By: Daniel Hart and Salene Mazur Kraemer
On September 11, 2015, the Please Touch Museum in Philadelphia filed for Chapter 11 bankruptcy (Bankruptcy Case no. 15-16558) in the United States Bankruptcy Court for Western District of Pennsylvania, thus triggering an automatic stay or injunction pursuant to 11 U.S.C. 362 of the Bankruptcy Code that halts actions by creditors, with certain exceptions, to collect debts from the debtor who has declared bankruptcy. “Don’t Touch the Debtor”.
The museum intends to remain as a debtor-in-possession and continue operating during the pendency of the Chapter 11 Case. The museum’s mission is to enrich the lives of children by creating learning opportunities through play. It aims to achieve this mission by creating meaningful interactive play-based experiences within the museum and beyond its walls for all young children and their families. The museum has been nationally recognized for its lasting impact.
The museum filed for protection under Chapter 11 bankruptcy because it borrowed more money then it could pay back to renovate a new home in Fairmount Park’s Memorial Hall. Sources say the bankruptcy filing has two main objectives: (i) to shed the majority of the $60 million it owes holders of its debt, and (ii) to negotiate a deal whereby the museum turns over maintenance and repairs of Memorial Hall to the city, which owns it.
The museum owes about half of its debts to a group of bondholders. It formulated a plan to pay back these bondholders about $11.5 million of the $60 million debt. Filing for bankruptcy was a tactic used to get this bondholder group to agree to the plan. Also, the museum is launching a $10 million fund-raising rescue plan. In addition to paying off the debt, the museum intends to use the money to pay professional fees associated with the bankruptcy and to make some exhibit upgrades. It remains to be seen whether this strategy will solve the museum’s problems.
In the beginning of 2014, I was asked by the WV Attorney General’s office to participate in a town hall meeting to discuss issues impacting the WV economy. As a business and bankruptcy lawyer, I wanted to do my diligence. I asked my clients and colleagues what they believed were significant factors. Here was a punch list of the issues identified by them and those at the town hall meeting:
- retention and attraction of young talent
- scarcity of livable downtown spaces in major WV cities, Weirton, Wheeling, Huntington, Charleston, Martinsburg, Morgantown
- healthcare reform proving costly for new businesses
- business and Occupancy taxes
- rampant drug addiction
- revitalization of old industry to attract new industry.
- deterioration of main streets
- oil and gas industry presence.
Prior to the town hall meeting, I also asked Justin Saporito, my law clerk to take to google to research this topic.
Justin found a 2014 Outlook Report (Report) for WV’s economy, produced by West Virginia University’s College of Business and Economics (one of my alma maters).
The economy of West Virginia has grown steadily over the past year with Gross Domestic Product (GDP) growing by 3.3% over the past year, ranking it tenth (10th) among U.S. states in real GDP growth. This growth was the result of several factors such as the addition of 3,000 new jobs over the past year, a state unemployment rate that has remained 1% below the national average for the past five years, and increased exports. Exports accounted for 16% of state economic output in 2012 compared with only 5% in 2000. The housing and automotive sectors of the economy, important indicators of economic health, have also seen increases. Home sales in WV are on par with home sales during the 2004-2005 housing boom and auto sales are at pre-recession levels.
According to the report, the key drivers of the economy in 2012 were coal mining, natural gas, healthcare, tourism, electrical power manufacturing, and chemical manufacturing. The Report predicted that annual job growth would increase in the healthcare services, wholesale and retail trade, construction, and professional and business service sectors every year through 2017.
A shining light for WV’s economy has been the city of Morgantown. Morgantown boasts an unemployment rate that is 3% below the national average with job growth above the national average with an estimated annual job growth rate of 2% in the coming years.
It is not all good news for WV however as it is ranked 47th among the 50 states in per capita income. Another major concern is the declining and aging population. WV’s median age is 5 years above the national average. Another concern is the state budget, ¼ of which comes from coal tax revenue and lottery revenue. With coal production predicted to fall through 2017, the state will have to find additional sources of revenue in the coming years. Despite these looming issues, WV is expected to have revenue growth of 3.5% for 2014.
“Dance Moms” Instructor Abby Lee Miller Files for Chapter 11 Protection: Public Disclosure of Private Facts
Salene’s Preface: I was in Bankruptcy Court last week in Pittsburgh and noticed Abby walking into Court. (She is a stunning woman by the way and you can understand why she is on TV). I had to ask myself, “How do I know her?” I did figure it out pretty quickly. I was surprised to see her on my turf (that is in the world of commercial bankruptcy) and was not aware that Abby had filed for Ch. 11. My daughter is a dancer and I watch the show!
Abigale Lee Miller filed for Chapter 11 relief on January 3rd, 2011. The petition was filed in the United States Bankruptcy Court for the Western District of Pennsylvania under petition number: 10-28606 TPA and has been overseen by the Honorable Judge Thomas P. Agresti.
