In re Interbank Funding Corp., Case No. 02-41590 (BRL) Jointly Administered (Bankr. S.D.N.Y. 10/3/2007), Case No. 02-41590 (BRL) Jointly Administered.
| Decision Date | 03 October 2007 |
| Docket Number | Case No. 02-41590 (BRL) Jointly Administered.,Adv. Proc. No. 07-1482. |
| Parties | In re: Interbank Funding Corp. et al., Debtors. IBF Fund Liquidating, LLC, Chapter 11, Plaintiffs, v. Chadmoore Wireless Group Inc., Chadmoore Shareholder Liquidating Trust, Robert Moore and Stephen Radusch, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
KAYE SCHOLER, LLP New York, NY, Counsel for the IBF Fund Liquidating, LLC And for Counsel for Arthur Steinberg, ICA Trustee By: Arthur J. Steinberg, Esq. Heath D. Rosenblatt, Esq.
FOX ROTHSCHILD LLP New York, NY, Counsel for Chadmoore Wireless Group, Inc. By: Yann Geron, Esq.
BAINTON MCCARTHY New York, NY, Counsel for Robert Moore By: J. Joseph Bainton, Esq. Michael J. Cohen, Esq.
Kravet & Vogel, LLP New York, NY, Counsel for Stephen Radusch By: Joseph A. Vogel, Esq.
Before the Court, initially, were four motions and two cross-motions for summary judgment brought pursuant to Rule 56 of the Federal Rules of Civil Procedure (the "Rules"), made applicable to this adversary proceeding pursuant to Rule 7056 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and Local Bankruptcy Rule 7056-1 (the "Local Rules"). The motions and cross motions involved nearly all counts of the complaint. A hearing was held on August 6, 2007 (the "Hearing"). Following the Hearing, two motions for approval of settlements were filed, relating to various counts involved in the previous motions for summary judgment. As a result of the settlements, the multiple summary judgment motions and cross motions have been whittled down to Counts V, VI, IX, X and XI.
The following are the relevant undisputed facts: On June 7, 2002, while under investigation by the United States Securities and Exchange Commission, the IBF Collateralized Finance Corporation ("CFC") and IBF VI-Secured Lending Corporation ("SLC" and, together with CFC, the "Funds"), InterBank Funding Corporation ("IBF" and together with the Funds, the "Debtors"), filed voluntary petitions for relief under title 11, United States Code (the "Bankruptcy Code"). On July 23, 2002, the SEC filed a complaint against, inter alia, IBF and the Funds commencing an enforcement action in the District Court for the Southern District of New York (the "District Court").1 On December 5, 2002, on motion of the SEC, the District Court entered an order (the December 5 Order) appointing Arthur J. Steinberg ("Steinberg") to act as the ICA Trustee for the Funds and their subsidiaries pursuant to the Investment Company Act of 1940, title 15, United States Code. See In re InterBank Funding Corp., 310 B.R. 238, 242-43 (Bankr. S.D.N.Y. 2004). Since then, the ICA Trustee, Steinberg, has qualified and is acting as Chapter 11 Trustee for the Debtors, who have confirmed and are implementing a Liquidation Plan.
Chadmoore Wireless Group ("Chadmoore") was a Colorado corporation that maintained its principal place of business in Las Vegas, Nevada. In February 2002, Chadmoore closed the sale of substantially all of its assets to another company. Chadmoore filed articles of dissolution under Colorado law on February 22, 2002. Chadmoore's dissolution was effective on February 23, 2002. At or about the same time, Chadmoore filed a Form 8-K with the SEC describing the commencement of its voluntary dissolution.
At all relevant times, Robert Moore ("Moore") was President, CEO and a Director of the Chadmoore Board and Radusch served as Chief Financial and Accounting Officer of Chadmoore. Following Chadmoore's dissolution, there were only three remaining members on the Board of Directors (the "Chadmoore Board"). As part of the sale of the Debtors' interest in US Mills to Sunset (described fully in footnote 3), the Trustee negotiated the Chadmoore Put with Sunset Brands, Inc. and Todd Sanders ("Sanders"). Fund LLC required the Chadmoore Put, or some other similar credit enhancement, to consummate the sale of US Mills to Sunset. The Chadmoore Put included a representation that Chadmoore had "full power, right and authority" to execute, deliver and perform under the Chadmoore Put; that the execution, delivery and performance by Chadmoore under the Chadmoore Put was "duly and validly authorized by all necessary actions on the part of Chadmoore" and would not conflict with Chadmoore's corporate formation documents or any applicable law; and that no further approvals, consents or other actions by Chadmoore or any other person or entity were required. The Chadmoore Put included a representation that Moore was authorized to execute and deliver the Chadmoore Put, that Moore had obtained all required approvals, and that the Chadmoore Put was a binding obligation on Chadmoore. The Chadmoore Put also included a covenant restriction requested by Fund LLC that prohibited Chadmoore from disbursing in excess of 110% of the cash required for the Chadmoore Put.
