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NJ Janitorial Firm Bradford and Byrd Tries to Clean House with a Chapter 11

By: Justin A. Saporito, Law Clerk

Bradford & Byrd Associates, Inc. filed for voluntary Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey on May 23rd, 2014.  The case has been assigned to the Honorable Christine M. Gravelle under case number 3:14:bk-20478.

b&bmopper400Debtor claims assets of less than $50,000 with liabilities ranging between $500,000 and $1 million.  Among debtor’s 21 creditors are the Internal Revenue Service, New Jersey Department of Labor, New York State Workers Compensation Board, Mercedes Benz, and several other companies and private individuals.  Debtor is represented by Bunce Atkinson of Atkinson & DeBartolo, PC from Red Bank, New Jersey.

Debtor is a janitorial firm that was founded in 1989 and headquartered in Freehold, New Jersey.  Debtor provides janitorial services clients in New York, New Jersey, Pennsylvania, Georgia, and North and South Carolina.  Some of debtor’s more notable clients include UPS, the Social Security Administration Headquarters, and Public Service Electric and Gas Company.  In debtor’s more than 20 years in business, it has achieved some noticeable accomplishments including servicing the Statue of Liberty in 1996 and being contracted to clean vintage chandeliers at West Point Military Academy in 2001.

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Pittsburgh Riverhounds Stumble as They Declare Chapter 11 Bankruptcy

By:  Justin A. Saporito

The  Riverhounds Event Center, L.P. and Riverhounds Acquisition Group, L.P., the limited partnerships that own and operate Highmark Stadium and the Pittsburgh Riverhounds Professional Soccer Club respectively,  jointly declared voluntary Chapter 11 bankruptcy on March 26, 2014.  Debtors filed in the United States Bankruptcy Court for the Western District of Pennsylvania, assigned case numbers 2:14-bk-21180 and 2:14-bk-21181 respectively.  Both cases have been assigned to the Honorable Jeffery A. Deller.

The Riverhounds Event Center, L.P. owns and operates the newly constructed Highmark Stadium located in the South Side area of Pittsburgh and claims assets ranging from $1 million to $10 million with liabilities between $10 million and $50 million.  Of those liabilities, $7.2 million is mortgage debt and $1.5 million in bank loans.  riverhounds_logo

The Riverhounds Acquisition Group, L.P. is the limited partnership that owns the Pittsburgh Riverhounds minor league soccer team and claims assets ranging from $500,000 to $1 million with liabilities between $1 million and $10 million.  The Pittsburgh Riverhounds  was founded in 1999 and currently plays in the United Soccer Leagues.  Much of the debt leading up to the bankruptcy was incurred in 2012-2013 during the construction of Highmark Stadium.  The bankruptcy is not expected to affect the 2014 season.

Debtors share some creditors such as Shallenberger Construction, Inc.,  First National Bank of Pennsylvania, and Urban Redevelopment Association of Pittsburgh.  Both debtors are represented by John M. Steiner of Leech Tishman Fuscaldo & Lampl, LLC.

The University of Pittsburgh Institute for Entrepreneurial Excellence Celebrates 20 Years of Empowering Local Entrepreneurs!

By:  Justin A. SaporitoMAZURKRAEMER Law Clerk

Founded in 1993 and run out of the University of Pittsburgh Joseph M. Katz Graduate School of Business, the University of Pittsburgh Institute for Entrepreneurial Excellence (IEE) began with a $300,000 grant and the mission of being the “innovative leader of economic renewal and growth serving enterprising people and businesses in the region.”  In pursuit of this mission the IEE utilizes a dynamic approach of programs and services including monthly workshops, customized consulting, social initiatives, educational programs, professionally-led peer forums, and social events.

