In the
United States Court of Appeals
For the Seventh Circuit
No. 08-4118
IN RE:
R ESOURCE T ECHNOLOGY C ORPORATION,
Debtor.
A PPEAL OF:
ILLINOIS INVESTMENT T RUST N O . 92-7163,
Appellant,
v.
A LLIED W ASTE INDUSTRIES, INC.,
A MERICAN D ISPOSAL S ERVICES OF ILLINOIS, INC.,
S ANGAMON VALLEY L ANDFILL, INC.,
C ITY OF P EORIA, ILLINOIS, and
C OUNTY OF P EORIA, ILLINOIS,
Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:08-cv-02425—Matthew F. Kennelly, Judge.
No. 08-4310
IN RE:
R ESOURCE T ECHNOLOGY C ORPORATION,
Debtor.
2 Nos. 08-4118 & 08-4310
A PPEAL OF:
C HIPLEASE, INCORPORATED ,
Appellant,
v.
JAY A. S TEINBERG, Chapter 7 Trustee
for Resource Technology Corporation,
Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:08-cv-04040—Matthew F. Kennelly, Judge.
A RGUED M AY 29, 2009—D ECIDED O CTOBER 1, 2010
Before R IPPLE, R OVNER, and SYKES, Circuit Judges.
S YKES, Circuit Judge. These appeals challenge several
rulings of the bankruptcy court in lengthy Chapter 7
proceedings involving Resource Technology Corpora-
tion (“RTC”). Prior to its involuntary placement in bank-
ruptcy, RTC was in the business of developing gas-to-
energy conversion systems at solid-waste landfills.
Other aspects of this bankruptcy have been addressed
in several earlier appeals. See Ill. Inv. Trust No. 92-7163 v.
Am. Grading Co., 562 F.3d 824 (7th Cir. 2009); In re Res. Tech.
Corp., 528 F.3d 467 (7th Cir. 2008); In re Res. Tech. Corp.,
430 F.3d 884 (7th Cir. 2005). We have consolidated these
two cases for decision because they are procedurally
interrelated and share a common factual background.
Nos. 08-4118 & 08-4310 3
Section 365 of the Bankruptcy Code allows a bank-
ruptcy trustee to assume certain executory contracts of
the debtor and assign them to a third party as long as the
bankruptcy court has received “adequate assurance of
future performance.” 11 U.S.C. § 365(a), (f)(2)(B). RTC
had contracts with four Illinois landfills for the exclusive
right to develop gas-to-energy conversion projects at the
landfill sites. During the course of the bankruptcy, RTC’s
key officers assumed managerial positions in two com-
panies—Chiplease, Inc. and Scattered Corp.—and then had
these companies designated as beneficiaries of a long-
dormant investment trust known as Illinois Investment
Trust No. 92-7163 (“the Investment Trust” or “the Trust”).
The idea was to have the trustee assume and assign
RTC’s gas-conversion contracts to the Trust.
The plan ran into trouble, however, when the bank-
ruptcy trustee applied to the court for permission to
assume and assign the contracts, as § 365(f)(2)(B) re-
quires. The owners of the four landfills objected; they
did not believe the Investment Trust could demonstrate
adequate assurance of future performance because it
had not explained how it would obtain the $3 million
necessary to perform RTC’s obligations under the con-
tracts. The bankruptcy court agreed with the landfill
owners and rejected the proposed assignments. The
district court affirmed, and the Investment Trust ap-
pealed to this court.
The second case is an appeal by Chiplease, and it chal-
lenges several orders made in connection with a court-
approved settlement requiring Chiplease to pay RTC’s
4 Nos. 08-4118 & 08-4310
Chapter 7 operating expenses in exchange for the as-
signment of certain RTC contracts. While the dispute
involving the Trust was working its way through the
lower courts, a group of administrative claimants chal-
lenged Chiplease’s failure to comply with a court order
requiring it to deposit $500,000 in an escrow account
as security for RTC’s ongoing operating expenses.
Chiplease claimed it was excused from the escrow-deposit
requirement because it had independently paid about
$1 million in RTC’s operating expenses. The bankruptcy
court disagreed and ordered Chiplease to make the
deposit. Chiplease appealed to the district court, which
affirmed and also found Chiplease in contempt for
failing to comply with the order. Chiplease appealed.
