ISC vs NSN Case Files #1 – ISC Motion

I have been trying for several months to find somebody – anybody – who is willing to articulate the International Storytelling Center’s position on the Chapter 11 Bankruptcy Court filing and the breaking of the contract with the National Storytelling Network. I have failed to find anyone who is willing to write an editorial on the ISC perspective. I have decided to present the two court filings from the ISC and NSN on the matter. Heavily edited to leave out the sections that deal with the more legal technical arguments and just include the core values expressed.

I could easily find someone to write a editorial defending NSN – but it seemed one sided – so I am posting both perspectives in the organizations own words.

The Following is the ISC filing with the arguments for the voiding of the agreements that they had with NSN. I have removed about 40% of the filing that dealt with legal statements supporting the legality of voiding the agreements. I have left what is I consider the core moral arguments.

All the best

Eric Wolf
Read on

CASE NO. 2:10-bk-53299 Chapter 11

The Debtor, International Storytelling Center (the “Debtor” or “ISC”), pursuant to, seeks the Court’s approval to reject certain executory contracts between ISC and the National Storytelling Network (“NSN”). Specifically, the Debtor seeks to reject Restructuring Agreement dated November 6, 1998 between ISC and NSN (the “Restructuring Agreement”); Festival Agreement dated November 1, 1998 (the “Festival Agreement”); and Settlement Agreement dated October 3, 2004 (the “Settlement Agreement”). In support of this Motion, the Debtor states as follows.

ISC filed a voluntary Chapter 11 petition in bankruptcy on December 31, 2010. It continues to own and operate its properties as a debtor-in-possession.

FACTUAL BACKGROUND

In 1973, Jonesborough resident Jimmy Neil Smith founded and staged the first National Storytelling Festival under the sponsorship of the Jonesborough Civic Trust. This event generated a storytelling revival in America. In 1975, Smith founded and formed the National Association for the Preservation and Perpetuation of Storytelling, Inc. (“NAPPS”), a not-for-profit entity organized for the purpose of continuing and perpetuating the revival of the art of storytelling.

NAPPS later received tax exempt status from the Internal Revenue Service and thereafter operated as an entity exempt from federal income taxes pursuant to Section 501(c)(3) of the Internal Revenue Code. On approximately November 17, 1994, NAPPS’ name was changed to the National Storytelling Association (“NSA”).

From its inception, through approximately 1998, NAPPS and NSA created a national and international following that served a growing membership who were engaged in advancing the tradition and art of storytelling.

In 1997, a division of opinion developed among the members of the board of directors of NSA regarding the future growth and vision of storytelling and the role of NSA in that process. A contingent of the board desired to develop a substantial Jonesborough presence including the building of the storytelling center in order to enhance Jonesborough’s recognition on a national and international basis, while another contingent on the board felt that NSA should focus solely on serving membership.

As a result, two separate entities emerged from the NSA, ISC and NSN. NSA continued to operate as an entity exempt from federal income taxes under the original NAPPS Charter. NSA elected a new board of directors. NSN was formed as a separate entity by certain of the former board of directors of NSA. NSA’s name was changed to Storytelling Foundation Center and, on June 5, 2003, NSA again changed its name to the “National Storytelling Center,” the name under which it operates today. NSA also, in 2005, obtained authority to operate under the assumed names of “National Association for the Preservation and Perpetuation of Storytelling” and “National Storytelling Foundation.” rarely operates under or uses such assumed names but continues to place value on the names and the ability to use them in the future.

As part of the separation of NSA into ISC and NSN, NSA (ISC) and the National Storytelling Membership Association (NSN) entered into two agreements, the Restructuring Agreement and the Festival Agreement.

The purpose of the Restructuring Agreement was to define the roles of the two entities and to set forth the continuing obligations of ISC to NSN and of NSN to ISC. These continuing obligations included, without limitation, the development of plans and programs; the obligation of ISC to not solicit or encourage any person to become a member of ISC; the obligation of NSN to not build or construct a storytelling center similar to that built and contemplated to be built by ISC; the granting of a license by ISC to NSN of the copyright and production rights then owned by NSA and in potential copyrights and production rights to archived materials; the right of both ISC and NSN to approve either party’s transfer or granting of a license to a third party of the copyright and production rights then shared by ISC and NSN; ISC’s right to access the database of NSN; the obligation of each party to share the name, address and telephone number of any independent data basis developed by either party; the exclusive right granted to ISC to operate the retail sales shop at the National Storytelling Center located in Jonesborough; the requirement of ISC to provide twenty (20) hours of accounting services to NSN for $500.00 per month; and ISC’s right to the grant awarded annually by the Tennessee Arts Commission.

