A New York bankruptcy judge confirmed the liquidation plan for Mercon Coffee Corp., ruling against rewarding corporate insiders with litigation release for sticking through the Chapter 11 case.
Judge Michael E. Wiles’ Decision
U.S. Bankruptcy Judge Michael E. Wiles approved the plan on Tuesday, allowing Mercon to wind down after selling its assets in Nicaragua, Brazil, and Vietnam.
Chapter 11 Filing
Mercon, alongside ten affiliates, filed for Chapter 11 in December, citing $363.3 million in debt due to COVID-19 disruptions, inflation, and a nine-year low in coffee futures.
Opposition from U.S. Trustee’s Office
The U.S. Trustee’s Office opposed the Chapter 11 plan, arguing against the provisions that released potential claims against 19 corporate insiders.
Mercon’s Argument
Mercon contended that these releases were essential to retain key employees during the Chapter 11 process, especially Nicaraguan employees facing hardships after the government seized the company’s assets over a tax dispute in January.
Employee Attrition and Asset Sale
Following the seizure, Mercon accelerated its sale efforts, reducing employees from 597 to 204 by February. In May, Mercon sold its Vietnam business for $10 million and its specialty business for $5 million.
Judge Wiles’ Ruling on Insider Releases
Judge Wiles adjourned a June hearing for additional briefing on why the releases didn’t violate Section 503(c) of the Bankruptcy Code. He later ruled that the waiver of claims is a form of payment, thus barred by the Code.
Legal Representation
Mercon is represented by Paul J. Keenan Jr., John R. Dodd, Reginald Sainvil, and Blaire A. Cahn of Baker McKenzie. The U.S. Trustee’s Office is represented by Daniel Rudewicz and Brian S. Masumoto.
Case Information
The case is In re: Mercon Coffee Corp. et al., case number 1:23-bk-11945, in the U.S. Bankruptcy Court.