We affirm in both cases. The bankruptcy court care-
fully evaluated the assumption-and-assignment proposal
under § 365(f)(2)(B), and its decision to deny the
trustee’s motion was sound. We likewise see no reason
to disturb the bankruptcy judge’s determination that
Chiplease failed to comply with the court order requiring
an escrow deposit. Finally, the district court’s contempt
finding is fully supported by the record; the court thor-
oughly considered and properly rejected Chiplease’s
defense to contempt.
I. Background
In the 1990s RTC was in the business of collecting gas
emitted from garbage landfills and either selling it or
converting it into electricity. RTC had contracts with
the owners of several Illinois landfills that gave it the
Nos. 08-4118 & 08-4310 5
exclusive right to develop and install gas-to-energy
conversion projects at the landfills. Four of these agree-
ments are at issue in this appeal. RTC never collected
enough revenue from its gas-to-energy operations to
offset the expense of capturing the gas, and by 1999 the
company became the subject of an involuntary Chapter 7
petition. For a time during the course of the lengthy
bankruptcy proceedings, RTC’s case proceeded under
Chapter 11 as a reorganization, but as the prospects for
RTC’s recovery grew increasingly dim, the bankruptcy
court converted the case back into a Chapter 7 proceeding.
The bankruptcy trustee eventually entered into a set-
tlement agreement with some of RTC’s creditors, in-
cluding Chiplease and Scattered, the two companies
whose principals are former owners and directors of RTC.
(Leon Greenblatt and Andrew Jahelka owned RTC;
Greenblatt owned Chiplease, and Greenblatt and Jahelka
together owned Scattered.) As part of this agreement,
the trustee was to assume some of RTC’s landfill con-
tracts and assign them to Chiplease and Scattered, and
Chiplease was to pay RTC’s operating expenses while
RTC remained in bankruptcy. The agreement also re-
quired Chiplease to establish a $500,000 escrow as
security for these expenses. The bankruptcy court ap-
proved the settlement agreement.
A. The Investment Trust’s Appeal
Pursuant to § 365(f)(2)(B), the bankruptcy trustee
asked the court for permission to assume four RTC land-
fill gas-conversion agreements and assign them to
6 Nos. 08-4118 & 08-4310
Chiplease and Scattered, which would then reassign to
the Investment Trust. The Trust had been organized
under Illinois law in 1992 to engage in dividend rein-
vestment plans but remained dormant for more than a
decade and did not engage in any business operations.
While the RTC bankruptcy was ongoing, however, Scat-
tered and Chiplease had been made the beneficiaries of
the Trust, and intended to use it to receive certain
RTC assets and re-enter the gas-to-energy business. With
this in mind, John Connolly, RTC’s president, was ap-
pointed as the trustee of the Investment Trust.
At the time of the bankruptcy trustee’s § 365(f)(2)(B)
motion, the City of Peoria and Allied Waste Industries
(“Allied”) owned the landfills that were the subject of the
underlying agreements. They objected to the proposed
assignment of their contracts to the Investment Trust;
they did not believe the Trust could demonstrate ade-
quate assurance of future performance as required by
§ 365(f)(2)(B). After lengthy discovery and a two-day
trial on the objections, the bankruptcy judge agreed with
Peoria and Allied and rejected the proposed assignments.
The parties had stipulated that it would cost about
$3 million to perform the obligations under the agree-
ments, and at the time of the trial, the Trust had less
than $1,000 cash on hand and no operating history.
Greenblatt and Jahelka testified that Chiplease and Scat-
tered would lend the required $3 million to the Trust, but
the judge was unconvinced. He concluded that the Trust
was not financially capable of performing under the
agreement, and Scattered and Chiplease had their own
financial problems. The judge also doubted that the
Nos. 08-4118 & 08-4310 7
Trust had any effective way of requiring Scattered and
Chiplease—who were the Trust’s beneficiaries—to lend
it the money it needed to perform the contracts.
Two weeks later Scattered and Chiplease moved the
court to reconsider. The motion proposed assigning the
same contracts to a new entity called Illinois Generating
Station #1. The judge denied the motion for two reasons.
First, interpreting the motion as an entirely new proposal,
the court held that it was untimely. Alternatively, if
the motion was properly interpreted as a motion to re-
consider based on new evidence, the judge concluded
that the “evidence” was not “newly discovered.” The
Investment Trust appealed to the district court, the
district court affirmed, and the Trust appealed to this
court.