ISC contends that the Restructuring Agreement is an executory contract which ISC is entitled to reject pursuant of the Bankruptcy Code. The purpose of the Festival Agreement was to set forth the respective obligations and responsibilities of ISC and NSN with respect to the annual Festival and a mechanism to generate funds for NSN so that it could continue as an independent entity and share in the history and tradition of storytelling. The Festival Agreement likewise created numerous continuing obligations of ISC and NSN including, without limitation, the creation and continued participation by ISC and NSN in the Production Advisory Committee, and the division of income from the annual Festival whereby NSN was to receive a “guaranteed eighteen percent (18%) of the gross income from the Festival each year.”

ISC contends that the Festival Agreement is an executory contract which ISC is entitled to reject under the Bankruptcy Code.Subsequent to the execution of the Restructuring Agreement and Festival Agreement, disputes arose between ISC and NSN regarding the interpretation and responsibilities of each party under the Restructuring Agreement and the Festival Agreement. ISC and NSN then engaged in a mediation through a third party mediator that resulted in the parties entering into the Settlement Agreement.

The purpose of the Settlement Agreement was to resolve the parties’ differences by further defining their respective obligations and, similar to the Restructuring Agreement and the Festival Agreement, the Settlement Agreement created numerous continuing obligations of These continuing obligations include, without limitation, the creation and continued participation by ISC and NSN in a Sponsorship Committee and related activities; the right of NSN to conduct an audit of the annual Festival; the continuation of the Festival Advisory Committee in a revised format; an annual joint meeting of the Executive Committee of ISC and NSN; ISC’s granting to NSN the use of ISC’s facilities and staff at various times and for various purposes during the annual Festival; and NSN’s obligation to include one (1) full page advertisement for the Festival in four (4) issues of NSN’s bi-monthly magazine and one (1) full page advertisement in NSN’s conference programs…

…Here, the requested rejections are in the business judgment of the Debtor and in the best interests of its bankruptcy estate. Under the Festival Agreement, the Debtor is required to pay NSN eighteen percent (18%) of the gross revenue of the Festival without NSN having any accompanying obligations and without NSN being responsible for the expenses of the organization or production of the Festival. The continuing obligation to make this payment was a major contributing factor in the Debtor seeking Chapter 11 relief. This continuing financial obligation to NSN also creates a substantial hardship on ISC’s ability to profitably produce the Festival. In addition, this financial obligation is inequitable to ISC and its bankruptcy estate and creates a material barrier to ISC’s ability to reorganize. It is, therefore, in the best interests of ISC to reject the Festival Agreement.

The continued association or relationship of ISC to NSN through the Reorganization Agreement, Festival Agreement and Settlement Agreement are no longer of benefit to ISC and, in fact, harm and hinder ISC’s growth and influence in the storytelling community. From the date of the signing of these agreements, NSN has steadily declined in size, scope, stature and influence. NSN’s membership has declined from approximately 5,500 in 1998 to approximately 1,500 in 2011 while, at the same time, ISC is precluded from soliciting members which hinders ISC’s growth and fundraising abilities. NSN chose to only service its members, but has apparently failed in its mission as membership has declined by some seventy-five percent (75%) since NSN’s inception. NSN no longer supplies all the talent for the Festival as ISC has independent relationships with the storytellers and storytelling community. This membership decline has occurred despite the growth of interest in the art and application of storytelling across America and internationally and the generous funding from ISC. In other words, NSN continues to share in the revenues of the annual Festival, but has failed in its mission to enhance ISC through its membership and related services. It is, therefore, also in the best interests of ISC to reject the Reorganization Agreement and Settlement Agreement.

ISC has and plans to continue to plan, produce and conduct and produce the Festival, but desires to remove the burdensome and unproductive relationship with NSN in the form of the Restructuring Agreement, Festival Agreement and Settlement Agreement.

WHEREFORE, ISC requests that the Court grant this motion and authorize and approve ISC’s rejection of the Reorganization Agreement, the Festival Agreement and the Settlement.

Here is the original filing document unedited…
Case 2:10-bk-53299