Tag Archive: Chapter 11


The maker of the “Girls Gone Wild” videos, Girls Gone Wild Brands LLC, has filed for Chapter 11 bankruptcy protection in an attempt to restructure its legal affairs and shield assets from creditor reach.   “GGW Magazine and GGW Events also filed for protection.”

The Chapter 11 was filed on the heels of high-profile lawsuits.  Girls Gone Wild founder, Joe Francis’ most high-profile “L” was to “casino mogul Steve Wynn [in the amount of] $10.3 million, including a $7.5 million slander award last year and a disputed $2 million gambling debt.”  Formerly, a St. Louis woman was awarded $5.8 million, in her lawsuit against the company” after claiming someone exposed her breasts in a bar for the Girls Gone Wild Sorority Orgy series.”  Other suits have been filed by women asserting that they were exploited in videos; one even asserts being exploited while she was underage. A company attorney has clarified, however, that none of the judgments are against the Girls Gone Wild entities.

Comparing the bankruptcy to those of American Airlines and General Motors, the company attorney has said that the Girls Gone Wild parent company is still strong financially, and plans to go forward with business as usual.

Spring Break, here they come!

Sources:

Quotations from Michael Winter, ‘Girls Gone Wild’ goes bankrupt to dodge legal awards, USA Today, http://www.usatoday.com/story/news/nation/2013/02/28/girls-gone-wild-bankruptcy/1954419/, Feb. 28, 2013.

Susanna Kim, ‘Girls Gone Wild’ Files for Bankruptcy, ABC News, http://abcnews.go.com/blogs/business/2013/02/joe-francis-girls-gone-wild-bankrupt/, Feb. 28, 2013.

Girls Gone Wild Files for Bankruptcy, The Huffington Post, http://www.huffingtonpost.com/2013/02/28/girls-gone-wild-bankruptcy_n_2782645.html, Feb. 28. 2013.

“A federal judge on Monday handed partial victories to both the Archdiocese of Milwaukee and the sex abuse victims who make up the vast majority of creditors in its bankruptcy.  The ruling, by U.S. District Judge Rudolph Randa, lets stand a February decision by U.S. Bankruptcy Judge Susan V. Kelley dismissing one victim’s claim and allowing two others to move forward, at least for now.”

Annysa Johnson, Judge lets archdiocese bankruptcy abuse ruling stand, http://www.jsonline.com/features/religion/judge-lets-archdiocese-bankruptcy-abuse-ruling-stand-1l7d86f-176360111.html (Oct. 29, 2012) (emphasis added).

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Post History

Archdiocese of Milwaukee Chapter 11 Mediation

  • UPDATE- As of Monday, October 15, 2012, it was reported that the mediation in the Archdiocese of Milwaukee Chapter 11 has failed.  Apparently, the estimated 570 victims and archdiocese were unable to reach a settlement.  The parties, however, have not provided any additional details regarding the reasons for the impasse.  As a result, the parties continue to pursue several pieces of litigation related to: (1) reduction of the number of eligible claims, (2) increasing the assets available to pay creditors, (3) the recovery of funds related to a certain cemetery trust created by the archdiocese in 2007, and (4) procedural claims–some of which are on appeal–regarding alleged venue shopping and to make public various discovery, which is currently subject to a protective order.

Sources:

Annysa Johnson, Milwaukee Archdiocese victims fail to reach bankruptcy settlement, Journal Sentinel, http://www.jsonline.com/features/religion/milwaukee-archdiocese-victims-fail-to-reach-bankruptcy-settlement-ii77put-174278861.html (Oct. 15, 2012).

  • The Archdiocese of Milwaukee, which faces more than a dozen civil fraud lawsuits over its handling of clergy known or alleged sex abuse cases, filed for Chapter 11 bankruptcy protection in January 2011.  Currently pending before the mediator, retired U.S. Bankruptcy Judge Randall J. Newsome, is the issue of whether an estimated 570 victims should be compensated, and if so, the extent of such compensation.  As of October 3, 2012, Judge Susan V. Kelley, who has raised concerns over increasing legal fees, granted a second mediation deadline extension to October 12, 2012.

