Art Van Allowed Chapter 7 After ‘Parade of Unfortunate Events’

Michigan-based furniture retailer Art Van Furniture LLC will enter Chapter 7 at midnight after coronavirus containment measures closed stores and drove the company into default.

The case is “a parade of unfortunate events that have conspired to put a longstanding, solid business into liquidation,” Chief Judge Christopher Sontchi of the U.S. Bankruptcy Court for the District of Delaware said at a telephonic hearing Monday.

The Chapter 7 conversion comes about a month after the company filed for Chapter 11 bankruptcy protection with plans to sell 44 Wolf and Levin branded stores and hold going-out-of business sales at the rest of its 169 stores.

Just days after getting the green light for its going-out-of-business sales, the company was forced to shutter all locations in response to government-mandated orders to stop the spread of Covid-19, the disease caused by the virus.

Sontchi said he felt “very strong sympathy” for creditors, employees, and customers who will lose money or not get paid right away, and couldn’t “blame anyone or anything but the coronavirus and the disaster that it has left in its wake.”

Sontchi signed the order to convert the case Monday, paving the way for a Chapter 7 trustee to be appointed and take control of the company’s liquidation.

The U.S. Trustee’s Office also raised concerns Monday that Art Van’s law firm, Benesch, Friedlander, Coplan & Aronoff LLP, may have had a conflict of interest because it also represented the furniture retailer’s lender, Wells Fargo Bank N.A.

Although Benesch obtained conflict waivers from both Art Van and Wells Fargo, the Wells Fargo waiver “did not cover any workout or restructuring efforts by Benesch if there was a default by the Debtors, which in fact is what has occurred,” the Justice Department’s bankruptcy watchdog said.

“We’re confident that this is something that can be worked out to everyone’s satisfaction with a little more time to discuss the situation,” Benesch attorney Gregory Werkheiser, who’s representing Art Van, said in an email to Bloomberg Law Monday.

A hearing on the U.S. Trustee’s objection will be heard April 27.

The case is Art Van Furniture, LLC, Bankr. D. Del., No. 20-10553, Order 4/6/20.

For additional legal resources, visit Bloomberg Law In Focus: Coronavirus.