to Presstek;1 2. the rights to the pre-paid product were an “Excluded

Asset” under Section 2.2 of the APA; and 3. Paragraph 9 of the bankruptcy court’s approval

order excluded A.B. Dick’s Postpetition Agreement with Mitsubishi from the sale. Presstek,

on the other hand, contends that: 1. the lack of title transfer is irrelevant since A.B. Dick

acquired rights and interest to the pre-paid product, which was then sold to Presstek; 2. the

pre-paid inventory was not an excluded asset under the APA; and 3. Paragraph 9 did not

apply to A.B. Dick’s transfer of its rights and interest in the on-order product from

Mitsubishi.

       We hold that although title to the pre-paid inventory did not pass from Mitsubishi to

A.B. Dick, the APA provided for Presstek’s acquisition of all right, title, and interest in A.B.

Dick’s assets and did not list pre-paid inventory among the excluded assets. Moreover, the

APA provided that A.B. Dick’s working capital (accounts receivable and inventory) had to

be at least $22.7 million in order for Presstek to purchase A.B. Dick’s assets for $40 million.

This working capital provision included pre-paid inventory. Finally, Paragraph 9 of the

bankruptcy court’s approval order was prospective in nature and thus did not apply to



       1
        Under the terms of a Postpetition Agreement with Mitsubishi, A.B. Dick did not
acquire title to the pre-paid product until delivery. At the time the bankruptcy court
entered its approval order, no product had yet been delivered.

                                              -3-
inventory, which was already paid for and in the process of shipment to A.B. Dick. Thus,

Paragraph 9 did not affect the transfer of this pre-paid inventory.

       We will affirm the district court’s order.




                                             -4-
