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Civic Skinny

Ex-Head of Dahl’s sues after severance is stopped. Sen. Harkin’s judgeships proposals are all but dead.

11/19/2014

Six weeks before Dahl’s filed for protection under the bankruptcy laws this month, it quit paying its former chief executive the severance negotiated when he left the grocery chain earlier this year.

And three weeks before the bankruptcy was filed, he sued.

According to the suit filed Oct. 20 in Polk County District Court, David W. Sinnwell, who was chief executive officer and a director of Dahl’s, negotiated a severance agreement of around $420,000 when he was terminated on March 24. The money was to be paid in 39 biweekly installments of $10,795.30, according to the lawsuit.

But the payments stopped in early September, Sinnwell says. He sued for unpaid wages, damages, interest, costs “and all other relief found by the Court to be just and equitable under the circumstances.”

Dahl’s, in effect, says tough luck. “The filing of the bankruptcy petition operates as a stay of the initiation or continuation of any judicial proceeding against the defendant…[and] of any act to collect, assess, or recover a claim…that arose before the filing of the bankruptcy petition,” Dahl’s says in a motion filed in the Sinnwell suit last week. Sinnwell’s attorney agrees that the bankruptcy filing results in an automatic stay.

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At the time of the bankruptcy petition, Sinnwell was the largest individual stockholder in Dahl’s, with 65,000 shares. Individuals own fewer than 200,000 shares, about 3 percent of the stock. The company is owned by its employees, and their 401K trusts own 5,500,000 shares, which could end up being worthless; all creditors have to be paid off before stockholders get anything in a bankruptcy, and creditors are owed $41.1 million. What’s more, Dahl’s “cash position has continued to erode,” according to a document filed with the bankruptcy petition.

Dahl’s owed five companies more than $100,000 each when it filed its petition, but the petition says Dahl’s “estimates that funds will be available for distribution to unsecured creditors.”

It doesn’t say how much.

Holmes Murphy, the West Des Moines insurance brokerage, is owed $364,707.65, according to the petition. The second biggest unsecured claim, $266,591.78, is owed to Thrifty White Pharmacy, an employee-owned pharmacy chain based in suburban Minneapolis and operator of the pharmacies in Dahl’s stores. Next is Anderson Erickson Dairy of Des Moines, at $255,872.02. Fourth is Dakota Drug Inc., which is owed $242,956.15 and which is a distributor of drugstore items and is based in Minot, North Dakota.

The next among the top 10 are: Mid American Energy, $126,682.40; United Healthcare Insurance Co., $90,965.56; Shullsburg Creamery of Shullsburg, Wisconsin, $84,192.37; Frito-Lay Inc., $79,842.27; Iowa Des Moines Supply Inc., $73,885.42, and Old Dutch Foods Inc. of St. Paul, $68,938.69.

All told, there are $3,701,001.30 in unsecured, non priority claims and another $329,932 in unsecured but priority claims. There are secured claims of $37,105,361.63, most of which involve the leases on various Dahl’s stores in the metropolitan area. The largest holder of a secured claim is Associated Wholesale Grocers Inc., of Kansas City, which has a claim of $36,234,960 and which probably will end up owning the stores and renaming them.

The unsecured but priority claims are tax claims — $247,766 in property taxes owed Polk County and $87,166 in sales and excise taxes owed to the state.

The smallest claim: $8.40 owed to the Altoona Herald.

But don’t worry about the lawyers not getting paid. The Dahl’s budget for the next six months includes biweekly payments of $37,333 to the Bradshaw law firm, of $9,333 to the Dickinson law firm, of $37,333 to Husch Blackwell, a law firm with offices in Kansas City, and of $9,333 to Crowe & Dunlevy, an Oklahoma law firm.

It’s a safe bet that retired employees will have little sympathy for former boss Sinnwell, who was collecting his severance while the company was saying it was too broke to make the retirement payments due to others. …

As this Congress winds down, the Obama administration still has not nominated anyone to fill the coming vacancies on the federal benches in Des Moines and Sioux City. In the fall, retiring Sen. Tom Harkin proposed that Obama nominate Cedar Rapids lawyer Dave O’Brien to succeed the retiring Mark Bennett in Sioux City, who after 20 years is leaving on June 4, and he sent the names of U.S. Attorney Nick Klinefeldt and Polk County District Judge Karen Romano as suggestions to succeed James Gritzner in Des Moines, who is moving to senior status on March 1 after nearly 13 years on the federal bench.

At this point, even if the President does send up names for the posts, it’s unlikely that the Senate would act on them in this lame-duck session. At any rate, names sent up this session do not carry over into the new session.

Historically, a President listens closely to a judicial recommendation from a state’s senior senator of the President’s party, but there will be no Iowa Democrat in the next Senate. In all likelihood, the White House will confer with Sen. Chuck Grassley. Besides being Iowa’s senior senator, Grassley also will be the chairman of the Senate Judiciary Committee in the coming session, the committee that must approve any nominations before they are sent to the floor.

One person who closely follows these things thinks the President and Grassley might make a deal: Grassley would see to it that the committee approves a name sent up by the White House if the White House agrees to fill the second post with someone recommended by Grassley.

At the moment, there are 54 openings on the federal bench, with 32 nominees pending. There are 26 vacancies expected next year — including the two from Iowa — but only one nominee has been sent to the Senate from the White House. …

Old (but unreported) news. The trial has been set for Sept. 22, 2015, in that defamation lawsuit that former Iowa State basketball player Bubu Palo filed against Hunter Elizabeth Breshears and her mother, Grace Breshears. Summary: Onetime friends and fellow ISU students Hunter Elizabeth Breshears and Palu slept together on occasion. After one such occasion, she went to the police and said she was raped. Charges were filed but later withdrawn by the Story County Attorney. The university brought its own charges under the student conduct code. An administrative law judge ruled in Palo’s favor. The university appealed to district court. It lost. Among other things, evidence — that was in the hands of mother and daughter — was tampered with, courts ruled. So Palo followed with the defamation suit.

Meantime, the Board of Regents, acting for the university, has again appealed, this time to the Iowa Supreme Court. No proceedings have yet been scheduled. CV

Citizen Dahl

Dahl’s has not been the most generous corporate citizen of late.

According to papers filed in connection with its bankruptcy petition, it made eight gifts of more than $100 in the year leading to the court filing. All gifts were food.

They were:

Dinners valued at $2,219.48 for the Iowa Shrine Football Game.

Bakery goods valued at $1,629.96 for Legislative Day.

A youth dinner valued at $783.87 at the Maple Street Missionary Baptist Church.

A meal valued at $634.94 for the Roosevelt High School football team.

Fruits baskets valued at $345.54 for families at the Maple Street church.

Food baskets valued at $289 for the needy for the ZaGaZig Shrine bowlers.

Gift cards for the Iowa State Fair valued at $255.

Meat for a chili dinner for undisclosed persons, valued at $242.52.

Dahl’s sales in the 12 months before filing the petition totaled more than $158 million.

The W.T. and Edna M. Dahl Trust, an unrelated entity with around $9 million in assets, gave away $578,500 in 2012, the latest year for which figures are available. CV

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