Commercial Banking, Collections, and Bankruptcy

Record contained sufficient evidence to support Bankruptcy Ct.’s order directing defendant-debtor’s mother to turnover to debtor’s bankruptcy estate fifty-percent of stake in company, where Bankruptcy Ct. could properly find that defendant served as debtor’s nominee with respect to said stake, and that equitable ownership of said stake belonged to debtor. While defendant argued that either she had significant financial stake in said company or that she was nominee on behalf of third-party who had significant financial stake in said company, record showed that debtor had invested $773,250 in company that was used, in conjunction with $1,000,000 construction loan in startup costs for said company. Moreover, there was no documentary support for defendant’s claims, and testimony from other partner in company also did not support defendant’s claims. Record also showed that debtor had placed stake in company in defendant’s name in anticipation of collection activities against her.

Dist. Ct. erred in granting plaintiff’s motion for summary judgment in proceeding to determine damages in plaintiff’s copyright infringement action, where Dist. Ct. granted plaintiff’s request for 33 separate statutory damages awards that reflected plaintiff’s claim that defendant had infringed on copyrights covering 33 illustrations. Instant proceedings was result of Ct. of Appeals remand, after Ct. of Appeals held that record contained insufficient evidence under independent economic value test to determine whether plaintiff was entitled to 33 separate statutory awards or was entitled to some lower number of awards. Dist. Ct. erred in: (1) finding that defendant had waived issue as to whether certain illustrations would not support finding of separate statutory damages award; and (2) ruling on summary judgment based on same record that Ct. of Appeals had previously found was insufficient to make such determination. Dist. Ct. also erred in granting plaintiff’s summary judgment motion, where there was some evidence indicating that: (1) plaintiff had produced and distributed instant illustrations as two collective products and not separate illustrations; (2) plaintiff registered illustrations in only two copyrights; and (3) certain illustrations were used only as solid color background textures, which might not have any independent economic value.

Bankruptcy Ct. did not err in directing counsel for debtor to completely disgorge all of his attorney’s fees received from debtor as sanction for counsel’s failure to file updated Rule 2016 disclosure statement of fees that debtor had paid to counsel. Record showed that: (1) debtor’s counsel originally reported in his Rule 2016 disclose statement that debtor had paid him $5,000 in attorney’s fees, while U.S. Trustee learned through discovery that debtor had actually paid counsel $21,500; and (2) counsel failed to file updated 2016 statement in spite of three reminders by Trustee to do so. Trustee thereafter filed motion to have counsel forfeit all fees paid by debtor, and Bankruptcy Ct. granted said motion. District Ct, thereafter affirmed Bankruptcy Ct. order, and Ct. of Appeals affirmed Dist. Ct., after noting that: (1) Rule 2016 statement is due within 14 days of filing bankruptcy petition; (2) attorneys are required to inform Bankruptcy Ct. of any update to information contained in said disclosure statement; and (3) Bankruptcy Ct. could properly discount counsel’s explanation that he was unfamiliar with his obligations under Rule 2016, where counsel had been involved in more than 350 other bankruptcy cases.

Bankruptcy Ct. did not err in finding creditor in contempt of Bankruptcy Ct.’s Chapter 11 confirmation order and imposing $9.5.million sanction. Record showed that: (1) creditor issued performance bonds to debtor to cover debtor’s promise to develop certain municipal properties and obtained from debtor separate indemnity agreement that bound debtor to reimburse creditor for any losses generated by said bonds; (2) debtor filed for Chapter 11 bankruptcy protection; (3) Bankruptcy Ct. entered into confirmation plan that contained injunction that prevented creditor from seeking payment on claims that creditor had agreed to extinguish; (4) debtor thereafter sold its development interests in municipalities’ land to third-party, which believed that it bought land free and clear of any claims that had been extinguished by bankruptcy plan confirmation order; and (5) as municipalities sued creditor to collect on performance bonds for debtor‘s failure to complete development of said properties, creditor interpleaded third-party in unsuccessful attempt to enforce debtor’s pre-petition indemnity obligations against third-party as debtor’s successor. Bankruptcy Ct. could properly conclude that there was no fair ground of doubt that creditor’s interpleading of third-party amounted to flagrant violation of agreed-to terms of instant confirmation plan. Moreover, pre-petition clams extinguished upon plan confirmation did not spring back into existence upon post-confirmation asset sales.

Dist. Ct. did not err in dismissing plaintiff’s lawsuit, alleging that defendants-employees of corporation insurance company had violated section 155 of Illinois Insurance Code and had tortiously interfered with insurance contract between plaintiff-insured and insurance company, where, according to plaintiff, defendants had vexatiously and unreasonably delayed payment on plaintiff’s claim for benefits under insurance policy. Defendants as employees/agents of corporation were shielded from liability by corporation, where, as here, instant denial of coverage by defendants was undertaken on behalf of corporation. Moreover, Illinois law provides corporation’s agents with conditional privilege from tortious interference lawsuits, and plaintiff otherwise failed to adequately plead that defendants acted against corporation’s interests and acted in their own interests when denying plaintiff’s claim for benefits under policy.