Bankruptcy Court Grants Lionel 7th Extension: MTH Motion to Extend TRO Granted by Erol Gurcan
There was some model train litigation involving Lionel and MTH in two different courts on 1/10/08.
Firstly,
in the New York City Bankruptcy Court, Lionel’s motion for a 7th
extension of the exclusive period in which to file its reorganization
plan, was granted by Judge Lifland. MTH’s lawyer, Alec Ostrow did not
oppose the motion. The court’s order gives Lionel the exclusive right
until March 31 file its plan with the court. Others including MTH may
file alternative plans after that up and until May 30.
Click on the link below to read on
During the court appearance, Judge Lifland amusingly asked Lionel’s
lawyer, Adam Harris, and Mr. Ostrow if each of their clients did well
during the holiday season. Mr. Harris stated Lionel sold many train
sets, but due to developmental problems, was not able to deliver many
of its Legacy sets. Mr. Ostrow stated that Mike Wolf told him MTH did
well, but did not provide him with specific numbers.
Most
importantly, Mr. Harris informed Judge Lifland that Lionel is currently
in the process of deciding which debt and equity financing proposal
they are going to decide upon as part of their plan to exit bankruptcy.
He confirmed following today’s court hearing that Lionel has several
proposals from which to choose. At the current time, the confirmation
of the plan is still scheduled for March 13.
Meanwhile, in the
Federal District Court in Detroit, Michigan, both MTH’s motion for
summary judgment and Korea Brass’s cross-motion to dismiss the suit
based on the fraudulent transfer of assets were before Judge O’Meara
today.
In my last legal article dated January 6, I stated the
District Court Judge would most likely deny Korea Brass’ motion to
dismiss the MTH lawsuit since the appeals court recently decided the
judgment against them was not vacated in the trade secrets case because
they did not appeal. The jury’s $38.6 million dollar verdict against
Lionel in the trade secrets case was vacated by the appeals court on
December 14, 2006, but not the verdict against Korea Brass.
Although
no order has been filed by the court as of this evening, the docket
report for the case on the PACER website states that Korea Brass’
motion to dismiss the fraudulent transfer assets lawsuit was denied.So
, in other words, this was to be expected.
MTH’s motion to
extend the temporary restraining order to cover payments made to Korea
Brass (aka MKT) from other model trains company’s doing business within
the United States be placed into escrow was granted by the court.
Previously, the court’s temporary restraining order (TRO) only applied
to payments made by Lionel to KB be put into a court approved escrow
account. In an email to me dated January 3, 2008, MTH’s Mike Wolf
stated “[If] we win, then we will get an injunction against all of
MKT’s accounts receivables from all their US customers including but
not limited to Lionel, Weaver, USA Trains, Broadway Limited, and
Precision Craft Models.” The practical effect of today’s court order is
that Korea Brass customers Like Lionel Weaver and others who paid/pay
for product produced by KB will not receive it since their payments are
going directly to the escrow account rather than the manufacturer. This
will of course ultimately affect us hobbyists.
What product
that was manufactured by KB and paid for Lionel is not exactly known.
However, Charlie “CharlieNassau” Hirschberg, owner of Nassau Hobbies in
Freeport, New York has reported it at least affects the special steam
locomotives cataloged in the insert on pages 60-71 of the current
Lionel catalog.
MTH’s motion for summary judgment was also
granted by the court today. However, since that motion was filed “under
seal”, meaning its contents are secret, I can not state exactly was
approved by the court. However, it’s safe to say, it will not be
beneficial to Korea Brass.
Stay tuned.
Erol Gurcan
Erol B. Gurcan, an O Gauge industry legal expert, is a regular contributor to OGaugeWatch.com
Related posts:
- MTH Settles Lawsuit with Korea Brass
- Court Approves Lionel’s Bankruptcy Plan and Settlement with MTH by Erol Gurcan
- MTH Attempts To Collect $$$ From Korea Brass by Erol Gurcan
- Legal Explanation of Latest Coil Couplers Posts
- Current Status Of MTH, Lionel Lawsuits Settlement By Erol Gurcan
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