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DENIED: NSN’s claim for $5.7M from ISC

National Storytelling Network’s $5.7 million claim against the International Storytelling Center was disallowed in its entirety Dec. 15 by United States Bankruptcy Judge Marcia Phillips Parsons.
The partnership between NSN and ISC was terminated seven months earlier when Parsons approved ISC’s motion to reject the three contracts between the organizations. NSN had filed an objection to the motion, but withdrew it the day before the April 26 hearing.
The day after Parsons’ ruling severed the ties between the organizations, NSN filed a $5.7 million claim for breach of contract.
Two of the agreements between NSN and ISC were formed in 1998 when they split from the entity operating as the National Storytelling Association. The third was the result of a mediation settlement during 2004.
ISC Founder and President Jimmy Neil Smith said a disagreement over the future of NSA led to the parting of ways.
The ISC assumed the corporate charter and recently produced the 39th National Storytelling Festival.
NSN had continued to annually receive 18 percent of gross revenues from the festival since the split, in accordance with one of the contracts.
Smith said payments to NSN of $1.9 million contributed to the financial crisis that required the ISC file for bankruptcy on Dec. 31, 2010. In one of its first steps toward recovery, ISC dissolved its relationship with NSN.
In response to NSN’s breach of contract claim, ISC Counsel Mark Dessauer submitted objections that included:
The claim is not supported by adequate documentation that describes the factual basis to determine how the claimant arrived at the sum of $5.7 million.
The agreements attached to the claim were rejected by a court order signed and filed April 27, 2011. The Bankruptcy Code does not address how to calculate damages for a rejection/breach, thus, the court is to look to state law.
Tennessee law permits the recovery of all damages that are the normal and foreseeable result of a breach of contract. Uncertain, contingent or speculative damages should not be awarded. Damages in a breach of contract case must be proven with a reasonable degree of certainty.
In support of his objections, Dessauer writes, “The claim presents no computation or other support for its damage claim of $5,700,000, much less establishes such damages to a reasonable degree of certainty. ISC contends that the amount of the claim is speculative and uncertain and, therefore, should be disallowed in its entirety.”
Dessauer filed ISC’s opposition to the claim on Nov. 9, 2011. All affected parties were served with copies, but no response was filed contesting the validity of the objections.
As a result, NSN will be limited to the scheduled amount of $173,188 as one of the creditors.