Justin and his team work towards understated, day-to-day successes for their clients. Many of these successes are not public - including situations where they negotiate a confidential settlement and avoid a bankruptcy filing or litigation. Here is a collection of some notable bankruptcy and creditor-rights matters that can be discussed publicly:
Summary of Representations in 2018
Throughout 2018, the firm wrapped up a number of significant commercial bankruptcy cases on behalf of chapter 7 trustees, including Albina Community Bancorp ($7.5 million in debt), Mastercraft Furniture Inc. ($6.8 million in debt), and Masterpiece Investments Corp. ($2.9 million in debt).
In addition, the firm defended a large institutional creditor in its multiple litigation matters in bankruptcy court; assisted litigators and business lawyers (from firms throughout Oregon) as special bankruptcy counsel in the prosecution of adversary proceedings or contested case matters, such as achieving relief from stay in multiple chapter 11 proceedings to allow creditors' counsel to complete their foreclosure actions; defended various individuals and businesses sued by debtors or trustees in bankruptcy court; and assisted Oregon-based businesses in their negotiations with lenders and landlords to avoid bankruptcy - or assisting them in a bankruptcy filing or an out-of-court dissolution when necessary.
Arrest of Chapter 7 Debtors
In what is believed to be the first arrest of debtors in an Oregon bankruptcy proceeding, Justin represented a chapter 7 trustee in substantively consolidating three converted chapter 12 farm cases in Wallowa County, then dealing with uncooperative debtors who refused to turn over assets, including their firearms. With the aid of the U.S. Marshals Service, Justin arranged for multiple search and seizures in real property owned by the debtors, to recover assets of the Bankruptcy Estate. Then – in light of threats by the debtors – Justin arranged court-approved U.S. Marshal and sheriff protection, to provide security at the Trustee’s auction of farm equipment and other assets. In light of the debtors’ further refusals to cooperate with the Trustee’s administration and respond to the bankruptcy court’s orders, arrest warrants were ultimately issued. The debtors were ultimately located and arrested by the U.S. Marshals, and then incarcerated for approximately 48 hours until they agreed to a Release Order, requiring their cooperation with the Trustee’s investigation. Justin is continuing to represent the Trustee, who is now tracking and recovering the transfers of the debtors – including the crop proceeds that were to be turned over in the chapter 12 cases. Justin investigated and uncovered significant fraud of the debtors, including significant transfers involving forged documents – including checks, DMV title applications, loan applications, and credit card applications. Justin is now representing the Trustee in an effort to collect the fraudulently transferred assets for the benefit of the creditors.
Dr. Bott LLC
Justin represented a number of manufacturers of Apple® accessories, sold through one of the few Apple-approved distributors in the country. In light of an ongoing and expensive feud between the two owners of the Portland-based company, the business had floundered and the vendors were being ignored. While the owners fought over the helm of the sinking ship, Justin arranged an involuntary chapter 11 bankruptcy on behalf of a group of vendors, including Applicant has represented the petitioning creditors Blue Microphones, Native Union, iStabilizer, Marware, and Sewell Development. Justin successfully challenged several attempts of one owner to continue the state court litigation over control of the company. Then Justin sought the appointment of an independent chapter 11 trustee to oversee the liquidation of the company’s assets, when reorganization was not feasible. Through this effort, the vendors and other creditors received a meaningful recovery before all of the company’s resources had been consumed in the owners’ feud over who was at fault.
Ex Parte Search and Seizure
In an action without precedent in Oregon (and likely in the 9th Circuit), Justin investigated and amassed sufficient evidence, coupled with a thorough legal analysis, for an ex parte claim and delivery order – essentially a “civil search warrant” – for a bankruptcy trustee to pursue suspected assets from a residence without giving any notice to the debtor. The order authorized the use of U.S. Marshals and professional investigators to assist the Trustee and Mr. Leonard in a simultaneous multi-location search for undisclosed assets, including an eight-hour search of a residence not owned by the debtor, where the debtor had secreted several safes and numerous firearms. Assets totaling more than $360,000, including cash and gold and silver bullion, were ultimately recovered for the benefit of the bankruptcy estate’s creditors. Since then, Mr. Leonard has assisted the U.S. Attorney and FBI in the successful criminal prosecution of the debtor, and has also advised other bankruptcy trustees and their counsel regarding the civil search and seizure process.
