Bankrupt NanoMech is asking for an injunction to stop a lawsuit in Arkansas against one of its officers, contending the matter is an attempt to sidestep bankruptcy law and will needlessly drain funds from the estate.
In a filing Thursday with the U.S. Bankruptcy Court for the District of Delaware, NanoMech contends a suit in Washington County Circuit Court filed last month against Wyatt Watkins, senior vice president of finance and operations for NanoMech, is an attempt to get around the company's bankruptcy protections. The suit alleges negligence and breach of fiduciary duty on the part of Watkins for issuing a $1 million promissory note payable to Daniel Carroll before the company's bankruptcy.
NanoMech argues since an automatic stay is in effect because of the bankruptcy proceedings, through the Washington County suit Carroll "decided to try to make an end run around the automatic stay and file a complaint against the officer who signed the note on behalf of the Debtor." The automatic stay prevents creditors from attempting collections of debts in cases of bankruptcy.
In court documents, NanoMech noted that it is obligated to defend Watkins. That defense could be paid through the company's directors and officers insurance policy or, if the insurance company refuses to provide a defense, by NanoMech's estate. In either case, NanoMech told the court, the cost of the defense will take money out of the pockets of other creditors.
Policies for the directors and officers provide a type of liability insurance to companies covering claims made against those serving on a company board or as an officer. In NanoMech's case, there is about $6 million available for claims of this type through two insurance policies, according to court records.
In mid-June, Carroll filed a limited objection in bankruptcy court to the sale of NanoMech, contending any sale order should spell out that it doesn't allow the debtor to sell the proceeds from the directors and officers policies. The judge ruled the proceeds of the polices were not part of the sale.
In late July, the court approved the sale of most of NanoMech's assets, free of liens and other legal encumbrances, to P&S Holdings for $8 million. P&S is a subsidiary of Houston's Vinmar International Ltd., a global marketing, distribution and project-development company serving the petrochemical industry. The deal closed Aug. 1.
NanoMech filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware in April. NanoMech claims $7.2 million in assets and owes nearly $19 million to its creditors, according to bankruptcy filings. With the approval of bankruptcy court, NanoMech is acting as a debtor in possession, which allows the business to operate normally as the bankruptcy unfolds.
Founded in 2002 in Springdale, NanoMech developed nanotechnology for use in machining and manufacturing, lubrication and packaging, and coatings. It also developed specialty chemicals. Nanotechnology focuses on the manipulation of matter at the atomic and molecular scale.
Business on 09/14/2019