Home News Local news Possibility of ICC Bankruptcy Becomes A Factor in Settlement of Delaware Case

Possibility of ICC Bankruptcy Becomes A Factor in Settlement of Delaware Case


Sept. 24, 2005– The threat of the possible bankruptcy of Innovative Communication Corp. is mentioned in a settlement of a civil suit filed against ICC by a group of minority stockholders in ICC's predecessor company, Emerging Communications Inc.
This can be seen in a court document filed by the competing lawyers on Aug. 2 in Delaware's Chancery Court. The document was the text of a proposed settlement of one of the three suits pending in the Delaware court system against ICC; the judge in the case subsequently approved the proposed settlement.
The case is entitled Brickell Partners v. Prosser and was first filed in June 1998 when a class action proceeding was initiated on behalf of a group of investors who had formerly owned shares in Emerging Communications. The Brickell group felt that they had not been properly compensated when Jeffrey Prosser took the corporation private earlier that year.
Two other similar suits were filed in the Delaware courts by another set of minority stockholders, Greenlight Capital; those two suits remain open and unsettled.
Last year, after extensive hearings, the sitting judge issued a decision, but not a final judgment, as Prosser's lawyers have pointed out in the past. State Supreme Court Justice Jack Jacobs, sitting in the Delaware Court of Chancery by assignment, deferred issuing a judgment, apparently hoping for a negotiated settlement, which would avert an appeal. Jacobs' decision was that the plaintiffs were essentially right; that they had been under-compensated, by more than a hundred million dollars, for their shares in Emerging Communications.
The parties subsequently proposed an $85 million settlement, including a multi-year schedule for payments. Justice Jacobs, however, put that on ice, at the request of the investors, until a controversy in Belize between that nation's government and ICC came to a conclusion.
ICC had earlier bought a substantial amount of stock in the Belizean phone system, obtained control of the company for a while, and then lost it when the Government of Belize seized it during a dispute over payments. One of the securities that had been pledged by ICC in the first proposed Delaware settlement was based on an equipment lease that was said to cause a flow of cash from Belize to ICC. (The Government of Belize subsequently stated that the lease never existed.)
This time, in connection with the Brickell suit, the proposed settlement was $5.6 million in cash with no references to Belize.
As lawyers working with such disputes explain, the texts of proposed settlements of civil cases involving money, such as the one in Delaware, often contain a discussion of why the proposed deal – by definition something different from what each party wanted originally – is the best possible settlement under the circumstances. The lawyers want to convince all the parties and the presiding judge that this is the case.
In the course of these arguments in the proposed Brickell settlement, signed by five sets of lawyers on all sides of the issue, there is the statement that the "Class counsel also considered the possibility that if . . . the total judgment was entered against the Judgment Defendants, such defendants were prepared to consider reorganization under the federal bankruptcy laws which could result in the complete extinguishment of the claims . . . a prospect that Class counsel viewed as a serious risk."
Later in the text of the proposed Brickell settlement the point was made that Greenlight, the other set of plaintiffs, had more invested in the matter and was willing to take risks that the Brickell group was not, and hence Greenlight was not involved in the most recent proposed settlement. As the text put it: "Greenlight considered itself better able to deal with the uncertainty of bankruptcy reorganization . . . and that it was prepared to accept the risks attendant upon a potential bankruptcy reorganization rather than reduce its proportion of the overall settlement consideration."
A careful examination of the earlier settlement proposal and other tea leaves suggests that the Brickell case was the smallest of the three cases, leaving the two larger ones outstanding.
While the court document of Aug. 2, setting the lawyers' fees, did not specify who would pay the lawyers' bill, the earlier draft settlement made it clear that the investors, not ICC, would bear those costs. The legal fees for the Brickell settlement were set by the judge at $600,000. This is a small sum compared to the $8 million figure that was cited in the proposed settlement as Greenlight‛s investment in its two cases.
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