August 12, 2008
Rights of Consignment Sellers, In re Whitehall Jewelers
I have a client who owns two large retail jewelry stores. When a chapter 11 looked imminent, my client wanted to know what happens to the consignment goods and the consignment creditors. In the business they call it goods "on memo." The memo, a small piece of paper, says that the goods are on consignment and at all times are owned by the seller until, of course, they become owned by the buyer/store. Clearly no one paid any attention to that language. So is it consignment or not? Bankruptcy Judge Kevin Gross responds to the same question saying, "I don't know either, but until there is an adversary proceeding and a judgment re ownership, the goods cannot be sold in a 363 sale." See, In re Whitehall Jewelers Holdings, Inc., 2008 WL 2951974 (Bankr. D. Del. 7/28/08).
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