C&K Market Reorganization
In one of the largest bankruptcy cases in Oregon history, Brookings-based C&K Market filed a chapter 11 bankruptcy in November 2013 to reorganize its approximately 60 “Ray’s Food Place” and other grocery stores in Oregon and California. Justin was appointed to represent the Official Committee of Unsecured Creditors, together with New York-based counsel Otterbourg PC. Justin actively participated in the intense and collaborative reorganization, including auditing and avoiding perfection of the secured creditors’ purported liens and litigating contested matters with insiders and with an unsuccessful DIP lender. Over an accelerated seven-month process, approximately one-third of C&K’s 60 stores were successfully closed/sold, and 80 percent of its 2,500-person workforce was preserved. C&K Market was one of Oregon’s largest bankruptcy cases, with over $150 million in assets and over $100 million in liabilities owed to 8,500 creditors. Based on the plan confirmed in July 2014, small unsecured creditors with claims of less than $10,000 received 80 cents on the dollar, with the larger creditors receiving stock in the successfully reorganized and financially healthy debtor.
Blue Heron Paper Company Liquidation
Justin assisted the trustee in all aspects of the liquidation of this Oregon City-based paper manufacturer that previously employed 250 employees, including the auction of all machinery and equipment, collection of receivables and preferences, claim litigation, administration and termination of ERISA plans, negotiations of filming/location agreements for TV shows (including Grimm and The Librarians) and advertisements (including Dell and Alienware), and management and eventual sales of real property. The real property included an effluent pond in West Linn and a 22-acre mill site in Oregon City, comprised of over 57 buildings bordering the Willamette Falls – the largest waterfall in the Pacific Northwest. At the time of the trustee’s appointment, the primary secured creditor was owed $14 million, and other liens on the real property exceeded $5 million. Through a number of settlements and sales, all secured claims were resolved, the mill site was sold subject to active local, regional, and state efforts to provide public access to one of the most historically important sites in the Pacific Northwest, and meaningful distributions were paid to chapter 11 administrative claimants, including hundreds of employee claimants.
Epic Aircraft Liquidation
Justin represented the chapter 11 trustee of the Epic Aircraft group of companies with his former partner David Criswell. In 2009, Epic’s aircraft manufacturing business collapsed, the business was locked out of its manufacturing facility in Bend, Oregon, and the company ceased operations. Prospects for a recovery to creditors looked bleak. Justin assisted the trustee with investigating the assets, substantively consolidating related entities and their assets, developing due diligence materials, and locating and courting bidders, including a major aircraft manufacturing company owned by the People’s Republic of China. After a series of contested hearings and a competitive auction, the Trustee closed on a sale of the operating assets of the business, which provided a significant recovery for creditors. Following closing, the purchaser reopened manufacturing operations in Bend, Oregon.
States Industries, Inc. Chapter 11 Sale
Justin and his former partner Brad T. “Tony” Summers represented Eugene-based States Industries, Inc. as debtor-in-possession in a chapter 11 case. For over 45 years, States Industries had been an industry leader in the design and manufacturing of natural wood veneered paneling and hardwood plywood panels, used in the manufacture of cabinets, furniture, store fixtures and architectural interiors. States supplied consumer and commercial manufactured wood products directly through retail home improvement stores and independent wholesale distributors throughout North America. When the housing downturn occurred, States’ revenues and profitability plummeted, leaving the company liquidity strained and unable to service its senior debt and trade payables. Through the efforts of Justin and Tony, debtor-in-possession financing was negotiated, a chapter 11 case was filed, sale procedures were arranged, and the assets were sold through a 363 sale - all in less than 90 days. Because the business was sold so quickly and as a going concern, one of Eugene’s largest employers was able to continue operation and approximately 230 jobs were preserved.
MAN AG v. Freightliner LLC Fraudulent Transfer
When at Ball Janik LLP, Justin assisted Rick Stone and Bruce Cahn in achieving, after many months of litigation battles and then an intense five-week trial, the largest jury verdict in the United States in 2006 and the largest punitive damages verdict in Oregon history to date. The case, a complex fraudulent transfer action (which also included successful claims of successor liability and piercing the corporate veil) was brought on behalf of MAN AG, a German industrial company, against Freightliner LLC and its DaimlerChrysler affiliates. The case resulted in a verdict of $1.1 billion, with approximately $750 million in compensatory damages and $350 million in punitive damages.