MIAMI, FL – May 05, 2021- Bast Amron attorneys have filed claims against the former officers and directors of Orchids Paper Products, Inc.Following an investigation, Bast Amron attorneys Brett M. Amron, Dana Quick, Peter J. Klock, II, and paralegal Jane Fernandes de Pina, brought claims of breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and for fraudulent transfer, against the former officers and directors. The Bast Amron team is special litigation counsel to Buchwald Capital Advisors LLC, the Liquidating Trustee of the Orchids Paper Products Liquidating Trust. Buchwald Capital Advisors is also represented by Jennifer B. Kimble of Lowenstein Sandler LLP, as general counsel, and Marc J. Phillips of Montgomery McCracken Walker & Rhoads LLP, as local Delaware counsel.
Orchids Paper Products Company (“Orchids”), was a Delaware corporation headquartered in Pryor, Oklahoma, which both produced bulk tissue paper in parent rolls and converted same into private label tissue products sold in the retail consumer market. In 2015, Orchids’ officers and directors undertook an expansion of the company and transition from a regional supplier of value tissue products to a national supplier of premium tissue products. To do so, Orchids’ officers and directors undertook a bi-coastal expansion – purchasing converting equipment and a customer list on the West Coast through purchase, leaseback, and supply agreements; and building an integrated mill and converting facility on the East Coast. Each phase of the Orchids’ expansion was fraught with problems. Among other things, the officers failed to secure assignment rights in the West Coast agreements, which left the West Coast operations non-transferable, even though the ultimate goal of the expansion was to position Orchids for a sale as a national supplier. On the East Coast, Orchids’ management opted to build a brand new tissue plant with a first-of-its-kind machine, only to belatedly discover that efficiently constructing the project, and even using and maintaining the machine post-construction, was far beyond management’s capabilities. All of which came at a steep cost for the company. In sum, Orchids’ expansion was overly ambitious, poorly planned and executed, and ultimately resulted in the company filing for bankruptcy protection in April 2019.
The Bast Amron team conducted a complete post-mortem examination of Orchids’ operations, which investigation provided the facts alleged in the adversary complaint bringing claims against Orchids’ former officers and directors. The Liquidating Trustee alleges that, because of the breaches of fiduciary duties by the officers and directors, Orchids suffered at least tens of millions of dollars in damages.
The Liquidating Trustee’s complaint was filed on May 4, 2021, as an adversary proceeding to Orchids’ bankruptcy case pending in the U.S. Bankruptcy Court for the District of Delaware.
Main Bankruptcy Case: In re OPP Liquidating Company, Inc. (f/k/a Orchids Paper Products Company), jointly administered with OPP Liquidating Company of South Carolina, Inc. (f/k/a Orchids Paper Products Company of South Carolina), and OLSC Liquidating Company, LLC (f/k/a Orchids Lessor SC, LLC)
Main Bankruptcy Case Number: Case No. 19-10729 (MFW), pending in the United States Bankruptcy Court for the District of Delaware
Main Bankruptcy Case Filing Date: April 1, 2019
Main Bankruptcy Case Judge: Judge Mary F. Walrath, U.S. Bankruptcy Judge
Main Bankruptcy Proceeding: Buchwald Capital Advisors LLC, as Liquidating Trustee of the Orchids Paper Products Liquidating Trust, v. Jeffrey S. Schoen, Mindy Bartel, Rodney D. Gloss, Keith Schroeder, Steven R. Berlin, John C. Guttilla, Douglas E. Hailey, Elaine MacDonald, and Mark Ravich
Adversary Case Number: Case No. 21-50431 (MFW)
Adversary Filing Date: May 4, 2021
Adversary Judge: Judge Mary F. Walrath, U.S. Bankruptcy Judge
Plaintiff’s attorneys: Brett M. Amron, Dana R. Quick, Peter J. Klock, II
Defendants’ attorneys: Vincent E. Lazar, Jenner & Block LLP
Details: Orchids was a Delaware company headquartered in Pryor, Oklahoma. It was formed in 1998, out of a predecessor entity bankruptcy. From formation until 2014, Orchids was a regional supplier of value branded tissue products for retail sale. In 2014, the directors and officers sought to expand the company into a national supplier of premium tissue to position the company for sale. In doing so, the company purchased West Coast production facilities, customer lists, and a non-transferrable tissue supply agreement at a premium, significantly impacting the value of the company’s West Coast operations in a sale transaction. The company also built a new facility on the East Coast, but the directors and officers failed to properly oversee the buildout or operation of the new production facility and failed to properly understand, plan for, operate, or maintain the first-of-its-kind tissue machine installed there. Upon completion, the buildout of the East Coast facility was more than $30 million over budget, months behind schedule, and never achieved the margins or efficiencies management claimed it would.
As a result of the officers’ and directors’ breaches of their fiduciary duties, Orchids filed for Chapter 11 protection in April 2019. Creditors filed claims totaling $251,148,473.09 against the bankruptcy estate, while the sale of substantially all of Orchids’ assets only resulted in $207,000,000 – leaving more than $40,000,000 in claims unpaid. Buchwald Capital Advisors, the Liquidating Trustee for the Orchids Paper Products Liquidating Trust, retained Bast Amron as special litigation counsel to investigate and prosecute director and officer liability claims.
Plaintiff’s Case: The Liquidating Trustee alleges the former officers of Orchids, which included Jeffrey S. Schoen (CEO), Mindy Bartel (CFO), Rodney D. Gloss (CFO), and Keith Schroeder (CFO), breached their fiduciary duties to Orchids by failing to impose sufficient corporate safeguards and controls over Orchids’ financial and operational affairs, causing significant losses to Orchids’ enterprise value; burdening Orchids with additional debt even after it was insolvent; failing to oversee or hire competent individuals to manage the Orchids’ East Coast buildout; and incurring significant additional expenses while Orchids was hopelessly insolvent. The Liquidating Trustee also alleges that the former directors, which included Jeffrey S. Schoen, Steven R. Berlin (Chairman of Board), John C. Guttilla, Douglas E. Hailey, Elaine MacDonald, and Mark Ravich breached their duties to Orchids by failing to properly oversee and monitor the officers’ operation of the business; failing to educate themselves about the tissue industry to understand the inherent risks in the officers’ actions; knowingly ignoring glaring issues in Orchids’ financials, budgets, and projections; failing to make a change in leadership when it was clear the officers were not competent in directing Orchids’ activities; approving continued extensions of Orchids’ credit facility when it was already insolvent, thereby increasing its debts; and allowing Orchids to continue operating at a time when it was insolvent, unnecessarily increasing its insolvency.
Defendants’ Case: Defendants have not yet responded to the Complaint.
 Jeffrey S. Schoen, CEO 2013-2019 and BOD member 2007-2019; Mindy Bartel, CFO April 2018-April 2019; Rodney D. Gloss, CFO August 2016-March 2018; and Keith Schroeder, CFO 2002-July 2016.
 Steven R. Berlin, BOD member 2005-2019, and BOD Chair 2007-2019; John C. Guttilla, BOD member 2005-2019; Douglas E. Hailey, BOD member 2004-2019; Elaine MacDonald, BOD member 2013-2019; and Mark Ravich, BOD member 2013-2019.