Thursday, April 7, 2016

PacSun Files for Chapter 11 protection in Delaware – Next Batch of Expected Retail Chapter 11 Bankruptcy Filings

On the heels of the Joyce Leslie and Sports Authority Chapter 11 bankruptcy filings, another retailer just filed for Chapter 11 bankruptcy protection, and it appears that two (2) more retailers are preparing to file to reorganize.

PacSun, formally known as Pacific Sunwear of California, Inc., just filed for Chapter 11 bankruptcy protection this morning in the United States Bankruptcy Court for Delaware, docket # 16-10882. High debt forced the teen retailer of surf/beachwear to file. PacSun operates 600 stores and is expected to close a number of stores either after the big back to school or holiday season. It lists total assets of $298,853,000 and liabilities of $305,056,000 in its petition.

In addition to PacSun, two more retailers are expected to file shortly. Bloomberg recently reported that Vestis Retail Group, owner of Eastern Mountain Sports (68 stores), Bob’s Stores (35 stores), and Sport Chalet (51 stores), appears to be preparing for a Chapter 11 bankruptcy filing. Bob’s Stores previously filed for bankruptcy in 2003 and was subsequently purchased by Vestis. This would be the second recent entrant into bankruptcy for a sporting goods retailer following Sports Authority, which filed on March 2, 2016.

Additionally, the New York Post recently reported that Fairway Market may also be filing shortly. The company hired Weil, Gotshal & Manges, the law firm which most recently handled the A&P bankruptcy.

Landlord’s Issues

Landlords – if one of these companies is a tenant of yours, the first thing you should do is ensure they are current on rent. If rent payments are not current, it is probably a good idea to call any defaults that may exist, now. Aside from staying current with rent, it is important to ensure that your operations personnel are fully-apprised. For instance, when was the last time your property manager spoke with the store manager to obtain important security codes, HVAC, and utility information? If a store is rejected or abandoned in a bankruptcy proceeding, you don’t want to be scrambling for that information after the fact.

If and when these companies file for bankruptcy protection, some important things landlords need to know are:

  • Will they remain a tenant?
  • When will rent be cured?
  • Are there pre-petition claims that are owed?
  • When will “Stub Rent” be paid?
  • Is their Debtor in default of pre-petition non-monetary obligations? and,
  • What other damages are owed (both pre- and post-petition)?

Trade Creditor Questions

Trade creditors, including suppliers, should also be asking important questions, such as:

  • Have you been paid on time and does a reclamation claim (right to take back goods shipped, unpaid within 45 days) exist?
  • Can an administrative claim be asserted?
  • Should a proof of claim be filed, and if so, how?
  • If you are a consignor of goods, when can you get paid or take your goods back?

It’s a good idea for commercial Landlords and trade creditors to speak with bankruptcy counsel immediately to formulate and execute a plan in the event of the likely bankruptcy filing.

Stark & Stark’s Bankruptcy & Creditors’ Rights Group can help. Our bankruptcy attorneys regularly represent landlords throughout the country, including recently in the District of New Jersey, Southern District of New York, District of Delaware, and Eastern District of Pennsylvanian on a variety of issues. Most recently, our Group represented landlords and trade creditors in the RadioShack, A&P, Joyce Leslie, and Sports Authority Chapter 11 bankruptcy cases.

For more information the PacSun filing and how Stark & Stark can assist you, please contact Thomas Onder, Shareholder at (609) 219-7458 or tonder@Stark-Stark.com. Mr. Onder writes regularly on commercial real estate issue and is a member of ICSC and Chair of the 2016 ICSC PA/NJ/DE Next Generation Committee.



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When Can a Custodial Parent Relocate Out of State With the Children, and What if The Divorcing Parties Have a Non-Relocation Agreement?

Bisbing v. Bisbing, ___ N.J. Super. ___ (App. Div. 2016).  N.J.S.A. 9:2-2 provides that children of divorced parents cannot be removed from the jurisdiction of the Superior Court “without the consent of both parents, unless the court, upon cause shown, shall otherwise order.”  A custodial parent who moves out of New Jersey may wish to […]

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Wednesday, April 6, 2016

The Third Circuit Applies Campbell-Ewald and Rejects an Attempt to Moot a Class Action by Buying Off the Named Plaintiff

Weitzner v. Sanofi Pasteur, Inc., ___ F.3d ___ (3d Cir. 2016).  Earlier this year, in Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663 (2016), discussed here, the Supreme Court of the United States rejected an attempt by a class action defendant to moot a class action via an unaccepted offer of judgment for full relief to […]

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Adam Siegelheim, Esq. Recognized as Franchise Times “Legal Eagle” for 2016

Stark & Stark would like to congratulate Shareholder Adam J. Siegelheim, Chair of the firm’s Franchise Practice, for being named by Franchise Times Magazine as a 2016 Legal Eagle. Mr. Siegelheim was even selected as a featured Legal Eagle.

