A Vedder Price bankruptcy team, led by Shareholders Bill Thorsness and Doug Lipke, secured a significant victory in the U.S. Court of Appeals for the Seventh Circuit when the Circuit Court affirmed a $9.5 million contempt sanction against the Fidelity and Deposit Company of Maryland (Fidelity). 

“The Seventh Circuit’s decisive ruling was the result of an overall team effort, and through close collaboration with our client and co-counsel, Ed Ruff at Pretzel & Stouffer,” said Thorsness. “TRG is obviously very pleased with this long-awaited result, having first sought to enforce the Bankruptcy Court’s injunction back in 2016.”

Vedder Price represented TRG Venture Two, LLC (TRG), which in 2010 purchased land—secured by Fidelity’s bonds—in multiple Illinois subdivisions from the liquidating trust administering Kimball Hill’s Chapter 11 bankruptcy. Despite voting in favor of the plan, which provided that sales of the land were to be free and clear of creditor claims, Fidelity pursued TRG in multiple state courts after the municipalities called Fidelity’s bonds. In 2017, Bankruptcy Judge Timothy Barnes first ruled that Fidelity violated the plan by prosecuting enjoined claims against TRG and, after a four-day trial, issued the sanctions award. 

While the initial appeal was pending, the U.S. Supreme Court handed down Taggart v. Lorenzen, 139 S. Ct. 1795, 1799 (2019), which changed the standard for imposing contempt sanctions in bankruptcy cases. On remand to consider Taggart’s impact, Judge Barnes reinstated his original contempt findings and sanctions, which the district court affirmed. The Seventh Circuit’s interpretation of Taggart’s contempt standard was a matter of first impression in this circuit. 

The contested matter in Kimball Hill’s bankruptcy is case number 08-10095 in the U.S. Bankruptcy Court for the Northern District of Illinois, and case number 22-1724 in the U.S. Court of Appeals for the Seventh Circuit.