By Jamie Vinson/Co-editor

The insurance company that filed suit against Eastern and three other institutions within the Wallace’s Bookstores Inc. bankruptcy proceeding argued its first case against two of the four schools named in the suit Wednesday in Lexington.U.S. Bankruptcy Judge William S. Howard heard claims filed by Lyndon Property Insurance Company against Southern University and Glenville State College. Lyndon filed claims against Southern, Glenville, Southern Illinois University and Eastern.

Eastern’s University Attorney Kacey Coleman said Tuesday Howard determined to split the trial proceedings given the specific evidence particular to the claims against each school.

Howard also was expected to set the date for the Eastern and Southern Illinois University proceedings at this hearing. Information from Wednesday’s proceeding was not available as of press time.

“I do not know if Judge Howard will rule tomorrow (Wednesday) or will hold the ruling until all matters are before him,” Coleman said. “Judge Howard often rules from the bench, but such rulings are not required — he could wait for all the universities and/or issue a written opinion and order at a later date.”

Coleman and Lexington attorney Fred Fugazzi Jr., of Vimont and Wills, PLLC, who is representing Eastern, attended the hearing Wednesday to “engage in any cross-examination of a witness that may be necessary for our purposes,” Coleman said. She added, however, that Eastern did not present its case, and Lyndon would not present its case against Eastern.

Lyndon Property Insurance Company, a Missouri-based insurance company that conducts business in Kentucky and several other states, filed suit March 26 for performance bonds it issued Wallace’s during the time the company served as bookstore provider for Eastern and the three other schools.

Performance bonds serve as a type of insurance policy, insuring a company’s performance if the company fails to meet the requirements of their contract so that the party affected by the failure may be compensated for losses. While at Eastern, Wallace’s was issued a $500,000 bond by the Lyndon company.

Lyndon argues in its claim that it should not be held responsible for the bonds. The company believes the money Wallace’s received from selling its assets after bankruptcy to Barnes and Noble and the Follett Corporation should have gone to the schools to pay off other debts, such as the bonds Lyndon issued.

Lyndon’s attorney, Wendell L. Jones of Conliffe, Sandman and Sullivan in Louisville, told The Progress previously part of the reason Lyndon filed suit was to determine who should be held responsible for the losses Lyndon incurred.

Coleman said previously that each of the four schools filed counterclaims against Lyndon. Eastern feels Lyndon should be required to pay the university for damages it suffered from Wallace’s failure to perform.

The claim, which was filed in circuit court, is being held until a decision is made regarding the action Lyndon filed in bankruptcy court.

Wallace’s, owned by late former Gov. Wallace Wilkinson, filed for Chapter 11 bankruptcy in February 2001. In May 2001, after Wallace’s determined it would not be able to meet the requirements of its various contracts, Barnes and Noble and the Follett Corporation agreed to buy and take over as bookstore provider for the various bookstores Wallace’s operated.

Wilkinson, 60, died July 5 after a battle with cancer. Creditors are now seeking payment from his estate.