In re Manolo Blahnik USA, Ltd.

• Decision Date: 18 August 2020
• Docket Number: Case No. 20-11102 (MG)
• Parties: IN RE: MANOLO BLAHNIK USA, LTD., Alleged Debtor.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

619 B.R. 81

IN RE: MANOLO BLAHNIK USA, LTD., Alleged Debtor.

Case No. 20-11102 (MG)

United States Bankruptcy Court, S.D. New York.

Signed August 18, 2020

POLSINELLI PC, Attorneys for Alleged Debtor, 600 Third Avenue, 42nd Floor, New York, New York, 10016, By: Jason A. Nagi, Esq., Morgan C. Fiander, Esq.

DENTONS US LLP, Attorneys for Petitioning Creditor, 1221 Avenue of the Americas, New York, New York 10020, By: Robert A. Hammeke, Esq., Lauren Macksoud, Esq.

MEMORANDUM OPINION AND ORDER DENYING ALLEGED DEBTOR'S MOTION TO DISMISS THE INVOLUNTARY PETITION

MARTIN GLENN, UNITED STATES BANKRUPTCY JUDGE

This case involves a dispute arising from the distribution within the United States of very expensive shoes—branded as Manolo Blahnik—manufactured in Italy and distributed to luxury stores in many places across the globe. Pending before the Court is Manolo Blahnik USA, Ltd.'s ("Alleged Debtor") Motion to Dismiss the Involuntary Petition filed by Calzaturificio Re Marcello S.R.L. ("Petitioning Creditor") pursuant to sections 303(b)(1) and 303(h) of the Bankruptcy Code. ("Motion," ECF Doc. # 14.) The Alleged Debtor was the exclusive distributor of Manolo Blahnik shoes in the United States before its license was not renewed in 2019. The Motion is supported by a memorandum of law ("MOL," ECF Doc. # 11) and the declaration of Denny Rodriguez ("Rodriguez Declaration," ECF Doc. # 12), the Alleged Debtor's Comptroller. On July 17, 2020, Petitioning Creditor filed a memorandum of law in opposition to the Motion. ("Response," ECF Doc. # 17.) The Response is supported by the declarations of: (1) Georgina McManus, the Global General Counsel of Petitioning Creditor's parent company ("McManus Declaration," ECF Doc. # 18); (2) Andrew Wright, the Chief Commercial Officer of Petitioning Creditor's parent company ("Wright Declaration," ECF Doc. # 19); and (3) Cardile Antonia, the Petitioning Creditor's Chief Administrative Officer ("Antonia Declaration," ECF Doc. # 20). On July 21, 2020, the Alleged Debtor filed a reply. ("Reply," ECF Doc. # 21.) On July 23, 2020, the Petitioning Creditor filed a sur-reply. ("Sur-Reply," ECF Doc. # 22.) The Sur-Reply is supported by a second declaration of Georgia McManus ("Second McManus Declaration," ECF Doc. # 23) and a second declaration of Andrew Wright ("Second Wright Declaration," ECF Doc. # 24). On July 24, 2020 the Alleged Debtor filed a supplemental declaration of Denny Rodriguez. ("Second Rodriguez Declaration," ECF Doc. # 25.) On July 24, 2020, the Court held a hearing (the "Hearing") on the Alleged Debtor's Motion and took the Motion under submission.

An involuntary petition filed by a single creditor must be dismissed if there is a bona fide dispute of either a genuine issue of material fact that bears upon the debtor's liability or a meritorious contention as to the application of law to undisputed facts. The Petitioning Creditor's claims in this case arise from two unpaid invoices totaling €949,567.00, arising from two separate transactions in 2019, each billed separately to the Alleged Debtor for the purchase of Manolo Blahnik branded shoes. The Motion and declarations underscore that, objectively viewed, there are disputed issues of material fact relating only to the second unpaid invoice in the amount of €403,181.10. There are no disputed issues of fact or law arising from the first unpaid invoice.

The Court holds below that the portion of the Petitioning Creditor's claim in the amount of "at least" $601,447.60 or €546,386.00 ¹ arising from the first unpaid invoice was a separate transaction and is not "contingent as to liability or the subject of a bona fide dispute as to liability or amount." 11 U.S.C. § 303(b)(1). The Petitioning Creditor's undisputed claim as to liability and amount for the first transaction makes it eligible to file the Involuntary Petition, even if the claim from the separate, second transaction is disputed as to liability or amount.

Therefore, the Alleged Debtor's Motion to Dismiss is DENIED. The Alleged Debtor is ordered to answer the Involuntary Petition within 21 days from the entry of this Opinion and Order. The answer must comply with Bankruptcy Rule 1003(b).² Once the Alleged Debtor files its answer, the Court will hold a case management conference to determine whether a trial is necessary before entering an order for relief. At the case management conference, the parties shall address whether they intend to take any discovery.

