David J. Kozlowski Discusses Uncle Nearest Receivership in Inc.

Morrison Cohen Bankruptcy, Restructuring & Governance Partner David J. Kozlowski was quoted in Inc. discussing a federal court’s denial of Uncle Nearest founder Fawn Weaver’s request to block a potential sale of the whiskey brand’s assets while she appeals the company’s receivership.

Uncle Nearest has been in receivership under court-appointed receiver Phillip G. Young for more than a year as the company faces financial challenges and a potential sale. Young has indicated that, once a sale is negotiated, he expects to file the company for Chapter 11 bankruptcy to facilitate the transfer of assets to a new owner without its existing liabilities. Weaver sought a preliminary injunction to prevent a sale before her appeal was decided, but the U.S. District Court for the Eastern District of Tennessee denied her request.

The court found that Weaver had not demonstrated a likelihood of success on the merits or irreparable harm warranting an injunction. Dave noted that the timing of her motion was a significant factor, given that the receiver’s intent to sell had been known for more than a year and no purchase agreement had been signed, so there was no exigency.

Dave also explained that the Bankruptcy Code provides a mechanism for Weaver to challenge a proposed sale. A sale under Section 363 requires notice and a hearing, allowing her to raise objections before the transaction proceeds. As a result, the court found that she had not established irreparable harm.

The court also considered the potential consequences of delaying a sale for creditors and the receivership estate. Dave emphasized the urgency of preserving the company’s remaining value, noting that continued losses and litigation could further diminish the assets available for creditors.

“Uncle Nearest is a melting ice cube, running at a loss on the lender’s cash. Every delay bleeds value from the constituents the receiver is trying to repay,” Dave told Inc. “An injunction would have run weeks, and spending estate money to hold a dubious appeal open was sufficient harm to creditors to deny the injunction.”

Read the full article in Inc. here.