A judge refused Monday to dismiss the bankruptcies of two Tacoma developers, essentially telling them and their creditors to come up with a plan or he’ll have to take action.
It’s been almost three years since Tom Price and Hyun Um filed personal bankruptcy with as much as $350 million in debt related to their real estate business, Prium Companies LLC. In that time, some creditors have settled their debt outside of court or through bankruptcy reorganizations of several of Prium’s subsidiaries.
Millions of dollars remain contested. Judge Paul Snyder said Monday that another bankruptcy judge, Brian Lynch, will mediate the outstanding claims, estimated to be around $50 million. Anyone interested in mediation has 10 days to sign up.
If mediation doesn’t work, Snyder said, the court will again consider all options, including appointing a trustee to run the business, or liquidating it.
“The court recognizes not all businesses have the ability to reorganize,” Snyder said in a ruling issued by telephone.
Todd Tracy, lawyer for Price and Um, said Monday after the ruling that his clients will move forward with mediation, as well as continue negotiations with individual creditors that he said have been ongoing.
Price and Um filed for bankruptcy on Aug. 17, 2010, to prevent Soundbuilt Northwest LLC from collecting a $5.9 million judgment by taking over ownership of the dozens of limited liability companies tied to Prium.
Almost two years later, in June of this year, the Soundbuilt claim was wiped out when the state Supreme Court refused to consider a lower court’s decision to erase the judgment.
But while the Soundbuilt claim was live, it and other creditors pursued Price and Um using the tools of bankruptcy court: Depositions. Requests for company emails. And finally, a court-appointed forensic accountant that in 2011 detailed many questionable business practices also outlined by The News Tribune.
During a hearing July 19, Price and Um asked Snyder to dismiss their cases, something lawyers say is rare in bankruptcy anyway. The men said they could work with creditors on their own now that Soundbuilt is out of the way.
“Do the creditors at this point need protection?” Tracy asked in court. “My answer is no. Those are very sophisticated creditors. They have top lawyers representing them. It’s not like the debtors are getting away with anything. These lenders will do what they can to protect their rights under state law.”
Though Price and Um long argued that the creditors’ committee was a proxy for Soundbuilt’s interests, several creditors now have filed individual objections to dismissal, including California-based East West Bank. It’s owed $6 million.
In its filings, East West Bank summed up the view of those creditors who would prefer to keep Price and Um in the regulated world of bankruptcy court:
“Given the debtors’ profession of a lack of assets and their use of separate entities to hold the trappings of their lifestyle, and in light of the flow of large amounts of cash through a web of companies controlled by the debtors, creditors are far better off having their claims addressed under the oversight of this tribunal.”
In his ruling Monday, Snyder accepted that argument and also noted that Price and Um may have taken some liberties in describing the state of things.
“While the debtors claim they’ve resolved most claims against them, only one was noted for court approval and shown to all creditors,” he said.
“And, claims of at least three creditors have not been resolved despite debtors’ claims in recent filings.”
In recent weeks, a new creditor has emerged: James Rigby, the court-appointed trustee liquidating the estate of disgraced Seattle-area fugitive real estate magnate Michael Mastro.
In the Price and Um case, Rigby is tracking down $11.4 million related to the Wells Fargo Center Building in Spokane.email@example.com