10 Retailers to Watch for a Bankruptcy Filing in 2019

2018 represented another busy year for Chapter 11 retail bankruptcy filings, with Sears dominating the headlines in the last quarter of 2018 and Toys “R” Us closing all of its US stores before the third quarter.

As the New Year unfolds, the following are 10 retailers to watch for a possible Chapter 11 filing this year:

• Gymboree – a Chapter 22 filing? Like Payless that filed a Chapter 11 about year ago, Gymboree also filed a Chapter 11 bankruptcy petition and shed a number of unprofitable stores. Yet, both the Wall Street Journal and Retail Dive recently reported that Gymboree is seeking a bankruptcy loan for a possible second Chapter 11, in less than two years from the first Chapter 11 filing. Further, reports are that the filing could occur in January. Currently, the retailer has about 900 stores.
• Guitar Center is the world’s largest retailer of musical instruments. It refinanced its debt mid-year, pushing out the maturity dates to 2021 and 2022. However, the large debt load and ecommerce is causing significant issues. As such, the company with more than 250 locations remains on the watch list.
• General Nutrition Centers (“GNC”) closed 200 stores in 2018, but that may not be enough to save off a Chapter 11 filing. The company operates more than 3,000 stores nationwide. With its competitor Vitamin World using the Chapter 11 process in 2017 to rid itself of unfavorable leases, GNC is a likely candidate to do the same in 2019.
• Crew tried in 2018 to rehab itself to more of an upscale retailer. Yet, the strategy apparently did not work. Declining sales and continued store closings do not bode well for this retailer.
• Payless Part 2? Although Payless completed its bankruptcy proceedings earlier this year, shedding stores and cutting debt, the company still faces the same challenging market conditions that forced it into bankruptcy. With 3,600 stores remaining, don’t be surprised for a second filing this year.
• JC Penney has faced a string of disappointing quarters which has caused much talk of a Chapter 11 filing. Moody’s downgraded the company in August. Although debt does not mature until 2020, like the Toys “R” Us bankruptcy, the retailer cold be forced to file before then as there have been significant vendor concerns, according to SeekingAlpha.
• Neiman Marcus, the Dallas-based luxury retailer’s faces e-commerce competition and changing consumer preferences. However, recent job cuts and digital presence has made a string of quarters positive and the company more likely to turn things around. Still interest expenses are keeping the company in the red and a likely reason for a filing.
• 99 Cent Only is just one of the discount retailers facing stiff competition from rivals, like Dollar General and Dollar Tree, as well as Walmart and Amazon. Reports show the chain is losing money because of operating expenses. A sure fire remedy for that is to cut retail locations through a Chapter 11 bankruptcy.
• Pier 1 Imports year after year always seems to avoid a bankruptcy filing. But recent news of a $51.1 million loss (a more than 500% increase from its loss in 2017) makes this filing almost assured.
• PetSmart, Inc. faces heavy competition from e-commerce. To circumvent his, it purchased “Chewy” an e-commerce site for a whopping $3.35 billion! This acquisition has added to the company’s existing debt that matures after 2020. If the new acquisition does not stem the losses, expect a 2019 filing.

If you are an owner, developer and/or landlord it is important to know and understand how these changes will affect your shopping center. Stark & Stark’s Shopping Center & Retail Development Group can help.

Our bankruptcy attorneys regularly represent owners, developers, and/or landlords throughout the country, in leasing, buying/selling, 1031 Exchanges, refinancing, as well an enforcement activities. One of our specialties is bankruptcy representation for owners, developers and/or landlords, nationally.

Currently, our team is providing value-added services to landlords in a number of Chapter 11 cases including: Sears, Toys R Us, Mattress Firm, Payless, EMS and Eastern Outfitters (aka “EMS Part II”), Gander Mountain, Golfsmith, RadioShack, General Wireless (aka “RadioShack Part II), Fairway Market, and A&P.

For more information on how Stark & Stark’s Shopping Center Group 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 issues, is an active member of ICSC, and is State Chair for ICSC PA/NJ/DE region.

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When Can a Municipality or Local Redevelopment Agency Condemn Property as “Necessary for [a] Redevelopment Project”?

Borough of Glassboro v. Grossman, ___ N.J. Super. ___ (App. Div. 2019).  The Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 to -49 (“LRHL”) allows municipalities or redevelopment agencies to acquire by condemnation lands or buildings “necessary for the redevelopment project.”  But what makes property “necessary” for such a project, and what sort of showing must […]

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New Published (Precedential) New Jersey Appellate Division Decision Confirms that all Custody and Parenting Time Decisions Are Created Equal

In a new, published (precedential) decision, J.G. v. J.H.,  Judge Koblitz, of the Appellate Division confirmed and explicitly held what we all should have known before:  No matter what type of case, the same rules apply with respect to discovery and investigation, and the trial court judge is under the same obligation to apply the legal standard resulting in a decision that is in the best interests of the child.