B. Chiplease’s Appeal
As the proposal involving the Investment Trust moved
from the bankruptcy court to the district court, two
administrative claimants complained to the bankruptcy
judge that Chiplease had not complied with its obliga-
tions under the settlement agreement to establish a
$500,000 escrow as security for RTC’s operating ex-
penses. Paragraph 23 of the Settlement Order set forth
Chiplease’s obligations in detail:
As more fully set forth in Paragraph 11 of the Settle-
ment Agreement: (I) [Chiplease] shall deposit the
sum of $500,000.00 to be held in escrow by its coun-
sel . . . for the payment of all unpaid Chapter 7 oper-
8 Nos. 08-4118 & 08-4310
ating expenses above $150,000.00 and any expenses
incurred while the Estate continues to operate [RTC’s]
business . . . .
Paragraph 11 of the Settlement Agreement, in turn, stated:
Chiplease shall pay all unpaid Chapter 7 operating
expenses above $150,000 and any expenses incurred
while the Estate continues to operate [RTC’s] business
(“Expenses”). The Estate shall pay the first $150,000
of these expenses. On or before the Closing Date,
Chiplease shall deliver to its counsel . . . the sum
of $500,000.00 to be used to pay the Expenses (“Ade-
quate Security”).
Paragraph 11 also established a detailed procedure
setting forth how Chiplease was required to pay RTC’s
operating expenses; it said expenses would be paid upon
submission of an expense request by the bankruptcy
trustee. When the settlement order was entered, the
parties had estimated that the operating costs would be
between $250,000 and $400,000. Chiplease claims that it
directly paid more than $1 million in operating expenses
between 2006 to 2008, but it is undisputed that it
never complied with the express terms of Paragraph 23’s
payment provisions—most particularly, it did not
comply with its obligation to deposit $500,000 into
escrow and follow the payment procedures specifically
established in the settlement agreement.
Accordingly, the administrative claimants asked the
bankruptcy court to order Chiplease to post the security
required by Paragraph 23 of the settlement order.
Nos. 08-4118 & 08-4310 9
Chiplease objected, claiming that its failure to establish
the $500,000 escrow account should be excused because
it had already directly paid more than twice that
amount in RTC’s operating expenses. The bankruptcy
trustee supported the administrative claimants’ motion,
arguing that the payment procedures prescribed by
the agreement prohibited Chiplease from unilaterally
deciding what expenses to pay. The trustee also argued
that the escrow requirement was designed to ensure the
existence of an adequate fund from which approved
operating expenses could be paid. The bankruptcy
court agreed with the trustee and ordered Chiplease to
make the escrow deposit of $500,000, as required by
the settlement order. Chiplease appealed to the district
court and asked for a stay of the bankruptcy court’s
order. The district court denied the stay and on July 18,
2008, specifically ordered Chiplease to make the $500,000
escrow deposit. With an exception not relevant here, the
district court later affirmed the bankruptcy court.1
Chiplease did not comply with the court’s July 18 order,
however, and on the trustee’s motion, the district court
initiated a civil contempt proceeding. Chiplease de-
fended its failure to comply, claiming it was financially
unable to establish the $500,000 escrow account. The
district court rejected this argument, held Chiplease in
1
The bankruptcy court had ordered Chiplease to pay ap-
proximately $47,000 in interest, but the district court reversed
this portion of the bankruptcy judge’s decision. Because the
trustee has not challenged this aspect of the district court’s
order, we do not discuss it further.
10 Nos. 08-4118 & 08-4310
contempt, and ordered it to pay a penalty of $5,000 per
day until it complied with the escrow requirement. The
court also ordered Chiplease to pay the bankruptcy
trustee’s attorney’s fees associated with the contempt
proceeding. A week later Chiplease asked the court to
reconsider its decision, claiming “new evidence.” The
court denied this motion based on Chiplease’s lack of
diligence in gathering the new evidence and presenting
it to the court.
II. Discussion
We review the bankruptcy court’s conclusions of law
de novo and its factual findings for clear error. Freeland
v. Enodis Corp., 540 F.3d 721, 729 (7th Cir. 2008). “If the
bankruptcy court’s account of the evidence is plausible
in light of the record viewed in its entirety, we will not
reverse its factual findings even if we would have
weighed the evidence differently.” Id. (citation and
internal quotation marks omitted).
