By Emily Le Coz/NEMS Daily Journal
TUPELO – The city will return $45,173 to the bankrupt estate of the former Block Corp., as part of a deal the company sought to recoup its final utility payment.
City Council members unanimously agreed Tuesday to the terms of the legal settlement to avoid a costly court battle.
Block Corp., a Tupelo-based garment maker with a 22,100-square-foot facility on West Main Street and a sales office in Manhattan, had filed for Chapter 7 bankruptcy in April 2009.
Around the same time, it had paid its $49,173 bill to Tupelo Water & Light.
But an attorney for Block’s estate filed a lawsuit to recuperate that utility payment, arguing that the company shouldn’t have paid it due to its financial woes.
“We got the money,” said TW&L Manager Johnny Timmons. “And then, of course, they wanted the money back.”
Tupelo attorney John Hill said the city had a good defense and likely could have won to keep the payment. But it would have cost more than it was worth, in part because the city would have had to hire attorneys in New York, where the suit was filed.
Instead, the city settled for $4,000 – about 8 cents on the dollar of the original amount.
The money will come from TW&L’s budget and not the city’s general fund. It will not affect customer rates.
At the time of its bankruptcy, Block Corp. owed money to more than 200 creditors.