Gymboree seeks more time to control its Ch. 11 and resolve WARN lawsuits

Reuters Legal - Jim Christie

Children’s clothing retailer Gymboree Group Inc on Wednesday asked a court in Virginia for 60 more days of exclusive control of its bankruptcy in order to resolve lawsuits over its recent termination of an estimated 400 workers.

Gymboree, which is in its second bankruptcy in less than two years, said it needs an extension of its exclusive period for filing a reorganization plan until July 16 to work out the litigation, in a filing in U.S. Bankruptcy Court in Richmond, Virginia.

Gymboree said it has identified funds for paying claims in the lawsuits, one an adversary proceeding in its bankruptcy and the other in U.S. District Court for the Northern District of California, now that sales of substantially all of its assets are stitched up.

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In Wednesday’s filing, Gymboree also said the lenders who provided its $30 million bankruptcy loan and its official committee of unsecured creditors have agreed to help draft a potential reorganization plan.

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On Jan. 16 of this year, Gymboree launched its current Chapter 11, citing the “unanticipated degree of decline of the brick-and-mortar retail industry” and the difficulty of sustaining its roughly $212 million in debt.

Ten days later former employee Katherine Pocrass brought her adversary class complaint in the Chapter 11 against Gymboree over its sacking staff.

Pocrass said she and other staff at Gymboree’s corporate headquarters were laid off on or about Jan. 18 without cause or advance notice as required by the federal Worker Adjustment and Retraining Notification Act (WARN).

In February, Pocrass filed a similar complaint invoking California’s WARN law in state court in San Francisco. Gymboree’s lenders removed the lawsuit in March to U.S. District Court for the Northern District of California, where it is pending.

Rene Roupinian of Outten & Golden, a lawyer for Pocrass, said in an email that talks with Gymboree are under way to calculate payments from the WARN claims and that she hopes an agreement is reached soon.

The cases are In re Gymboree Group Inc et al, U.S. Bankruptcy Court for the Eastern District of Virginia, No. 19-30258; and Katherine Pocrass v. Searchlight Capital Partners et al, U.S. District Court for the Northern District of California, No. 3:19-cv-01476.

For Katherine Pocrass: Haig Kalbian and D. Michelle Douglas of Kalbian Hagerty; and Gail Lin, Robert Fisher, Jack Raisner and Rene Roupinian of Outten & Golden.

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