Guest Post: The Premier Cru Bankruptcy
The following is a guest post from the attorneys at Downey Brand
On January 8, 2016, Fox Ortega Enterprises, Inc. filed for Chapter 7 bankruptcy in the Northern District of California. The debtor, operating under the name Premier Cru, was a seller of fine wines in Berkeley, California, and well known for selling rare and fine wines at price points much less than the competition. The debtor’s owner John Fox, who has also filed for bankruptcy protection, is also apparently under criminal investigation by the FBI. See, for example, http://www.berkeleyside.com/2016/02/11/troubles-mount-for-premier-cru-as-fbi-steps-in/ . Various publications have accused Premier Cru of running a Ponzi scheme, which will be interesting to follow as that investigation unfolds.
At the commencement of the bankruptcy case, Premier Cru listed approximately $6,800,000 in wine inventory, and $70,000,000 in debts. While Premier Cru had approximately $19,000,000 in gross revenue in 2015, at the time of the bankruptcy filing, it was also facing more than ten (10) collection lawsuits from unpaid creditors. In a chapter 7 bankruptcy case, a trustee (who is an independent third party fiduciary) liquidates the assets, reviews and potentially objects to claims filed by creditors, and disburses funds to creditors on a pro rata basis in accordance with the Bankruptcy Code’s distribution scheme.
Chapter 7 trustee Michael G. Kasolas completed a physical inventory of the wines at the debtor’s facility in Berkeley, and identified approximately 4,000 bottles of wine that were physically segregated under specific customers names. On March 4, 2016, the trustee filed a list of customers’ names who were associated with the segregated bottles, along with a proposed stipulation to litigate title to the segregated wines, which the trustee requests be returned by March 14, 2016. If you paid for wine from Premier Cru but have not received it, you should contact the trustee or his lawyers immediately. Mark Bostick of the Wendel Rosen law firm of Oakland is representing the trustee.
The deadline for filing proofs of claim is May 24, 2016. Any creditor of Premier Cru needs to file a proof of claim with the bankruptcy court by that deadline. Directions for filing claims can be found on the court’s website at www.canb.uscourts.gov. If you are owed money by Premier Cru you should file a claim to ensure you participate in any future distribution of funds, if there is one. Given the amount of claims against the value of the assets, it does not appear as of now that there will be a substantial distribution. Additionally, there appears to be a secured creditor who is owed approximately $1.0 million, and who appears to have a lien on Premier Cru’s assets, so that secured claim may be paid ahead of general unsecured creditors. Additionally, the costs of administering the estate also come off the top of any cash generated from wine sales, which includes the trustee’s fees, his lawyer and accountant fees, the auctioneer costs, and the costs of managing the bankruptcy case.
Premier Cru appears to have fallen hard and fast. The chapter 7 is the end of the road for this East Bay institution, perhaps others will pick up its business model, but also perhaps it was that business model that got Premier Cru to where it is now.