A. The Investment Trust’s Appeal
1. Allied’s Standing to Challenge the Proposed Assignment
The Trust begins with a curious argument about
standing, claiming that Allied lacked standing to chal-
lenge the trustee’s proposed assumption and assignment
of the contracts at issue in this appeal. This argument
makes little sense. Article III’s standing requirements
apply to proceedings in bankruptcy courts just as they
Nos. 08-4118 & 08-4310 11
do to proceedings in district courts. In re FedPak Sys., Inc.,
80 F.3d 207, 213 (7th Cir. 1996). However, “[b]ankruptcy
standing is narrower than Article III standing.” In re Cult
Awareness Network, Inc., 151 F.3d 605, 607 (7th Cir. 1998).
Standing to object to a proposed bankruptcy order
requires that the objector “have a pecuniary interest in
the outcome of the bankruptcy proceedings.” Id. Although
Allied did not have any ownership interest in the
landfills in the 1990s when the RTC gas-to-energy con-
tracts were signed, by the time of the bankruptcy, it was
the owner by succession and was identified by the
trustee as RTC’s contract partner in three of the agree-
ments. (Peoria owns the landfill involved in the fourth.)
Although the Investment Trust now contends that Allied
did not prove in the bankruptcy court that it owns the
landfills in question, everyone proceeded on that under-
standing, and the Trust itself referred to Allied as the
owner in several of its bankruptcy-court filings. There
is absolutely nothing in the record to suggest that Allied
is not the owner of the landfills. Tellingly, although it
had every incentive to do so, the Investment Trust has
never identified who (if not Allied) actually does own
the landfills and therefore is a party to the agreements
sought to be assumed and assigned. Quite obviously,
there would be no reason for Allied to object to the as-
signments if it had no ownership interest in the landfills.
We reject the Investment Trust’s challenge to Allied’s
standing.
12 Nos. 08-4118 & 08-4310
2. Adequate Assurance of Future Performance
The Investment Trust argues that the bankruptcy court
erred in rejecting its assumption-and-assignment pro-
posal under § 365(f)(2)(B). As we have noted, § 365 of
the Bankruptcy Code allows the bankruptcy trustee to
assume and assign a contract of the debtor to another
party, but only if “adequate assurance of future perfor-
mance by the assignee of such contract . . . is provided.”
11 U.S.C. § 365(f)(2)(B). “Adequate assurance of future
performance” is interpreted by reference to section 2-609
of the Uniform Commercial Code. Cinicola v. Scharf-
fenberger, 248 F.3d 110, 120 n.10 (3d Cir. 2001); Richmond
Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1310 (5th
Cir. 1985); see also R EPORT OF THE C OMMISSION ON B ANK-
RUPTCY L AWS OF THE U NITED S TATES, H.R. Doc. No. 93-137,
pt. 2, at 156-57 (1973) (observing that the phrase “ade-
quate assurance of future performance” “is adopted
from Uniform Commercial Code § 2-609(1)”). Several
factors are relevant to the determination: the financial
ability to perform the contract; the general economic
climate; the existence of a guarantee; the reputation of
the party seeking to assume responsibility for the con-
tract; and past dealings between the parties. See, e.g.,
Richmond Leasing Co., 762 F.2d at 1310 (identifying the
first three factors); U.C.C. § 2-609 cmt. 4 (discussing the
last two factors). We review the bankruptcy court’s deter-
mination for clear error. In re Liljeberg Enters., Inc., 304
F.3d 410, 439 (5th Cir. 2002).
The Investment Trust argues first that the bankruptcy
court applied the incorrect legal standard by essentially
Nos. 08-4118 & 08-4310 13
requiring an absolute guarantee of performance. See In re
Carlisle Homes, Inc., 103 B.R. 524, 538 (Bankr. D.N.J. 1988)
(observing that “the required assurance will fall con-
siderably short of an absolute guarantee of performance”
(citation omitted)). As used in § 365(f)(2)(B), “adequate” is
a term of art and simply means assurances that are com-
mercially reasonable under the particular circumstances
of the case. This is a commonsense, case-specific inquiry,
and § 365(f)(2)(B) is given “a practical, pragmatic con-
struction,” Richmond Leasing Co., 762 F.2d at 1309. Our
review of the record convinces us that the bankruptcy
court applied the correct standard.
