Lionel and MTH Mediation Update

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MR. HARRIS AND MR. OSTROW will be cautiosly optomistic up to the point that their great-grandchildren's college tuition is paid for...

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A very objective and informative update regarding the Lionel and MTH lawsuit was posted by Erol Gurcan on the OGR forum.  I've copied his summary below.  For the full thread, follow the link: http://ogaugerr.infopop.cc/eve/forums/a/tpc/f/57660482/m/6481053134

February 22, 2007-Lionel and MTH's attorneys were back in bankruptcy court this morning for both a motion and status conference. Lionel CEO/President Jerry Calabrese and MTH owner Mike Wolf were not in court today. It was not necessary for them to be present. Both attended the last bankrptcy court conference on January 9 when both sides agreed to mediation. I attended today's court proceedings.

First on the court's docket was Lionel's motion seeking an extension to file a chapter 11 reorganization plan. The motion, filed on February 9, sought an exclusive 75 day period in which Lionel would be allowed to file a reorganzation plan with the bankrutpcy court, after the appeals court either denies, or issues a final decision regarding MTH's petition for a rehearing of the trade secrets appeal. Lionel's attorney, Adam Harris informed the court that he, MTH's lawyer, Alec Ostrow, and the lawyer for the creditor's committee, Robert Raicht, entered into a stipulation (agreement) yesterday whereby Lionel would have 60 days to file a plan, instead of the 75 days they had sought in the motion. Judge Lifland signed an order endorsing the stipulation entered into by the three lawyers. The current extension to file a reorganization plan with the court expireson February 27.

Next on the agenda was a status conference. Mr. Harris informed the court that he and Mr Ostrow have already had two mediation sessions with Bankruptcy Judge Cecilia Morris concerning procedural matters in the separate trade secrets and synchronized smoke patent infringement lawsuits. The most recent mediation session occured yesterday. The two model train rivals agreed to have Judge Morris appointed as the mediator on January 30. Judge Lifland approved the agreement on February 1. The attorneys are currently scheduled to meet with Judge Morris again on March 14, three weeks from now. At that time, in addition to the lawyers, MTH's Mike Wolf, and Lionel's Jerry Calabrese, are expected to be present as well, so the substantive matters in each case can be discussed.

Mr. Harris correctly informed Judge Lifland that as of the present time, the Sixth Circuit Court of Appeals has not taken any action on MTH's petition for a rehearing of its December 14, 2006 decision. That decision vacated the $38.6 million dollar judgement against Lionel and remanded the case to the trial court for another trial. I too checked with the Circuit Court's website yesterday, and the last entry was the filing of Lionel's response to MTH's petition, filed on February 1. At present, it is unknown how long the appeals court will take to decide the petition for a rehearing.

Since there has not been a decision on MTH's petition for a rehearing in the trade secrets case, Judge Lifland can not do anything to expediate that matter. However, since MTH's lawsuit in the patent infringment matter was filed in the bankruptcy court, Judge Lifland wanted to expedite it with a damages estimation hearing pursuant to Bankruptcy Code section 502c. MTH's attorney, Mr. Ostrow, objected, stating there should be no litigation in the patent infringement matter until the mediation process is completed. Judge Lifland disagreed at first, wanting to get the matter moving, but ultimately backed off and decided to wait until after the next mediation on March 14.

Following the court proceedings today, I spoke with both Mr. Harris and Mr. Ostrow as they exited the courtroom together. I asked them if they were hopeful the trade secrets and patent infringment lawsuits could be resolved through mediation. They were cautiously optimistic most or all of the matters could be resolved at mediation. For the sake of the hobby, let's hope that this happens.

I will continue to keep you updated as circumstances warrant....Erol Gurcan