For eight months, 79,000 bottles of wine have sat in the warehouse behind bankrupt California retailer Premier Cru, sequestered by court order. Now the wine has been sold, bringing resolution closer for thousands of angry customers. Unfortunately, the sale will not pay them back much.
On Aug. 30, a trio of bidders vied to purchase the wine at an auction in an Oakland federal courtroom. The winning bid of $3.6 million was made by Spectrum, a California-based auction firm. That sum was well below the $5 million the bankruptcy trustee had once hoped to get for the wine, but $400,000 more than the initial bid. After expenses, the proceeds will be divided up among 4,450 former customers of Premier Cru. They will get pennies on the dollar.
"There've been a lot of dark days in this case when I thought I'd never get to sell this wine, but we are here today," said Mark Bostick, the trustee's lawyer, as he opened the auction.
Soon after Premier Cru's chapter 7 declaration in January, Bostick had asserted that under bankruptcy law, ownership of the wine had transferred to the debtor's estate. His intention was to sell it all on behalf of the unsecured creditors. That did not sit well with some disgruntled former customers who had received notification that their wine had arrived. They argued that title passed to them, even if they had yet to arrange for delivery.
For months, bankruptcy Judge William Lafferty put off deciding who had title to which wine. After intense mediation, an agreement was hammered out which allowed the trustee to sell most of the wine. Four customers opted to continue litigating for their wines. One was Ross Bott, a Silicon Valley tech guru, whose stash of 9,787 bottles was the largest belonging to any single customer. Bostick has warned that, in theory, at least, if no settlement can be reached with those four by the time the warehouse must be vacated this fall, their wine could be "abandoned."
Prior to the auction, Spectrum placed an opening bid of $3.2 million. As opening bidder, Spectrum was required to assign an individual price to each and every bottle. That herculean task was accomplished by a trio of the firm's wine specialists, working for 12 straight days, according to Jason Boland, Spectrum president.
After being allowed to inspect Premier Cru's warehouse, David Parker of Brentwood Wine Group, one of the unsuccessful bidders, said, "This was probably the largest collection of wine I have ever seen." No physical inventory had been done since 2008, Parker was informed. "I was told that the current inventory was at best 90 percent accurate, he says. "Any inventory that is less than 99 percent accurate, and you have problems."
The inventory includes 154 bottles of Taittinger Brut Blanc de Blancs Comtes de Champagne 2000, more than 600 bottles of Pierre Usseglio & Fils Châteauneuf-du-Pape 1998, 252 bottles of Valdicava Brunello di Montalcino 2006, and 34 bottles and 1 magnum of Comte Georges de Vogüé Bonnes Mares 2005. The rarest jewels are two magnums of Domaine de la Romanée-Conti Romanée-Conti 1966.
Parker made the highest bid for the inventory, but he proposed to pay the estate as it sold the wine rather than pay a lump sum immediately. That was rejected. Asked about his plans for reselling the wine, Jason Boland told Wine Spectator, "We are starting to pack up the wine, and you will hear more over the coming weeks and months."
Now that the wine is sold, the next task for the trustee, according to Bostick, is to try and return offsite assets of Premier Cru, including wine it purchased prior to bankruptcy that is now being held by European suppliers. Bankruptcy law allows a debtor's estate to "claw back" payments it made within 90 days of declaring bankruptcy. On Sept. 7, Bostick acted to claw back $178,000 paid to Shirlin Wong, a California chiropractor who received a settlement in lieu of undelivered wine from Premier Cru late last year.
John Fox, cofounder and president of Premier Cru, has pleaded guilty to fraud resulting in the collapse of the firm. Now behind bars, he faces a sentence of up to six and a half years. His sentencing is scheduled for Dec. 13.