Institute-for-Entrepren.-Excellence

This dynamic program has led the IEE to grow to $3 million in annual revenue and the annual serving of hundreds of businesses through its seminars, customized consulting, and millions of dollars in raised capital and revenue.  Last year alone the IEE served 824 businesses, helped create 39 startups, raised $10.7 million in capital, increased $14.4 million in revenue for clients, and educated more than 1,400 business leaders through 56 programs and seminars. (according to its 2012 Community Impact Report)

The IEE provides its services through its 8 institute centers and programs.  These centers/programs consist of Agricultural Entrepreneurship, a 12-month Entrepreneurial Fellows Program, the Family Enterprise Center, the Information Technology Program, PantherlabWorks, the Small Business Development Center, Student Entrepreneurship program in conjunction with Katz School of Business, and the Urban Entrepreneurship Program.  For more information about these programs please click here.  To take advantage of one or more of these programs an individual or firm must become an IEE member.  Membership includes benefits in addition to participation in IEE programs.  For more information about membership please see the IEE’s membership brochure or contact the IEE’s membership director Shelley Taylor.

For more information about the IEE please visit their website at http://www.entrepreneur.pitt.edu.

The Company You Own Files Bankruptcy: Can Creditors Still Come After You?

automatic-stayAs is almost always the case, principals of a distressed business have personally guaranteed the debt on a credit line or property or equipment lease. When a business files bankruptcy, an automatic stay is imposed against any adverse actions taken against the business entity, the Debtor. But what about the owners of the business? Often, I find myself seeking to extend the automatic stay injunction to those principals. This issue came up in a recent case we had pending in the Fourth Circuit. We were compelled to find case law regarding the standard for relief.

A factual example would be as follows: A distressed business ABC Recylcing owns a building, and the building has a mortgage on it in favor of Meanie Bank, N.A.  The business falls behind on payments. Meanie Bank initiates a foreclosure action to set an auction to sell the building. Jake, the owner of the business had to sign a guaranty in order for ABC Recycling to get the loan with Meanie Bank. ABC Recycling still operates with the faint hopes of reorganizing through a Chapter 11 bankruptcy. Once the Chapter 11 is filed, the foreclosure action is stayed as to ABC Recycling, but now the Meanie Bank is going after Jake. Help, my clients say.

ISSUE: Pursuant 11 U.S.C. §105 and §362 of the Bankruptcy Code, is a court likely to grant an injunction to protect the principal of a bankrupt business?

CONCLUSION: Where the principal Jack is a primary guarantor of the mortgage and Meanie Bank now intends to secure a judgment against the principal, the principal will only be able to obtain an injunction by demonstrating a mutuality of identity with the Debtor such that allowing Meanie Bank to proceed against Jake will substantially deprive the Debtor of a primary asset (its owner’s time and attention).  In Plain English, how important is the principal Jake to the Debtor’s operations?  A four-part test is employed to make that determination.

While automatic stay proceedings are usually only available to the Debtor, under unusual circumstances, the Fourth Circuit has held that the Bankruptcy Court can enjoin proceedings against third parties.  In re F.T.L. Inc., 152 B.R. 61 (Bankr. E.D. Va. 1993).  However, where no compelling or unusual circumstances exist, then under §362 the Debtor’s guarantors must file their own bankruptcy petition in order to be protected by the Bankruptcy laws.  Id. at 63. (this also happens often).

A court is only likely to grant an injunction to a third party non-debtor principal in the unusual circumstance that it is evident that the identity of the debtor and the non-debtor third party is so interconnected that it is clear that the creditor is proceeding against the debtor.   Under such circumstances, the court may apply a four-part test and equitably grant an injunction where the court finds that:

  • the plaintiff principal has a greater likelihood of succeeding on the merits;
  • plaintiff principal has shown that lack of relief will result in irreparable injury;
  • an injunction will not substantially harm other interested parties, and;
  • preserving the status quo until the merits of the controversy is decided will serve public interests. Id.

