Dippin' Dots Gets New Counsel
A Kentucky judge approved bankrupt Dippin' Dots Inc.'s motion to employ new debtor counsel and approved the ice cream maker's continued use of cash collateral at a March 30 hearing.
Judge Thomas H. Fulton of the U.S. Bankruptcy Court for the Western District of Kentucky in Paducah also approved the motion by Dippin' Dots' former debtor counsel, Farmer & Wright PLLC, to withdraw at the hearing, court documents show. Fulton is scheduled to preside over a final cash collateral hearing on April 16.
Frost Brown Todd LLC, Dippin's new counsel, filed an application on March 16.
Dippin' may need to seek an additional debtor-in-possession loan depending on how long the sale process takes, according to Bobby Guy of Frost Brown Todd.
The company is currently operating with a $1.25 million DIP from secured creditor Regions Bank.
Frost Brown Todd is "aggressively pursuing a sale of Dippin' Dots" in order to maximize the value of the estate, Guy said.
Farmer & Wright filed a motion to withdraw as debtor counsel on March 20. Greg Charleston of Conway MacKenzie Inc., serving as chief restructuring officer, had advised the law firm that his actions could place it in a conflict of interest, and had requested new counsel, according to court documents.
Fulton was scheduled to preside over the hearing on March 22, then March 29, court documents show, but it was continued.
Samuel K. Crocker, the U.S. trustee, filed a limited objection to Frost Brown Todd's employment on March 28, saying that the employment shouldn't be unlimited because of the strict timeline in the case. The objection was overruled at the hearing, Guy said.
"Instead, the UST proposes that this court constrain FBT's representation of DDI to either the completion of the sales process currently under way … or a total period of 90 days," Crocker said in court papers.
The U.S. trustee also objected to FBT's compensation because it's unlikely unsecured creditors would receive sale proceeds and that Farmer & Wright provided services to the estate for "far less." The U.S. trustee believes that the $20,000 per week that DDI requested as a weekly budget for FBT fees should be reduced, court document show.
Farmer & Wright billed Dippin' $81,694.50 in legal fees in the 19 weeks and five days it represented the company in the bankruptcy proceeding.
Crocker also filed a motion to examine Charleston "relative to the debtor's acts, conduct, property, liabilities and financial condition, or to any matter which may affect the administration of the debtor's estate," on May 1, court documents show.
The cash collateral order includes a carve-out of $20,000 per week for Frost Brown Todd's retention, court documents show.
Charleston was appointed chief restructuring officer on March 6, when Fulton approved an agreement to resolve issues between the debtor, its former president and creator Curt Jones and secured lender Regions Bank.
The group filed a motion on March 6 for an order approving an agreed-upon stipulation that would resolve Regions' motion for a Chapter 11 trustee by appointing a chief restructuring officer. Dippin' also filed a motion seeking a second debtor-in-possession loan from Regions.
Through the motion, Dippin' withdrew its borrowing motion and Regions withdrew its trustee motion, with the option of filing a second trustee motion if the chief restructuring officer is incapacitated or displaced, court documents show.
Jones invented Dippin' Dots in 1988, using a cryogenic encapsulation process he pioneered that flash-freezes ice cream in small beads. The process differs from the freeze-drying of food used by NASA for astronauts. As a result, the ice cream can still melt.
Todd Farmer of Farmer & Wright did not return calls for comment.
Regions' counsel, Brian H. Meldrum of Stites & Harbison PLLC, also did not return a call for comment.