Legal Eagles are selected each year from nominations by their clients and peers and are recognized as the top lawyers in franchising. This year’s selection focused on “around-the-clock” attorneys, who are always available for clients. When looking at this year’s list of Legal Eagles you will find “dedicated professionals who are available whenever their clients need them, steeped in knowledge about all things franchising – with plenty of interesting aspirations and outlets beyond the courtroom.”

For more information about this year’s Legal Eagle selections, please click here.



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Tuesday, April 5, 2016

Shareholder Quorum Requirement Cannot be Altered by Changing the Bylaws

Sterling Laurel Realty, LLC v. Laurel Gardens Co-Op, Inc., ___ N.J. Super. ___ (App. Div. 2016).  A majority of the board of the defendant residential co-op development became frustrated that it was repeatedly unable to conduct shareholder meetings due to lack of a quorum.  One reason for that was the coop’s sponsor, who still owned […]

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When Do I Receive My Share of the Estate

If you are the beneficiary of an Estate where a Decedent recently passed away, you will undoubtedly like to know when you will receive your bequest under the Decedent’s Last Will and Testament. What you should be aware of, however, is that there are a multitude of steps that must occur before distributions can be made under a Last Will and Testament.

The first necessary step is that the Decedent’s Will must be admitted to probate. This would be done by the named Executor in the Will, and thereafter, the Executor would be appointed by the Surrogate to serve as the Executor of the Estate. The next step would be for the Executor to marshal all available liquid assets of the Estate and deposit them into an Estate account, or simply discover the location of the assets if they exist in the form of stocks, bonds, or other investment vehicles. Once this has occurred, the Executor will typically prepare an informal accounting, which will be provided to the beneficiaries of the Estate.

If all continues smoothly, the Executor will then commission the preparation of tax returns to be filed with both the federal and state government, depending upon the value of the Estate. Once the returns are filed, it is often necessary for the Executor to receive tax waivers from the individual state(s), provided all appropriate taxes are paid by the Estate. Once this has occurred, it is almost time for distributions to be made.

Prior to distributions being made, the Executor will typically provide an informal accounting and will require any beneficiary of the Estate to sign a Release and Refunding Bond. This means that any bequest that a beneficiary receives from the Estate could potentially have to be paid back in full or in part to the Estate should additional tax liabilities be incurred by the Estate. Provided the Estate accounting is done properly and the appropriate taxes are paid, a refund by a beneficiary to the Estate is typically unlikely—however, is possible. Once all Release and Refunding Bonds are returned to the Executor of the Estate, distributions can be made.

As you can see, the process to receive a distribution from an Estate often takes a significant amount of time as many steps are necessary. The number and complexity of the steps that must be performed correlates directly to the value of the Estate, as well as the complexity and nature of the assets held by a decedent.

If you are a beneficiary of an Estate and you are experiencing difficulty receiving your bequest, you should consult with counsel experienced in Estates to determine whether the Executor is acting properly. At times, an Executor may not be acting properly or may be unnecessarily delaying the distribution of an Estate, which may entitle you to bring an action. The above information is merely a roadmap as to how distributions might be made, and should you require additional information it is suggested that you consult with experienced legal counsel.



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Monday, April 4, 2016

Cohabitation Under the Amended Alimony Statute – Are We There Yet?

Suffice it to say, the issue of cohabitation under the amended alimony statute has been a hot topic of late in New Jersey family law. With several recent notable seminars on the topic, and two recently issued Appellate Division decisions (one published and the other unpublished) addressing when the amended law applies, practitioners and potential litigants hungrily consume these new cases looking for any morsel of guidance on how the statutory language will work.

Back when the law originally passed, I wrote an article for the New Jersey Law Journal analyzing cohabitation law past, present and future. A year and a half later, I am not only unable to confirm how a trial judge would apply the new statute, but if the discussions from each of those recent seminars are any indication, different judges may and will likely apply the statute very differently.  In other words, some trial judges may favor applying the pre-amendment legal analysis, some may strictly apply the new statutory language, and some may even implement some sort of combination of the two.

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Thus, as a very strong introductory caveat – We have no idea how the new will be applied given what we have heard judges say about it, and the fact that there is no law to guide us.  Now, with that being said…

Just to briefly refresh, what did the old law say? Well, cohabitation was described by the Supreme Court of New Jersey as:

  • An “intimate,” “close and enduring” relationship that requires “more than a common residence” or mere sexual liaison. The relationship “bears the generic character of a family unit as a relatively permanent household,” is “serious and lasting,” and reflects the “stability, permanency and mutual interdependence” of a single household.
  • It involves conduct whereby “the couple has undertaken duties and privileges that are commonly associated with marriage.”