Sources:

Annysa Johnson, Archdiocese bankruptcy mediation extended, Journal Sentinel, http://www.jsonline.com/blogs/news/172543611.html (Oct. 3, 2012).

Milwaukee Archdiocese, bankruptcy creditors to enter mediation, Journal Sentinel, http://www.jsonline.com/news/milwaukee/milwaukee-archdiocese-bankruptcy-creditors-to-enter-mediation-r960mvk-161244745.html (July 3, 2012).

Consider this scenario:

Critical Vendor  (“Critical”) has been doing business with Great Expectations Theater of International Talent  (“GETIT”) for over 20 years.  Actually, Critical has been in the trenches with GETIT since its opening.  Over the years, Critical has supplied dance shoes (i.e. ballet slippers, tap shoes, jazz shoes), leotards, tutus (similar to the multitude of taffeta and mesh skirts trending now), stage make-up, lighting, props and music (on cassette, CD and MP3 formats).  There was never a time when Critical could not meet GETIT’s supply demands.  For the first 15 years of the business relationship, GETIT timely paid every invoice and used Critical for all theater and production-related needs.  GETIT provided Critical with so much business that GETIT was always Critical’s top customer and frequently its only customer.  The owners of each operation also became close friends and often took family vacations together.  Their children were around the same ages and attended the same schools.

The last five years, however, have not been as copacetic.  You see, with the combination of in-home entertainment, the nearly bottomed-out economy and sundry reality TV options, audiences were no longer flocking to GETIT’s productions.  Sales receipts and annual memberships were down.  GETIT went from nightly shows and matinees on each weekend day to three shows per week.  Then, eventually, one show per week.  During that phase, Critical’s owner donated supplies, heavily discounted bills and offered to invest in GETIT, all to save the company she essentially helped to build for 15-20 years.  Plus, she wanted to help her friend, to whom she attributed much faith and loyalty, and could not bare to see GETIT collapse.  Even in light of her willingness to help, Critical’s owner was still a “savvy” businesswoman and often felt foolish for financially helping a friend’s company.  She knew that could be a significant mistake and could negatively impact Critical.  But she did it anyway, while periodically asking GETIT’s owner if she was contemplating bankruptcy.  GETIT’s owner always shrugged off such inquiries, but offered a trifling bit of reassurance, saying, “If I do decide to file, you’ll be the first to know.”

Turns out, Critical’s owner was not the first to know.  Indeed, she did not learn of GETIT’s Chapter 11 filing until she received a copy of GETIT’s petition and schedules in the mail.  Critical was listed in GETIT’s schedules and a related motion as a critical vendor with a sizable prepetition unsecured claim.  Although the practical benefits of retaining a critical vendor in restructuring and reorganization proceedings is to avoid the disruption of the debtor’s business, Critical wanted out.  Critical’s owner knew that her prepetition unsecured claim could be zeroed out, or at best, receive only pennies on the dollar.  If GETIT’s motion was granted, Critical would have to continue to meet GETIT’s supply demands.

Therein lied the dispute.  Critical heavily objected to GETIT’s motion to approve its proposed critical vendor status, which led to thousands of dollars of motions practice and litigation.  Prideful and equally humiliated, the parties refused to speak during the contentious time, but eventually agreed to mediation.

The bankruptcy court-approved mediator worked diligently with the parties to guide them to a resolution.  Upon the parties’ impasse on several occasions, the mediator continued the mediation and followed up with the parties after the failed sessions, which brought the parties back to the table each time.  Frustrations, anger and even rising prejudices by Critical’s and GETIT’s counsel, stalled each attempted mediation session.  Not to be deterred, the mediator took one last shot at getting the parties to a potential resolution and pondered what method or tactic might work best.  Finally, she believed she knew the true basis of the contention.

