Six months after the wine store Premier Cru abruptly shut it doors, leaving thousands of customers without access to the wine they had purchased, relief may be on the way.
The bankruptcy trustee appointed to liquidate the wine company’s assets recently reached a settlement with a disgruntled patron that will allow many customers to recoup a portion of their investment — but only for pennies on the dollar.
The settlement affects about 4,800 customers, but excludes another 2,300 or so who may not see any refunds.
Michael D. Podolsky, who had $383,000 in wine stuck in Premier Cru’s warehouse, filed a class action lawsuit in April against the trustee, Michael Kasolas, challenging his contention that most of the 79,000 bottles of wine in the warehouse at 1011 University Ave. belonged to the estate and not to the people who purchased the bottles. Podolsky believed the bottles belonged to those who had paid for them.
Kasolas’ attorney, Mark Bostick, had argued in court that a 2009 bankruptcy case involving the Carolina Wine Company had determined that an estate owned the wine until it was actually shipped to a client. The trustee had planned to liquidate most of the bottles and use the proceeds to pay back secured creditors.
Read more Berkeleyside coverage of Premier Cru
But the bankruptcy judge overseeing the case, William Lafferty, indicated from the bench in mid-May that he didn’t agree with the trustee’s basic legal argument. He said it was not “a matter of law.” That meant that Kasolas and Bostick would have had to have mounted a lengthy and expensive legal defense to prove their point.
Spending months in court could have drained the estate of all its funds, leaving it without enough money to continue renting the air-conditioned warehouse where the wines are stored.
So the two sides settled in early June.
“The legal arguments and disputes between the Trustee and the plaintiff … are extremely complicated, numerous and difficult to resolve,” according to the settlement documents filed in court. “In all likelihood, nonconsensual resolution of those disputes would consume many months or years of litigation, at much greater expense and at significant risk of loss. In addition, the bottles of wine in question would need to be stored and preserved at substantial cost throughout the litigation, and the Trustee’s limited funds and other resources, and lack of long-term warehouse occupancy, would make such storage and preservation highly problematic and unlikely. As a result, at the end of the litigation, there might be nothing left of value to recover, despite prevailing on the issues.”
Judge Lafferty will hold a hearing July 27 to rule on the settlement, although he gave tentative approval from the bench in early June.
The people who will benefit most from the settlement are those whose wine had been boxed and addressed and were in a special section of the warehouse awaiting shipping. They will be able to get their wine back after they pay 20 cents on each dollar of cost plus tax, shipping, and handling. This group only makes up a small percentage of the creditors, as there were only 2,674 segregated bottles, about 3.4% of the total collection.
The customers who had general bottles stored in the warehouse and the ones whose wines John Fox, the owner of Premier Cru, had sold multiple times will get a small fraction of what they paid for their wines. They will not have the ability to get back the actual bottles. They can recover anywhere from five cents to 30 cents on the dollar, according to court documents.
The most unlucky customers are the ones who had paid for wine “futures,” or wines that were still aging in casks around the world and had not yet been delivered to Premier Cru. There are about 2,319 customers who paid $45 million for wine that has not been delivered, according to Wine Spectator. It is unlikely this group will see any money.
Now that a settlement has been reached, the trustee plans to auction off the entire collection. Kasolas expects the bottles of wine will fetch at least $5 million, or about $63 per bottle. They may sell for more. Kasolas said the customers should get around $2 million of the proceeds, with the rest going to secured creditors and legal fees.
The two law firms that brought the class action suit, Meyer Law Group and Chavez & Gertler of Mill Valley, are seeking 25% of the sale, up to $650,000, according to court documents. The trustee’s expenses of at least $155,000 will also come from the settlement, according to court documents.
The fate of the building at 1011 University Ave. is still unknown. While Fox’s LLC owns the property, it has numerous liens against it. The Taylor Family trust lent Fox $3.8 million and filed notice in court that it planned to foreclose on the property. That action has been postponed until November, said William King, the attorney for the trust.
The LLC also owes more than $130,000 in back taxes on the building.
The 29,610-square foot property with three buildings is for sale for $6.8 million.
The settlement is a major step in resolving Premier Cru’s problems but not Fox’s. The FBI is still investigating him for possibly running a Ponzi scheme. He has also filed for personal bankruptcy.
Related:
Premier Cru not run in a ‘reliable fashion’ (05.05.16)
Premier Cru owner had penchant for expensive cars (03.08.16)
Customers confront owner of bankrupt wine store (02.25.16)
Troubles mount for Premier Cru as FBI steps in (02.11.16)
Berkeley’s Premier Cru paid its tech staffer in wine (02.04.16)
Shop Talk: The ins and outs of Berkeley businesses (12.22.15)
Berkeley store sued for not delivering $3M worth of wine (10.29.15)
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