Debtor is better known as Abby Lee Miller, the host and instructor for the popular Lifetime reality television show Dance Moms. The show follows a group mothers and their young daughters who are participating in the world of young competitive dance. The show takes place in Pittsburgh, PA at the debtor’s studio, the Abby Lee Dance Company, and follows the ladies as they travel across the country to various competitions. Dance Moms is currently holding open casting calls for its 4th season.
The Abby Lee Dance Company was formed 27 years ago as a not-for-profit organization and is an audition only program. It is located at 7123 Saltsburg Road, Pittsburgh, PA, 15235. Debtor is also the owner of Reign Dance Productions, which shares the building with The Abby Lee Dance Company.
Debtor has declared approximately $325,500 in assets with approximately $356,500 in liabilities. Thirty-four creditors are listed in the petition, with Chase Mortgage holding the largest unsecured claim in the amount of $50,000. This debt is the unsecured portion of what appears to be a $200,000 undersecured mortgage on a home of Ms. Miller’s in Florida valued at $150k. Ms. Miller’s dance studio has a $96,000 mortgage on it; the studio is valued at around $150,000 Ms. Miller owes about $27,000 in back taxes (which are unsecured priority claims). Her unsecured debt only totals $32,000, many of whom are vendors for her business.
The Second Amended Disclosure Statement was approved on January 18th, 2013 and the Order Approving Disclosure Statement and Scheduling Hearing on Plan Confirmation was entered into on October 21st, 2013. Please click here to for a copy of the order. The debtor is represented by Donald R. Calaiaro of Calaiaro & Corbett, P.C. The Confirmation Hearing to approve her Plan of Reorganization is set for December 12, 2013 at 1:30 p.m. EST. Please click here for a copy of the Disclosure Statement. A summary of the Chapter 11 plan can be found here.
Salene’s comment: We purposefully do not often write blog posts about individual Chapter 11 cases (usually filed by very wealth individuals. Most folks file a Chapter 7 or Chapter 13). When a company or person files for bankruptcy, I warn my clients that you are subjecting yourselves to a “financial autopsy”; you are making a public filing of all of your assets and liabilities. So, information seekers can look up what your home is worth, what kind of car you drive, how much credit card debt you have, whether you own a fur coat, how much your wedding ring costs, and whether you have any money in an IRA/401k. Anyone can see how much money you have made in the last three years and they get to read what your monthly budget is for expenses. While there are certainly benefits to the privilege of filing for bankruptcy, public disclosure of private facts is certainly one of the drawbacks.
The entities in charge of the 1818 Market Street location for the Marathon Grill Philadelphia restaurant chain, 1818 Market Street Marathon Grill, Inc. and its general partner 1818 Market Street Marathon Grill Associates , filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Eastern District of Pennsylvania (Philadelphia) on October 9, 2013. 1818 Market Street Marathon Grill, Inc. is the corporate entity for the 1818 Market Street location and has been assigned to the Honorable Judge Magdeline D. Coleman under case number 2:13-bk-18861. 1818 Market Street Marathon Grill Associates, the partnership in charge of the location filed separately and has been assigned to the Honorable Judge Eric L. Frank under case number 2:13-bk-18863. (Please click the hyperlinks for docket summaries). Motions for Joint Administration of both cases were filed by each entity on October 9, 2013. The debtors listed the same creditors with the exception that 1818 Market Street Marathon Grill, Inc. also lists NNN 1818 Market, LLC, the building management company in charge of 1818 Market St.
The Marathon Grill began as a 10-seat hamburger restaurant in Northeast Philadelphia in 1984. It eventually grew into a six location restaurant chain before shrinking back down to operating three locations at 1818 Market St., 19th & Spruce St., and 16th & Sansom St. The bankruptcies affect the 1818 Market St. location, the largest of the three restaurants. The filings were made in response to learning that the landlord intended to take possession of the restaurant space over an ongoing dispute over unpaid back rent and fees of approximately $540,000.
1818 Market Street Marathon Grill Associates declared assets between $500,000 and $1 million with liabilities between $100,000 and $500,000. 1818 Market Street Marathon Grill, Inc. declared assets between $50,000 and $100,000 with liabilities between $1 and $10 million. The debtors entities are represented by Aris J. Karalis and Robert W. Seitzer of Maschmeyer Karalis P.C. The bankruptcies do not affect the other Marathon Grill locations and the debtors have pledged that the 1818 Market St. location will remain open during the bankruptcy proceedings.
Salene: In my younger years as a lawyer at Weir & Partners LLP in Philadelphia (2002-2004), I used to grab many late dinners at the Marathon Grill location at Sansom Street. It was hip, for sure. What is the formula for sustainability in the restaurant industry?
By: Justin Saporito, MAZURKRAEMER Law Clerk
On September 10, 2013, the Riverview Country Club, Inc. filed a Chapter 11 Voluntary Petition in the United States Bankruptcy Court for the Southern District of West Virginia, Case No 2:13-bk-20467 in front of the Honorable Judge Ron Pearson. Riverview Country Club is a semi-private 18 hole regulation golf course that was built in 1970 and opened in 1972. Riverview Country Club is located on Route 17 Riverview Course Road in Madison, West Virginia 25130. The 6,069 yard par 70 course was designed by Bob Plant and is open year round to the public.
