United creditors seek asset liquidationWells Fargo seeks involuntary bankruptcy petition on United Furniture

Furniture sales continue slump. BUSINESS, B5

Wells Fargo & Co. and two other creditors have filed a petition to force United Furniture Industries Inc. into liquidating its assets as part of an involuntary federal bankruptcy protection case.

The filing was submitted and posted Friday in the Northern District of Mississippi. It requests a Chapter 7 bankruptcy case, which typically results in liquidation of company assets.

"The abrupt shutdown of United Furniture Industries, Inc. ("UFI") by company owners has adversely affected thousands of UFI's employees, vendors, customers, and creditors," Wells Fargo said in a statement.

"Wells Fargo has been diligently working to help those impacted by UFI's disorderly closure. After analyzing all possible options, we have determined the best way to proceed is through an organized and formal court process to properly handle all issues that have come to light after the company's decision to close its doors. Our hope is that with court supervision, everyone impacted will be treated fairly."

Wells Fargo listed in the involuntary petition that United "is generally not paying its debts as they become due," though it said there could be bona fide reasons such as a dispute over liability.

The bank also has filed a motion for an expedited appointment of an interim bankruptcy trustee for potential additional relief. The motion is for the court to address the request at 1 p.m. Friday.

Wells Fargo said it has notified other potential United creditors of both filings.

United officials had not submitted a formal reply as of Monday.

The manufacturer has not filed for federal bankruptcy protection since unexpectedly shutting down the business in the early morning of Nov. 22, ending the employment and health benefits - effective immediately - of about 530 Triad workers and about 2,700 overall in three states.

United made promotional- to mid-priced upholstered furniture in the U.S. under its brand and the Lane Home Furnishings brand. The manufacturer also imported wooden bedroom and dining furniture.

Wells Fargo listed being owed at least $30,000 in a revolving credit claim.

The other creditors participating in the bankruptcy petition are: Security Associates of Mississippi/Alabama, claiming it is owed $265,000; and V&B International Inc., which claims it is owned $30,486 for purchase orders.

Ohio businessman David Belford, United's owner, said in a statement to media outlets in Columbus, Ohio, that United staff is working with lenders to wind down the company and liquidate assets. Belford indicated that some of the proceeds will be distributed to former employees and creditors.

According to the Ohio media reports, Wells Fargo was involving in efforts to return trucks and equipment to vendors and paying for security to protect these assets.

Other legal actions

In a related federal lawsuit, a federal transportation lawsuit involving DFW LinQ Transport Inc. was dismissed voluntarily by the plaintiff on Dec. 15, but with the ability to re-file.

DFW, based in Belford, Texas, sued on Dec. 2, requesting compensatory and punitive damages of at least $500,000 each.

According to the complaint, DFW had contracted with United in 2019 to transport copper from Texas to facilities in Mississippi via United's trucking operations.

In a separate legal action on Dec. 15, DFW voluntarily dismissed with prejudice (meaning it cannot be re-filed) its lawsuit against Wells Fargo, Focus Management Group USA Inc. and Security Associates of Mississippi LLC.

WARN notices

Meanwhile, there has been little movement involving four WARN Act lawsuits since former employees filed them employees between Nov. 23 and Nov. 28.

David Rhoades, an N.C. Commerce Department spokesman, said Thursday that as of Dec. 21, 148 former United employees had filed for unemployment insurance benefits. He said at least 91 were approved and had received their first benefit check.

There have been several job fairs focused on former United employees in the Triad since the shutdown, including two in Winston-Salem.

In a typical WARN filing, a company agrees to pay 60 days' worth of wages and benefits as part of closing their business or a business operation. The notice also sets in motion local and state employment assistance initiatives.

As of Thursday, no WARN notices had been filed by United in California, Mississippi and North Carolina.

However, the act lacks enforcement teeth. Several studies have shown that it has lots of loopholes and virtually no enforcement authority from federal, state and local officials.

Employees must file a lawsuit in federal court to assert WARN rights, which has produced occasional success, such as in 2016 when former employees of the closed Yadkinville hospital were able to secure a settlement with the hospital's for-profit operator.

The latest WARN lawsuit was filed in California on Nov. 28, claiming that most of the manufacturer's workers have not been paid their final paycheck.

The other three lawsuits were filed in federal court in Mississippi.

North Carolina employees would be covered by two of the Mississippi lawsuits and the California lawsuit.

Besides the WARN Act, the California plaintiffs claim United violated the N.C. Wage and Hour Act and two California labor codes.

The N.C. law requires employers to pay final wages to discharged employees through the regular payroll method on or before the normal payday.

The California lawsuit claims that N.C. employees haven't been paid their final paycheck, accrued vacation pay or company-paid pension and 401(k) contributions.

Under the N.C. law, United can be liable for civil penalties of $250 per day per employee, up to a maximum of $2,000 per violation.

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