Following a $30 million judgment for compensatory damages obtained in April against The Dress Barn Inc., the former owners of Bedford Fair may be able to push the total near $100 million next month.
Attorney Peter Wang is scheduled to appear July 2 in the Superior Court of Connecticut in Waterbury, CT, before judge Carl Schuman. Wang, with the firm of Friedman, Wang & Bleiberg, New York, represents Alan Glazer and the other former owners of Bedford Fair — GLZR Acquisitions Corp. and Bedford Fair Industries.
“We made an application [last month] for punitive damages, and in Connecticut those are set by the court and not by the jury,” Wang said. “The judge decides, [and] the punitive damage range we're talking about would as much as double the compensatory damages.”
Also to be argued is prejudgment interest, which he said is a “discretionary matter” in Connecticut, of about $18 million being sought. The interest is considered part of the compensatory damages. The origin of the suit dates from 1997, “and the statutory rate in Connecticut is 10 percent per year.”
Legal fees of about $2 million are also being requested.
Wang added that Dress Barn has put forth a motion to set aside the verdict on multiple grounds.
“[The judge] can reserve decision and listen to arguments,” he said.
Wang said the suit alleged breach of contract, negligent misrepresentation and unfair trade practices. Six jurors in April awarded the former owners of Bedford Fair just under the $34 million requested following a 3 1/2 week trial.
He said Dress Barn had agreed to help finance “certain of Bedford Fair's receivables” relating to ongoing negotiations to acquire Bedford Fair in 1997. “The financing agreement, we alleged, was breached and the company was not acquired by Dress Barn [and] Bedford Fair filed for bankruptcy in September of 1997. The assets were sold in bankruptcy in 1998 to Fingerhut.”
Chris McDonald, vice president and corporate counsel for The Dress Barn, Suffern, NY, said he was surprised by the verdict.
“The basis of the claim was a breach of an oral agreement to loan $4 million to Bedford Fair from Dress Barn for financing some deferred billing receivables,” McDonald said.
“There may have been an agreement, but … the conditions of the agreement were never satisfied by Bedford Fair,” he said. “The loan would have to have been secured and there would have had to been inter-credit agreements between Bedford Fair, their bank and their printer. They owed money to both — close to $10 million each.”
McDonald's plan for July 2 includes a motion to have the entire case thrown out and have a new trial ordered, or obtain a judgment in Dress Barn's favor, thus disregarding the verdict. If this fails, Dress Barn would try to reduce the amount of the award.
“We're seeking zero,” he said, promising an appeal if his efforts prove unsuccessful.
The appeal would be to the Connecticut state Court of Appeals in Hartford, a process that could take 18 months and could occur only after the judge rules on the motions.
McDonald said due diligence uncovered problems with Bedford Fair, including back-order and financial issues.
“They were in much worse financial condition than we were led to believe,” he said.
The entire case comes down to one question for McDonald: “Would you lend me $4 million on an oral agreement, or would any business do so?
“We entered into a non-binding agreement with them,” he said. “It was a letter of intent to purchase the company, and they walked away.”
He added that Bedford Fair's Sept. 2, 1997, bankruptcy filing ended the process.
“The assets were sold for $39 million, plus an assumption of debt of approximately $7 million, to Fingerhut,” he said. “The jury awarded them $30 million after collecting $39 million plus $7 million. No one in their right mind could say this company was worth in excess of $70 million. That's ridiculous. They've been paid twice for the same thing, and that's why we believe it can't stand.”
