Lorna Jane USA, Inc.

THE DEBTOR SELLS ACTIVEWEAR

The Lorna Jane brand was founded in 1989 in Brisbane, Australia. After a period of rapid growth within Australia, the brand went global. The Debtor, Lorna Jane USA, Inc. was founded in 2011 to implement Lorna Jane’s expansion into the United States. The first Lorna Jane store opened in California in 2012.

In the last decade, Lorna Jane expanded into the United States. At the peak of its operations, the Debtor operated 22 retail boutique locations in five states: California, Arizona, Texas, Utah, and Washington. Its boutique locations provided the Debtor with more than 50% of its sales as recently as 2019. However, in 2019, Lorna Jane began feeling the struggles familiar to so many retail businesses.

Then, when the COVID-19 pandemic shut down retail locations, Lorna Jane’s brick-and-mortar sales plummeted. In 2021, the Debtor’s retail sales have constituted less than half of its total profits. The Debtor has made a business decision to close all of its retail locations in the United States and pivot to a 100% e-commerce model.

CREDITORS ARE ENTITLED TO INFORMATION

A 341 meeting is conducted in each Chapter 11 Bankruptcy Case by the United States Trustee’s attorney. The Debtor’s representative is required to attend. In this case, it is likely that the Debtor’s Chief Restructuring Officer, or CRO, Richard Munro of Invenz, Inc., will testify for the Debtor. At the 341 meeting, the United States Trustee and creditors ask the Debtor’s representative questions about the Debtor’s finances, why the Debtor is in bankruptcy, and how the Debtor intends to repay its creditors.

The 341 meeting in this case will likely occur in the next couple of months. Creditors should take advantage of the opportunity to ask questions about the Debtor, either themselves or through their attorneys. Some topics that the creditors might want to address include:

1. How the Debtor plans to treat the $43 million or more it owes to affiliates.
2. The amount that the Debtor believes will be added to the unsecured claims pool by rejecting its 21 retail store leases.
3. Whether the Debtor plans to pay its unsecured vendor creditors in full.

CERTAIN UNSECURED CREDITORS MAY HAVE PRIORITY REPAYMENT RIGHTS

The main goal of the Bankruptcy Code is to be equitable to all parties. While creditors can sometimes feel like the Code is designed to benefit the Debtor and only the Debtor, that is not always the case. Experienced bankruptcy attorneys know that there are provisions in the Bankruptcy Code that work to benefit creditors, also.

One such provision protects creditors who, in good faith, deliver goods or supplies to the Debtor in the weeks leading up to the bankruptcy filing. Other Bankruptcy Code sections benefit creditors who continue to do business with a Debtor in bankruptcy. In some cases, these creditors who work with debtors right before and after they file for bankruptcy can move up in priority of payment. In essence, sometimes, creditors can jump the line and get paid before others.

Lorna Jane has reported that it may have some creditors who will be entitled to these protections. If you are a creditor of Lorna Jane, you should act to protect your rights to payment as soon as possible. Contact PRLT with any questions you may have about the case or your potential recovery.