In a closely watched retail bankruptcy case, a federal judge has granted Modell’s Sporting Goods a second suspension of its bankruptcy proceedings amid the COVID-19 crisis.
The retailer was granted its first suspension on March 27, allowing it to defer April 1 rent due to its store’s landlords. Law firm Cole Schotz P.C. said it secured the suspension to counter the operational shutdown of Modell’s store closing sales caused by COVID-19. In making what it called “ground-breaking law,’ Cole Schotz said it relied on an infrequently used bankruptcy law provision in a way no party had ever done, allowing the sporting goods retailer to temporarily freeze its Chapter 11 case until at least April 30.
In granting the second suspension, the same judge again referenced infrequently used bankruptcy law provision, Section 305 of the U.S. Bankruptcy Code, to suspend bankruptcy proceedings until May 31, citing the extraordinary circumstances that continue to be faced with the coronavirus pandemic. (The Cole Schotz team was led by Michael D. Sirota, co-chairman of the firm’s bankruptcy and corporate restructuring department, and included members David M. Bass, Felice R. Yudkin and Rebecca Hollander.)
The second suspension, unlike the first, was granted over the objections filed by approximately 44 landlords for slightly fewer than half of Modell’s 134 stores, according to a report by law.com. At the hearing, which was done via teleconferencing, the landlords said that they are suffering hardship with the loss of rent and that the debtors are running the case.