Bankruptcy Lawyer Bryan W. Stone answers the question: “What is a small business bankruptcy ?”
Bus manufacturer DesignLine infamously relocated to Charlotte, North Carolina in 2006 from New Zealand and it has been a largely uphill drive for the company ever since.
It didn’t start out that way—the company initially attracted high-profile investors including former Gov. Jim Martin, and set up shop in a factory off Westinghouse Boulevard. They hired local name Anthony Foxx, former Charlotte mayor and current U.S. Transportation Secretary, as general counsel and set about manufacturing buses for transit agencies in cities around the country as well as locally.
The Charlotte Douglas International Airport purchased 10 hybrid DesignLine buses at a cost of nearly $5 million in 2007 in an effort to become more environmentally friendly. However, the vehicles were notoriously plagued with maintenance problems from almost the beginning, including brake issues and a fire.
The Charlotte buses were just one of the bus company’s problems. DesignLine also came to face contract cancellations and lawsuits from other cities over late deliveries and performance problems.
Then in 2013, the bus manufacturer filed for bankruptcy. That same year, The Charlotte Observer reported that the FBI was conducting an investigation into allegations that DesignLine was putting used parts on new buses.
Meanwhile, DesignLine customers were struggling to keep the expensive buses operational. Allegedly-new parts had skyrocketed in price, especially since the company filed for bankruptcy. The Charlotte Douglas Airport auctioned off all of its DesignLine buses in 2014 for a fraction of what was paid for them in an attempt to stop hemorrhaging money keeping them operational.
Then, the trustee in DesignLine’s bankruptcy case filed a wide-ranging lawsuit against former officials within the company, alleging fraud, breaches of fiduciary duty and violations of racketeering statutes. Some of the allegations in particular pertained to former Charlotte mayor Foxx.
Among other things, the bankruptcy trustee’s lawsuit alleged that the company had hired Foxx in an attempt to influence him to secure contracts with the government. That lawsuit did not name Foxx as a defendant.
However, the bankruptcy trustee also sued Foxx separately in order to recover the more than $300,000 in pay the former mayor received in pay as DesignLine’s deputy general counsel from 2009 to 2013. The trustee’s complaint claimed that company documents showed Foxx had done little to no work during that time period.
From the beginning of his tenure at DesignLine, Foxx was already working as mayor of Charlotte, where he remained until he was nominated to President Obama’s Cabinet in 2013.
The filing included excerpts from emails between Foxx and DesignLine top executives showing frustration with the attorney’s responsiveness, sometimes for months at a time.
Foxx and his attorneys, meanwhile, have responded by recounting emails demonstrating Foxx did do substantive work for the company. Court records reportedly indicate that should the case eventually proceed to a bench trial in bankruptcy court, Foxx would testify on his own behalf.
However, in allowing the case to proceed, the judge urged both sides to discuss possible settlement and mutually cooperate with releasing discovery—most of which seem to consist of emails—to the other side.
Meanwhile, the broader-ranging fraud lawsuit filed against DesignLine’s executives is still pending as the judge decides on whether or not to grant the executives’ motion to dismiss.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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