By D.R. STEWART World Staff Writer on Aug 5, 2011, at 2:02 AM Updated on 8/05/11 at 5:20 AM
A federal bankruptcy judge has cleared the way for a trial of Arrow Trucking Co. bankruptcy trustee Patrick J. Malloy III's lawsuit against Transportation Alliance Bank, Arrow's former lender, court documents say.
While lifting a stay on the TAB litigation - one of the multimillion-dollar issues remaining to be resolved in the 19-month-old Arrow bankruptcy case - U.S. Bankruptcy Judge Dana L. Rasure also approved Malloy's motion for an amended employment agreement in the TAB case.
Rasure's order permits Malloy to convert his compensation in the TAB litigation from his $250-an-hour rate to a contingent-fee agreement, court documents show.
In their pursuit of claims against TAB, Malloy and his co-counsel, Stueve Siegel Hanson LLP of Kansas City, Mo., "shall receive 30 percent of all net sums recovered before trial, or 40 percent of all net sums recovered after trial," Rasure said in the order.
Net sums are defined as the gross recovery less costs of litigation, he said.
Malloy and the Kansas City firm will pay for litigation expenses in the TAB case with Arrow bankruptcy estate assets, Rasure said in the order.
"In the event there is no recovery, Malloy and SSH shall not be entitled to any compensation and/or reimbursement for any costs advanced," the order says.
Malloy said Rasure's order converting his compensation to a contingent-fee agreement will preserve the Arrow bankruptcy estate's assets, which are now estimated at $1.5 million, in what could be long and costly litigation in the TAB case.
"The judge's order assures us as we go forward with the TAB litigation that we will be without concern we will be expending substantial sums in attorneys fees that would be paid from monies I presently have on hand" in the form of Arrow bankruptcy estate assets, Malloy said.
Preservation of the estate's assets are vital if there is going to be a second distribution of assets to former Arrow employees, who continue to file wage claims against the estate, he said.
In July, seven former Arrow drivers filed wage claims in the case, court documents show.
In December, Rasure approved Malloy's motion to distribute $1.97 million in Arrow assets to 564 former Arrow employees who filed wage and employment law violation claims against the Arrow estate.
At the time, Malloy said he hoped to make a second distribution to former Arrow employees early in 2011.
But because employees continue to file wage claims in the case, Malloy said a second distribution is being delayed.
Executives at Arrow, the 61-year-old Tulsa-based flatbed carrier, suspended company operations and locked employees out of corporate offices at 4230 S. Elwood Ave. on Dec. 22, 2009. Company executives also abandoned hundreds of drivers and their freight around the country without fuel or money to return home after TAB canceled Arrow's fuel credit cards and refused further operating loans.
Lawyers for Arrow filed a Chapter 7 bankruptcy liquidation petition in U.S. Bankruptcy Court in Tulsa on Jan. 8, 2010.
The same day Arrow filed for bankruptcy, TAB filed a lawsuit against Arrow and its top executives in U.S. District Court in Tulsa.
TAB's lawsuit alleges the company submitted to TAB false invoices that defrauded the bank of at least $15.1 million, court documents show.
TAB alleges in its lawsuit 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 his lawsuit against TAB, Malloy 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.
The trustee's lawsuit against TAB seeks to reclaim arbitrary transfers of money from Arrow to TAB in the 90 days before it filed for bankruptcy.
Malloy has estimated Arrow's assets at $8.55 million and liabilities of $98.97 million.
D.R. Stewart 918-581-8451
don.stewart@tulsaworld.com
Original Print Headline: Ex-Arrow lender target of suit
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