Vermont Business Magazine Attorney General TJ Donovan today filed a brief to appear in bankruptcy court in support of Koffee Kup Bakery. At issue is an involuntary bankruptcy petition filed by several creditors of Koffee Kup, which has resulted in a delay of paying former employees’ their collective balance of paid-time-off (PTO) amounting to $838,299 in total.
In its brief, the State argues that the PTO should not be considered part of the bankruptcy case and should be paid now in accordance with a prior state court order that, last month, compelled the PTO payment.
“Koffee Kup employees are owed their paid-time-off and cannot wait any longer,” said Attorney General Donovan. “These payments should not be held up in bankruptcy court.”
Last month, the State appeared in a state court proceeding to support Koffee Kup in paying the employees PTO. The employees were supposed to be paid their PTO by a court-appointed receiver, but technical issues arose with the payment processor. As a result, payment of the PTO was stalled. On August 17, 2021, several creditors of Koffee Kup filed a petition for an involuntary bankruptcy.
The receiver claims that it can no longer pay the PTO while the bankruptcy petition is pending. The State argues in its brief that the PTO is an exception to the bankruptcy matter. First, the State argues the PTO amounts to a constructive trust whereby the money already belongs to the employees and is no longer an asset of Koffee Kup. Second, under the broad powers of a bankruptcy court, the Court may authorize payment to a creditor under circumstances like this. Finally, payment of the PTO is appropriate under the duties of receivership law and the broad remedies of Vermont’s Consumer Protection Act.
According to the Vermont Department of Labor, 156 workers lost their jobs at Koffee Kup’s Riverside Avenue bakery on Riverside Avenue in Burlington and 91 workers lost their jobs at Vermont Bread’s bakery on Cotton Mill Hill in Brattleboro.
Employees did not have advance warning. Workers who showed up on April 26 were greeted with a closure notice on the door.
Flowers Foods, Inc (NYSE: FLO), producer of Nature's Own, Dave's Killer Bread, Wonder, Canyon Bakehouse, Tastykake, and other bakery foods, announced on June 7 that it had acquired the assets of Koffee Kup Bakery, Inc (KKB) from the court-appointed receiver of the assets. Financial terms of the transaction were not disclosed.
The acquisition includes three closed bakeries located in Burlington and Brattleboro, Vermont and North Grosvenor Dale, Connecticut, and the Koffee Kup Bakery and Vermont Bread Company brands. According to the Brattleboro Reformer,(link is external) Flowers has no immediate plans to reopen the plants, but former employees will get back pay. When the plant closed, the receiver had clawed back some of the pending compensation. But as of now, the jobs will not be coming back.
The receiver in early June rejected an apparently less-lucrative offer from a Canadian family-owned baker (Blair and Rosalyn Hyslop, from Sussex, New Brunswick, owners of Mrs. Dunster’s Bakery) to buy the assets and keep open the Burlington and Brattleboro plants.
A copy of today's motion to intervene is available here and its brief here.
Source: Montpelier. 8.27.2021. Office of the Attorney General