Steinberg knew that Chadmoore was in dissolution before he signed the Chadmoore Put. Moore signed the Chadmoore Put on Chadmoore's behalf without approval of Chadmoore's Board of Directors, of which he was a member. When Moore executed the Chadmoore Put, he inserted by hand the term "President" on the title line of the Chadmoore Put. Moore admits that he signed the Chadmoore Put intending that it would not be enforceable against Chadmoore. Moore concedes that he signed the Chadmoore Put to protect his friend, Sanders, who allegedly led Moore to believe he would have had serious financial difficulty and possibly been subject to physical harm if Moore did not sign the Chadmoore Put.2
The Chadmoore Put matured by its terms on November 6, 2006. Chadmoore refused to perform under the Chadmoore Put and disclosed in a Form 8-K that, prior to November 2006, certain members of the Board had no knowledge of the Chadmoore Put.
The initial complaint (the "Complaint") was filed on February 14, 2007 by IBF Fund Liquidating LLC ("Fund LLC") against Defendants Chadmoore, Moore, and Stephen Radusch ("Radusch"). The Complaint relates to events that took place in November 2005 involving the "Chadmoore Put."3 Along with the Complaint, Fund LLC requested a preliminary injunction to prevent Moore and Radusch from dissipating funds that had allegedly been wrongly distributed by Chadmoore to them. Moore and Radusch opposed the preliminary injunction. Radusch filed a motion to dismiss the Complaint based on lack of subject matter jurisdiction, improper venue and failure to properly plead. This Court denied the motions to dismiss and granted the preliminary injunction motion on April 23, 2007. The preliminary injunction required specific amounts to be placed in escrow, preventing transfers of assets and required that Moore and Radusch provide Fund LLC with an accounting. On May 8, 2007, Moore and Radusch filed statements indicating that they did not comply with the escrow requirements of the preliminary injunction.4 (See ECF Docket # 55, 56). On May 14, 2007, Fund LLC moved for sanctions against Moore and Radusch for failing to comply with the escrow and accounting requirements of the preliminary injunction. On May 30, 2007, the Court entered the contempt order, requiring additional disclosures and adjourning the sanctions portion of the motion.5 A further hearing on the contempt motion was held on September 18, 2007. At that time, the Court granted Fund LLC's request for a weekly monetary sanction, required additional disclosures, and other relief. The Court heard additional argument relating to the contempt motion on October 2, 2007.
On September 18, 2007, the Court approved the settlement agreement between Chadmoore and Fund LLC (the "Chadmoore Settlement Agreement"). The Chadmoore Settlement Agreement provided for a $750,000 payment to Fund LLC in return for a full resolution of all claims Fund LLC had against Chadmoore. Additionally, Chadmoore agreed to assign its claims against Moore and Radusch to Fund LLC.
On October 2, 2007, the Court approved the settlement agreement between Radusch and Fund LLC (the "Radusch Settlement Agreement"). The Radusch Settlement Agreement provided for a payment of $75,000 to Fund LCC and the assignment of any claims against various parties. Fund LLC agreed to dismiss its claims against Radusch (which were not involved in the summary judgment motions) and agreed to dismiss any claims against Radusch that Fund LLC acquired from Chadmoore as part of the Chadmoore Settlement Agreement.
The first motion for summary judgment was filed by Fund LLC against Moore. Fund LLC contends that because the admissions made by Moore in his answer and amended answer are conclusive for purposes of summary judgment, on the basis of those admissions, summary judgment is warranted on Count VI of the Complaint. Moore filed his opposition to these contentions.
The second motion for summary judgment was filed by Moore relating to all counts of the Complaint, including Fund LLC's counts against Chadmoore (which were dismissed in accordance with the Chadmoore Settlement Agreement).
The third motion for summary judgment was filed by Chadmoore related to Fund LLC's counts against Chadmoore.6 Pursuant to the Chadmoore Settlement Agreement, the claims against Chadmoore have been resolved.
The fourth motion for summary judgment was filed by Chadmoore against Moore and Radusch. As part of the settlement between Chadmoore and Fund LLC, Chadmoore has assigned its claims against Moore and Radusch to Fund LLC. As part of the Radusch Settlement Agreement, Fund LLC has agreed to dismiss the claims filed by Chadmoore against Radusch. The issue as to whether Fund LLC, as assignee, can pursue Chadmoore's claims against Moore as a result of the Chadmoore Settlement is not currently before the Court and will need to be briefed and argued...
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