Publishers sue Family Christian Stores over bankruptcy plan

Business
by Lynde Langdon
Posted 3/10/15, 08:00 am

A group of Christian publishers that stands to lose $20 million is fighting back against part of Family Christian Stores’ bankruptcy plan. Twenty-seven companies filed a joint lawsuit in federal bankruptcy court Friday to protect products Family Christian Stores has on its shelves but hasn’t yet paid for.

The companies provided the so-called “consignment inventory” to Family Christian Stores (FCS) under a contract that required it to pay for their products after customers buy them from stores. Under a traditional retail arrangement, retailers buy products first, then resell them. The plaintiffs in the lawsuit—a who’s who of Christian publishers, including Baker Book House, David C. Cook, and Intervarsity Press—say they still own some of the books and other products in FCS locations.

The dispute arose because in its bankruptcy petition, filed last month, FCS stated it wants to include the consignment inventory—at least what it had on hand before the bankruptcy filing—when it sells off its assets to pay creditors. According to court documents, FCS owes banks and vendors about $97 million, not including the $20 million in consignment inventory.

“What is happening … is that Family is basically saying that they will take ownership of that product so that they can sell it,” said Mark Kuyper, president of the Evangelical Christian Publishers Association (ECPA), which has been monitoring the bankruptcy for member publishing companies and keeping them informed of issues that affect them.

The plaintiffs have asked the bankruptcy judge to order Family Christian Stores not to include the consignment goods in its proposed asset sell-off and to either pay for the products or return them.

The dispute over consignment items is just one piece of the complex financial puzzle in the Family Christian Stores bankruptcy. The nation’s largest Christian bookstore, FCS has 266 stores in 36 states. The bankruptcy case pulls Christian publishers in two different directions. As creditors, they want to recover money the bookstore chain owes them, but as suppliers, they want the stores to stay open and profitable so they can sell their products in the future.

“The publishers would like to see Family succeed,” Kuyper said. “The challenge is the financial situation is also significant.”

A representative of Family Christian Stores said the company would not comment on the bankruptcy case while it remains in progress. Attorneys for the plaintiffs also declined to comment on a pending case.

Lynde Langdon

Lynde is a WORLD Digital’s managing editor and reports on popular and fine arts. She lives in Wichita, Kan., with her husband and two daughters. Follow Lynde on Twitter @lmlangdon.

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Comments

  • STEPHEN KLOOSTERMAN's picture
    STEPHEN KLOOSTERMAN
    Posted: Fri, 04/15/2016 05:19 pm

    I would think there would be some precedent for this based on what happened with Borders bookstores a few years ago.

  • PuritanD
    Posted: Fri, 04/15/2016 05:19 pm

    Makes one wonder if they would go back to being closed on Sundays......

  • Bruce's picture
    Bruce
    Posted: Fri, 04/15/2016 05:19 pm

    Well said, DLG. It would be great if Christian business could be an example of Christ-living.  Through the years, it seems like business oriented around products ostensibly for Christ-followers has become less Christ-focused, but there are good examples otherwise.  It would be great if this was one.  I don't get how FCS can assume ownership of inventory that it did not pay for under a consignment contract.  It seems like it should be obvious that FCS must give up on that.

  • DLG
    Posted: Fri, 04/15/2016 05:19 pm

    Capt Hook raises some good points to consider but also oversimplifies. If he were to let someone borrow his car for an evening and never got it back, I imagine he would be disappointed and there would be hard feelings. All the moreso if the borrower was a business partner with whom he had a contractual agreement. I suppose another option would be never to lend anything, but that would be unbiblical. The Bible does instruct us to lend freely to our neighbors, but it also tells us to keep our word, fulfill our obligations, and do harm to no one. May God bring these parties to a place where they are burdened to fulfill the whole counsel of God's Word and all be reconciled. That would be an amazing example to the world. 

  • Capt Hook
    Posted: Fri, 04/15/2016 05:19 pm

    I've always gone with the philosophy of "I don't loan something to someone that I can't afford to loose" and "If I loan something to someone I don't plan on getting it back".  Then, if I'm not paid back, I'm not disappointed and there are no hard feelings.  If I am repaid, I just consider that a bonus.  In this case, the publishers should have known that when they put something on a store shelf for free and agree to get paid when the item is sold there is always the chance of something going wrong-like bankruptcy.  The publishers should take it in the shorts and learn their lesson.  As for FCS, as Loren said, How did they amass that kind of debt to begin with?

  • Loren
    Posted: Fri, 04/15/2016 05:19 pm

    "FCS owes banks and vendors about $97 million"How does a purportedly Christian business/organization amass that kind of debt to begin with?

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