Bad Faith or Business Judgment?June 1, 2021 – Herrick Restructuring Review
The Herrick Restructuring Review provides insights and information related to restructuring and finance litigation. The Herrick team regularly represents official and ad hoc creditor committees, hedge funds, distressed debt investors, bondholders, and other parties in interest, and often serve as conflicts or special counsel for large-scale complex litigation matters.
Brooks Brothers’ minority shareholders and unsecured creditors, TAL Apparel Ltd. (“TAL Apparel”) and its subsidiary Castle Apparel Ltd. (“Castle”), recently brought an action against the men’s retailer’s former owners, the Del Vecchio family. TAL Apparel and Castle allege bad faith and more than $100 million in damages for losses arising from the Brooks Brothers bankruptcy. TAL Apparel alleges that the Del Vecchio family did not engage “in good faith” with potential buyers in 2019, and “put their own financial interests ahead of the Company” by refusing to pursue bids for acquisition prior to filing for chapter 11 in 2020. According to TAL Apparel and Castle, Brooks Brothers was sold for $325 million to SPARC group in 2020, “for a fraction of the price set forth in the 2019 bids.” This case will test the extent of protection provided to business owners who liquidate in chapter 11.
The case is Castle Apparel Ltd. et al. v. Del Vecchio et al., No. 1:21-cv-04406, (S.D.N.Y. 2021).
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