FD Docket versus FM Docket

It sounds obvious:  the welfare of all children should be determined using the same standards and practices.  Child custody and parenting time determinations are made under either one of two case or “docket” types.  The FM docket type refers to divorce cases; obviously, oftentimes a child custody decision is made incident to a divorce.

When a child custody or parenting time issue arises between unmarried parents (or, more uncommonly, married parents who have not yet filed for divorce), these are handled under the FD or “Non-Dissolution” (i.e. a marriage is not being “dissolved”) docket.  These types of cases are known as “summary proceedings,” meaning that they are to be handled much more quickly than divorce cases.  While divorce cases are automatically assigned timeframes for exchanging information and appointing experts if needed, this is not automatically done in FD cases and if you want discovery or experts, you have to request it.

As a result, in practice, many judges are tasked with and face the pressure to move FD cases along quickly.  Unfortunately, in the J.G. v. J.H. case, and perhaps in many others like it, this led to a very important decision about a child’s custody and welfare being made quickly without taking the proper steps to investigate the best interests of the child that would have occurred in due course in a divorce case.  In this important decision, the Appellate Division reminds us that bona fide disputes in child custody cases must not be treated differently just because they may arise in different case types.

The Facts of J.H. v. J.G.

In J.H. v. J.G., although there was no court order establishing same, the parties essentially shared joint legal custody of the minor child, with the mother designated the parent of primary residence and the father the parent of alternate residence with liberal parenting time.  When the mother began dating someone else, the father alleged that this new romantic partner posted a threat to the safety of the child, and came to court requesting sole custody.  The Court temporarily awarded the father sole custody.  When the mother challenged this, the Court entered a permanent change in the parenting schedule, making the father the parent of primary residence and significantly reducing the mother’s parenting time.  The judge made each of these decisions without investigation, and gave the parties no opportunity to resolve their differences amicably.  The judge did not allow for discovery (even though the mother’s attorney requested it), did not allow the mother’s attorney to meaningfully participate in the proceedings; nor did the judge conduct a hearing despite the the fact that the parties’ claims were completely contradictory.

Requirements for ALL Custody Disputes

Thus, the Appellate Division affirmed that the following requirements must be adhered to in ALL custody disputes, no matter the docket type:

Pre-Hearing Requirements

• Pursuant to Rules 1:40-5 and 5:8-1, parties must attend Custody and Parenting Time Mediation prior to a trial.
• If parties are unable to resolve the issues in mediation, they must submit a Custody and Parenting Time Plan to the Court, pursuant to Rule 5:8-5(a) and the case Luedtke v. Shobert (Luedtke), 342 N.J. Super. 202, 218 (App. Div. 2001).
• Where there is “conflicting information regarding which parent can serve the long term best interest of the child,” but there is no issue as to the psychological fitness of either parent, the Luedtke case requires that a Social Investigation Report should be completed.
• In FD cases, if a party requests that the matter be placed on the “complex” case management track, the court can in its discretion grant this request under Major v. Maguire, 224 N.J. 1, 24 (2016), a case on which I have written in the past.  Absent a clear reason to deny such a request, it should be granted.
• Pursuant to Rule 5:8-1, an investigative report should have been prepared by court staff before any custody determination is made.

Required Plenary Hearing

In all contested custody matters, a thorough plenary hearing is required where parents make materially conflicting representations of fact, pursuant to K.A.F. v. D.L.M., 437 N.J. Super. 123, 137-38 (App. Div. 2014) and many other cases.  The plenary hearing must afford both parties the opportunity to present witnesses and to cross-examine the other party’s witnesses, and parties and counsel must have a meaningful opportunity to participate.

Requisite Fact-Findings and Reasons for Award

Judges must explicitly make findings of fact and apply those facts to the custody factors set forth in N.J.S.A. 9:2-4(c), which are:

• the parents’ ability to agree, communicate and cooperate in matters relating to the child;
• the parents’ willingness to accept custody and any history of unwillingness to allow parenting time not based on substantiated abuse;
• the interaction and relationship of the child with its parents and siblings;
• the history of domestic violence, if any;
• the safety of the child and the safety of either parent from physical abuse by the other parent;
• the preference of the child when of sufficient age and capacity to reason so as to form an intelligent decision;
• the needs of the child;
• the stability of the home environment offered;
• the quality and continuity of the child’s education;
• the fitness of the parents;
• the geographical proximity of the parents’ homes;
• the extent and quality of the time spent with the child prior to or subsequent to the separation;
• the parents’ employment responsibilities;
• the age and number of the children; and
• a parent shall not be deemed unfit unless the parents’ conduct has a substantial adverse effect on the child.

Without specifically addressing each and every one of the above factors after listening to the facts presented by both parties and assessing credibility, a court cannot make a determination as to what is in the child’s best interests.

Of course, ALL children and parents deserve this type of extensive inquiry into their welfare and the parent-child relationship – but thankfully this case makes it official and provides additional precedent for overruling or remanding trial court decisions made in haste, without the requisite inquiry.

