Ruff and Turiello obtain affirmance of $9 million sanctions award

A $9,539,768.54 award obtained by Pretzel & Stouffer attorneys Edward Ruff and Michael Turiello was reaffirmed by the US Bankruptcy Court in Chicago.

The sanction award, one of the largest in US history, was entered after a bench trial before Judge Timothy A. Barnes in 2018. Fidelity and Deposit Company of Maryland (“F&D”) was held in contempt in the Kimball Hill bankruptcy proceedings for pursuing multiple state court actions against the firm’s client—a buyer of hundreds of residential lots from the estate—seeking recovery of what F&D owed to municipalities under surety bonds issued to the bankrupt developer.

After appeal, the case was remanded to Judge Barnes to determine whether the contempt finding, and sanction award could stand in light of the subsequent SCOTUS decision in Taggert v Lorenzen. Under the Taggart standard, a creditor may be held in contempt if there is “no fair ground of doubt” that the creditor’s conduct might be unlawful.

On remand, Judge Barnes found that the record developed by the Pretzel team at trial had established by clear and convincing evidence that “[t]here is no doubt, let alone a fair ground of doubt, that F&D’s actions were unlawful under the orders entered in this case” Judge Barnes reinstated the award and ordered F&D to pay the award.