I. BACKGROUND

On May 4, 2020 (the "Petition Date"), the Petitioning Creditor filed an involuntary chapter 7 petition against the Alleged Debtor. ("Involuntary Petition," ECF Doc. #1.) The Involuntary Petition alleges that the Alleged Debtor was generally not paying its debts as they became due. (See id. ) The Involuntary Petition states the amount of the Petitioning Creditor's claim to be "at least" €546,386.00. (Id. ) The facts, as set forth in the Motion and declarations submitted to this Court, are detailed below.

A. Manolo Blahnik Entities

The Petitioning Creditor is an Italian private limited company that is 100% owned by Manolo Blahnik International, Lmtd. ("Parent"). (Id. at 5; MOL at 6.) The Petitioning Creditor is a manufacturer of luxury products and manufactures Manolo Blahnik branded products. (McManus Declaration ¶ 4.) In July 2019, Parent acquired the entire issued share capital of the Petitioning Creditor. (Id. ) Parent designs, markets and sells luxury apparel, including luxury shoes and accessories under the Manolo Blahnik brand. (Response at 7.)

The Alleged Debtor was previously the exclusive licensee to sell both women's and men's Manolo Blahnik shoes in the United States; in 2019, its license was not renewed. (Rodriguez Declaration ¶ 2.) Parent then created a new entity, Manolo Blahnik Americas, LLC ("Affiliate"), to take over the Alleged Debtor's licensee rights and responsibilities on January 1, 2020. (Id. ; Response at 10.) On November 25, 2019, Parent and the Alleged Debtor entered into a "transition deed" (the "Transition Deed"), detailing the transition of licensing and responsibilities from Parent to Affiliate. (MOL at 9; Response at 10.) The Transition Deed provided that the Alleged Debtor would send a daily tally of inventory, and return all samples, drawings, and other Manolo Blahnik materials to Parent. (MOL at 9.) The Transition Deed also provided that calls and emails relating to new business in North America that had been previously directed to the Alleged Debtor should be directed to Andrew Wright ("Wright"), the Commercial Officer of Parent and President of Affiliate. (MOL at 9; Response at 10.) At the Hearing, the two parties clarified that the Transition Deed provided that Affiliate would begin its licensing responsibilities on January 1, 2020, but that Affiliate's business relationship with Neiman Marcus could begin on the date of the Transition Deed. The Alleged Debtor stated that its business continues to operate for the purpose of collecting debts owed to it by other parties, specifically including Neiman Marcus. However, the Alleged Debtor is no longer distributing any products.

The Petitioning Creditor argues that it conducts its business independently of Parent and Affiliate through separate corporate structures and corporate financial records. (McManus Declaration ¶¶ 6, 8, 9.) The Petitioning Creditor's board of directors is different from Parent's and Affiliate's boards of directors, aside from one member, Ms. Eva Kristina Hulsebus, who sits on both boards. (Id. ¶¶ 4, 7.) The Second McManus Declaration provides that each entity is separately formed and maintained and separately capitalized. (Second McManus Declaration ¶ 6.) The Petitioning Creditor's funds and property are used solely for the benefit of Petitioning Creditor, and not for the benefit of Parent or Affiliate. (McManus Declaration ¶ 11.) Except for certain officer-level employees, the companies have separate employees. (Second McManus Declaration ¶ 6.) The companies do not share a website, and emails are sent from separate domains. (Id. ) McManus represents that Parent purchases products from the Petitioning Creditor at arm's length terms that are profitable to both. (McManus Declaration ¶ 12.) The Petitioning Creditor and the Alleged Debtor conducted business directly when the Alleged Debtor wished to place an order. (Response at 7.)

By contrast, the Alleged Debtor maintains that the Petitioning Creditor and the Manolo Blahnik corporate family are jointly owned and controlled, supporting an agency relationship and alter ego liability. (Reply at 6–7.) The Alleged Debtor highlights that Parent is the parent company of both Affiliate and the Petitioning Creditor. (Id. at 6.) McManus, Global General Counsel to Parent, also provides legal support to Affiliate and the Petitioning Creditor and is a member of the Board of Directors that manages the Petitioning Creditor. (Id. at 6–7.) McManus's email communications with Denny Rodriguez show that she acted on behalf of the Petitioning Creditor by pressuring Alleged Debtor to pay the Petitioning Creditor. (Rodriguez Declaration ¶ 19, Ex. H; MOL at 21.) The Alleged Debtor also points out that the various companies in the Manolo Blahnik corporate family are all presented to the public as one unit and use the same email domain and website. (See Rodriguez Declaration, Exs. C–F; Reply at 6–7.)

B. Petitioning Creditor's Unpaid Invoices and Two Neiman Marcus Purchase Orders

1. The First Neiman Marcus Purchase Order

In June 2019, Neiman Marcus placed an order with the Alleged Debtor for a collection of shoes. (MOL at 7; Rodriguez Declaration ¶ 4.) The Alleged Debtor subsequently placed the order with the Petitioning Creditor, who shipped the collection to the Alleged Debtor between October 15, 2019 and December 15, 2019. (MOL at 7; Rodriguez Declaration ¶ 4.) The Alleged Debtor then shipped the collection to Neiman Marcus. (MOL at 7; Rodriguez Declaration ¶ 4.) On or about November 3, 2019, the...