Wolf Mountain in bankruptcy
Attorneys for Canyons Resort are in a race against time.
They have waged a lawsuit against Kenny Griswold and his Wolf Mountain Resorts for five years. Earlier this month a jury declared them victors, but now legal wrangling threatens to delay their collecting the judgment: $54 million in damages.
Judge Robert Hilder, who oversaw the case, is committed to seeing it to its conclusion. But he retires in July, and Canyons’ attorneys fear if the case is not wrapped up by then, it will be delayed indefinitely.
At a hearing to finalize the judgment on May 9, Griswold’s attorney was frequently checking his phone. Then a message arrived: the hearing could not go forward; Wolf Mountain, a Utah company, had filed for Chapter 11 bankruptcy relief in California.
That’s according to the Canyons attorneys in their filing to Los Angeles Bankruptcy Judge Peter Carroll asking him to throw out the case. The petition was a "poster" example of Chapter 11 abuse, they wrote.
Chapter 11 bankruptcy is like an intensive care unit for businesses. It helps companies deep in debt stay alive and continue employing people and providing services by halting collections and preserving assets. In contrast to a Chapter 7 in which assets are sold off, Chapter 11 allows for a repayment plan.
Wolf Mountain bankruptcy attorney Mark Horoupian told the court the company had debts exceeding $100 million.
Canyons attorneys insist the move was illegitimate because Wolf Mountain has no employees, provides no services and isn’t even a California company. The attorneys also insist the debt load was fabricated except for their $54 million decision. They said Wolf Mountain was only seeking relief from the jury verdict.
One of the debts listed is $4 million of property tax to Summit County. David Thomas, an attorney for the county, said Wolf Mountain does not owe a cent in property tax. The second largest creditor after Canyons is the Osguthorpe family. According to Wolf Mountain’s attorney David Wahlquist, this is not a debt but a claim. The family claims it is owed $41.2 million, but it is not currently pursuing this claim.
An even more devious motivation, the attorneys said, was to escape Utah’s 3rd District Court’s ban on transferring away its assets. According to the court filing, representatives for Wolf Mountain tried to notarize a transition of land parcels on May 5, 2011 and date it 2005. The attorneys allege Wolf Mountain was transferring deeds to one of the company’s owners in Texas to remove assets that could presumably be used to help pay the $54 million debt.
Judge Hilder ordered a stop to this strategy, but this "freeze" expired Thursday. Canyons attorneys allege a motivation of the California filing was to tie Hilder’s hands, allow the freeze to expire, and continue transitioning assets away from Wolf Mountain while Judge Carroll deliberates on the petition.
On Tuesday, Judge Carroll denied the request to dismiss the Chapter 11 filing, but agreed to allow Thursday’s hearing to occur, at which Hilder extended the freeze.
"The ‘Release from the Automatic Stay’ essentially clears the way for us to move forward with Judge Hilder," said Canyons attorney John Lund.
Thursday’s hearing set a schedule for finalizing the case before July, but Hilder can no longer influence the payment, Wahlquist said.
The bankruptcy petition put Wahlquist and Wolf Mountain’s other attorneys in an awkward position that of creditors. Owed approximately $820,000, Wahlquist said last Tuesday he’s been asked to possibly handle the trial phase of the bankruptcy process. Nothing has been decided yet.
"Once the bankruptcy was filed, we don’t represent them anymore," he said.
Wahlquist asserted he believes there are grounds to appeal the jury’s decision. To appeal, a large bond would need to be posted.
Bankruptcies don’t prohibit companies from contesting their debts, so Wolf Mountain has multiple options to delay their delivery of the $54 million.
This is especially frustrating, Canyons attorneys wrote to Judge Carroll, because the Wolf Mountain Resorts vs. ASC Utah (a subsidiary of Canyons) is now the largest and most resource-consuming case on the Utah 3rd District Court’s docket.
According to Debbie Foust, judicial case manager at the Silver Summit branch of 3rd District Court, the case file that began in June of 2006 has around 180 volumes. The next largest has under 50.
Mark Horoupian and the Osguthorpe family’s attorney were unsuccessfully contacted for comment.
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