She went into a caucus, or private meeting, with each party.  In the caucus with Critical’s owner and counsel, she looked Critical’s owner squarely in the eyes and said, “I think what you are seeking from this is something deeper yet more basic and personal than all of the legal issues you all have tossed back and forth for months.  Tell me what that is.”  Critical’s owner peered back at the mediator; her eyes revealed the competing emotions of perplexity, anger and relief.  Finally, she said, “All this time, I just wanted GETIT’s owner to apologize.  She never said, I’m sorry.  She drug me into this.  I asked many times if she was planning on a bankruptcy and she gave me no heads up.  She told me she would.  I took her word.  Now, my business is on the brink of collapse, and she never even said, ‘I’m sorry.'”

At the end of the day, GETIT’s owner delivered the long-awaited words, “I’m sorry,” and the parties moved forward to an agreement.
So, what’s the moral of the story?  Sometimes, the legalities, the substantive law, bankruptcy code and rules are not enough.  Often, the “Golden Rule” wins out.  When faced with these types of circumstances as a mediator, or practitioner representing emotionally torn, humiliated and embattled parties, start with that rule first.  You’re likely to avoid the complexities of pride and prejudice.  Get it?

Let me know how you would you have handled this situation.

As of Monday, October 15, 2012, it was reported that the mediation in the Archdiocese of Milwaukee Chapter 11 has failed.  Apparently, the estimated 570 victims and archdiocese were unable to reach a settlement.  The parties, however, have not provided any additional details regarding the reasons for the impasse.  As a result, the parties continue to pursue several pieces of litigation related to: (1) reduction of the number of eligible claims, (2) increasing the assets available to pay creditors, (3) the recovery of funds related to a certain cemetery trust created by the archdiocese in 2007, and (4) procedural claims–some of which are on appeal–regarding alleged venue shopping and to make public various discovery, which is currently subject to a protective order.

Reading the new reports, it strikes me as ironic that this attempt at resolution and restoring peace among the parties, failed in a bankruptcy where the principal party involved is one that is frequently called as a mediator, or neutral.

What are your thoughts on why and how this attempted settlement and mediation failed?

Sources:

Annysa Johnson, Milwaukee Archdiocese victims fail to reach bankruptcy settlement, Journal Sentinel, http://www.jsonline.com/features/religion/milwaukee-archdiocese-victims-fail-to-reach-bankruptcy-settlement-ii77put-174278861.html (Oct. 15, 2012).

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According to the Kentucky Department of Agriculture, hundreds of claimants in the Eastern Livestock Co., LLC, involuntary Chapter 11 bankruptcy proceeding will have the opportunity to participate in a global mediation on October 9-10, 2012 in Louisville, Kentucky.  On December 6, 2010, certain creditors commenced an involuntary Chapter 11 proceeding against Eastern Livestock, a cattle brokerage, related to a so-called check-kiting scheme.  The petition came on the heels of Fifth Third Bank’s freezing the company assets and those of its primary owner, which resulted in a subsequent receivership and the filing of the involuntary petition.  In early 2012, Eastern Livestock executives admitted to “falsely inflating the balances of bank accounts held by the company between 2009 and 2010, essentially allowing company officials to buy cattle from producers with nonexistent funds.”  Eastern Livestock’s creditors include cattle farmers, markets, truckers and veterinarians, with claims totaling in the millions.  At least four former Eastern Livestock executives, including the owner, were indicted and eventually sentenced to prison terms (with three sentences withheld on the condition that the individuals would pay restitution) for their actions related to the scheme.  On September 24, 2012, Robert M. Fishman was appointed as mediator by the U.S. Bankruptcy Court for the Southern District of Indiana.

Sources:

Quotation from Justin Story, Farmers will get restitution checks, The Daily News, http://www.bgdailynews.com/news/local/farmers-will-get-restitution-checks/article_b36019d0-99f8-11e1-ad66-0019bb2963f4.html (May 9, 2012).

Janet Patton, Cattle farmers get mediation in Eastern Livestock bankruptcy, http://www.kentucky.com/2012/10/07/2363832/cattle-farmers-get-mediation-in.html (Oct. 7, 2012).

Kevin Eigelbach, Eastern Livestock founder sentenced in fraud case, Business First, http://www.bizjournals.com/louisville/news/2012/06/26/eastern-livestock-founder-sentenced-in.html (June 26, 2012).