Indicia may include, but is not limited to, long-term intimate or romantic involvement; living together, intertwined finances such as joint bank accounts, shared living expenses and household chores, and recognition of the relationship in the couple’s social and family circle.  The so-called “economic benefits” test would come into play after the payor made an initial showing of cohabitation, at which time the court would determine if the third party contributed to the dependent spouse’s support, or if the third party resided in the dependent spouse’s home without contributing anything to household expenses.

Now what does the new law have to say? The law defines cohabitation as involving a “mutually supportive, intimate personal relationship in which a couple has undertaken duties and privileges that are commonly associated with marriage or civil union but does not necessarily maintain a single common household.” A trial judge presented with a cohabitation allegation is required to consider: (1) Intertwined finances such as joint bank accounts and other joint holdings or liabilities; (2) Sharing or joint responsibility for living expenses; (3) Recognition of the relationship in the couple’s social and family circle; (4) Living together, the frequency of contact, the duration of the relationship, and other indicia of a mutually supportive intimate personal relationship; (5) Sharing household chores; (6) Whether the recipient of alimony has received an enforceable promise of support from another person within the meaning of subsection h. of R.S. 25:1-5; and – of course, since this is family law that we are dealing with – (7) All other relevant evidence. So we now know that, at the very least – under the amended law – cohabitation does not require the couple to live together on a full time basis, which was unresolved pre-amendment.

Also to clarify what I indicated earlier, some trial judges have suggested that because the family part is one tasked with imparting an equitable result, they may still apply the economic benefits test and potentially modify – rather than suspend or terminate as the statute says – an existing alimony obligation. Notably, as I wrote for the Law Journal, those amended portions of the law addressing an alimony change in the event of the payer’s retirement or down income use the word modify as a possible option, but that word is nowhere to be found in the cohabitation section. Was that deliberate, favoring the notion that the law is more payor friendly, or was it unintentional and not meant to wipe away the old law?  We do not yet know the answer.  Also notable is how a recent case addressing the retirement language section of the amended statute relied upon statutory interpretation and construction, rather than a broader interpretation that perhaps some practitioners were expecting. This does not mean, however, that the cohabitation portion of the statute will be similarly analyzed and applied.

Other trial judges have indicated that the statute requires a suspension or termination, although a separate question exists as to when a suspension would occur. Perhaps as a sign of rulings to come or, perhaps, also inadvertently, the Appellate Division in one of those two cases I mentioned above indicated that alimony “shall” terminate upon cohabitation by the payee. This, however, was neither an issue or holding in the case, and even the statute uses the word “may” rather than “shall.” Also, when should a so-called suspension of alimony even occur? Should it only occur during a cohabitation proceeding and potentially be reinstated if cohabitation is ultimately unproven? Should it occur as a final result and be subject to reinstatement if the cohabitation ends?  The answers are unknown at this point.

What about making the initial cohabitation showing?  As is true with any case, judges are going to look at the same set of facts differently from each other. For instance, while one judge may find it sufficient for the payor to establish that the couple has been living together at least four days per week for a month, another judge may want more. While one judge may deem sufficient intertwined finances via a single joint bank account and the couple holding themselves out as in a relationship on occasion, another judge may disagree. All judges present at the seminars seem to agree, however, that the more information and evidence of cohabitation to be considered in the initial filing, the better. We even discussed a good old fashioned garbage inspection, where you never know what kind of gems may turn up in a payee’s trash bin – in other words, one payee’s trash may be one payor’s Exhibit A to a Certification.

Thus, no matter how the law is to apply once cohabitation is established (suspension, terminate or modify), the process by which a payor spouse is to gather information for a motion to “address” alimony due to cohabitation seems to remain the same. Private investigators will often still be a potentially key part of the puzzle, and, to the extent the couple somehow cannot manage to keep themselves from discussing the relationship on social media, such evidence is often, but not always, the equivalent of the goose that laid the golden egg – in other words, the online version of the garbage can.

It was those recent seminars that really brought back to the forefront for me how much has yet to be determined under the amended law and, perhaps more importantly, how each case leaves unanswered the question of what gets a moving party passed that first litigation hurdle, and what a payee spouse can do to successfully fend it off. For both sides, the picture remains cloudy in some ways and crystal clear in others, and that is without any of the sort of guidance that we have recently seen with the retirement portion of the amended law.  We will all continue to stay tuned as to what this portion of the new law can do once tested.

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 Robert Epstein is a partner in Fox Rothschild LLP’s Family Law Practice Group and practices throughout New Jersey.  He can be reached at (973) 994-7526, or repstein@foxrothschild.com.

Connect with Robert: Twitter_64 Linkedin

*Photo courtesy of mondspeer (Google free images).



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