NINESTAR DISTRIBUTOR TOWN-SKY FILES FOR BANKRUPTCY

[Anonymous]

NINESTAR DISTRIBUTOR TOWN-SKY TO GO BANKRUPT
Ninestar Distributor Town Sky Goes Bankrupt: Implications for ITC Fine and Epson’s Case in Portland.In researching a recent article on Ninestar’s appeal of an $11.1 million fine ordered by the U.S. International Trade Commission (ITC) against both Ninestar and its U.S. distributor Town Sky , we learned that Ninestar’s distributor has filed for bankruptcy. This leaves Nano Pacific as the Ninestar group of companies’ main distributor in the United States.

San Francisco-based Town Sky filed for Chapter 7 bankruptcy protection in the United States Bankruptcy Court for the Northern District of California over a year ago, on February 12, 2010, saying it had ceased operations and had no income or expenditures. Unlike Chapter 11 bankruptcy, which can allow a firm to reorganize its debt and reemerge and resume operations, under Chapter 7, all assets are liquidated to pay off creditors.

It appears that litigation with Epson and the general exclusion order that Epson was granted barring importation of compatible Epson inkjet cartridges and tanks hit Ninestar’s distributor hard. According to Town Sky’s petition for bankruptcy, the company had a mere $26,640.89 in assets and owed $207,867.03 to its creditors. The firm’s assets are primarily in the form of a security deposit on the space it formerly leased plus a little over $7,000 in accounts receivable. Town Sky’s creditors include its phone company, its garbage company, and one employee, but its biggest unsecured creditor, to the tune of $202,000, appears to be the company that took over its lease.
Can’t Get Blood from a Stone

The amount that the ITC has ordered Ninestar and Town Sky to pay for violating the general exclusion order currently stands at $11.1 million. This amount is payable to the U.S. government, not Epson. Epson is still litigating in the U.S. District Court for the District of Oregon, Portland Division, for damages from Ninestar and other defendants.

Under U.S. bankruptcy law, an automatic stay protects the debtor from certain collections and other actions while the bankruptcy is under way. To proceed in its legal actions against Town Sky in the U.S. District Court for the District of Oregon, Portland Division, and in the matter of the $11.1 million in fines currently before the U.S. Court of Appeals for the Federal Circuit, Epson had to petition the bankruptcy courts to lift the automatic stay. Epson was granted a so-called order for relief from stay by the Bankruptcy Court for the Northern District of California. Now, to collect any money from Town Sky resulting from the ITC enforcement appeal or the Oregon district court cases, the ITC and/or Epson must pursue the matter in bankruptcy court.

While we understand that this was a necessary legal move for Epson, the aphorism, “You can’t get blood from a stone,” springs to mind. In the event that the Ninestar respondents are ultimately ordered to pay a fine stemming from violating the general exclusion order or damages in the district court cases, Ninestar will receive little financial help from its former distributor.

Will Ninestar Be on the Hook?
It appears that in the matter of the fine levied by the ITC, Ninestar will be on the hook to pay the full amount unless it prevails before the appeals court. The ITC’s determination on issuing civil penalties to the Ninestar, Mipo, and Apex respondents specifies that the fines levied are imposed on each group of respondents “jointly and severally.” This means that the entire judgment can be collected from any one of the parties, or from any and all of the parties in various amounts until the judgment is paid in full. In other words, if Town Sky cannot pay its share of the fine meted out to the Ninestar respondents, the other Ninestar respondents (Ninestar Technology Co., Ltd. and Ninestar Technology Company, Ltd.) must make up the difference. Given how little Town Sky has in assets, it is questionable that either the ITC or Epson can recover much from the former distributor via bankruptcy court proceedings.

[Author]

February 16, 2011 at 11:52 AM