In re F.T.L., the primary secured creditor to a car wash company debtor, secured a judgment lien against the debtor’s guarantors, the plaintiffs. Plaintiffs are the primary owners and guarantors of the car wash and the creditor perfected its lien against plaintiffs’ personal residence.  Id. at 62.  Noting that the collection activities against the owners arose from the car wash’s debt to the creditor, the court applied the four-part test and found that the debtor was likely to succeed on the merits by proposing a confirmable chapter 11 plan; the debtor’s chapter 11 plan would be impossible if the owners were forced to file their own chapter 11 petition; very little harm was likely to come to the creditor if it was enjoined from collection activities against the owner, and; lastly the creditors as a whole were best served if the debtor were allowed to propose a plan for reorganization. Id.  The Court extended the injunction to the owners.

If you own a business and are wondering the same questions,  you should review the facts and circumstances of your workout with your attorney.  I think, by and large, the automatic stay is difficult to extend in Bankruptcy Court.  You have to make a really compelling argument that the principal will be so consumed with his or her own bankruptcy that the Chapter 11 reorganization will suffer.

Billing Services Company Penn Data Services, Inc. Makes a 2nd Trip to Bankruptcy Court

By:  Justin A. Saporito, MAZURKRAEMER Law Clerk and Salene Kraemer, Esquire

Penn Data Services, Inc. filed a voluntary petition for Chapter 11 bankruptcy protection on October 1st, 2013 in the Bankruptcy Court for the Western District of Pennsylvania (Pittsburgh).  The case has been assigned to the Honorable Judge Carlota M. Bohm under case number 2:13-bk-24153.  A summary of the docket can be found here.double bankruptcy

This is the debtor’s 2nd consecutive voluntary filing for Chapter 11 bankruptcy protection, having previously filed over a year ago on August 21st, 2012 (that is referred to as a “Chapter 22” by those in the industry).  That case was assigned case # 2:12-bk-24156 and was also overseen by Judge Bohm.  The 2012 case was dismissed on August 30th, 2013 for failure to timely file a Chapter 11 Plan and Disclosure Statement.  A docket summary of the initial filing for the 2012 case can be found here.

Penn Data Services, Inc. is a billing services company founded in 1996 and located in Natrona Heights, PA.  The debtor claims assets of less than $50,000 with liabilities between $50,000 and $100,000.  Christopher M. Frye of Steidl & Steinberg P.C. is again representing the debtor, having been debtor’s counsel for the 2012 case.

DragonFire, Inc. Running Out of Breath as it Files Chapter 11

By: Justin A. Saporito, MAZURKRAEMER Law Clerk

DragonFire, Inc. filed a voluntary petition for Chapter 11 bankruptcy in October 25th, 2013.  The petition was filed in the United States Bankruptcy Court for the Western District of Pennsylvania and has been assigned case number 2:13-bk-24517.  Debtor’s Disclosure Statement, Balance Sheet, Declaration of Schedules, and other documents were due by November 8th, 2013.  For a complete list of the documents due please refer to the document summary.1366998187

Debtor is the corporate entity for DragonFire Japanese Steakhouse and Sushi Bar located at 1500 Washington Rd. in the Gallery Mall in Mt. Lebanon, Pennsylvania.  As the name suggests, DragonFire specializes in hibachi and sushi.  For those unfamiliar with hibachi, it is a rectangular Japanese style barbecue grill.  Customers often sit at a counter that spans three sides of the grill.  The chef stands at the fourth side and prepares the meal (which typically consists of fried rice, vegetables, and various meats) with much fanfare.   DragonFire also boasts a robata grill, a traditional Japanese slow grilling method. For more information about DragonFire, you can visit their website here.

Debtor has declared between $50k and $100k in assets with between $500k and $1 million in liabilities with approximately 20 creditors listed in the petition.  Debtor is represented by Donald R. Calaiaro of Calaiaro  & Corbett, P.C.

