Judge upholds SIST bankruptcy petition dismissal

Shawano Leader/May 26, 2010

By Tim Ryan

A U.S. District Court Judge Tuesday upheld a Bankruptcy Court ruling dismissing the Chapter 11 petitions filed by the Samanta Roy Institute of Science and Technology, Inc. and several of its subsidiaries.

The case was initially dismissed in U.S. Bankruptcy Court on September 22, but SIST appealed and was also granted a stay on any pending civil litigation during the appeal process.

The matter had been languishing in legal limbo for the last eight months. The ruling filed Tuesday dismissed the appeal and removed SIST's protection from civil litigation.

In his ruling, U.S. District Court Judge Gregory M. Sleet affirmed the September 22 dismissal, stating the Bankruptcy Court did not abuse its discretion and finding the reasons given for dismissal to be appropriate.

"The Bankruptcy Court properly found gross mismanagement warranting termination of the automatic stay and dismissal of the case," Sleet stated in a footnote to the ruling Tuesday.

Sleet cited several examples, including, "the debtors' failure to consider the purchase offer for their property located in Oakdale, Minnesota; the debtors' failure to file tax returns both before and after the filing of their petition; and the debtors' failure to report and account for nearly $60,000 in cash that they were holding in a gas station safe."

Sleet found SIST's claims that the Bankruptcy Court committed legal error to be without merit.

In the same order, Sleet also denied SIST's motion for contempt against one of its creditors, along with a motion filed by creditor Green Mountain Finance Fund LLC for contempt against SIST.

Sleet also criticized Green Mountain in denying several motions filed during the appeal process that called for an expedited hearing.

"These filings were not well-taken," Sleet said in another footnote hinting at why the case has languished so long. "Counsel should know well the significant number of motions and proceedings in both civil and criminal cases that this court must manage."

Last September, U.S. Bankruptcy Judge Kevin Gross ruled a dismissal was necessary given SIST's mounting financial losses, the absence of a plan to rehabilitate, lengthy inaction in obtaining financing and a lack of effort to maximize the value of assets for the benefit of creditors.

Tuesday's ruling potentially clears the way for the resumption of numerous civil cases against SIST and some of its subsidiaries involving more than $4 million in claims.

Those cases - including the pending foreclosure sale of three Shawano gas stations and a defamation suit filed by Shawano Mayor Lorna Marquardt - were put on hold when the Chapter 11 petitions were filed in March of last year.

It could not be verified by deadline Tuesday whether there could still be another avenue for appeal or other options yet open to SIST.

The bankruptcy filings included SIST and subsidiaries Midwest Oil of Shawano, LLC; Midwest Oil of Wisconsin, LLC; Midwest Oil of Minnesota, LLC; Midwest Properties of Shawano, LLC; Midwest Hotels and Motels of Shawano, LLC; and U.S. Acquisitions and Oil, Inc.

The cases were ultimately consolidated under the SIST filing. The judge's ruling applied to all of the cases.

The bankruptcy petitions were filed two days before the scheduled sheriff's sale on March 18, 2009, of three Shawano gas station properties owned by SIST subsidiary Midwest Oil of Wisconsin.

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