I. Factual Background
Appellants Leon Greenblatt, Andrew Jahelka, and Richard Nichols embrace a “three men and a telephone” business style. These purported business minimalists own Loop Corp. (also an appellant) as a closely-held corporation for their real estate holdings. Loop incorporated in South Dakota in 1997 with $1,000 in paid-in capital and maintains its principal place of business in Illinois. Greenblatt (Loop’s corporate secretary) owns 50% of Loop. Jahelka (Loop’s president) owns 30%. And Nichols (Loop’s treasurer) owns 20%. Appellant Banco Panamericano, Inc. also incorporated in South Dakota and lists Illinois as its principal place of business. A Greenblatt family trust owns Banco. Greenblatt is Banco’s sole officer, director, and employee.
A focus of this appeal is a $9.9 million line of credit Banco gave Loop on January 3, 2000. In exchange, Loop gave Banco a blanket lien over Loop’s assets (once totaling an estimated $32 million) at a 12% interest rate. A promissory note and a security agreement documented this transaction. Greenblatt signed for Banco and Jahelka signed for Loop. On the same day, a handful of Loop subsidiaries entered into a participation agreement on the line of credit through which they (and other entities associated with the Loop owners) advanced $3 million to Loop. This arrangement gave the subsidiaries senior secured creditor status over Loop’s assets. Greenblatt signed for Banco and the participants and Jahelka signed for Loop. As Greenblatt admitted at trial, the now-creditor subsidiaries also functioned as collateral for the funds they loaned Loop.
Judge(s): John Tinder
Jurisdiction: U.S. Court of Appeals, Seventh Circuit
Related Categories: Conflict of Laws , Finance / Banking , Shareholder , Torts
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Trial Court Judge(s)