The Debtor claims assets valued between 0$ to $50,000 with liabilities of $500,001 to $1 million listing BB&T, Dollar Bank Leasing Corp, Motive Power, Inc. Premier Bank, and USX Transportation as creditors. The Debtor is represented by Mitchell Lee Klein of Klein Law Office located at 3566 Teays Valley Road Hurricane, WV 25526. Mr. Klein filed a Corporate Statement Ownership Statement and Corporate Resolution.
On May 2, 2013, River Cities Glass & Construction, LLC, a glass and glazing contractors company, located at 4750 Winchester Avenue, Ashland, KY 41101 filed a voluntary Chapter 11 bankruptcy protection in the Southern District of West Virginia (Huntington), assigned case No. 3:13-bk-30226 (RGP). The case was assigned to the Honorable Judge Ronald G. Pearson. See docket here. William Cox signed the Debtor’s Schedules as President of the Debtor.
The Debtor is represented by Mitchell Lee Klein of the Klein Law Office, 3566 Teays Valley Road, Hurricane, WV 25526. Klein’s disclosed a retainer of $5,000 and an hourly rate of $200/hour.
The Debtor elected to be considered a “small business debtor” pursuant to Bankruptcy Code Section 1116. Its Chapter 11 Plan is due in 6 months, or by October 29, 2013. Its Disclosure Statement is also due on October 29, 2013. The Debtor listed liabilities of $159,936.01 and assets under $50,000 with less than 50 creditors. Simultaneously with its voluntary petition, the Debtor filed an initial operating report and an application to employ an attorney. Because this is a “small debtor case”, in addition to filing a petition, schedules and a statement of financial affairs, the Debtor is required to also submit a balance sheet, statement of operation, and a cash flow statement, as well as a federal tax return.
New Bankruptcy Code Section 1116 imposes duties on a small business debtor beyond not required of other Chapter 11 debtors, beginning with the filing of the petition. Under § 1116(1), the debtor must attach to its petition (or in an involuntary case, file within seven days after the date of the order for relief) either (a) its most recent balance sheet, statement of operations, cash flow statement and federal income tax return or (b) a statement made under oath that such documents have not been prepared and that such tax return has not been filed.
We found this listing on the salespider website for the Debtor; we are not certain when it was ever initially listed. The listing stated that the company has about 7 employees and estimated yearly revenue of $1,200,000 and that the Debtor’s SIC Code is 5231. This industry consists of establishments engaged in selling primarily paint, glass, and wallpaper, or any combination of these lines, to the general public. While these establishments may sell primarily to construction contractors, they are known as retail in the trade. Establishments that do not sell to the general public or are known in the trade as wholesale are classified in the wholesale trade industries. See SIC Code article here.
On April 23, 2013, Debtor Mike’s Open Face Breakfast, Inc. of 107 W. Chelten Avenue, Philadelphia, PA 19144 filed a Chapter 11 bankruptcy petition in the Bankruptcy Court for the Eastern District of Pennsylvania (Philadelphia), Case No. 13-13583-elf. Debtor’s counsel is Hae Yeon Baik, of Baik & Associates, PC, 2333 Fairmount Avenue,1st Floor Left, Philadelphia, PA 19130. The case has been assigned to Honorable Chief Judge Eric L. Frank. The Debtor’s assets are less than $50,000 and the liabilities are less than $50,000. The Debtor has yet to file a full set of schedules and a statement of financial affairs. The Debtor will have 15 days from the Petition Date in which to do so, unless the Debtor’s counsel seeks and extension of such a deadline.
A summary of the docket for this Chapter 11 can be viewed here.
Mike’s Open Face Breakfast operates as a breakfast and lunch spot in the Germantown area of Philadelphia, just outside of one of my old stomping grounds Chestnut Hill, Pennsylvania (got my first post-law school apartment there).
Notably, Mike’s Open Face Breakfast filed as a “small business debtor case” filed by a “small business debtor”. Pursuant to Bankruptcy Code 101, in order to be a “small business debtor”, a debtor must have aggregate noncontingent liquidated, secured and unsecured debts as of the date of the petition in an amount not more than $2,190,000 (excluding debts owed to 1 or more affiliates or insiders). 11 U.S.C. ss 101(51D). The debtor must be engaged in commercial or business activities (other than primarily owning or operating real property). Also, the case must be one in which a U.S. trustee has not appointed a creditors’ committee, or the court has determined that the creditors’ committee is insufficiently active and representative to provide oversight of the debtor. 11 U.S.C. ss 101(51D).
What is the impact of the “small business debtor case” designation? The most obvious benefit is that typically the case proceeds more quickly, but at that same time the debtor is subjected to more U.S. trustee oversight and is required to comply with more procedural filing requirements. For a great article re: “small business debtor cases”, click here.