Note: Thirteenth Floor Entertainment Center, LLC (Lessee) leased commercial premises from Louisville Galleria, LLC (Lessor) for use as a fitness center. At the request of Lessee's CEO, Randall S. Waldman (Applicant), PBI Bank, Inc. (Issuer) issued a USD 400,000 standby letter of credit in favor of Lessor secured by reserve holds placed on Applicant's preexisting credit lines. While the reason for the LC was a matter of dispute between the parties, Lessor allegedly required it as a condition for the lease. Lessee later vacated the premises and filed a Chapter 11 (reorganization) petition with the U.S. Bankruptcy Court for the Western District of Kentucky, which was then converted to a Chapter 7 (liquidation) proceeding. Subsequently, Lessor drew on the LC, but Applicant demanded that Issuer refuse to honor the LC, making various allegations, including fraud. Thereupon, Issuer denied payment on the LC.

Applicant, Lessee, Lessor, and Issuer filed various petitions, counter-claims, and cross-claims against one another in the Circuit Court of Bullitt County, Kentucky. The court dismissed Applicant's claims against Issuer and Lessor, granted summary judgment to Issuer against Applicant, and dismissed all remaining claims between Issuer and Lessor. The court also denied Applicant's motion to vacate these orders. On appeal, the Court of Appeals of Kentucky, Dixon, Lambert and Taylor, JJ., in an opinion by Taylor, J., affirmed.

The appellate court ruled that even though Applicant had the opportunity to monitor the case and secure alternative counsel, Applicant failed to timely file a notice of appeal from the circuit court's grant of summary judgment. The appellate court rejected Applicant's argument that the automatic stay arising from Lessee's bankruptcy protected his claims, noting that there is no co-debtor stay protection available to appellants under the U.S. Bankruptcy Code.



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.