First Premier Capital LLC v. Republic Bank of Chicago (In re Equipment Acquisition Resources Inc.)

Summarized by Allen Guon , Cozen O'Connor
13 years 6 months ago

Citation:

First Premier Capital LLC v. Republic Bank of Chicago (In re Equipment Acquisition Resources Inc.), Case No. 11-3905 (7th Cir. Aug. 9, 2012)

Tag(s):

Ruling:

Seventh Circuit Court of Appeals affirmed the District Court's ruling, which affirmed the Bankruptcy Court's ruling, that the granting of the settlement motion was not an abuse of discretion.

Procedural context:

This was an appeal from First Premier Capital's objection to the settlement motion, which was brought by the Estate's Plan Administrator, as means of settling its adversary commenced against Republic Bank of Chicago. The standard of review was abuse of discretion.

Facts:

Equipment Acquisition Resources is a debtor, that had borrowed millions of dollars against collateral that largely did not exist, and what little collateral did exist was overstated and pledged numerous times to various creditors. The Plan Administrator brought many adversary actions, one of which named Republic Bank as a defendant, asserting that roughly $4.6 million was wrongfully transferred to Republic, and sought equitable relief attacking Republic's lien claim, due to a typo on the face of the lease amendment, and sought to bar Republic from suing the debtor's auditors. Republic answered and the parties were at issue. The Plan Administrator and Republic agreed to terms of a settlement and sought Bankruptcy Court approval of the settlement. First Premier objected, claiming that a) the parties could not retroactively reform the fatal defect found in the lease amendment, b) the settlement prejudiced other creditors, and c) it was not in the best interests of the creditors. In support of this objection, First Premier cited In re Martin Grinding & Machine Works, Inc., 793 F.2d 592 (7th Cir. 1986), which stands for the proposition that parol evidence may not alter an unambiguous secured transaction, which went to the heart of the dispute between the Plan Administrator and Republic respecting the typo on Republic's lease amendment. The 7th Circuit held that the settlement was not an abuse of discretion, and that the parties need not establish which party would prevail on the reformation of the lease amendment claims, only that the potential for the Plan Administrator to lose on the issue of reformation was enough to support a settlement of the claim, without the necessity of having to determine the outcome of the issue.

Judge(s):

Circuit Judges: Cudahy, Kanne, and Hamilton

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