Does the latest chapter in a three-year old legal case involving the terminated executive of an insurance CUSO and Texans Credit Union hinge on semantics?
According to a March 2 U.S. Bankruptcy Court for the Northern District of Texas ruling, Kevin Curley, former president/CEO of Texans Insurance Group, may finally be able to recoup $21 million in back pay and benefits in a case that goes back to 2007.
The court's decision confirmed what Curley told Credit Union Times in August 2009 when he said a trial was set for that September to determine whether he was entitled to compensation. The court's most recent opinion said Curley has a claim of $21 million, which includes $347,699 for back pay, benefits and prejudgment interest, $441,000 for attorneys' fees and employment arbitration and $156,909 for post-arbitration fees.
However, Texans CU disputes how the $21 million is defined. In a March 4 statement to Credit Union Times, it wrote, "This is an unsecured claim and is not a judgment. It is an estimation of Mr. Curley's claims for purposes of allowance and voting on Texans Insurance Group's plan of reorganization. Other secured creditors, including Credit Union Liquidity Services LLC are also part of the Chapter 11 process."
When asked when Texans Insurance Group's reorganization would be complete, Texans spokeswoman Shalissa Clary said, "Mr. Curley is now an unsecured creditor of TIG and will be treated as such in any plan for reorganization."
Curley's attorney did not respond to calls for comment. Credit Union Times left a message with Curley the day the bankruptcy court case was released. He said he would call back on either March 8 or March 9 but did not.
In September, Texans Insurance Group filed for Chapter 11 bankruptcy protection due to the economic recession, the loss of business from construction industry clients, an unstable insurance market and expenses to fight legal battles and other reasons, the CU said. A bankruptcy court granted several forms of relief, including approval to pay prepetition commissions owed to its independent agents, approval to remit all insurance premiums to insurance carriers, approval to honor prepetition wages and benefits of its employee and interim approval to utilize cash collateral, according to the CUSO. In October, the CU also received its request for a final cash collateral.
Meanwhile, Texans said a hearing was held in January in bankruptcy court for the purpose of estimating Curley's claims against Texans Insurance Group. On March 2, Judge Barbara Houser issued her order on the estimation of claims and determined that Curley's claim should include lost profits, attorney's fees and back pay. She estimated the amount of the claim to be approximately $21 million.
Curley's case goes back to January 2007 when Texans CU bought the Curley Insurance Group LLC and six other companies from him for $19 million. Curley was also entitled to a $21 million contingent right to an earn-out paid by Texans Insurance.
According to an employment agreement, Curley was to continue working with the new CUSO from Jan. 1, 2007 to Dec. 31, 2009. A clause prevented Texans Insurance from terminating him prematurely except for willful or negligent conduct harmful to the company, participation in felony acts or breach of contract. According to a July 2008 arbitration letter, Curley was terminated for several reasons including alleged insubordination, failing to set up "enhanced" benefit packages, discussing personnel matters and the alleged unauthorized issuance of certain insurance policies. In July 2008, an arbitrator determined that Curley was entitled to back compensation.
Texans CU recently scored a win among the litany of lawsuits it has been involved in over the past few years. In February, a federal bankruptcy court ruled that four Dallas real estate investors with Realty America Group LLC owed Credit Union Liquidity Services LLC more than $40 million in a suit involving a defaulted Illinois property loan. The CUSO was previously known as Texans Commercial Capital.