The judge focused his inquiry on whether the Invest-
ment Trust could show “by a preponderance of the evi-
dence that future performance is likely.” Contrary to
the Trust’s argument, this statement does not suggest that
the court required an absolute guarantee of performance.
Instead, the court required the Trust to show it was
more likely than not to perform the obligations of the
contract. This is the standard commonly applied to evalu-
ate the adequacy of the future-performance assurances
for purposes of § 365(f)(2)(B). See In re Prime Motor Inns,
Inc., 166 B.R. 993, 997 (Bankr. S.D. Fla. 1994) (citing cases
and explaining that an adequate assurance means that
performance should be “more probable than not”). As the
party seeking to become the assignee, the Trust had
the burden of proving it met the requirements of § 365(f).
See In re Tex. Health Enters., Inc., 246 B.R. 832, 835
(Bankr. E.D. Tex. 2000).
14 Nos. 08-4118 & 08-4310
To understand the bankruptcy judge’s decision, it is
important to place the proposed assumption-and-assign-
ment transaction in context. The Trust was created
under Illinois law as an investment vehicle but was long
dormant; Scattered and Chiplease were named as its
beneficiaries while the RTC bankruptcy was ongoing
and RTC’s principals decided to use the Trust to hold
and manage the four RTC contracts they wanted to as-
sume. The parties agreed that it would take about
$3 million to perform RTC’s obligations under these
contracts. Thus, the Investment Trust’s ability to obtain
$3 million in financing was, to use the bankruptcy
judge’s words, “absolutely essential” to the Trust’s
ability to perform; the Trust had no independent assets
or revenue stream and was entirely dependent on other
entities for capital. Although Scattered and Chiplease
intended to loan the Investment Trust the $3 million it
needed to perform the four landfill gas-collection agree-
ments, the Trust had no enforceable right to demand
this financing, as the bankruptcy judge noted. The judge
was understandably skeptical that the Investment Trust
would sue Scattered or Chiplease if they decided not to
provide the funds. Indeed, Connolly acknowledged in
his testimony that he would be unlikely to sue Scattered
or Chiplease to obtain the promised financing; and even
if he did, Scattered and Chiplease—in their role as benefi-
ciaries of the Trust—could have him replaced as trustee.
The bankruptcy judge also doubted that Chiplease
or Scattered had the financial wherewithal to lend the
Investment Trust the $3 million everyone agreed was
required to fulfill the obligations of the assigned con-
Nos. 08-4118 & 08-4310 15
tracts. The Trust did not submit any financial statements
at trial, and according to the witnesses’ testimony, most
of the assets of the two companies were illiquid. There
is very little in the record explaining exactly how
Chiplease and Scattered expected to come up with a
$3 million capital infusion for the Investment Trust;
indeed, the testimony established that Scattered did not
have the funds necessary to contribute to this sum.2
Finally, the bankruptcy court properly considered the
fact that the Trust was controlled by the same managers
who were at the helm of RTC when it was forced into
bankruptcy. Given RTC’s difficulties in performing its
contracts before the involuntary Chapter 7 petition
was filed, the bankruptcy court was within its discretion
to require more convincing evidence of the Investment
2
We also note the incongruity between the Investment Trust’s
reliance on Chiplease for financing and Chiplease’s own
argument in the consolidated appeal that as of June-July 2008,
it lacked sufficient funds to comply with the district court’s
order to establish a $500,000 escrow as security for RTC’s
operating expenses. Indeed, in its opening brief on appeal,
Chiplease argued that it should not be held responsible for
its failure to comply with the district court’s escrow order
because of its “extremely weak financial condition” in 2008.
Appellant’s Br. at 9, In re Res. Tech. Corp., No. 08-4310 (7th
Cir. Mar. 9, 2009). In light of this argument—made by the
same attorneys who represent the Trust in its appeal—we are
surprised the Trust continues to insist that Chiplease stood
ready and able to provide the $3 million in financing neces-
sary for the Trust to be in a position to fulfill the obligations
of the assumed-and-assigned contracts.
16 Nos. 08-4118 & 08-4310
Trust’s ability to perform. See U.C.C. § 2-609 cmt. 4
(noting that a promise of performance alone might be
“adequate” when it is made by “a seller of good repute”
but not when it is made by “a known corner-cutter”).