Eastern Livestock Bankruptcy (website and trustee’s blog), http://www.easternlivestockbkinfo.com/index.html.

On September 16, 2012, National Hockey League Commissioner, Gary Bettman, locked out players.  Since then, negotiations between the league and players’ association have stalled.  Reportedly, Bettman and players’ association counsel have discussed the option of an outside mediator, but it is uncertain whether that is a viable option.  NHL deputy commissioner, Bill Daly, intimated that mediation is unlikely, reportedly stating, “We certainly understand what their position is . . . We just wish it was different.”  The NHL benefited from a mediator in its 2004 lockout, during which it lost an entire season because of the labor dispute.

Mediation has also crossed over into the realm of sports team/franchise, bankruptcy-related disputes.  When the Los Angeles Dodgers filed a Chapter 11 bankruptcy in June 2011, the bankruptcy court approved the appointment of a mediator in short order.  In October 2011, Judge Kevin Gross entered an order formally appointing Joseph Farnan Jr., a retired federal district judge in Delaware as a mediator, with the Dodgers and Commissioner Bud Selig to split his fees.  Nearly one year later, in April 2012, the judge approved the sale of the Dodgers to a group of investors headed by Magic Johnson, despite the league’s objections.  However, provisions regarding the mediator’s authority sparked contentious debate lasting 8 hours, prior to approval of the settlement.   At the center of  the dispute was the authority of the court-appointed mediator responsible for enforcing the settlement between the Dodgers’ former owner, Frank McCourt and the MLB.  The mediator had the power to mediate disputes regarding the settlement terms even after the Dodgers exited bankruptcy.  The league’s position was that the mediator’s provision of authority would be unfair to other teams without recourse to challenge the decisions of Commissioner Bud Selig.  Although the terms of the mediation were confidential, after the mediation sessions, McCourt agreed to sell the team, ending his battle with MLB.  McCourt also ceased his effort to sell the television rights separately from the team.  At the end of the day, the mediator also played a significant role in the final terms of the sale before its closing.

Similarly, mediation was ordered in the Texas Rangers’ 2010 Chapter 11 bankruptcy.  U.S. Bankruptcy Judge D. Michael Lynn ordered mediation for the parties to hammer out issues related to the team’s Chapter 11 plan confirmation, including the repayment of creditors, sale of the team and whether the bankruptcy was filed in bad faith.  At one point, the judge delayed confirmation for more mediation time, although that delay was reversed to avoid hindering the team’s trades before a non-waiver trading deadline.  Eventually a group of investors led by hall of fame pitcher and Texas Rangers president, Nolan Ryan won the team through a court-approved auction.

Although the NHL and players’ association are not negotiating through the bankruptcy process, a mediator could be a win-win for all involved.

Sources:

Quotation from Pat Leonard, NHL lockout resolution? Don’t hold your breath as league and players still far apart on core economic issues, New York Daily Times, http://www.nydailynews.com/sports/hockey/leonard-nhl-lockout-breeding-optimism-article-1.1173314 (Oct. 2, 2012).

Steven Church, Dodgers Win Approval for Team’s Sale and Bankruptcy Exit, http://www.businessweek.com/news/2012-04-13/dodgers-win-court-approval-to-sell-team-exit-bankruptcy, Bloomberg Businessweek (Apr. 14, 2012).

Bill Shaikin, Bankruptcy judge approves sale of Dodgers despite MLB objection, The Los Angeles Times, http://articles.latimes.com/2012/apr/13/sports/la-sp-0414-dodgers-sale-20120414 (Apr. 13, 2012).

Nolan Ryan group wins Rangers auction, ESPN Dallas, http://sports.espn.go.com/dallas/mlb/news/story?id=5436579 (Aug. 5, 2010).

Texas Rangers, creditors need more time in mediation, ESPN Dallas, sports.espn.go.com/dallas/mlb/news/story?id=5347193 (July 1, 2010).

Sides will have to ratify new CBA, ESPN.com, http://sports.espn.go.com/nhl/news/story?id=2106776 (July 13, 2005).

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