About 56 Clawback Actions Initiated in Charming Charlie Holdings, Inc and its affiliates Bankruptcy
May 4, 2021, District of Delaware – Last month, about 56 adversary proceedings were initiated in Charming Charlie Holdings, Inc. and 6 affiliated debtors (collectively, the “Debtors” or “Plaintiff”) bankruptcy case for the return of about $12 million in alleged preference transfers.
Plaintiff seeks to avoid and recover all “preferential transfers” of property that occurred during the ninety (90) day period before the commencement of the Debtors’ bankruptcy case under sections 547 and 550 of chapter 11 of title 11 of the Bankruptcy Code. Plaintiff also seeks to avoid and recover any transfers that may have been “fraudulent conveyances” according to sections 548 and 550 of the Bankruptcy Code.
The Debtors were a leading specialty retailer focused on colorful fashion jewelry, handbags, apparel, gifts, and beauty products. As contended in the complaint, the Debtors had over 390 stores spread across the United States, Canada, the Middle East, and the Philippines. The Debtors’ retail stores were located in lifestyle centers, shopping malls, power centers, street-level shops, and outlets. Allegedly, the Debtors began to experience a decline driven primarily by an “overly broad vendor base, a disproportionately large physical footprint, certain operational missteps, and challenging retail market conditions.” These factors apparently tightened the Debtors’ liquidity and complicated their relationship with their vendors. Industry-wide declines in the sale and traffic supposedly exacerbated these factors. As alleged in the complaint, there was no viable option to remain as a going concern and the Debtors finally decided to proceed with liquidation, closing all stores and winding down their business.
The Debtors maintained business relationships with various business entities and individuals, through which they regularly purchased, sold, received, and delivered goods and services. Some of the largest cases in the group had been filed against Secret Charm, LLC, Moa Moa, Inc, Salesforce, Inc., 9th Wonder, Our America, Inc., et al. Secret Charm, LLC has been sued for return of $1,737,000.00
Charming Charlie Holdings, Inc. and 6 affiliated debtors filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware on July 11, 2019. The cases are pending before the Honorable Christopher S. Sontchi and are jointly administered under Case No. 19-11534.