Judge Rejects Uncle Nearest Bankruptcy Filing as $100 Million Lawsuit Heats up in Court

(Photo: Uncle Nearest)

On Thursday, a federal judge blocked a Chapter 11 bankruptcy filing made by Uncle Nearest founder Fawn Weaver. It was the latest in a series of attempts by Weaver to reclaim her whiskey brand, which is currently under a court-ordered receivership amid allegations of defaulting on over $100 million in loans.

The legal drama kicked off last August, when Kentucky-based lender Farm Credit Mid-America (FCMA) alleged that the whiskey maker had failed to pay principal and interest payments multiple times. FCMA alleges that proceeds from a loan were used to purchase a Martha’s Vineyard home worth more than $2 million, and recently accused the Weavers of hiding a separate $20 million loan given by music mogul Jay-Z.

On March 17, the Weavers announced that they had filed a lawsuit against FCMA in the New York Supreme Court. Uncle Nearest’s lawyers accused the lender of leading a “smear campaign” that pushed spurious allegations of missing inventory, financial misconduct, negative cash flow and insolvency. The complaint alleged that accusations were made against the distiller to “protect the lender’s own bankers and deflect scrutiny from failures in the administration of the credit facility.”

“The accusations circulated about us were not only false. The bank knew they were false when they made them, and they knew those accusations would strike directly at the credibility that allowed this brand to grow against all odds in this industry,” Weaver said in a news release.

In an Instagram post published on the same day, Weaver said that she had approved the filing of Chapter 11 bankruptcy for Uncle Nearest. In addition to reorganizing the company’s debt, a bankruptcy filing could theoretically remove Uncle Nearest from its court-ordered receivership, as Chapter 11 triggers a halt on most legal enforcement actions.

Hinting at the implications of the filing, Weaver announced that “the receivership of Uncle Nearest is done.” The news made its way from headline to headline as several outlets took the founder at her word.

“Frankly, if I were just reading the headlines or only the bank’s allegations, I’d be concerned too, but that’s one of the reasons I approved entering Chapter 11 this morning because Chapter 11 requires complete financial transparency,” Weaver said in her post. “In that courtroom, no one gets to hide behind filings without evidence or accusations without proof, and the picture that has been painted about Uncle Nearest will now have to be proven through numbers that add up, not words.”

The attempt was dead on arrival. Judge Suzanne H. Bauknight said that only the receiver has the power to take Uncle Nearest into bankruptcy protection. Justin Campbell, attorney for court-ordered receiver Phillip Young, reportedly said that the move was “beyond the pale” and has asked the court to sanction Weaver for $75,000.

Observer News reports that Weaver has already appealed the judge’s dismissal.