The Trust claims that the bankruptcy judge improp-
erly demanded an escrow account as a condition for
approving the assignment. The record does not support
this assertion. When the judge announced his deci-
sion, he suggested that he would have approved the
proposed assignment if the Investment Trust could have
shown it had the necessary $3 million in an escrow ac-
count. This comment is no more than an observation
that the absence of such a fund further undermined the
Trust’s effort to carry its burden of establishing ade-
quate assurance of performance. Under the fact-intensive,
commercial-reasonableness inquiry contemplated by
§ 365(f)(2)(B), the judge’s observation was entirely ap-
propriate.
As a final matter, the Trust claims the bankruptcy
court gave insufficient weight to the testimony of
Connolly (president of RTC and the trustee of the Invest-
ment Trust), Greenblatt (owner and director of both
Scattered and Chiplease), and Jahelka (co-owner and
director of Scattered). These witnesses testified about the
financial health of the Investment Trust, Chiplease, and
Scattered, and explained that Scattered and Chiplease
intended to loan $3 million to the Trust. But the cross-
examination of these witnesses identified many weak-
nesses in their testimony, and it was the Trust’s burden
to introduce enough evidence to demonstrate adequate
Nos. 08-4118 & 08-4310 17
assurance of future performance. See Texas Health En-
ters., 246 B.R. at 835. The bankruptcy judge was well
within his discretion to conclude that the testimony of the
Trust’s witnesses was insufficient to meets its burden
of proof under § 365(f)(2)(B). See United States v. Irby,
558 F.3d 651, 654 n.3 (7th Cir. 2009).
In sum, the bankruptcy court weighed all the evidence
and made a reasoned, well-supported decision that
the Investment Trust had failed to provide adequate
assurance of future performance under § 365(f)(2)(B).
We have considered the Trust’s other arguments and
find them without merit. Accordingly, we reject the
Investment Trust’s challenge to the bankruptcy court’s
order declining to approve the assignment of the four
Allied and Peoria landfill contracts to the Trust.
3. The Bankruptcy Court’s Refusal to Reconsider its Decision
The Investment Trust also challenges the bankruptcy
court’s refusal to reconsider its decision rejecting the
assignments. Our review is for an abuse of discretion,
Greene v. Potter, 557 F.3d 765, 767 (7th Cir. 2009), and
under the circumstances here, the Trust’s argument
requires only brief comment. It is somewhat unclear
whether the bankruptcy judge treated this motion as a
request to revisit its decision and entertain newly dis-
covered evidence under Rule 59 of the Federal Rules
of Civil Procedure or as an entirely new assumption-and-
assignment proposal. If the former, the evidence was
not “newly discovered” within the contemplation of a
proper Rule 59(e) motion, and the request was properly
18 Nos. 08-4118 & 08-4310
denied on this basis. See, e.g., Envtl. Barrier Co. v. Slurry
Sys., Inc., 540 F.3d 598, 609 (7th Cir. 2008). If the latter, the
motion was properly denied as untimely; it was filed
more than a year-and-a-half after the deadline set by the
bankruptcy judge, and under 11 U.S.C. § 365(d)(1), the
judge was entitled to reject it on timeliness grounds.
B. Chiplease’s Appeal
1. The Bankruptcy Court’s Escrow Order
Chiplease challenges the bankruptcy court’s order
requiring it to deposit $500,000 in escrow for RTC’s
operating expenses as contemplated by the settlement
agreement that had been approved by the court. Chip-
lease admits it never deposited the money in accordance
with the terms of the settlement agreement and the
court’s order, but it defends its failure to do so on the
ground that it had already directly paid more than
$1 million of RTC’s operating expenses. Essentially,
Chiplease maintains it complied with the spirit but not
the letter of the order. “[A] court that has issued an
order is in the best position to interpret it.” Ill. Inv. Trust
No. 92-7163 v. Am. Grading Co., 562 F.3d 824, 830 (7th
Cir. 2009). We owe substantial deference to the bank-
ruptcy court’s interpretation of its own orders and
will not overturn that interpretation unless we are con-
vinced that it amounts to an abuse of discretion. See In re
Airadigm Commc’ns, Inc., 547 F.3d 763, 768 (7th Cir. 2008).
