SSCE, GP Resolve Property Dispute

Smurfit-Stone Container Enterprises (SSCE) has reached an agreement with Georgia-Pacific Corrugated LLC and GNN Investor LLC to settle a contract dispute over $1 million the bankrupt box and containerboard maker is holding in escrow as part of a failed $15 million property deal, Law360 reports.

Under the proposed settlement, SSCE will hand over $700,000 from the escrow account to GP, while keeping the remaining funds and accrued interest, according to a motion filed on Sept. 11 in the U.S. Bankruptcy Court for the District of Delaware.

The agreement, which is still subject to court approval, would put to rest an adversary proceeding GP filed in June, as well as a state court action alleging SSCE breached a property agreement signed in July 2008.

In addition to ensuring the debtor would avoid costly litigation, the settlement would preserve the beneficial business relationship between the two companies, SSCE said.

The settlement has no bearing on GP’s other claims against SSCE in bankruptcy court, and neither party admits that the escrow funds are part of SSCE’s estate, according to the motion.

Law 360 says the dispute dates back to summer 2008, when SSCE, the operating company of SSCC, purportedly agreed to buy a piece of property in Massachusetts from GP and deposited $1 million into an escrow account to be used either as earnest money or as liquidated damages if SSCC breached the agreement, according to GP’s adversary complaint. The $1 million was supposed to be applied to the $15 million overall price tag of the property. Or, in the event of a default, the money was to be turned over to GP, the suit claimed. Before the transaction closed, however, SSCE wrote to GP to call off the deal, contending that soil and groundwater samples from the area were allegedly contaminated.