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Jessica C. Diamond is an associate in the firm’s Family Law Practice, resident in the Morristown, NJ, office. You can reach Jessica at (973) 994.7517 or jdiamond@foxrothschild.com.

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No Tax Relief for Alimony Payments in the New Year

It feels like a strange thing to say but you may end up regretting not getting divorced sooner.

Judicial Estoppel Applies in Spill Act Cases

Terranova v. General Electric Pension Trust, ___ N.J. Super. ___ (App. Div. 2019).  Judge Moynihan’s opinion in this New Jersey Spill Compensation and Control Act case today addresses whether the doctrine of judicial estoppel is available in cases under that statute.  Plaintiffs asserted that judicial estoppel cannot be asserted under the Spill Act because of […]

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Pendent Appellate Jurisdiction

Reinig v. RBS Citizens, N.A., ___ F.3d ___ (3d Cir. 2018).  This was the final published opinion of 2018 for the Third Circuit.  Authored by Judge Vanaskie, the opinion reverses an order that granted class certification under Federal Rule of Civil Procedure 23 in this overtime pay dispute.  That issue was before the court on […]

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Top 8 Habits to Quit (from the Perspective of a Family Law Attorney)

I was in the middle of writing a blog about the 2018 Tax Cuts & Jobs Act and the non-alimony changes, when a friend of mine posted something on Facebook. This is friend who contracted a virus when we were in junior high school which left him in a wheelchair. Yet, he has always been one of the most upbeat and inspirational people I have ever known. He posted a list of 8 things to quit in 2019, and I realized it was the basis for my first post of the New Year. The tax laws will just have to wait.

The top 8 things to Quit in 2019, from a Family Lawyer’s Perspective:

Trying to please everyone: I think this is on the top of the list for a reason. It simply can’t be done, so stop trying! It’s impossible in the best of situations, and when a person is going through a divorce or other family law matter, the guilt of unsuccessfully trying to please everybody is simply going to drag you further into morass. Moreover, the reason it’s impossible even in the best of situations is that it’s not your responsibility to please everyone. It’s your responsibility to act fairly, listen to the other person’s perspective with an open mind, and be the best parent, son, daughter, former spouse or partner you can be.

Fearing change: for my clients, this is a biggie. Sometimes, staying in a toxic relationship is the less of two perceived evils. At least you know how it is. I can’t tell you how many times during my almost 30 year career that I have clients come back to me two or three years later to let me know that their lives are so much more peaceful. I can promise that during the time I represent a client, one of my most significant goals is to prepare the client for the next chapter in their life. I recognize that it is not easy. When children are involved, it is even more challenging. But remember, change can be good. When talking to children about the changes that are coming, talk about the adventures and new things that await, rather than what is being left behind. Stop worrying about what furniture you’re going to get from the former marital home – think about the new look that your new home is going to have.

Living in the past: as Pumbaa from the Lion King quoted, “It’s times like this my buddy, Timon, here says: you got to put your behind in your past.” I recognize that at one time, the person who a client is now separating from, divorcing, or otherwise having a conflict with was the person with whom a happy ending was expected. However, dwelling on what could have been, the times that were happier years ago, and what might’ve felt more secure isn’t going to allow forward movement.

Overthinking: this one is the lawyer’s tight rope. On the one hand, I want you to listen to me, and carefully consider what I am saying and think about the options I am suggesting you have. On the other, when a client hyper analyzes what I say, it can turn into a black hole of inability to actually make a decision. The most common reason for overthinking in the family law context is that people want a definite answer as to their future. Sadly, this is simply something I cannot give. But I can give you the most information that I have at my disposal to help you make the best decision you can.

Being afraid to be different: “No one in my family is divorced.” “There are no other single moms at the nursery school.” “I will be looked down upon in my church.” These are representatives of so many of the statements that I get from people who come in thinking about a divorce or separation. However, rather than focusing on being the one who can be criticized for doing something different, think about the respect and admiration that people are going give when you have the courage to make a positive change in your life as well as that of your children. Think of the role model you are becoming for those behind you.

Sacrificing your happiness for others: Yes, we all make some sacrifices for our children. However, other than this one small exception, you are entitled to be happy and as for the children, studies consistently show that when parents are happy children are happy.

Thinking you’re not good enough: You are good enough. Let me help you extract yourself from the person who is abusing you by making you think this way. Your relationship did not fail because you were not good enough. Your relationship changed due to a number of factors which may or may not have been any one person’s responsibility. So much of my time is spent listening to clients talk about what brought them to my office, and I realize that someone else has made them feel inadequate in some way. Changing that dynamic is one of the most important things that I can help them accomplish. For example, a mother might believe that she will not be an adequate mother now that she doesn’t have the same income to allow her to take the children to Disney World twice a year. Refocusing the conversation and budgeting for other activities that the children love becomes a priority to allow someone to move forward.

Thinking you have no purpose: To close with a quote from Leonard Cohen: “Ring the bells that still can ring, forget your perfect offering. There’s a crack in everything. That’s how the light gets in.”

Happy New Year to All.

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