Since I first posted about the Whitehall credit dispute, I have gotten a lot of feedback from people anxious to know what is happening with the case …
For the moment, things seem status quo. According to sources present, there were considerable “fireworks” at the hearing yesterday. The judge has agreed to segregate the proceeds from consignment goods from everything else being sold at the upcoming auction — something sought by the consignors’ attorneys. Still, the issues remain up in the air.
A key issue, attorneys tell me, is whether the UCCs have to be “perfected” to be upheld. So the fact that Whitehall apparently changed its spelling of “Jewelers” from two “l”s to one “l,” and changed its location to Delaware, and this may not have been reflected in the filings, is, in the view of the Whitehall side, enough to contest the UCCs.
At least one person on the consignors’ side seemed optimistic the UCCs would be upheld. “[If they weren’t], it would be such a bombshell not just on this case but on UCCs in general,” that person noted. One of the attorneys also noted that Whitehall’s consignors were not required to file UCCs. (I haven’t been able to get in touch with anyone from the Whitehall side, but would be happy to include their point of view here.)
This is all another sign that creditors in bankruptcies may not always be as protected as they think. And that outsiders like hedge funds who come into the industry don’t always play by our rules.
You can read the transcript of the hearing where these issues first came up here. (Warning: It’s a PDF, you have to download it, and it’s quite lengthy. But there is some interesting stuff there.)