Schutt wins court approval of settlement with Riddell

Schutt Sports Inc. won court approval of a settlement with Riddell Inc., ending their legal dispute over football-helmet infringement and setting Schutt on the path to exit bankruptcy.

U.S. Bankruptcy Judge Kevin J. Carey approved the accord at a hearing today in Wilmington, Delaware, even though he said the settlement had elements of a plan of liquidation. Schutt attorney Nancy A. Peterman told him the company would have a liquidating plan “filed by next Friday,” Feb. 18.

“The settlement provides finality and certainty on a large portion of the competing claims” and “saves a significant amount of litigation costs that would otherwise be required and deplete the estates,” Schutt's lawyers said in court papers.

The closely held company, the world's largest provider of football helmets and faceguards, sought bankruptcy protection Sept. 6 to block rival Riddell from collecting on a $29 million patent lawsuit verdict. In court filings, Schutt listed both assets and debt of $50 million to $100 million.

Schutt won court approval on Dec. 15 to sell substantially all its assets to a unit of Platinum Equity LLC, the Beverly Hills, California-based private-equity firm run by billionaire Tom Gores, for about $33.1 million. Schutt had to change its name to SSI Liquidating Inc. following the sale.

The settlement parties negotiated the agreement after two days with a mediator, according to court documents. The resolution distributes $7.5 million of sale funds that are held in escrow.

Under the agreement, Riddell will get a $29 million unsecured claim that will be fully satisfied by an immediate $1 million cash payment, court papers show. Riddell will get $70,348 to pay for administrative expenses. Lastly, a final order will be entered in the Wisconsin patent infringement case in favor of Riddell, which will permanently bar Schutt from selling the infringing helmets. All other disputes will be deemed resolved.

In August, a federal jury in Madison, Wisconsin, found that Schutt's DNA and ION football helmets infringed Riddell inventions and awarded Riddell about $29 million in damages, according to court filings.

Platinum Equity's unit will buy creditor Windjammer Mezzanine & Equity Fund II LP's $17.4 million claim for $1 million cash, and will give any recovery over $200,000 on that claim to Windjammer and other unsecured creditors.

So-called critical vendors will get $5.3 million from the escrowed funds, according to court documents. General unsecured creditors will get $400,000, and creditors who supplied goods within 20 days of Schutt's bankruptcy filing will get $800,000.