Chiplease’s lone argument is that it effectively com-
plied with its obligations under the order by directly
Nos. 08-4118 & 08-4310 19
paying more than $1 million of RTC’s operating expenses.
The trustee notes, however, that the agreement and
order called for the establishment of the $500,000 escrow
account as security for payment and set up a specific
procedure for payment of approved operating expenses.
The trustee argues that much of the $1 million Chiplease
paid was for unapproved expenses.3
The bankruptcy judge held that the order was clear and
that Chiplease’s direct payment of RTC’s operating ex-
penses did not satisfy its obligation to establish the
$500,000 escrow account. This was not an abuse of dis-
cretion. Chiplease was ordered to deposit $500,000 into
an account that would serve both as a source of funds
for approved expenses and as a security deposit in the
event Chiplease could not fulfill its obligations to pay
RTC’s operating expenses under the settlement agree-
ment. Chiplease’s failure to comply is not excused by its
direct payment of unapproved operating expenses.
Chiplease argues that because the trustee knew it was
paying RTC’s Chapter 7 operating expenses—albeit not
in accordance with the agreement and order—it was
relieved of its obligation to establish the escrow account.
We disagree. The noncompliance motion was filed by
administrative claimants who were concerned that
3
Under the agreement the Chapter 7 trustee was to submit an
expense request to Chiplease, which then had seven days to
either pay the expense or to dispute the request in writing.
If Chiplease disputed the expense, the trustee had ten days
to file a motion with the bankruptcy court to determine
whether Chiplease should pay the expense.
20 Nos. 08-4118 & 08-4310
Chiplease lacked sufficient funds to cover continuing
operating expenses. See F ED. R. B ANKR. P. 9019 (permitting
administrative claimants to file such a motion). The
trustee’s knowledge of Chiplease’s direct payments
has no bearing on Chiplease’s obligation to comply with
the escrow order. Chiplease and the trustee could not
privately agree to modify a settlement agreement that
was approved by court order; unlike a private con-
tract, “an agreement whose every provision has been
approved and therefore activated by court order
requires court approval before it may be modified. In re
Heartland Steel, Inc., 389 F.3d 741, 745 (7th Cir. 2004).4
2. The District Court’s Contempt Order
In connection with its appeal of the bankruptcy
court’s order to the district court, Chiplease asked the
district court to stay the escrow order. The district
court denied the motion on July 18, 2008, and ordered
Chiplease to make the $500,000 deposit. Chiplease did not
do so. A civil contempt hearing was convened, and the
4
Chiplease briefly argues that the court’s order violated its due-
process rights; this argument is woefully undeveloped and
need not be addressed. Chiplease also maintains that it was
entitled to a trial on the issue because it submitted an affi-
davit from Connolly, RTC’s president, insisting that Chiplease
had complied with the agreement and order. Not true. It was
undisputed that Chiplease did not establish the $500,000
escrow account as ordered. Chiplease offered an alternative
theory of “compliance” that the bankruptcy court properly
rejected.
Nos. 08-4118 & 08-4310 21
district court held Chiplease in contempt and ordered it
to pay a penalty of $5,000 a day until it complied with
the escrow deposit requirement. Chiplease challenges
the district court’s contempt finding and also argues that
the court should have reopened the proceedings to
allow it to introduce additional evidence explaining its
inability to pay.5
A district court may not enter an order of civil contempt
unless it finds by clear and convincing evidence that a
party has violated the express and unequivocal com-
mand of a court order. Autotech Techs. LP v. Integral Re-
search & Dev. Corp., 499 F.3d 737, 751 (7th Cir. 2007). There
is no dispute in this case that Chiplease did not comply
with the district court’s July 18 order or that this order
constitutes an express and unequivocal command of
the court. Instead, Chiplease says that it could not
comply with the order because it lacked the financial
resources to do so. Inability to pay is a valid defense in a
contempt proceeding, but the party raising the defense
has the burden of proving its inability to pay. United States
v. Rylander, 460 U.S. 752, 757 (1983). There must be an
adequate factual basis to support the defense, S. Suburban
Hous. Ctr. v. Berry, 186 F.3d 851, 855 (7th Cir. 1999), and
the alleged contemnor’s past ability to comply with a
5
As a preliminary matter, Chiplease attacks the district court’s
refusal to grant its motion for a stay of the bankruptcy
court’s order while it appealed the bankruptcy court’s order.