The Chatham University: Center for Women Entrepreneurship, Assisting Women Entrepreneurs Since 2005

By:  Justin A. Saporito, MAZURKRAEMER Law Clerk

Founded in 2005, the Chatham University: Center for Women Entrepreneurship was founded in 2005 with the mission is to educate, create economic opportunities, and foster entrepreneurial thinking for women entrepreneurs and business managers in all stages of business and students.  Through the Center for Women Entrepreneurship (CWE), women entrepreneurs and business managers can take advantage of Chatham University’s resources and its more than 120 years of experience in education.

The CWE’s programs and services include the Small Business Basics cwe-logoWorkshop, the Women Business Leaders Breakfast Series, and the Annual Think Big Forum, and consulting services.

The Small Business Basics Workshops are geared towards women interested in starting their own business or expanding their current business.  At the workshops, industry experts discuss business planning, financing, bookkeeping, marketing, and legal issues pertaining to small business.

The Women Business Leaders Breakfast Series features prominent regional women business leaders speaking on a variety of progressive business topics.  Casual networking and a continental breakfast is followed by interactive presentations on topics essential for women in business such as innovative entrepreneurship, strategic business growth, unique marketing strategies, and logistical business planning.

The Annual Think Big Forum has been hosted by the CWE every year since its founding and has been growing every year.  Think Big hosts leading women business leaders and entrepreneurs such as CEOs and other executives from startups and established companies as speakers and panelists.

For more information about the Chatham University: Center for Women Entrepreneurship and its programs please visit http://www.chatham.edu/cwe/.

Chapter 11 Debtors Beware: Do Not Fail to Pay Quarterly Fees Owed to the U.S. Trustee

By:  Justin Saporito, Law Clerk and Salene Mazur Kraemer, Owner

U.S. DOJ seal

What fees are associated with filing a Chapter 11 case? Aside from payment of attorneys’ fees (which can be steep), there are filing fees and ongoing quarterly administrative fees.

For a chapter 11 case, quarterly fees must be paid to the U.S. Trustee each quarter, or fraction thereof, until that case is closed, dismissed, or converted.  These fees are in addition to the filing fee that must be paid by the debtor.  The amount owed by the debtor is based upon the amount of disbursements made during the quarter starting at a minimum of $325 with a maximum of $30,000.  (Complete breakdown of quarterly fees w/ instructions.)   Again we repeat, there is a minimum payment of at least $325 a quarter.   If significant assets are sold, a debtor may be looking at a quarterly fee up to $13,000 or even $30,000 to be made payable to the U.S. Trustee’s office.  The fee schedule is uniform for all Federal Judicial Districts that are a part of the U.S. Trustee Program which includes all Federal Judicial Districts except for Alabama and North Carolina.

Quarterly fee bills are mailed to the debtor by the U.S. Trustee at the end of each quarter with instructions on how to determine the amount of fees owed.  These fees are due on the last day of the calendar month following the calendar quarter.  The minimum fee is due even if no disbursements were made that quarter and failure to pay a quarterly fee is cause for conversion or dismissal of the chapter 11 case.  Failure to receive an invoice does not excuse the obligation to timely pay U.S. Trustee’s fees.  Debtor’s counsel should contact the Office of the U.S. Trustee If a quarterly bill is not received, unless counsel for the debtor has executed an authorization allowing the U.S. Trustee to discuss the issue of quarterly fees with the debtor.

For payments made by check, the payment is converted to an electronic funds transfer (EFT).  This means that the account information will be copied from the check to electronically debit the debtor’s account for the amount of the check.  The debit usually occurs within 24 hours after which the original check is destroyed.  A copy of the check will be made by the U.S. Trustee’s Office however.  If the EFT cannot be process due to technical reasons, the debtor authorizes the U.S. Trustee’s Office to process the copy in place of the original check.  If the EFT cannot be completed due to insufficient funds, two more attempts to make the transfer may be made.

