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Trimec, Inc. v. Zale Corporation

United States District Court for the Northern District of Illinois
150 B.R. 685 (1993)


Facts

Aeroplex Stores, Inc. (Aeroplex) (defendant) and Trimec, Inc. (Trimec) (plaintiff) created a joint venture called Aeroplex O’Hare (O’Hare) (defendant). Aeroplex O’Hare entered into an agreement with the City of Chicago (City) (defendant) to run three concession stores at O’Hare International Airport. Aeroplex O’Hare was to pay the City a license fee during operation. Zale Corporation (Zale) (defendant) became a guarantor of Aeroplex O’Hare’s contract obligations, agreeing to indemnify the other parties in the event of default. In addition, the Federal Insurance Company (FIC) (defendant) guaranteed a performance bond posted by Aeroplex O’Hare. After the concession stores failed, Aeroplex O’Hare ceased operations. Trimec filed suit against Aeroplex and Zale to recover losses associated with the joint venture. Aeroplex and Zale brought a third-party complaint against the City. The City then counterclaimed against Aeroplex O’Hare, Aeroplex, Trimec, Zale, and FIC. Trimec eventually settled its claims against Aeroplex and Zale. Thereafter, Zale filed for bankruptcy. Pursuant to the United States Bankruptcy Code (Code), 11 U.S.C. § 362, all further proceedings involving Zale were automatically stayed pending resolution of the bankruptcy case, including the City’s ongoing counterclaim. The City moved to lift the stay. Zale objected and moved to extend the stay, arguing that the stay should be extended to all parties to the suit, because any judgment in the City’s favor would necessarily bind Zale as Aeroplex O’Hare’s guarantor.

Rule of Law

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Issue

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Holding and Reasoning (Williams, J.)

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  • A "yes" or "no" answer to the question framed in the issue section;
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