Bagel Brothers Maple, Inc. v. Ohio Farmers, Inc.

Robert and Jay Gershberg owned 14 bagel stores in the Buffalo, New York area. Each store was operated by a separate corporation that included the trade name Bagel Brothers and the name of the street on which the store was located. For example, Bagel Brothers Maple, Inc. (Maple) (defendant) operated a store on Maple Road in Amherst, New York. Beginning in 1993, the Gershberg brothers opened nine bagel stores in Ohio. Each of the Ohio stores was operated by a separate corporation that included the trade name Bagel Brothers and the name of the city in which the store operated. All 23 Bagel Brothers corporations adhered to corporate formalities and maintained their own corporate business records. Ohio Farmers, Inc. (Ohio Farmers) (plaintiff) supplied food products on credit to the Bagel Brothers stores as they opened in Ohio. The Gershberg brothers directed Ohio Farmers to deliver the products to the specific stores and send the bill to Bagel Brothers’ corporate headquarters on Alberta Road in Amherst, New York. Ohio Farmers created an account for each new Bagel Brothers store with the corporate name, the store’s address, and Bagel Brothers’ Amherst billing address. Bagel Brothers paid Ohio Farmers’ invoices from checking accounts maintained in the name of the stores’ corresponding Ohio corporations. In 1995, the 14 Bagel Brothers New York corporations merged into Maple for administrative purposes. In March of 1998, the Gershberg brothers filed a Chapter 11 bankruptcy petition in the Western District of New York on behalf of Maple and the broader company Bagel Bros. Bakery and Deli, Inc. The Gershberg brothers closed the Ohio stores after the bankruptcy filing. At the time of the closures, Ohio Farmers was owed $34,000 and filed a claim for the money in Maple’s Chapter 11 case. Maple objected and argued that it was not liable for the unpaid invoices because the Ohio corporations that owed the money were separate corporate entities from Maple, and Maple had never dealt directly with or contracted with Ohio Farmers. After a hearing, the bankruptcy judge allowed Ohio Farmers’ claim against Maple, finding that Ohio Farmers reasonably believed that it was being paid by an entity in Buffalo known as Bagel Brothers and was never told that only the Ohio corporations would be liable for payment. Maple appealed to the federal district court.