Columbus Blue Jackets defenseman Jack Johnson filed for Chapter 11 bankruptcy last October, after being scammed out of millions by his parents. Now, he’s attempting to convert his filing into a Chapter 7 case—which, in very broad terms, would allow Johnson to resolve his debts by liquidating his assets instead of via a reorganized payment plan. The people to whom he owes money don’t want that to happen. This is a dry, technical dispute between a guy and his creditors; according to the latter, though, what’s at stake is whether Johnson will be able to enjoy the full benefit of a $15 million contract. And the creditors are willing to critique Johnson’s dry cleaning habits if it helps their case in the slightest.
In Chapter 11, a debtor agrees to pay back all his debts over time, while in Chapter 7, a debtor is allowed to discharge most debts owed through selling off property. His creditors, who are owed “in excess of $15 million” in predatory loans signed by Johnson and his parents Jack II and Tina, understandably don’t want that to happen, and accuse Johnson of trying to set “a roadmap for irresponsible or unethical multi-millionaires.”
The creditors’ counsel filed a memorandum on Aug. 27 listing the reasons why Judge John E. Hoffman Jr. shouldn’t rule in favor of Johnson. It gets as detailed as listing Johnson’s wedding costs and (admittedly absurd) dry cleaning expenses for the month of July. The introduction to the document claims that the 28-year-old NHL player is attempting to make the conversion in order to preserve as much as possible of the money owed to him under the terms of his Blue Jackets contract, which will pay him $15 million over its last three years:
The obvious and primary reason for the Debtor’s attempt to convert this case to chapter 7 is to enable the Debtor to reap the remaining benefits under his player contract, namely $15 million over three years, while leaving his creditors, who are owed in excess of $15 million, with a few immaterial assets and unknown litigation claims. Thus, granting the Conversion Motion is tantamount to this Court condoning abuse of the federal bankruptcy system and lavishly rewarding a privileged, high-income individual debtor for irresponsible serial borrowing and bad faith conduct (in and out of bankruptcy court). Moreover, from a policy perspective, granting the Conversion Motion would create a roadmap for irresponsible or unethical multi-millionaires with substantial future income to incur and then discharge millions of dollars in debt while retaining such future income. It is fair to say that such relief would be unprecedented and would turn the Bankruptcy Code on its head.
When Johnson originally filed for Chapter 11 bankruptcy last October, one of the conditions was that his finances would be monitored to see if he was making an effort to live more frugally. His credit and debit card statements were submitted into the case roughly once a month. The creditors claim that these statements show he hasn’t been seriously following the idea of living within his means while being bankrupt. He married Brady Quinn’s sister Kelly Quinn in July, and supposedly spent $50,000 on the wedding. Some of Johnson’s money is being used to pay private school tuition for his younger brother. He somehow spent over $1,000 in dry cleaning in a single month:
The Debtor’s Post-Petition Spending Evidences Bad Faith.
15. In the first ten months of the Debtor’s chapter 11 case, he received total net income in excess of $2.2 million dollars. See Monthly Operating Report for July 2015 [ECF 360] (the “July 2015 MOR”). Despite being in bankruptcy, the Debtor continues to live a luxury lifestyle and has yet to curb his high-level spending. Debtor continues to incur monthly rent obligations on his Dublin, Ohio residence which as of July exceed $27,000. He is spending $521 a month on a vehicle, which he fills with over $1,000 of gas per month (more than $10,000 since filing). His telecommunications bills approach $700 per month (over $5,000 since filing). His dry cleaning bill in July 2015 alone exceeded $1000. He continues to pay approximately $1,500 a month (over $15,000 since filing) for his brother’s private school tuition and living expenses. He also continues to make regular unaccounted for ATM cash withdrawals from his checking account – in 2015 alone (as of July), he had 39 withdrawals totaling $16,5000 [sic]. In 2015 alone, he has spent at least $22,000.00 at retailers and restaurants via check card purchases. Most shocking is that the Debtor spent close to $50,000 on wedding expenses during the pendency of this case. In total, through July 2015, Debtor has spent $732,511.92 since the Petition Date.
The creditors’ counsel claims that Johnson hasn’t made a legitimate effort to negotiate with them or propose a plan for repayment. The memorandum also points out that while Johnson said that his parents had control of his money and took advantage of their power, he hasn’t made any effort to hold them responsible. Jack II’s and Tina’s attorneys filed a motion for a protective order in an attempt to limit the amount and scope of questions asked during the deposition, as well as the duration. Their son didn’t really argue against them:
Yet, the Debtor has not taken any meaningful action to pursue claims against his parents or other advisors (or third parties). In fact, the only action that appears to have been taken is a meeting between the Debtor’s parents and counsel to the Debtor where the parents were asked questions – not under oath – about their actions in regard to the Debtor’s finances.
When Jack II and Tina claimed that all of their physical records and emails were simply lost, their son didn’t press them on anything:
No documents have been subpoenaed from the parents related to such actions. In fact, the Debtor’s parents recently testified that all of their physical records were “lost” when they left California, and all of their electronic records (emails, etc.) have been “lost” because their Comcast email account has been terminated. Despite all of these obvious red flags, the Debtor concludes in his Reply that the parents are insolvent and not collectible, thereby facially attempting to justify his failure to pursue substantial claims against them.
As Jack III strains to turn a debacle into a smaller debacle, his parents appear to have been pulling out all the stops to not provide any meaningful information. Before the deposition, on Aug. 17, attorneys for Jack’s parents filed a motion for a protective order in an effort to get them out of the Aug. 21 deposition. A big portion of their argument was the length of the testimony. According to the motion, Jack II and Tina would be tired afterward and have to rent a hotel room, and since they weren’t primary parties in the case, the whole procedure was unnecessary. No, seriously:
It is unduly burdensome to the Johnsons to subject them to questioning by eight attorneys over fourteen hours in relation to the Conversion Motion. The fact that the Depositions could last that long is evidence that the Depositions will move beyond the discrete scope of the Conversion Motion. The Objecting Creditors have refused to limit the questioning or timeframe, and what is sure to result will be a physically, mentally, and emotionally draining day that is simply unnecessary for these non-parties. Moreover, the potential of the Depositions going until midnight makes travel for the Johnsons dangerous; they will either have to drive home in the middle of the night while completely exhausted, or they will be forced to outlay additional funds to purchase a hotel room. On top of it all, given the allegations surrounding their involvement with the Debtor’s historical finances, this is unlikely to be the only time that the Johnsons are going to be subject to depositions. There may be future contested matters or adversary proceedings where that their testimony is sought. Taken altogether, the Depositions and Production Demands are unduly burdensome on the Johnsons.
 The Johnsons will have an approximate one-hour drive both to and from the deposition.
One day later, the creditors’ counsel issued its own response, calling the motion “ridiculous” and “without merit.” The court ended up denying the request anyway, but Jack II and Tina really gave it their best shot.
Judge Hoffman has not yet made a decision on Johnson’s case.
All cited documents are below.
Photo: Christian Petersen/Getty Images Sport
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