TIPS FOR THE CHAPTER 11 DEBTOR:  Payment of these U.S. Trustees fees is important.  The U.S. Trustee is an agent of the Department of Justice.  He or she is a lawyer who plays a critical and influential role in every Chapter 11 Case (more on this later).  Do not overlook paying these fees or responding to any requests made by a U.S. Trustee.   If a Debtor ignores such requests or fails to pay U.S. Trustee fees, the Debtor can almost be certain that a Motion to Dismiss the Case or Convert the Chapter 11 Case to  Chapter 7 Case (liquidation) will be forthcoming.

MSI Corporation Files a Chapter 11

By: Katie Imler, Law Clerk

June 10, 2013

ImageOn June 7, 2013, MSI Corporation, a specialty metals processor, filed for a voluntary Chapter 11 bankruptcy in the Western District of Pennsylvania (Case No. 2:13-bk-22457). The company, located at 210 First Street, Vandergrift, PA 15690, processes metals such as titanium alloys, copper, and steel. MSI Corporation also offers material conditioning such as cast slab milling, grinding, and plate polishing.

The Chapter 11 case has been assigned to the Honorable Judge Jeffery A. Deller. Michael J. Roeschenthaler of McGuireWoods LLP, 625 Liberty Ave., 23rd Floor, Pittsburgh, PA 15222.  A summary of the case docket can be found here.

Debtor listed $10-$50 million in assets and $1-$10 million in liabilities. The largest unsecured creditors are mostly for trade debt including: Euler Hermes Collections $279,230.11, Dynamark Security Centers $32,617.76, D&S Industrial Contracting $27,040.00, H&K Equipment Company $22,038.30, and Production Abrasives, Inc. $19,740.00.

Schedules are due June 21, 2013. The Disclosure Statement and Plan of Reorganization are due October 7, 2013.

StonePepper’s Grill in Robinson Twp. files for Chapter 11

Settlers Ridge No. 3, L.P. files for Chapter 11

By Katie Imler, Law Clerk

On May 13, 2013, StonePepper’s Grill, formally known as Settlers Ridge No. 3, L.P., of 1738 North Highland Road, Pittsburgh, PA  15241 filed a voluntary Chapter 11 bankruptcy petition in the Bankruptcy Court for the Western District of Pennsylvania, assigned Case No. 13-22082-CMB. The case has been assigned to the Honorable Judge Carlota M. Bohm.

 Stonepepper Grill's LogoStonePepper’s Grill is a restaurant that serves brick-oven pizza and won the 2012 Best Burger in Upper St. Clair Contest. The restaurant chain has three (3) locations in Upper Saint Clair, Mars, and Robinson Township. The only location effected by this filing is the Robinson Township location. Counsel for the Debtor is Robert O. Lampl, located at 960 Penn Avenue, Pittsburgh, PA 15222. Lampl’s disclosed hourly rate is $400/hour.

A summary of the docket for the case can be viewed here.

The Debtor has elected to be considered a “small business debtor, ” defined under Bankruptcy Code § 101(51D)(A) as a person engaged in commercial or business activities who as of the date of petition filing or order of relief has an aggregate non-contingent liquidated secured and unsecured debts in an amount not more than $2,000,000.00 (excluding debts owed to 1 or more affiliates or insiders). See also Bankruptcy Code § 1116. The bankruptcy filing showed liabilities and assets between $100,000.00 -$500,000.00. The Debtor listed the largest unsecured debts as $93,940.00 in Employer Withholding, $78,775.00 in Loans to owner Jeff Joyce, $77,535.00 in PA Sales Tax, and $38,465.00 in Business Debt to CRK Management LLC, who also employs Jeff Joyce. It also has a Business Debt of $77,613.00 payable to Settlers Ridge Leased, LP.

      A hearing will take place on June 25, 2013 in regards to confirmation of employing Debtor’s counsel. The Chapter 11 Small Business Plan and Disclosure Statement are due November 12, 2013.