Aspen Skiing Co. loses bankruptcy fight with ex-exec
November 14, 2014
Aspen Skiing Co. has lost its bid to have a former executive's bankruptcy case dismissed.
The U.S. Bankruptcy Appellate Panel of the 9th Circuit affirmed an order from a California bankruptcy court that approved the Chapter 7 filing by Paul and Colleen Cherrett. Paul Cherrett was Skico's senior vice president of hospitality from April 2007 to June 2011.
At the center of the Cherretts' bankruptcy had been a $500,000 loan Skico gave the couple to help them buy a condominium in Basalt. Skico had contended that the couple's earnings — well into the six figures — made them ineligible for bankruptcy protection. And Paul Cherrett, Skico argued in a March court filing, "hopes to leave his lender holding the bag, despite his ability to pay the debt in full."
The Cherrett couple filed for bankruptcy in August 2013, prompting Skico's attempts to have the case thrown out. Skico's first bid was denied in February by the California bankruptcy court, prompting the firm to appeal the ruling. An Oct. 23 hearing, held before the appellate bankruptcy court in Malibu, California, triggered Friday's order.
"We discern no clear error by the bankruptcy court in making that determination," the appellate panel wrote in its 23-page ruling.
Skico declined comment about the decision, and the Cherretts' attorney did not return a telephone message Wednesday.
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At the crux of the dispute was whether the Cherretts' bankruptcy filing was due to consumer debts or non-consumer debts.
As the Cherretts' largest unsecured creditor in the bankruptcy filing, Skico argued that the loan was a consumer debt, which would have disqualified the Cherretts from bankruptcy protection.
The Cherretts, however, contended that they obtained the loan for a business purpose so that they could relocate to Colorado from Jackson Hole, Wyoming. Paul Cherrett also had contended that he viewed the condominium purchase as an investment opportunity.
In siding with the Cherretts, the appellate panel said it was clear that the loan was used for business purposes.
"Paul provided ample evidence that he obtained the housing loan for a business purpose with respect to his employment with Aspen," the order says. "Given his testimony at the hearing, his deposition and his declaration, as well as the written offer of employment from Aspen, the bankruptcy court had sufficient evidence to find that Paul's purpose in obtaining the housing loan was primarily related to his employment."
Before Cherrett came to Skico, he had been working at the Four Seasons Resort in Jackson Hole, where he still owns a home. But Skico floated him a $500,000 home loan, along with a starting salary of $300,000, to lure him away.
Skico hatched the deal with Cherrett after it failed to woo him to the company with previous offers.
"The initial salary proposed by Aspen, at least from Paul's perspective, did not cover the high cost of living/housing in the Aspen, Colorado area," the appellate ruling says. "Ultimately, Paul accepted a written offer of employment that included a $300,000 salary, a 'signing bonus' of $75,000, participation in an incentive plan for potential additional compensation annually," and the housing loan.
After the Cherretts moved to Basalt, they bought a condo for $995,000 using their own cash, the Skico loan and a $417,000 bank loan.
"When he bought the Colorado residence, Paul hoped that it would appreciate in value so that when it was sold, the Cherretts would realize a profit," the appellate court said, adding that the condo was bought at the "very peak of the real estate bubble."
But when the recession arrived in 2008, the condo's value "plummeted, and the Cherretts' hopes of realizing a profit on resale evaporated," the appellate ruling says.
Cherrett left Skico in 2011 to work for Talisker Mountain Co. in Park City, Utah, for more money before eventually taking a job with Hilton in California in 2013, according to court papers.