A settlement could be close in a lawsuit against the family of the late Art Van Elslander concerning proceeds from the furniture retailer’s 2017 leveraged-buyout sale to a private-equity company that ultimately led to bankruptcy liquidation.
The trustee in the Art Van Furniture bankruptcy case, who is suing the Van Elslander heirs and others to recoup tens of millions of sale proceeds, said this week in a court filing that the parties in the lawsuit have reached a “settlement in principal” and are in the process of negotiating and documenting the settlement deal.
This potential settlement follows mediation sessions in December and late January that involved the bankruptcy trustee, the heirs, former Art Van CEO Kim Yost and others. Discussions then continued after the formal mediation sessions.
The court filing doesn’t give any details of the potential settlement.
A representative for the Van Elslander family confirmed Friday that there is a settlement in principal, but declined further comment.
The bankruptcy trustee sued the heirs and others in March 2022 with claims of “fraudulent conveyance,” which is a legal term that doesn’t reference crime but rather a claim that a third party did not receive fair value in a deal. The lawsuit also alleged breaches of fiduciary duties by Yost, the late Archie Van Elslander and his sons Gary and David Van Elslander.
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The lawsuit focuses on a flurry of sale-leaseback transactions involving nearly 40 Art Van Furniture stores and related properties that the retailer had owned outright and that were part of the family’s $621 million sale deal in March 2017 with Boston-based Thomas H. Lee Partners.
The sale-leasebacks financed 70% of the deal, according to the lawsuit, and saddled Art Van Furniture with new rent expenses — on top of a debt load from the deal — that proved unsustainable. Proceeds from the real estate transactions went toward the deal.
Company founder Archie Van Elslander was still alive when the sale happened. He died the following year at age 87.
Art Van Furniture filed for what became a Chapter 7 liquidation bankruptcy in early March 2020, just as the COVID-19 pandemic hit Michigan. Nearly 190 Art Van stores closed and roughly 3,000 workers in nine states lost jobs. Creditors had hundreds of millions in unpaid claims, according to the bankruptcy trustee.
The trustee’s lawsuit seeks to recover more than $105 million in transfers that include the sale-leaseback transactions, as well as $8 million in transfers to Gary Van Elslander and $2.5 million to David Van Elslander, among other transfers.
The Van Elslander family has denied the lawsuit’s allegations and put the entirety of the blame for Art Van Furniture’s demise on “business decisions made by the company that purchased our family business.”
Thomas H. Lee Partners later set up a nearly $2 million hardship fund to help the laid-off Art Van employees, enough money for about $1,200 for each eligible former worker.
The Van Elslander family in 2021 bid $6 million to buy back legal rights to the Art Van Furniture name from the bankruptcy court.
There have been other fraudulent conveyance lawsuits concerning retailers J. Crew, Neiman Marcus and Nine West, which all filed for bankruptcy in the wake of private-equity sale deals that soured.