Opinion ID: 176367
Heading Depth: 3
Heading Rank: 1

Heading: The Bankruptcy Court's Escrow Order

Text: Chiplease challenges the bankruptcy court's order requiring it to deposit $500,000 in escrow for RTC's operating expenses as contemplated by the settlement agreement that had been approved by the court. Chiplease admits it never deposited the money in accordance with the terms of the settlement agreement and the court's order, but it defends its failure to do so on the ground that it had already directly paid more than $1 million of RTC's operating expenses. Essentially, Chiplease maintains it complied with the spirit but not the letter of the order. [A] court that has issued an order is in the best position to interpret it. Ill. Inv. Trust No. 92-7163 v. Am. Grading Co., 562 F.3d 824, 830 (7th Cir.2009). We owe substantial deference to the bankruptcy court's interpretation of its own orders and will not overturn that interpretation unless we are convinced that it amounts to an abuse of discretion. See In re Airadigm Commc'ns, Inc., 547 F.3d 763, 768 (7th Cir.2008). Chiplease's lone argument is that it effectively complied with its obligations under the order by directly paying more than $1 million of RTC's operating expenses. The trustee notes, however, that the agreement and order called for the establishment of the $500,000 escrow account as security for payment and set up a specific procedure for payment of approved operating expenses. The trustee argues that much of the $1 million Chiplease paid was for unapproved expenses. [3] The bankruptcy judge held that the order was clear and that Chiplease's direct payment of RTC's operating expenses did not satisfy its obligation to establish the $500,000 escrow account. This was not an abuse of discretion. Chiplease was ordered to deposit $500,000 into an account that would serve both as a source of funds for approved expenses and as a security deposit in the event Chiplease could not fulfill its obligations to pay RTC's operating expenses under the settlement agreement. Chiplease's failure to comply is not excused by its direct payment of unapproved operating expenses. Chiplease argues that because the trustee knew it was paying RTC's Chapter 7 operating expensesalbeit not in accordance with the agreement and orderit was relieved of its obligation to establish the escrow account. We disagree. The noncompliance motion was filed by administrative claimants who were concerned that Chiplease lacked sufficient funds to cover continuing operating expenses. See FED. R. BANKR.P. 9019 (permitting administrative claimants to file such a motion). The trustee's knowledge of Chiplease's direct payments has no bearing on Chiplease's obligation to comply with the escrow order. Chiplease and the trustee could not privately agree to modify a settlement agreement that was approved by court order; unlike a private contract, an agreement whose every provision has been approved and therefore activated by court order requires court approval before it may be modified. In re Heartland Steel, Inc., 389 F.3d 741, 745 (7th Cir.2004). [4]