By D.R. STEWART World Staff Writer on Nov 5, 2011, at 2:07 AM Updated on 11/05/11 at 6:09 AM
Arrow Trucking Co.'s bankruptcy trustee and a Utah bank have reached a proposed settlement under which the bank would pay $850,000 to the bankruptcy estate while both parties would dismiss all claims against each other, court documents show.
The agreement, which must be approved by U.S. Bankruptcy Judge Dana L. Rasure, would resolve the major issues remaining in the 22-month-old Arrow bankruptcy case and clear the way for a second distribution of Arrow's assets to former employees, court officials said.
"I think it is as good a result and in as good a time period as could be expected under the circumstances," said bankruptcy trustee Patrick J. Malloy III. "It avoids years of litigation and allows me to pay the remaining sums to (former Arrow) employees."
Malloy said he will file a motion with the Tulsa bankruptcy court early next week to distribute about $2.1 million in Arrow bankruptcy assets to more than 500 former employees who filed wage and employment law violation claims against the estate.
In December 2010, Malloy distributed $1.97 million in Arrow assets to 564 former employees who filed claims against the estate. The first distribution represented 58.7 percent of the $3,359,304 in priority wage and employment law violation claims against the estate.
A 61-year-old Tulsa-based flatbed carrier, Arrow closed down its operations on Dec. 22, 2009 in the face of mounting debts and the refusal by its lender, Transportation Alliance Bank of Ogden, Utah, to extend further credit, court documents say.
On Jan. 8, 2010, lawyers for Arrow filed a Chapter 7 bankruptcy liquidation petition.
After weeks reconstructing Arrow's records, Malloy estimates Arrow's assets at $8.55 million and liabilities at $98.97 million.
The same day Arrow filed its bankruptcy petition, TAB filed a lawsuit against Arrow and its top executives in U.S. District Court in Tulsa.
TAB's lawsuit alleges Arrow's executives submitted to TAB false invoices that defrauded the bank of at least $15.1 million, court documents show.
In its bankruptcy court pleadings, TAB alleges that all assets and avoidance claims to which Malloy claims legal title under U.S. bankruptcy statutes "were, in fact, acquired and maintained with proceeds of, or resulting acquisitions from, the money stolen from TAB such that all assets of the bankruptcy estate are, in equity, assets of TAB prepetition and not assets of the bankruptcy estate."
In a lawsuit Malloy filed against TAB, the trustee alleges the bank improved its financial condition during the 90 days before Arrow's bankruptcy filing while it continued lending money to the carrier - to the detriment of other creditors.
Malloy's lawsuit against TAB seeks to reclaim arbitrary transfers of money from Arrow to TAB in the 90 days before it filed for bankruptcy.
During the last week, Malloy, lawyers for TAB and mediator Peter W. Billings met in Salt Lake City to discuss issues in the case, court officials said.
The proposed settlement agreement was reached on Tuesday, officials said.
Under the proposed agreement, TAB will pay $850,000 to the bankruptcy estate.
"The parties will file a joint dismissal of all claims asserted in the referenced adversary proceeding, including all counter-claims," the trustee's motion says. "The parties will exchange full and mutual release of all claims asserted or which could have been asserted."
In his motion before the court, Malloy says continuing litigation between the parties would entail "thousands of dollars" in accounting expenses, a lengthy trial and appeals.
"The settlement avoids years of litigation and appeals," Malloy says in his motion. "Given the fact there are substantial legal questions involved in this dispute, there will certainly be appeals ... by one or both of the parties depending on the rulings. These appeals will effectively delay any ability of the trustee to effect additional distributions of monies to priority wage claimants for years to come.
"The settlement funds which are to be paid in connection with this settlement coupled with TAB's release of its constructive lien claim will permit the trustee to effect a second distribution to priority wage claimants. This distribution will be sufficient to pay 100 percent of the priority wage claims (of former Arrow employees)."
D.R. Stewart 918-581-8451
don.stewart@tulsaworld.com
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