Government seeks dismissal of Fountain bankruptcy filing - Trade Only Today

Government seeks dismissal of Fountain bankruptcy filing

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A U.S. Trustee filed a motion to dismiss Fountain Powerboats’ Chapter 11 bankruptcy case or, in the alternative, appoint a Chapter 11 trustee.

The motion, filed last Friday by U.S. Trustee Donald Walton, from Miami, questions whether Ronald Glass, who had been appointed the temporary receiver in North Carolina, had the jurisdiction to file the petitions for Chapter 11.

Fountain Powerboats and its affiliates filed Jan. 18 for Chapter 11 bankruptcy protection for the second time in less than three years. The filing was recorded with the bankruptcy court in the Southern District of Florida in West Palm Beach. The company listed more than $53 million in liabilities and less than $50,000 in assets, according to court documents.

A North Carolina Business Court judge appointed Glass a temporary receiver last October in First Capital's case against Fountain Powerboats and other defendants. First Capital is seeking $61.04 million in damages from Fountain Powerboats and other entities for the "borrower defendants' " breach of loan agreements, according to documents filed earlier this month in the North Carolina court.

Walton, in court papers, said Glass did not seek or receive permission from the North Carolina court to file the Chapter 11 petitions, and after the petition was filed the North Carolina court said it no longer had jurisdiction over Fountain and the other entities in the case.

“The United States Trustee does not know why the receiver placed these entities into Chapter 11. It is clear, however, that once the petitions for relief were filed, the North Carolina state court that entered the order appointing temporary receiver no longer has jurisdiction over these entities. Therefore, the receiver is no longer bound by North Carolina law,” Walton said in his motion.

“The receiver not only no longer has to report and be accountable to the North Carolina state court, he also no longer [has] a fiduciary responsibility to any party,” Walton added. “He cannot be removed by any board of directors or shareholders because the state court took away their ability to act. As such, the receiver has free reign to take actions far in excess of the authority given to him before the bankruptcy petitions were filed, such as liquidating the estates.”

Glass did not immediately return a request for comment.

Walton asked for an evidentiary hearing on his motion for Feb. 21, the day the court scheduled a hearing for another motion to dismiss the Chapter 11 petitions, which was filed by Joseph Wortley.

According to Walton’s filing, the ownership of Fountain, and the related entities, breaks down like this:

• Debtor American Marine Holdings LLC is the parent corporation, owning 100 percent of Donzi Marine LLC; AMH Government Services LLC; Pro-Line Boats LLC; and Fountain Powerboats LLC. AMH is owned by 50509 Marine LLC. The Wortley American Marine Trust is a 20 percent owner and 50509 Marine Corp. is an 80 percent owner of 50509 Marine LLC. In turn, The Wortley 50509 Marine Corp. Trust owns all of the interests of 50509 Marine Corp.

• Liberty Acquisitions FPB LLC, a non-debtor entity, is the parent company, owning 100 percent of the following debtor entities: Fountain Powerboat Industries Inc.; Fountain Powerboats Inc.; Fountain Dealers Factory Super Store Inc.; and Baja By Fountain Inc. Liberty Associates LC owns all of the interests of Liberty Acquisitions FPB LLC. Joseph Wortley owns 99 percent, and Bill Gates owns 1 percent of Liberty Associates LC.

• Wortley owns 100 percent of Palmetto Park Financial LLC.

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