April 30, 2019, Southern District of New York – James S. Feltman, in his capacity as Chapter 11 trustee of TS Employment, Inc. (“TSE”) and Corporate Resource Services, Inc. (“CRS”) recently filed a motion pursuant to Rule 9019(a) of the Federal Rules of Bankruptcy Procedure in the United States Bankruptcy Court for the Southern District of New York, for an order approving a settlement between the trustee and the defendant Wells Fargo Bank. Under the terms of the settlement agreement, Wells Fargo agreed to pay $5 million to the trustee to settle the claims and avoid the expense, risk, and delay of continued litigation.
CRS trustee strongly believed that the debtors’ estates would prevail on appeal and would be entitled to a substantial recovery for attorneys’ fees upon the accounting directed in the Court’s trial order. At the same time, Wells Fargo also disputed the trial opinion and was prepared to prosecute an appeal vigorously. Finally, after engaging in extensive negotiations with the assistance of counsels, the parties agreed that the settlement represents a favorable alternative for all parties in interest as opposed to the delay, cost, and uncertainty of continued litigation.
Under the settlement, the debtors’ estates will now recover $4.95 million in the near term and avoid the expense, risk, and delay of continued litigation. According to the terms of the settlement agreement, Wells Fargo has to pay an amount worth $4,950,000 to the debtors’ estates within the seven days after the entry of a final order approving the settlement. The hearing date on the motion is scheduled for May 21, 2019, and the deadline to object to the trustee’s motion is May 14, 2019.