Illinois Investment Trust No. 92-7163 v. Allied Waste Industries, Inc. (In re Resource Technology Corp.)

In re Resource Tech. Corp., --- F.3d ---, Nos. 08-4118 & 08-45310 (7th Cir. Oct. 1, 2010)
The Court affirmed the rulings below that the proper standard to use to evaluate adequate assurance of further performance under an executory contract was whether a preponderance of the evidence demonstrated that future performance would be likely. As a result, the courts below did not err in finding that executory contracts should not be assumed and assigned when the new assignee could not demonstrate under the "fact-intensive commerical reasonableness" inquiry required by Code section 365(f)(2)(B)that it had a reasonable certainty of obtaining the funds that all parties agreed would be necessary for performance to occur. The Court also affirmed the finding of the courts below that a party required to escrow funds under an approved settlement agreement could not modify that obligation without obtaining court approval. As a result, the party's direct payment of certain unapproved expenses in lieu of depositing the funds in escrow to pay approved expenses did not satisfy its obligations under the settlement agreement, even though the direct payments substantially exceeded the required escrow amount. Finally, the Court found that the district court correctly held the party in contempt for failing to comply with the bankruptcy's order directing payment of funds into escrow where that failure clearly "violated the express and unequivocal command of a court order". Moreover, the distrrict court properly rejected the party's asserted inability to pay defense where the evidence in the record showed assets and funds available to pay in the past and where there was a lack of evidence showing any present inability to comply with the order directing payment.
Procedural context:
Consolidated appeals from orders of United States District Court for the Northern District of Illinois (1) affirming decision of the United States Bankruptcy Court for the Northern District of Illinois denying trustee's motion to assume and assign executory contract, (2) affirming decision of the Bankruptcy Court ordering payment of funds into escrow in accord with previously approved settlement, and (3) granting trustee's motion for contempt and awarding sanctions in the form of penalties and payment of trustee's attorneys' fees for continuing failure to pay funds into escrow.
Pursuant to approved settlement agreement, Chapter 7 bankruptcy trustee sought to assume and assign certain executory contracts to entities controlled by former principals of debtor who then would reassign those contracts to an investment trust. Parties to executory contracts objected on grounds that the trust could not provide adequate assurance of its ability to comply with the debtor's future monetary obligations under the contracts. In addition, certain administrative creditors sought to compel one of the entities to place funds in escrow for payment of approved administrative expenses of the Chapter 7 estate in accord with the terms of the settlement agreement. After lower court ordered escrow and denied stay pending appeal, bankruptcy trustee sought contempt against entity for failure to pay required funds.
Sykes, Ripple, Rovner

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!

About us in numbers

3525 in the system

3408 Summarized

7 Being Processed