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Wine Industry Insight
This is one of Wine Industry Insight’s three-part series on the Fresh and Easy bankruptcy and its effects on wine and alcoholic beverage creditors. Two of the three articles contain material and links to court documents available only to premium subscribers. The three articles in the series are:
NOTE: Wine Industry Insight emailed more than two dozen of the attorneys on all sides of the bankruptcy, asking for comment. 11 attorneys defending Fresh and Easy clawback targets. Because of the pending litigation, none would speak on the record. However, all of them considered the current Unsecured Creditors Committee action an abuse of the process.
One attorney not associated with defending clawback targets responded with an angry phone call. Before hanging up abruptly, the attorney — who did not identify himself — said, “Mind your own business.”
Gallo, Southern W&S, and Young’s Market are among more than 16,000 Fresh & Easy creditors snared by Fresh & Easy’s complicated, chaotic Chapter 11 bankruptcy.
The proceedings are plagued by incomplete, often redacted, and/or sealed court filings, and inconsistencies that make it impossible to determine whether all the parties and creditors involved have been treated fairly and equally.
At least 32 other wine, beer and spirits companies (including distributors) have been caught up in the queasy proceedings.
Young’s Market was the only alcoholic beverage-related company to make the list of the largest 30 unsecured creditors.
In addition, Gallo Wine Company and Southern Wines & Spirits are among at least 13 creditors in the wine, beer and spirits field being sued by the Unsecured Creditors Committee in separate clawback lawsuits. Those lawsuits demand that companies re-pay funds they received as payments for legitimate products and services ordered by F&E and paid within 90 days of the bankruptcy filing.
Clawback adversarial proceedings are common in many bankruptcies. A brief explanation of the process — based on information from the American Bar Association and Lexis/Nexis — can be found at this link.
Fresh & Easy filed for Chapter 11 bankruptcy reorganization on Oct. 30, 2015. This was F&E’s second bankruptcy in two years. Billionaire Ron Burkle bought much of the chain’s assets in 2014 after U.K. supermarket chain Tesco took F&E into Chapter ll. Tesco has suffered through its own financial setbacks in its homeland.
Among other restructuring activities, assets and operational units of F&E were assigned to two main subsidiary companies: Burkle’s main investment firm, The Yucaipa Companies and a new one formed for the acquisition, YFE (think Yucaipa/Fresh & Easy).
Some background on Yucaipa Companies is available on Wikipedia, but the entry has not been updated to include the current bankruptcy or that of The Great Atlantic & Pacific Tea Company in which Burkle made a major investment.
The full text of the following sections along with original charts and tables are available to premium subscribers of Wine Executive News.
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The author of this article is not a lawyer but he stayed at a Holiday Inn Express last night.
But seriously, Wine Industry Insight Publisher and Executive Editor Lewis Perdue has covered courts at every level for more than 45 years: from the lowest local level to the highest federal courts.
That experience includes Perdue’s time covering the U.S. Supreme Court as a Washington correspondent for Dow-Jones publications and major newspapers. Perdue was also admitted to classes at the Cornell Law School as part of an honors program as an undergraduate there. With his nearly off-the-chart LSATs, he narrowly escaped becoming a lawyer like so many of his family members.
Perdue’s coverage in this case — especially sections dealing with the procedural chaos, lack of transparency, and apparent abuse of the clawback process — reflects that experience and how this case departs so strikingly and negatively from scores of other bankruptcies he has covered.