IN RE PJC TECHNOLOGIES, INC. (Bankr.W.D.N.Y. 1-20-2010)

In re: PJC TECHNOLOGIES, INC., (d/b/a Metro Circuits and d/b/a Speedy Circuits), CHAPTER 11, Debtor. PJC TECHNOLOGIES, INC., Plaintiff, v. C3 CAPITAL PARTNERS, LP, Defendant.

CASE NO. 09-22733, AP #09-2119.United States Bankruptcy Court, W.D. New York.
January 20, 2010

DECISION ORDER
JOHN NINFO II, Chief Judge

After reading the pleadings and hearing oral argument, the Court denies the request of PJC Technologies, Inc. (the “Debtor”), for a preliminary injunction in Adversary Proceeding No. 09-2119 (the “Adversary Proceeding”), wherein it has requested that the Court stay the January 29, 2010 secured creditor’s UCC sale (the “Sale”) by C3 Capital Partners, LP (“C3”) of the stock, which constitutes 100% of the issued and outstanding stock in the Debtor (the “Stock”), owned by the Peter J. Casson Declaration of Trust (the “Trust”), for the following reasons:

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1. The scheduled Sale of the Stock, which is owned by the Trust,
as opposed to treasury stock, which would be owned by the
Debtor and would be an asset of the estate, would not be a
violation of the automatic stay provided for by Section 362,
as asserted in the complaint in the Adversary Proceeding,
particularly, Section 362(a)(1), since it would not be an act
against the Debtor, as specifically required by Section
362(a)(1);

2. The Debtor has not met its burden to demonstrate that, under
Section 105(a), in the Court’s discretion, it is entitled to
a preliminary injunction, for the following reasons:

a. It has failed to demonstrate, to this Court’s
satisfaction, that there is sufficient certainty that the
Sale will result in imminent, irreparable harm to the
Debtor, or to its reorganization efforts, or that there
is a reasonable likelihood that the Debtor can
successfully reorganize pursuant to its filed plan (the
“Plan”), because:

i. Although the Sale of the Stock will result in a
change in control of the Debtor, which is a default

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under the post-petition financing agreements
between the Debtor and Marquette Business Credit,
Inc. (“Marquette”), Marquette has indicated that,
without prejudice to its rights, it will not
automatically call the default and terminate its
post-petition financing;

ii. C3 has indicated that, if the Sale does not result
in the full payment of its indebtedness and
Marquette elects to terminate the post-petition
financing, C3 will provide post-petition financing
on the same terms as provided by Marquette, and
there is no evidence or allegations that it is not
capable of providing such financing;

iii. There is no direct evidence that, if C3 or an
affiliate purchases the Stock, or if any third
party purchases the Stock, that the purchaser will
remove the President and CEO, Peter Casson
(“Casson”), or that if Casson is removed, the
Debtor will not be able to operate, succeed and
reorganize. If the Debtor cannot operate and
reorganize without Casson, in this Court’s opinion,

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it is not properly structured and staffed, which
can only be the fault of Casson;

iv. If C3 or an affiliate is the successful purchaser
of the Stock, unless the price results in the full
satisfaction of its debt, then C3 remains a
creditor and C3 will be placed in a very obvious
conflict of interest, which the Court will
carefully scrutinize, and which C3 is no doubt
aware of;

v. There is no evidence that the Sale of the Stock
will result in the loss of any of the rights and
remedies that the creditors of the Debtor have in
the pending Chapter 11 case, or that a purchaser of
the Stock would not want to successfully reorganize
the Debtor in the pending Chapter 11 case;

vi. In summary, all the irreparable harm alleged by the
Debtor is speculative; and

vii. Although the Debtor alleges that its filed Chapter
11 Plan is confirmable and provides for the full

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payment of the indebtedness of all the creditors,
including C3, this Court, at this early stage of
the Plan confirmation process, would not be
inclined, under Section 1129, to confirm a plan,
even if it proposed to pay C3 in full and was
otherwise feasible, if it resulted in C3 losing its
security interest in the Stock before it received
full payment;

b. Depriving C3 of its contractual rights against a third
party, which does not directly harm the Debtor, when any
alleged harm to the Debtor is speculative, cannot result
in a finding by this Court that the balance of the harm
and equities tips in favor of the Debtor; and

c. Certainly there is great public interest in the
Bankruptcy System encouraging and facilitating eligible
entities reorganizing in Chapter 11, but there is also
important public interest in enforcing contracts when
they are between third parties and do not sufficiently
harm a debtor and its reorganization efforts, as the
Court believes is the case here. Otherwise, parties will

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not have the necessary certainty and predictability they
require in commercial transactions.

3. Additionally, the Debtor may have been able to better protect
itself from the very situation it now finds itself in. The
Debtor had previously entered into agreements with C3 that
provided C3 with the opportunity to exercise the rights it now
seeks to enforce. Also, shortly before the filing of its
petition, the Debtor was negotiating with C3 for additional
financing, where, once again, C3’s equity stake in the Debtor
was at issue. Notwithstanding those negotiations, the Debtor
chose to file for bankruptcy before securing the proposed
financing with C3, and chose to enter into post-petition
financing with Marquette, under which, the Sale constitutes a
default.

IT IS SO ORDERED.

Notice Recipients
District/Off: 0209-2 User: schwenk Date Created: 1/20/2010

Case: 2-09-02119-JCN Form ID: pdfattch Total: 6

Recipients submitted to the BNC (Bankruptcy Noticing Center) without an address:

dft C3 Capital Partners LP

TOTAL: 1

Recipients of Notice of Electronic Filing:

aty David L. Rasmussen drasmussen@davidsonfink.com, vbillups@davidsonfink.com

aty Jeffrey S. Davis jdavis@rosenpc.com, srosen@rosenpc.com

aty John R. Weider jweider@hselaw.com, litigation@hselaw.com, sheffner@hselaw.com

TOTAL: 3

Recipients submitted to the BNC (Bankruptcy Noticing Center):

pla PJC Technologies, Inc. 205 La Grange Avenue Rochester, NY 14613

cr Marquette Business Credit, Inc. Attn: Andrew D. Burgess, Underwriter 5910 N. Central Expressway, Suite
1780 Dallas, TX 75206

TOTAL: 2

NOTICE OF ENTRY PLEASE TAKE NOTICE of the entry of an Order, duly entered in the within action in the Clerk’s Office of the United States Bankruptcy Court, Western District of New York on January 20, 2010. The undersigned deputy clerk of the United States Bankruptcy Court, Western District of New York, hereby certifies that a copy of the subject Order was sent to all parties in interest herein as required by the Bankruptcy Code, The Federal Rules of Bankruptcy Procedure.