Modell’s Sporting Goods’s bankruptcy proceedings were suspended until April 30 after COVID-19 restrictions temporarily shuttered stores to prevent going-out-of-business sales.
The ruling, the first known one of its kind pertaining to bankruptcies, allows Modell’s to suspend bankruptcy proceedings until April 30, as well as not having to pay April rent to landlords. Modell’s was in the midst of closing its 134 stores after filing for Chapter 11 bankruptcy on March 11.
In court documents, Modell’s lawyers said that the “unprecedented, exponential spread of Coronavirus disease” has impacted its bankruptcy proceedings, most notably its liquidation sales.

“Notwithstanding the debtors’ best-laid plans, COVID-19 has prevented the debtors from conducting the robust liquidation sales that seemed possible just one week ago,” the retailer wrote.

Mitchell Modell, chief executive officer and president of Modell’s Sporting Goods, issued a statement following the granting of the suspension: “I want to personally thank Judge Vincent F. Papalia for being so understanding in these most difficult and unprecedented times. … I also appreciate the collaborative efforts of the vendors and landlords in reaching this temporary solution.”

Modell’s landlords had objected to the suspension due to the uncertainty caused by the coronavirus. The landlords said in court papers earlier last week, “Simply put, it is not appropriate to prevent a creditor from seeking relief from the Court during the suspension period. Creditors cannot predict how COVID-19 events will affect their own situation.”  The landlords also asked Modell’s to put together a revised plan by the last week of April.

Earlier this week, Modell’s landlord creditors had filed a letter in response to the retailer’s suspension request expressing “serious concerns” about the relief being sought.

“Simply put, it is not appropriate to prevent a creditor from seeking relief from the Court during the suspension period. Creditors cannot predict how COVID-19 events will affect their own situation,” the letter read. The landlords had further asked Modell’s to put together a revised plan by the last week of April.

In making what it called “ground-breaking law,’ Cole Schotz relied on an infrequently used bankruptcy law provision in a way no party had ever done, the firm said, allowing the sporting goods retailer to temporarily freeze its Chapter 11 case until at least April 30. The bankruptcy process is expected to resume once the coronavirus crisis is no longer deemed a threat and the stores can resume operations.

“We are extremely pleased to have obtained this first-of-its-kind order for Modell’s given the unprecedented circumstances posed by COVID-19,” said Michael D. Sirota, co-chair of the bankruptcy & corporate restructuring department at Cole Schotz. “We are thankful that Judge Vincent F. Papalia extended extraordinary time, effort and considered the extraordinary circumstances in granting the requested relief for the benefit of all parties.”

Mitchell Modell, CEO and president of Modell’s Sporting Goods, said, “I want to personally thank Judge Vincent F. Papalia for being so understanding in these most difficult and unprecedented times. The brilliant team of Michael Sirota and his spectacular colleagues from Cole Schotz presented clear facts, working around the clock to accomplish this result. I also appreciate the collaborative efforts of the vendors and landlords in reaching this temporary solution.”

Photo courtesy Modell’s