Post by alexweiihman on Feb 13, 2007 15:05:05 GMT -5
Lionel LLC, the model-train maker, is seeking a fourth extension of its period of exclusive control over its bankruptcy case as it struggles to settle a years-old dispute over trade secrets.
Lionel said it can't file a plan of reorganization until the 6th U.S. Circuit Court of Appeals in Cincinnati makes a final decision in the trade-secrets lawsuit filed by rival Mike's Train House against Lionel.
Lionel was sued after its South Korean supplier, Korea Brass, allegedly misappropriated trade secrets from Mike's. The 2004 decision and $40.8 million judgment derailed the 105-year-old train-maker, pushing it into bankruptcy.
In December, a panel of the appeals court overturned the verdict, but Mike's Train House has asked the entire court to consider its appeal.
Lionel is asking the U.S. Bankruptcy Court in Manhattan for a 75-day extension that would start from either the date of the 6th Circuit's ruling denying the request from Mike's or when the full court issues a new ruling.
A hearing on Lionel's request is scheduled for Feb. 22 in the Manhattan bankruptcy court.
Depending on the appeals court's actions, Lionel could need anywhere from $12 million to $50 million or more to pay Mike's Train House, which will have a major impact on the company's reorganization.
Meanwhile, the two companies last month agreed to allow Judge Cecelia Morris of the U.S. Bankruptcy Court in Poughkeepsie, N.Y., to work out an agreement between them. The mediation, however, isn't binding.
Lionel said it must be certain of the outcome before they can propose a "feasible plan of reorganization."
Companies filing for Chapter 11 must submit a plan to a bankruptcy court outlining how creditors will be paid. Exclusive periods prevent other groups from submitting rival plans and allow the company to keep control of its bankruptcy case.
Lionel said that while in Chapter 11, it has made significant strides to improve its financial status by reviewing undisputed claims and prosecuting third parties who "misappropriated or otherwise wrongfully used portions of that intellectual property."
It also improved sales by signing a license agreement with NASCAR, allowing Lionel to market Nascar-themed trains and related products, which attract customers beyond traditional train enthusiasts.
Copyright 2006 Associated Press. All rights reserved.