ALBION — After filing for Chapter 11 bankruptcy earlier this year, Patriot Solar Group LLC won a minor court victory late last month to keep its case moving forward.
Judge John Gregg issued a ruling denying a motion from Virginia-based Vanguard Energy Partners LLC to move the case from bankruptcy court to arbitration, according to filings in the U.S. Bankruptcy Court for the Western District of Michigan.
Essentially, granting Vanguard’s motion would have moved the decision-making power to an arbitrator, who could have determined the amount owed to the company and whether Patriot Solar was required to pay.
“Over the last few years, more and more contracts will be arbitrated rather than tried in court,” said Robb Wardrop, an attorney with Grand Rapids-based Wardrop & Wardrop PC. “The reason for that is that arbitration tends to be quicker and less costly. In this case, the reason Vanguard wanted (arbitration) is to sort of take away the home court advantage, if there is one — take it back out east instead of having it decided in the Midwest.”
The decision by the court also preserves the “grace period” offered to Patriot Solar Group under Chapter 11 bankruptcy protection, Wardrop said. Companies have 120 days after declaring bankruptcy where all pending litigation and legal proceedings are stopped. During that time, they must complete a plan to exit bankruptcy and have an additional 60 days to get that plan approved by the court.
“It gives you time to breathe,” Wardrop said. “This gives Patriot Solar a time to step back and say, ‘Where are we going, how are we going to handle Vanguard.’”
Wardrop notes the while the court’s decision does not hurt Vanguard’s case against Patriot Solar, it does “set the tone” for the rest of the proceedings.
“It doesn’t really affect it at all,” he said of Vanguard’s case. “It just means that they have to sit back a while (and) wait and see what happens. That’s what a bankruptcy is for.”
Patriot Solar’s decision to file for Chapter 11 bankruptcy in March 2017 stems from disputes over four solar installation projects commissioned by Vanguard Energy Partners in late October 2016. Patriot Solar alleges Vanguard failed to pay $1.1 million it owed for the project, thrusting the otherwise profitable company into bankruptcy protection.
Specifically, the company said Vanguard severely delayed returning a signed subcontractor agreement and completing other on-site preparation work for each project, preventing the solar installer from completing the project on time.
Patriot Solar also filed a civil complaint regarding Vanguard’s alleged non-payments in a Commonwealth of Massachusetts trial court at approximately the same time it filed for bankruptcy protection.
Meanwhile, Vanguard says Patriot Solar’s alleged failure to complete the projects resulted in $3.5 million in damages.
Vanguard originally filed the motion for relief in April and Patriot Solar responded with its objection to the motion soon after.
Patriot Solar’s objection was supported by its sole secured creditor, Huntington National Bank, and one of its largest unsecured creditors, Grand Haven-based Shape Corp.
Huntington is holding approximately $1.2 million in mortgages, while Shape Corp. is owed approximately $100,000, according to the court documents.
Patriot Solar’s list of unsecured creditors in West Michigan also includes Paragon Die & Engineering ($125,000), Sinclair Designs & Engineering ($121,000), Cascade Engineering ($48,000), Damron Bros. Asphalt ($34,000) and Richmond Agency ($29,000).
The company also listed a net loss of $86,351.69 for the period between January and April, according to a monthly progress report filed with the court.
The progress report noted that a delay by a major client on five projects totaling $1.6 million affected the company’s operations, but those projects had begun as of May 19.
None of the parties involved in the case responded to requests for comment.
Wardrop notes that this case illustrates the quality of West Michigan’s bankruptcy courts.
“The actuality is that some companies are looking to file in West Michigan because they know they’ll be treated fairly and correctly, and we have good judges,” Wardrop said. “I’ve been involved in at least two cases that were specifically filed in the Western District where they could have been filed in other districts because our judges are available, they do good work, and the court works well with the attorneys, works well with the debtors, works well with the creditors. Everything works smoothly.”