Ordinarily such a challenge becomes moot when the district
court rules on the underlying appeal. See Orion Sales, Inc.
v. Emerson Radio Corp., 148 F.3d 840, 843 (7th Cir. 1998).
22 Nos. 08-4118 & 08-4310
court order triggers a presumption that it has a present
ability to comply, e.g., United States ex rel. Thom v. Jenkins,
760 F.2d 736, 739 (7th Cir. 1985). Moreover, where, as
here, there has been no effort at even partial compliance
with the court’s order, the inability-to-pay defense re-
quires a showing of a “complete inability” to pay; stated
differently, under the circumstances here, Chiplease had
the burden of establishing “clearly, plainly, and unmistak-
ably” that “compliance is impossible.” Huber v. Marine
Midland Bank, 51 F.3d 5, 10 (2d Cir. 1995) (citation omitted).
The record supports the district court’s rejection of
Chiplease’s inability-to-pay defense. Chiplease sub-
mitted accounting documents from June and July 2008,
which it claimed showed that it lacked the cash-on-hand
necessary to comply with the bankruptcy court’s order,
and a perfunctory affidavit from Greenblatt, who stated
that Chiplease’s assets were illiquid. According to
Greenblatt’s affidavit, the money Chiplease held in its
accounts belonged to other entities and was unavailable
to pay its own debts.
The district court discounted Chiplease’s evidence in
light of the evidence from the February 2008 trial in the
bankruptcy court regarding the Investment Trust’s effort
to assume the four landfill gas-conversion contracts. To
persuade the bankruptcy judge that Chiplease stood
ready and able to lend $3 million to the Trust, Greenblatt
had testified that Chiplease’s assets were between $15
and $16 million. Greenblatt had also testified that the net
available to Chiplease was approximately $150,000 per
month. Chiplease complains that it was improper for
the district court to rely on Greenblatt’s February 2008
Nos. 08-4118 & 08-4310 23
trial testimony because the court only reviewed a partial
transcript of that proceeding. But there is no indication
that this resulted in any unfairness; Chiplease had the
opportunity at the contempt hearing to introduce evi-
dence explaining the differences between Greenblatt’s
affidavit and his trial testimony a few months earlier, but
elected not to do so.6 The evidence before the district
court established that Chiplease had the past ability to
comply with the escrow order, and Chiplease did little
to rebut the resulting presumption that it had the present
ability to comply. See Thom, 760 F.2d at 739. Chiplease
failed to demonstrate that it had been “reasonably
diligent and energetic in attempting to accomplish what
was ordered,” Goluba v. Sch. Dist. of Ripon, 45 F.3d 1035,
1037 (7th Cir. 1995) (citations omitted), and so did not
carry its burden of producing sufficient evidence to
establish its inability to pay. Accordingly, the district
court did not abuse its discretion in holding Chiplease
in contempt.
Nor did the district court abuse its discretion in denying
Chiplease’s motion to reconsider. Rule 59 requires a
showing that the moving party discovered new evidence
after trial that could not have been discovered by exer-
cising due diligence before trial. F ED. R. C IV . P. 59(a);
Envtl. Barrier Co., 540 F.3d at 608. Chiplease wanted
6
Chiplease’s objection to the district court’s consideration
of this evidence in the contempt proceeding is particularly
suspect in light of its own reliance on this transcript in an
earlier filing with the district court asking the district court
to reconsider the order requiring Chiplease to make the
$500,000 deposit.
24 Nos. 08-4118 & 08-4310
the court to review eight new exhibits containing more
information about its financial status, but Chiplease
had plenty of time to compile these exhibits before
the contempt hearing. The order to show cause gave
Chiplease five-and-a-half weeks to prepare its case.
For the foregoing reasons, we A FFIRM the district
court’s order rejecting the Investment Trust’s challenge
to the bankruptcy court’s refusal to approve the assign-
ments of the four Peoria and Allied landfill contracts to
the Trust. We also A FFIRM the district court’s order re-
jecting Chiplease’s challenge to the bankruptcy court’s
order regarding the escrow account. Finally, we A FFIRM
the district court’s contempt order. The trustee’s request
for an award of costs and attorney’s fees on appeal
is D ENIED.
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