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In re Resource Technology Corp.

December 23, 2008

IN RE: RESOURCE TECHNOLOGY CORP., DEBTOR.


The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

The Chapter 7 bankruptcy trustee of Resource Technology Corp. (RTC) moved for an order directing Chiplease, Inc. and Leon Greenblatt to show cause why they should not be held in criminal contempt. At the time the motion was presented, the Court stated (and later ordered) that it would consider the motion as seeking, in addition, a finding of civil contempt against Mr. Greenblatt. Having considered the parties' written submissions, the Court grants the trustee's motion in part and denies it in part. Specifically, the Court denies the trustee's request to initiate criminal contempt charges but orders Mr. Greenblatt to show cause why he should not be held in civil contempt. The Court also advises the parties that it will, upon proper presentation, entertain a request for additional coercive or remedial measures in connection with the Court's prior civil contempt finding against Chiplease.

Background

The trustee's motion concerns noncompliance with this Court's orders of July 18, 2008 and September 11, 2008. A summary of the relevant underlying bankruptcy court proceedings is needed to understand what led to the trustee's motion.

On March 14, 2006, the bankruptcy judge presiding over the Resource Technology Corp. bankruptcy case entered an order approving a settlement between the bankruptcy estate and Leon Greenblatt, Chiplease, Inc. and other related entities. Paragraph 23 of the order stated, in relevant part, as follows:

23. As more fully set forth in Paragraph 11 of the Settlement Agreement: (i) the Purchaser shall deposit the sum of $500,000.00 to be held in escrow by its counsel, Dykema Gossett PLLC, for the payment of all unpaid Chapter 7 operating expenses above $150,000.00 and any expenses incurred while the Estate continues to operate the Debtor's business[.]

Order of Mar. 16, 2006 ¶ 23. Paragraph 11 of the settlement agreement stated, in substance, that the estate would pay the first $150,000 in expenses incurred in operating the debtor's business during the Chapter 7 proceedings and that Chiplease would pay the rest. Paragraph 11 of the agreement, similar to paragraph 23 of the court's order, required Chiplease to deliver $500,000 to its legal counsel "prior to the Closing Date" to be used to pay those expenses. It provided that after the estate had paid $150,000 in operating expenses, the trustee would advise Chiplease in writing of its obligation to pay particular expenses; Chiplease would have seven days to comply or dispute payment; and the trustee would submit any disputes to the bankruptcy court for decision. Id., Ex. A ¶ 11.

In the spring of 2008, via a series of filings, the bankruptcy court learned that Chiplease had not deposited $500,000 with its legal counsel prior to the closing date, as required by the incorporated provisions of paragraph 11 of the Settlement Agreement, and had not completed with paragraph 11's requirements for paying Chapter 7 operating expenses. On June 25, 2008, the bankruptcy court entered an order directing Chiplease to deliver to the trustee, by July 17, 2008, $547,367.47, representing the original escrow amount of $500,000, plus $47,367.47 in interest from the date the original deposit should have been made.

Chiplease appealed, challenging both the requirement to deposit $500,000 and the inclusion of interest. It moved this Court for a stay of the bankruptcy court's order pending determination of the appeal. On July 18, 2008, the Court stayed the obligation to deposit interest but directed Chiplease to deposit $500,000 with its current legal counsel, in an interest-bearing account, by July 24, 2008. On July 21, 2008, the Court denied Chiplease's motion to reconsider the ruling.

After Chiplease failed to comply with this Court's July 18, 2008 order, the trustee sought a finding of civil contempt. On September 11, 2008, the Court entered an order in which it found Chiplease in civil contempt, directed it to deposit with the trustee's legal counsel $511,875.05 ($500,000 plus accrued interest and attorney's fees incurred by the estate), imposed a civil fine of $5,000 per each calendar day after September 11 that Chiplease failed to comply, and enjoined Chiplease from making other payments, dissipating its assets, and taking steps to impair its ability to pay.

Chiplease did not make the deposit required by the September 11 order. On September 15, 2008, the trustee filed the present motion for a rule to show cause. It asked the Court to direct Chiplease and Mr. Greenblatt, Chiplease's sole shareholder and officer, to show cause why they should not be held in criminal contempt. On September 18, the date the motion was presented in court, the Court stated that it would consider the motion as seeking findings of criminal and/or civil contempt as to Mr. Greenblatt.

Discussion

1. Preliminary Points

Mr. Greenblatt's response includes, in footnotes that are in type so small that one can barely read them, several apparent substantive and procedural objections to the trustee's motion. That is not a good way to bring points to a court's attention. The Court is tempted to say that all of Mr. Greenblatt's arguments contained only in footnotes are forfeited. See, e.g., Williams v. General Electric Capital Auto Lease, Inc., 159 F.3d 266, 274 (7th Cir. 1998); U.S. Dept. of Navy v. Federal Labor Rels. Auth., 975 F.2d 348, 352 n.1 (7th Cir. 1992). But the Court will nonetheless deal with two of these points, because ...


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