A Bast Amron team consisting of Partners Brett M. Amron, Peter J. Klock, II, Attorney Alejandra Iglesia, and Paralegal Supervisor Jane de Pina serve as Special Litigation Counsel to the Modell’s Sporting Goods, Inc. (“MSGI”) Liquidation Trust. Bast Amron negotiated a $2.8M settlement with the former CFO of MSGI, which was formally approved by the Bankruptcy Court over the objections of the remaining defendants. Prosecution of the claims against the other defendants, including former CEO Mitchell Modell, continues following the Court’s ruling on motions to dismiss. Click here to view the 85-page opinion.
Brett Amron stated, “The claims against Mr. Modell and his family-owned entities are strong. The Liquidation Trustee is pleased with the outcome thus far, and looks forward to continuing prosecution of the claims and recovering more money for creditors.”
Bast Amron uncovered evidence that the sole director and CEO of MSGI, Mitchell Modell, was aware that MSGI was insolvent and could not be returned to profitability years before the company declared bankruptcy in March 2020. However, as alleged in the lawsuit, because Mr. Modell determined that Modell-family-owned real estate holding entities would suffer a cash flow crisis and exposure to more than $150M in liability as a result of MSGI filing for bankruptcy, he concocted a scheme to “sacrifice” MSGI to preserve his own wealth (which was documented in a presentation prepared at his direction). With the help of MSGI’s CFO for the express and intended purpose of prioritizing his own family’s wealth over the interests of MSGI and its creditors, Mr. Modell caused MSGI to incur hundreds of millions of dollars in debt to unpaid creditors between 2017 and 2020 while enriching himself via an arm-in-arm transaction, fraudulent transfers, and the elimination of $90M of liability on $150M worth of real estate holdings.
Bast Amron filed suit against the former officers of MSGI for the breach of their fiduciary duties, six affiliated real estate holding companies owned by the Modell family for, among other things, aiding and abetting the officers’ breach of their duties, and Mr. Modell for authorizing nearly $11.5M in unlawful dividends while the company was insolvent.
The defendants filed seven motions to dismiss the claims against them, but as set forth in the Bankruptcy Court’s opinion, every one of the Liquidation Trustee’s twelve claims will proceed. The defendants each answered the amended complaint on May 31, 2023, and the case is proceeding toward discovery and trial.