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#2124 signed 3-31-95

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS

In Re:

AMERICAN FREIGHT SYSTEM, INC.,

DEBTOR(S)

NO. 88-41050-11

CHAPTER 11

AMERICAN FREIGHT SYSTEM, INC.,

PLAINTIFF(S),

v.

ALL AMERICAN METAL CORP.,

DEFENDANT(S)

ADV. NO. 89-7370

ORDER ALLOWING WITHDRAWAL OF ADMISSIONS

AND DENYING SUMMARY JUDGMENT

This proceeding is before the Court for resolution of various motions and objections. American Freight System, Inc. (AFS), the plaintiff-debtor, appears by counsel Kurt Stohlgren and Joseph L. Steinfeld, Jr. Defendant All American Metal Corporation (All American) appears by counsel Alex M. Lewandoski, Frank W. Taylor, Jr., and Frank J. Rebori. The Court has reviewed the relevant pleadings and is now ready to rule.

Late in November of 1994, AFS filed a motion for summary judgment based on deemed admissions resulting from All American's failure to respond to a request for admissions that had been served by mail on August 23. A week later, on December 2, All American filed a motion to respond out of time to AFS's request for admissions, stating that it had changed attorneys after the request was served and that its new attorneys did not become aware of the request until the summary judgment motion was filed. AFS objected, stating, among other things, that its attorney had spoken with one of the new attorneys and told him AFS had agreed that All American could have until October 18 to respond to the request. All American then filed a motion to withdraw or amend the admissions, and on December 21, served AFS with its proposed responses to the request for admissions. AFS also objected to this motion and All American filed a reply. All American has filed a response to AFS's summary judgment motion, and AFS has replied to that response. Thus, All American first asked for more time to respond to the request for admissions forty-five days after its response was due, and served its actual response sixty-four days after it was due.

All American concedes that its attorneys, in transferring responsibilities from one firm to another, simply neglected to respond timely to the request for admissions. Federal Rule of Bankruptcy Procedure 7036 makes Federal Rule of Civil Procedure 36 apply to adversary proceedings. Rule 36(a) provides that, when a party is served with a request for admission, "[t]he matter is admitted unless, within 30 days after service of the request . . . the party to whom the request is directed serves upon the party requesting the admission a written answer or objection addressed to the matter." Rule 36(b) provides that: "Any matter admitted under this rule is conclusively established unless the court on motion permits withdrawal or amendment of the admission. . . . [T]he court may permit withdrawal or amendment when the presentation of the merits of the action will be subserved thereby and the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice that party in maintaining the action or defense on the merits." The 1970 Advisory Committee Notes state that the provision for withdrawal or amendment of admissions "emphasizes the importance of having the action resolved on the merits, while at the same time assuring each party that justified reliance on an admission in preparation for trial will not operate to his prejudice." The Tenth Circuit reviews a grant of relief from deemed admissions under an abuse of discretion standard. Bergemann v. United States, 820 F.2d 1117, 1121 (10th Cir. 1987).

Summarized, AFS's request for admissions asked All American to admit that certain lists of invoices, identified by "PRO" numbers, represented shipments AFS carried for All American, that All American had not paid the invoices, and that All American did not dispute it owed AFS the money shown on the lists. If All American is not allowed to withdraw the admissions, presentation of the case on the merits will be completely foreclosed. It seems clear that allowing All American to make its tardy response to the request for admissions will serve the presentation of the merits of the case. See Rabil v. Swafford, 128 F.R.D. 1, 2 (D.D.C. 1989).

This case was filed in November of 1989 and seeks to collect charges evidenced largely, if not completely, by records AFS kept in the ordinary course of its business. Consequently, AFS probably had in 1989, or if not, should certainly have obtained before August of 1994, all the evidence it needed to prove its claims. The requested admissions, then, would not have saved AFS from any need to collect evidence, but only from the need to prepare for, and present its evidence at, trial. No trial is presently scheduled, so AFS has probably not yet commenced such trial preparations. In its pleadings, AFS claims it will be prejudiced if the Court allows All American to withdraw its admissions. However, the only prejudice it identifies pertains to the substance of All American's proposed responses to the request for admissions. The Court has reviewed the request and proposed responses, and believes All American's responses essentially say that All American does not know what shipments the "PRO" numbers included in the request are referring to. AFS has not shown that All American knows what the numbers refer to. Furthermore, the "prejudice" required to preclude withdrawal of admissions must arise from reliance on the binding effect of the admissions. 8A Wright, Miller & Marcus, Fed. Prac. & Pro. Civil 2d, §2264 at 577 (1994); Rabil v. Swafford, 128 F.R.D. at 2-3; Flohr v. Pennsylvania Power & Light Co., 821 F.Supp. 301, 306 (E.D.Pa. 1993). AFS has not claimed that kind of prejudice. If All American's refusal to admit the facts asserted in AFS's request is improper, after trial AFS may seek under Rule 37(c)(2) to recover the reasonable expenses incurred in proving them.

Since the deemed admissions formed the basis for AFS's summary judgment motion and the Court has allowed All American to withdraw them, AFS's motion is denied.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this 31st day of March, 1995.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

 

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