St. James Law works with troubled business in three areas of concentration:

1. Counsel and Strategic Advice for Businesses Facing Financial Stress

2. Representing Troubled Businesses in Work-Outs and Wind-Downs

3. Representing Business Debtors in Subchapter V and Chapter 11 Cases

Counsel and Strategic Advice for Businesses Facing Financial Stress

Businesses face unique challenges and issues when they suffer a loss of liquidity, a cash-flow crisis or a constriction in credit availability. Often, the individuals who have successfully run the business in the past do not have the breadth of experience and business sensibilities necessary to respond to these challenges.

Michael St. James provides these clients with a clearer understanding of the issues and alternatives they face under these difficult circumstances, helping them formulate a strategy for protecting the business and resolving its financial problems. In the process, he provides the client with an understanding of the issues that are likely to develop and the responses that are likely to prove successful as they implement the strategy.

Often, the best strategy for a business facing financial stress is to engage in negotiations with key creditors, premised on a frank discussion of the legal alternatives available to the business. St. James has decades of experience in such discussions and often-delicate negotiations. In some cases, renegotiating a key license or restructuring a single critical debt will enable a business to resume ordinary operations, and a candid exploration of the business’ legal alternatives will provide both sides with incentives to renegotiate.  In other cases, St. James will negotiate with creditors generally, either through an out-of-court work-out or a Chapter 11 case.

Representing Troubled Businesses in Work-Outs and Wind-Downs

In many cases, a business will require a pervasive restructuring of its debts or business relations. Where possible, Michael St. James approaches these cases by attempting to negotiate with creditors generally, seeking a suspension of debt repayments and collection efforts in the short term, and a material modification in the business’ general payment obligations in the long term. This is commonly referred to as an “out of court work-out.” In cases where it is possible, an out-of-court work-out or wind-down is generally preferable to a Chapter 11 case, because it allows the business to avoid the expense, uncertainty and publicity of a bankruptcy proceeding. St. James always explores this as a first alternative for troubled businesses.

An example of St. James’ work in such a case was CHC, a significant developer and operator of affordable housing projects. When it determined it did not have a viable future, it had three developments in process and nearly 30 affordable-housing projects under management. St. James guided CHC through a wind-down, during which operations were successfully transitioned to appropriate substitute nonprofit organizations, the residents were protected from harm, and the projects in process were successfully completed. Although the wind-down ultimately required almost two years, CHC’s core values and business objectives were met and all creditors were paid in full.

Representing Business Debtors in Subchapter V and Chapter 11 Cases

Representing business debtors in Chapter 11 cases has always represented a significant portion of Michael St. James’ practice. Whenever he commences a Chapter 11 case, he maintains a strategic focus oriented around the client’s “exit strategy” and the specific objectives of the case. By doing so, he reduces the expense and duration of the case and increases the prospect of ultimate success. Wherever appropriate, St. James makes use of a “pre-packaged” Chapter 11, which makes it possible to complete the entire Chapter 11 process within a month.

Congress enacted Subchapter V to provide a streamlined and less expensive approach to Chapter 11; it took effect in 2020. St. James confirmed one of the first Subchapter V Plans in the Bay Area – after a total of 44 days in bankruptcy – and Subchapter V has been a mainstay of his practice ever since. St.James has confirmed a number of Subchapter V Plans under which general unsecured creditors received nothing (and were deemed to reject the Plan) but equity was unimpaired.

St. James has successfully used Subchapter V in cases which would not ordinarily be thought of as “small businesses.” For example, The Ghost Ship warehouse fire caused more fatalities than any other urban California fire. The landlord and two of her children (collectively, the “GS Landlord”) were defendants in lawsuits brought by 78 plaintiffs with respect to the fire.  St. James helped the GS Landlord use a consolidated Subchapter V Plan to bring the litigation to closure and to implement an overall restructuring of their debts and assets.

St. James represented Round Table Pizza as co-counsel in the company’s Chapter 11 case. Round Table, wholly owned by an employee stock ownership trust, operated 120 restaurants and acted as franchisor for an additional 300. Although key creditor constituencies sought a sale of the business, and the franchisee association unsuccessfully engaged in bankruptcy litigation attempting to cancel or modify their franchise agreements, the reorganization was completely successful: With St. James’ help, Round Table confirmed a Plan of Reorganization and emerged from Chapter 11 after only 10 months, with employee ownership and management intact, and creditors to be paid in full over four years.