The Federal Bankruptcy Court in the Northern District of California on Thursday dismissed the involuntary Chapter 11 Bankruptcy petition filed against Liftopia in early June by four ski companies. The ruling removes as an option a powerful legal tool that could have helped the ski companies retrieve the nearly $3 million that Liftopia does not dispute it still collectively owes them.
The ruling, signed by U.S. Bankruptcy Judge Hannah L. Blumenstiel, dismissed the petition on two grounds: 1) the ski companies overstated the amounts Liftopia owed them, meaning the petition was subject to what is called a “bona fide dispute”; and 2) the ski companies therefore lacked standing to pursue this particular type of legal action.
Liftopia – which sells lift tickets and other products via its website, takes a commission, and, according to court documents, typically sends the balance to its partners by the end of the following calendar month – stopped paying many of its partners in March, following the Covid-19 related shutdown of the entire North American ski industry.
Following several weeks without payment and, court records show, no clarity from Liftopia as to when payments would resume, a coalition made up of Aspen (as managing partner of the Mountain Collective pass), Alterra, Boyne’s Cypress Mountain, and Arapahoe Basin filed the involuntary bankruptcy petition against the company, claiming in documents submitted to the court that Liftopia’s outstanding debts amounted to more than $3 million. If successful, the involuntary Chapter 11 bankruptcy would have forced Liftopia to grant the ski companies access to its financial records and propose a plan to the court for repayment of Liftopia’s debts.
On June 24, Liftopia answered the petition, seeking to have it dismissed on the grounds that the ski companies had overstated the amounts owed, collectively, by more than $85,000. On July 16, the ski companies filed additional documents with the court accepting Liftopia’s revisions, admitting that they had no independent source of the company’s transactional data, had always relied on Liftopia to calculate payments, and had never had a “meaningful dispute” as to the amounts calculated.
The judge ultimately agreed with Liftopia, primarily, it seems, because the ski companies did not gather the correct amounts from Liftopia prior to taking legal action.
“Petitioning Creditors admit that they relied on Liftopia to correctly calculate the amounts it owed to them during the ordinary course of their business relationship,” wrote Judge Blumenstiel.
“They further admit that they understood the calculation of these amounts was a complex process, involving thousands of consumer transactions. Despite knowing that Liftopia possessed the most current and most accurate information concerning the amounts it owed to them, Petitioning Creditors appear not to have reached out to Liftopia and requested a calculation of those amounts prior to filing the Involuntary Petition. The court does not understand why, given the possible consequences, they did not take such a simple step.
“The court is further inclined to find that, by expressing their willingness to amend the involuntary Petition to state claims in the amounts Liftopia concedes it owed to them on the Petition Date, the Petitioning Creditors have admitted that they incorrectly calculated the amounts of their claims and incorrectly stated those claims in the Involuntary Petition. This establishes that their claims were the subject of a bona fide dispute as to amount, which means that Petitioning Creditors lacked standing to file the Involuntary Petition.”
An “Order Granting Alleged Debtor’s Motion to Dismiss,” also signed by Judge Blumenstiel, stated that “The Involuntary Petition is hereby dismissed without leave to amend,” meaning it cannot be appealed.
It is unclear what possible next steps the ski companies will take to recoup their lost funds. At least two other ski areas aside from those that filed the petition have confirmed to The Storm Skiing Journal that Liftopia has not paid them for March ticket sales, and an anonymous source with knowledge of ski industry finances has estimated that Liftopia could owe a total of up to $10 million to its partners industrywide.
These outstanding funds, some owed to independent, family-owned ski areas such as Plattekill Mountain in New York’s Catskills, compound industry-wide losses that the NSAA estimates were as high as $2 billion due to Covid-19 shutdowns.
A lawyer familiar with federal bankruptcy law told The Storm Skiing Journal that no recourse remained for the ski companies in federal bankruptcy court, and the only legal option left to them was a lawsuit, which, the lawyer indicated, would likely drag on for some time.
Liftopia’s path is also unclear. In an April 20 email exchange with Aspen Chief Financial Officer Matt Jones that the ski companies filed with the bankruptcy court, Reece indicated that Liftopia’s credit card processors were withholding at least a portion of the “about $2 million” that the service had collected up to that point from Mountain Collective sales, and that the company was seeking financing to repay its partners. Such holds have become commonplace in many industries following the onset of Covid-19, as processors fear that consumers will demand refunds should ski resorts not re-open this winter.
Even when Liftopia submitted documentation to the court disputing the amount of its alleged debts, the company still conceded to owing $2,344,052.48 to Aspen for Mountain Collective passes, $394,899.62 to Cypress, $172,119.93 to Arapahoe Basin, and $18,244.68 to Alterra.
It is unclear how or when Liftopia will repay these amounts, and an anonymous source with knowledge of the negotiations told The Storm Skiing Journal that the service had offered some partners as little as 20 cents on the dollar prior to the filing of the involuntary bankruptcy petition.
Representatives from Liftopia and each of the four ski companies did not respond to requests for comment from The Storm Skiing Journal.
Posted from The Storm Skiing Journal
