Hurricane-Ravaged New York Wine Storage Company Liquidated

WineCare, the high-end Manhattan storage facility that experienced flood damage during Hurricane Sandy, has been sunk for good. Federal Bankruptcy Judge Robert Gerber of the Southern District of New York ruled Dec. 16 that the company would be liquidated following a year of operational and legal woes, during which most clients were unable to access their wines.

WineCare filed for Chapter 11 Bankruptcy on Jan. 30, 2013, after being sued by restaurateur Keith McNally for either the return of his wines or $2 million, plus $1 million to cover losses incurred in the months after the storm. In the year since, creditors have piled on, eventually requesting a motion that the case be converted to a Chapter 7 case—liquidation of the company under the supervision of a U.S. trustee.

After waving off one attempt to install a trustee in June, citing WineCare's need for time to re-index the 27,000 cases of wine that had become unidentifiable after the storm destroyed a computer database, Gerber ruled it was time to turn over the reins of the company. By Dec. 20, WineCare's answering machine had been disconnected (earlier attempts to reach Derek Limbocker, founder and CEO of the company, went unanswered) and, according to Gary Kaplan, attorney for four prominent collectors, the trustee had begun securing the premises and contacting experts to assess the situation. A letter sent to 36 creditors and obtained by Wine Spectator instructed them not to file claims for their wines yet, as they are not immediately available.

"This is an individual who has had more than a year to return the wine," Kaplan said of Limbocker. "Most of the customers have not seen a single bottle yet. We just don't believe that if he remained in control, he would return any of the wine any time soon, or that it would take longer for a trustee." Limbocker had argued that handing over control to a trustee, an outside party without knowledge of his system, would cause more delays.

WineCare's headaches began when the storm hit in late October 2012. Limbocker told Wine Spectator in January 2013 that after the storm, WineCare's landlord and the New York City Department of Environmental Protection ordered that the cellars be cleared and certified safe to work in, and the wines moved to temperature-controlled rooms on higher floors. Each case was affixed with a barcode linking to a digital database that recorded its place in the cellar, but a burst drain pipe during the storm flooded WineCare's offices, and the cases had to be moved before the database could be recovered. The company had 27,000 unmarked boxes.

In January, Limbocker said it would be "like looking for a needle in a haystack" to identify any specific cases until all were returned to the cellar and re-indexed, a process he estimated would take three or four months. By June, Limbocker's lawyer said only 10,000 cases had been scanned and returned to storage. Later that summer, some clients began to see their wines.

But WineCare’s struggling finances began to look increasingly insurmountable. In October, Limbocker's lawyers filed a request to drop him as a client, which the court granted. Some creditors received wine—one of Kaplan's got half of his out, though none in the past six months. McNally declined to comment on his own situation and suit against WineCare, but his restaurants were listed among the creditors.

In November, the office of the regional trustee, Tracy Hope Davis, filed a motion for either Chapter 7 bankruptcy or the dismissal of Chapter 11 status: "The Debtor is losing money and appears to be unable to confirm a plan." Under the law, Chapter 11 status can be revoked with a "substantial or continuing loss to the estate and the absence of reasonable likelihood of rehabilitation." By the end of November, WineCare had nearly $185,000 in unpaid administrative bills and counting, and just $11,000 in cash on hand.

With some wines returned and Limbocker sidelined, collectors are now finding out whether the wines suffered damage. Limbocker always maintained that the wine never lacked for proper storage and breakage was minimal: "The good news is that all—I say 95 percent because I can't be 100 percent sure—but I am sure that the wine is fine," he said in January.

Kaplan, without going into detail, is less sure. "Generally, what we have heard from speaking to others who received some of their wine back, there was a percentage that had some damage to it.” For those waiting to see their wine, the cellar saga could still be far from over.