WILMINGTON, Del. — An $8 million settlement in federal bankruptcy court was reached on Aug. 23 between heirs of Art Van Elslander and trustee Alfred T. Giuliano, in relation to defunct retailer Art Van Furniture’s sale to private equity in 2017.
Under terms of the settlement, the majority of the settlement will be paid by National Union Fire Insurance Company. The agreement is not an admission by the parties of any of the allegations made, and the trustee released the defendants from all claims.
“Thanks to the parties for working through the issues. This obviously looks like a very sensible resolution,” Judge Craig Goldblatt of U.S. Bankruptcy Court in Delaware said last week when approving the settlement, according to The Detroit Free Press.
Gary Van Elslander, the son of Art Van Elslander, told The Free Press that the family is glad that the suit was settled, but it remains a painful final chapter for the family and employees of the former Warren, Mich.-based retailer.
“Who I feel really bad for is the employees of Art Van,” he told reporter J.C. Reindel. “My father always said that the heartbeat of the company was the people, and that was a fact — and they probably got hurt worse than anyone. The Van Elslander family, our feelings were hurt, my father’s legacy was hurt, but the pain that the employees felt was real, and that I think we probably feel worse about.”
Gary Van Elslander told The Free Press that, ultimately, the push for expansion and bringing in outside leadership helped doom the company.
“I think along the way that some of the culture of the business was lost,” he said. “We had a very driven culture, very hands-on among the executive team with our retail stores, and I think a lot of that was lost. There was management that was hired that was from outside the Detroit area. They really didn’t understand the legacy and the brand of Art Van Furniture as well as they could have, didn’t put enough importance on it.”
In the original complaint, filed March 7, 2022, Giuliano sought to recover more than $105 million in “fraudulent transfers” and more than $84.7 million in certain real properties, among recoveries.
The complaint alleged that Art Van’s sale to Thomas H. Lee Partners in 2017 for $620 million was a highly leveraged transaction, accomplished by stripping the value out of the debtors’ owned real properties and saddled the debtors with an unsustainable debt load for the benefit of the defendants and detriment of the debtors and their creditors.
It stated that prior to the acquisition, Art Van paid less than $23 million per year in total lease obligations and had $136.5 million in total future lease obligations. After a spate of sale/leaseback transactions, the debtors’ minimum lease obligations ballooned to $46 million per year and more than $877 million in total future operating lease obligations.
On March 8, 2020, Art Van filed for relief under Chapter 11 of Title 11 of the United States Code with the U.S. Bankruptcy Court for the District of Delaware. In April 2020, the Chapter 11 cases were converted to Chapter 7.
Just prior to beginning bankruptcy procedures, Art Van ranked No. 14 in Furniture Today’s 2020 Top 100 with $1.043 billion in sales across 192 stores in 2019.