Open Range trustee files suit for breach of $40 million equity deal

By Caroline Salls

Pittsburgh, May 23 - Open Range Communications Inc.'s Chapter 7 trustee filed a lawsuit Tuesday with the U.S. Bankruptcy Court for the District of Delaware to assert state and federal law claims arising from agreements with provide the company with equity funding for operating expenses.

The defendants named in the lawsuit include One Equity Partners III, LP, OEP Open Range Holdings, LLC, Colin M. Farmer, Andrew G. Dunn, Franklin W. Hobbs, David A. Walsh, Gregory Slemons, Charles W. Stenholm and George M. Tronsrue.

Chapter 7 trustee Charles M. Forman is also alleging breaches of fiduciary and other duties.

Forman said OEP Equity and OEP Holdings entered into an agreement in April 2011 under which OEP Equity agreed to capitalize OEP Holdings with up to $40 million in equity contributions.

The trustee said OEP Holdings was to use those contributions to purchase equity in Open Range to allow Open Range to fund operating expenses.

According to the lawsuit, OEP Equity and OEP Holdings made their initial $10 million equity contribution under the agreements and provided an additional $13.5 million of equity funding.

However, beginning in June 2011, the trustee alleged that OEP Holdings and OEP Equity first breached their agreements by not providing the equity funding necessary for Open Range to have cash and cash equivalents to fund the required number of weeks of operating expenses.

"OEP Equity and OEP Holdings eventually ceased funding altogether notwithstanding their agreements," Forman said in the complaint.

The trustee said defendants Farmer, Dunn, Hobbs, and Walsh were responsible for making the equity contributions on behalf of OEP, while at the same time they served as fiduciaries to Open Range.

Forman alleged that Farmer, Dunn, Hobbs and Walsh knew that, beginning in approximately June 2011, Open Range did not have enough cash and cash equivalents to fund the operating expenses, and all of the defendants knew or should have known that Open Range did not have enough cash and cash equivalents.

Open Range is a Greenwood Village, Colo.-based broadband company that filed for bankruptcy on Oct. 6, 2011. Its Chapter 11 case number is 11-13188.

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