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Most of Garces bankruptcy may proceed, judge rules

The decision paves the way for a sale of much of his restaurant empire.

Jose Garces (left) cooks with Gregg Ciprioni, vice president of culinary operations, in the test kitchen at 2401 Walnut St.
Jose Garces (left) cooks with Gregg Ciprioni, vice president of culinary operations, in the test kitchen at 2401 Walnut St.Read moreCHARLES FOX / Staff Photographer

Chef Jose Garces won a victory late Tuesday when a federal judge allowed most of his bankruptcy case to proceed, paving the way for a sale of much of his restaurant empire.

Judge Jerrold N. Poslusny said operating agreements for Amada, Village Whiskey, Tinto, and the Olde Bar allowed Garces to file for bankruptcy protection over the objections of two of his early investors, food distributor Jim Sorkin and a New Jersey couple, Tom and Maria Spinner.

Poslusny also ruled that Garces did not have authority to file on behalf of Buena Onda, his taqueria. Sorkin also owns a small percentage of that restaurant.

In a statement, Garces said: "Today is a proud day for me. This ruling proves that I have adhered to fair and legal business practices.  It not only confirms claims made by these investors completely false, but also that they are the ones that have perpetrated a litigious sham based off contrived ignorance on how we have run our business for more than a decade.

"The fact is that I have always — in good times and challenging  — put our employees and the success of our entire enterprise at the forefront. These investors have proved with the rejection of lucrative deals that this was always only about them. We eagerly look forward to completing this process, joining our new partners and building a successful future alongside them. With this victory, we can get back to focusing on what we do best — providing excellent food and hospitality to our loyal customers."

William Harvey, an attorney for Sorkin, declined to comment Tuesday night. An attorney for the Spinners did not respond to a request for comment.

The case will proceed Wednesday morning in U.S. Bankruptcy Court in Camden with arguments about an auction, tentatively scheduled for next month. Testimony has indicated that the company is in danger of running out of money by July, typically the start of Garces' slow season.

Ballard Brands of Covington, La., was identified in court papers as the so-called stalking horse bidder, a preferred candidate of sorts. Jeff Manning of CohnReznick Capital, retained to sell the restaurants, said in a court hearing Monday that Ballard originally offered $14 million to buy the restaurants and catering division, and to settle with Garces' three largest vendors. Manning said he fielded six solid offers  — one of which, he said, offered Garces a seven-figure salary.

Garces likely will have a leading role in the restaurants under Ballard. Manning said interested parties had deemed Garces to be a crucial part of the operation,

After investors spurned the deal and Garces filed for bankruptcy protection, Ballard cut its offer to about $6.3 million, including $2 million in cash and $2.8 million to pay for gift cards and catering deposits. That offer is expected to become the floor for bids.

Bankruptcy likely would leave investors with little or nothing. Most of the buyout money would go to M&T Bank of Buffalo, N.Y., a secured creditor owed about $7 million. It has liens on Garces' restaurants and his home and farm.

Garces, 45, has blamed his financial woes on the impact of the 2014 closing of the Revel casino in Atlantic City, which housed four successful Garces restaurants, and the recent failure of an Amada restaurant in New York.