Court Denies Frank Dlubak’s Motion to Convert and Grants Committee Authority to Pursue Affiliated Entities

Following hearings held on April 4, 2014, the Court entered an Order denying the Motion to Convert Case from Chapter 11 to Chapter 7 filed by Frank Dlubak.  In conjunction therewith, the Court also entered an Order, over the objection of Frank Dlubak, allowing the Committee to file an amended Disclosure Statement within the next thirty (30) days. 

Additionally, the Court directed the Committee to file a proposed order granting their Motion for Authority to Prosecute Avoidance Action (“Motion for Authority”).  Per the Court’s instruction, the proposed order should grant authority to the Committee to not only pursue Dlubak Glass Co. and Frank Dlubak for fraudulent transfers as described in the Motion for Authority, but also to pursue affiliated entities Greenheat, Global Ceramic Services, and Dlubak Powder Coating for similar transfers.  Upon entry of the proposed order by the Court, the Committee will have authority to file claims against those entities, which claims are estimated to be in excess of $1 million.

Frank Dlubak Files Motion to Convert and Objection to Disclosure Statement; All Hearings Continued

On or about March 7, 2014, interested party Frank Dlubak filed a Motion to Convert Case from Chapter 11 to Chapter 7 (“Motion to Convert”).  In conjunction therewith, Frank Dlubak also filed an Objection to the Committee’s Disclosure Statement, as well as a response opposing the Committee’s Motion for Authority to Prosecute Avoidance Action (“Motion for Authority”).  The essence of Frank Dlubak’s position is that all operating assets of the Debtor have been liquidated, and any remaining claims that may be property of the Estate are speculative, meritless, and provide no benefit to the Estate.  As a result, he argues that the remainder of the Case is better administered by a Chapter 7 Trustee. 

A hearing on the Motion to Convert has been scheduled for Friday, April 4, 2014, at 11am in the Johnstown Bankruptcy Court (or via video conference from Pittsburgh), with responses due by March 28.  Additionally, hearings on the Committee’s Disclosure Statement and Motion for Authority have been continued to the same day and time.

Court Enters Order Granting Motion for Sale of Property

On or about February 14, 2014, following a public sale hearing, the Court entered an Order granting the Debtor’s Motion for sale of its former operating facility to KMS Property Acquisition Co. for the sum of $800,000.  After payment of real estate taxes, broker’s fees, US Trustee’s fees, and related closing costs, the entire remainder of the sale proceeds are likely to be paid to the Debtor’s primary secured lender, First Commonwealth Bank.  As a result, there presently appear to be no funds available from this sale for the benefit of the Bankruptcy Estate.  Closing is set to occur on or before March 31, 2014, with a report of sale to be filed shortly after closing.

Committee Files Liquidating Plan and Motion for Authority to Prosecute Avoidance Action

On or about February 10, 2014, following an Order from the Court directing any party in interest to file a Plan and Disclosure Statement, the Official Committee of Unsecured Creditors of Dlubak Corp. (the “Committee”) filed a liquidating Chapter 11 plan (the “Plan”).  The crux of the Plan revolves around the disbursement of any sale proceeds available to the Estate from the disposition of substantially all of the Debtor’s assets, as well as the pursuit of potential preference, fraudulent transfer, and related claims against third-parties.  A hearing has been scheduled on the Disclosure Statement for March 27, 2014, at 10:00am in the Johnstown Bankruptcy Court, or via video conference from Pittsburgh, with objections due by March 20, 2014. 

In conjunction therewith, the Committee also filed a Motion for Authority to Prosecute Avoidance Action (the “Motion”) against the Debtor with respect to potential fraudulent and/or unauthorized post-petition transfers made by the Debtor to Dlubak Glass Co. and Frank C. Dlubak.  The Committee demanded that the Debtor pursue said action valued at approximately $83,000 or otherwise that it be granted derivate standing to do so.  A hearing has been scheduled on the Motion for March 13, 2014, at 10:00am in the Johnstown Bankruptcy Court, or via video conference from Pittsburgh, with responses due by March 6, 2014.

Court Enters Order Directing Any Party to File a Plan

On or about January 14, 2014, the Court entered an Order finding that the 120-day exclusivity period for the Debtor to file a Plan of Reorganization and Disclosure Statement concluded on December 5, 2013.  As a result, the Court ordered that the Debtor or any party in interest shall file a Plan and Disclosure Statement on or before February 13, 2014.  The Court further ordered that the failure to file a Plan and Disclosure Statement within the time allotted without extension will result in a Rule to Show Cause Hearing to determine why the Bankruptcy Case should not be converted to Chapter 7 and/or dismissed.  A hearing has been scheduled for February 27, 2014, at 10:00am in the Johnstown Bankruptcy Court, or via video conference from Pittsburgh.  In the event that a Plan and Disclosure Statement are timely filed, the Rule to Show Cause Hearing will be cancelled.

Debtor Files Motion to Sell Real Estate; Public Sale Hearing Scheduled

On or about January 9, 2014, the Debtor filed a Motion to Sell Real Estate Free & Clear of Liens & Encumbrances (the “Motion”) with respect to the sale of its former operating facility located at 520 Chestnut Street, Blairsville, PA 15717.  The Debtor previously sold substantially all of its non-real estate assets to Dlubak Specialty Glass Corporation, an affiliate of Grey Mountain Partners (the “Buyer”).   As a result, the Debtor has essentially ceased doing business, while its former operating facility is being leased by the Buyer.  The Debtor now proposes to sell substantially all of its real estate assets to KMS Property Acquisition Co. (“KMS”) for the sum of $800,000.  With approximately $660,000 still reportedly owed to First Commonwealth Bank, and additional costs expected to total in excess of $75,000, including real estate taxes and a broker’s fee, there presently appears to be limited funds available from the sale for the benefit of the Bankruptcy Estate. 

The proposed sale to KMS is subject to higher bidding by qualified third-party buyers.  A Sale Hearing has been scheduled for Thursday, February 13, 2014, at 10am in the Johnstown Courtroom, or via video conference from Pittsburgh.  Responses to the Motion are due by February 6, 2014.  For additional information regarding the terms of the proposed sale or third-party buyer qualifications, please do not hesitate to contact us at dlubakcommittee@quinnfirm.com.