Neiman Marcus sues Marble Ridge after report alleges bid tampering

By Caroline Salls

Pittsburgh, Aug. 28 – Neiman Marcus Group Ltd., LLC and its Mariposa Intermediate Holdings LLC and Neiman Marcus Group LLC debtors filed a lawsuit Thursday against Marble Ridge Capital LP and Marble Ridge Master Fund LP, according to a filing with the U.S. Bankruptcy Court for the Southern District of Texas.

Neiman alleged that Marble Ridge, while co-chairman of its official committee of unsecured creditors in late July, “violated its fiduciary duties, acted in bad faith and abused the bankruptcy process by coercing a third-party bidder not to submit a bid to fund a cash-out option for unsecured creditors.”

Thursday’s complaint said the third-party bid would have benefited the plaintiffs and their stakeholders but limited Marble Ridge’s profits on a competing proposal.

In addition, Neiman alleged that Marble Ridge tried to cover up its illegal activities by pressuring the competing bidder into misleading the committee, the U.S. Trustee overseeing the Chapter 11 cases, the court and the public.

“This is simply the latest chapter in a two-year campaign that Marble Ridge has waged to harm the debtors and their stakeholders,” the lawsuit said.

Trustee findings

As previously reported, the U.S. Trustee overseeing Neiman Marcus Group’s case said in a statement filed on Aug. 20 that former official committee of unsecured creditors member Dan Kamensky, a managing partner at Marble Ridge, breached his fiduciary duty.

Specifically, acting Region 7 U.S. Trustee Henry G. Hobbs Jr. said he made these findings after being ordered by the court to review “alarming allegations” about Marble Ridge’s conduct.

The U.S. Trustee said his investigation focused on the circumstances surrounding the potential purchase or conversion to cash of MyTheresa series B preferred shares held or to be held by Neiman Marcus’s unsecured creditors and/or any potential conflict of interest arising from that transaction.

According to Hobbs’s statement, Kamensky, on behalf of Marble Ridge, submitted an offer on July 24 to purchase the Neiman Marcus debtors’ MyTheresa-related litigation claims.

After committee counsel told Kamensky that he could either withdraw his offer and agree not to submit another offer without prior committee approval or be recused from committee discussions regarding a settlement, Hobbs said Kamensky chose to withdraw his offer.

Hobbs said neither he nor the court were informed of Kamensky’s initial expression of interest, his offer to purchase the claims, or the withdrawal of his offer until after July 31.

As the committee worked on the Marble Ridge proposal, financial firm Jefferies expressed interest in making its own cash-out offer to buy the series B shares.

After Kamensky was informed on Jefferies interest in submitting a proposal to buy the shares on the afternoon of July 31, Hobbs said he believed that the Jefferies’s expression of interest was not serious and that nothing would come of it, but that Kamensky subsequently “engaged in a frenzy of activity” once his conversation about the Jefferies interest ended.

The U.S. Trustee said Kamensky ultimately told Jefferies not to make an offer for the shares.

Lawsuit requests

Through the lawsuit, Neiman said it is seeking damages and sanctions to compensate the plaintiffs and their estates for the harm caused by the defendants’ alleged breach of fiduciary duty and bad-faith conduct and deter future misconduct.

The plaintiffs are also asking the court to subordinate all of Marble Ridge’s claims to those of unsecured creditors and to grant a temporary restraining order and preliminary injunction prohibiting Marble Ridge from distributing any funds or proceeds from any asset sales in connection with its wind-down and liquidation unless it can prove that Marble Ridge has segregated $55 million into trust or escrow to pay any damages or sanctions ordered by the court.

Neiman said the court should also order Marble Ridge to provide notice to any potential buyer of its claims or interests related to Neiman Marcus that those claims are subject to subordination.

Neiman Marcus is a Dallas-based department store and catalog retailer. The company filed bankruptcy on May 7 under Chapter 11 case number 20-32519.

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