Newspaper Shareholder Owes Creditor $13M
(CN) - A court mistake deprived a creditor of a defunct Florida newspaper company its share of the $36 million won by an investor, a federal judge ruled.
After Cox Enterprises Inc. sued it in 2004 for misuse of corporate funds and waste of assets, New-Journal Corp., then-owner of the Daytona Beach News Journal, elected to buy Cox's shares.
A federal judge in Orlando ultimately valued those shares at $129 million, and NJC had to sell itself to pay back Cox.
"The publishing operations were sold to a third-party buyer on March 31, 2010, and the proceeds of the sale were placed in a segregated account" maintained by a court-appointed receiver, U.S. District Judge John Antoon II explained in an Aug. 13 ruling.
"In his report and recommendation, the receiver found that Cox had priority over all other claims, and he recommended that the sales proceeds and other remaining NJC assets - valued at approximately $36 million - be distributed to Cox, except for $347,639.70, which Cox had agreed to relinquish to be paid to seven other claimants," Antoon added.
The court adopted the receiver's report, but the Pension Benefit Guaranty Corp. and other claimants objected, arguing "that payment to Cox ahead of other creditors would violate Florida's distributions-to-shareholders statute" which "forbids a distribution to a shareholder if the making of such a distribution would render the corporation insolvent," Antoon wrote.
Agreeing with PBGC, the 11th Circuit vacated the District Court's distribution order and remanded the case in 2012.
Having given the case a second look, Antoon found Wednesday that PBGC is NJC's only remaining unpaid creditor. It was entitled to $13 million before Cox received any of NJC's assets, according to the ruling.
Cox has until Sept. 12 to pay PBGC $13.8 million, the court found.
"A distribution was erroneously made to Cox before the PBGC received payment, and therefore Cox will be ordered to submit the amount of the PBGC's claim into the registry of this court," Antoon wrote.