Lowenstein Client, Modell’s Liquidation Trustee, Secures $22.7M Settlement in Multi-Year Litigation Against Former D&Os, Insiders and Affiliates

With the guidance of Lowenstein Sandler's Bankruptcy & Restructuring Department, the Liquidation Trustee appointed in the Chapter 11 cases of iconic sporting goods retailer Modell's Sporting Goods, has secured a $22.7 million settlement in litigation against Modell's former CEO and other defendants, including several Modell family-owned companies, and a Modell family trust.

If approved by the Bankruptcy Court, the settlement will resolve claims brought by the Liquidation Trustee on behalf of the MSGI Liquidation Trust, ending more than two years of litigation over circumstances related to the collapse of the retailer, led by Lowenstein's litigation co-counsel at Bast Amron LLP. Modell's filed for bankruptcy in early March 2020-just before Covid-19-related closures began.

The claims alleged that company executives prioritized the interests of Modell-affiliated entities over the interests of the debtors, thus incurring significant damages recoverable for the benefit of the company's creditors. The litigation also sought to recover millions in shareholder distributions paid to the Modell family trust while the company was allegedly insolvent.

The settlement consideration will consist of $15 million in cash and a promissory note for $7.7 million, plus interest. In support of the compromise, the Liquidation Trustee cites the cost, delay and uncertainty of litigation and potential difficulties in collecting a judgment in excess of the settlement amount.

The hearing to approve the settlement is scheduled for May 21.

Lowenstein and Bast Amron are co-counsel to the Liquidation Trustee, Steven Balasiano of MHR Advisory. Saccullo Business Consulting serves as the Liquidation Trustee's financial consultant/advisor.

The Lowenstein team includes Jeffrey Cohen, Michael A. Kaplan, Nicole Fulfree, and Michael Papandrea. Lowenstein initially served as counsel to the Official Committee of Unsecured Creditors in Modell's Chapter 11, through which Modell's liquidated all of its stores and successfully confirmed a chapter 11 plan of liquidation.

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