L&L Wings files bankruptcy following trademark dispute judgement

By Sarah Lizee

Olympia, Wash., April 26 – L&L Wings, Inc. filed Chapter 11 bankruptcy on Friday in the U.S. Bankruptcy Court for the Southern District of New York.

Ariel Levy, president and sole officer of L&L, said in a declaration that sometime in or around 2011, a dispute arose between L&L Wings and a former employee and his company to whom L&L Wings, in 2005, had licensed the mark and tradename “Wings,” thereby permitting the operations of similar beachwear stores under the adapted name “Super Wings.”

In 2011, the former employee’s company, Beach Mart Inc., began an action in the U.S. District Court for the Eastern District of North Carolina against L&L seeking various causes of action and damages and claiming various breaches of the underlying license agreement between the parties.

On Nov. 16, a jury verdict was rendered in favor of Beach Mart and against the L&L, awarding $4.18 million in damages to Beach Mart.

On March 25, the court issued a decision and order with judgment against L&L in the amount of $16 million along with findings that the debtor’s interest in the Wings mark under the Morrow license terminated and debtor’s own registration of the Wings mark was void.

It’s also possible that the district court may award the plaintiff significant legal fees to be added to the judgment, Levy said.

“Due to the substantially increased size of the judgment in comparison to the verdict, the debtor, which vigorously disputes the verdict and judgment and intends to appeal the judgment, does not have the financial wherewithal to bond the impending appeal,” Levy said.

“In addition, if the judgment were enforced and executed upon, it would lead to the likely cessation of the debtor’s business and forced liquidation of its assets.”

L&L plans to use the Chapter 11 process to appeal or resolve the judgment, restructure its debt, seek out new capital or other strategic transactions and liquidate the claims of Beach Mart so that a plan of reorganization can be filed within a reasonable amount of time.

The company is seeking court approval to use cash collateral in which TD Bank may assert a security interest under a pre-petition line of credit arrangement.

During the Chapter 11 case, it is anticipated that the debtor will seek to continue financing under a modified lien of credit arrangement subject to further documentation and application to the court.

Levy said the cash collateral use is necessary in order for the debtor to sustain operations and pay ongoing overhead and necessary expenses throughout the course of the Chapter 11 case.

The company listed $10 million to $50 million in assets and $50 million to $100 million in liabilities.

The company’s largest unsecured creditors are Beach Mart, based in Greensboro, N.C., with a $15.87 million judgment claim, TD Bank, NA, based in Jacksonville, Fla., with a $7.92 million guaranty claim, a $5.13 million guaranty claim, a $4.79 million guaranty claim and a $2.6 million PPP loan claim, Truist Bank, based in Tampa, Fla., with a $2.93 million guaranty claim, and Bank of America, based in Tampa, Fla., with a $2.67 million guaranty claim.

The New York-based beachwear and beach sundry items retailer filed bankruptcy under Chapter 11 case number 21-10795.

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