Payless Holdings LLC, parent company of Payless ShoeSource Inc., filed for bankruptcy for the second time in two years on February 18, 2019. The company plans to close all 2,500 stores in North America and lay-off most of its 16,000 employees. Locations in Latin America are not included in the bankruptcy and will reportedly remain in business.
Payless first filed for bankruptcy in April 2017, when it sought court approval to close 800 stores and ended up closing 673 locations. It has struggled with a high debt load in a challenging retail environment since its 2012 leveraged buyout by Golden Gate Capital and Blum Capital Partners.
Payless Panel Counsel Background
Payless maintained an active U.S. panel counsel program in the following areas:
- Premises liability
- General liability
- Employment practices liability (EPL)
The national shoe retailer has been subject to high profile litigated matters in recent years, including the representative cases listed below.
FLSA and ERISA Violations. The firm faced a 2014 federal case alleging that Payless misclassified a group of employees (titled Store Managers and Store Leaders) as exempt from the overtime wage sections of the Fair Labor Standards Act for all its stores in the U.S. and its territories. The same lawsuit also alleged related violations of the Employment Retirement Income Security Act of 1974.
Wrongful Death. In 2018 a two-year-old girl died from injuries sustained when a full length mirror fell on her in a Payless store in Clayton County in Georgia. The family filed a $200 million wrongful death lawsuit.
California Labor Violations. A class action lawsuit was filed late in 2018 over alleged violations of both the Fair Credit Reporting Act (FCRA) and California’s Labor Code. Questionable practices regarding background checks as part of the hiring process was one element of the lawsuit. Additionally, Payless allegedly did not provide employees 10-minute rest breaks for every four-hours worked. Chronic understaffing was also cited as a workplace violation.
Forced Bonus Repayments. Payless sought to claw back relocation and sign-up bonuses it paid to new employees after promising them new positions with attractive pay and benefits in recent years. The new employees, some of whom uprooted their families to work for Payless, soon realized that the firm was in financial distress.
Dividend Recapitalizations. Payless settled a dispute with its creditors in June 2017 involving allegations that the firm’s private equity owners misappropriated $400 million prior to the first bankruptcy. The payment was considered to be a form of special dividend paid to the owners, funded by corporate debt borrowings.
Wage and Hour Dispute. Payless lost an appeal against Travelers Insurance in the U.S. Court of Appeals for the Tenth Circuit in a 2009 decision. Dating back to 2003, the class action lawsuit charged that Payless unlawfully required hourly employees to work “off the clock” without compensation while also engaging in other violations of the California Labor Code, the California Business & Professions Code, and state common law. Payless had sought insurance coverage for litigation costs, but the appellate court upheld Travelers’ argument that the violations of law alleged in the matter fell outside the bounds of the policy’s terms. (Payless Shoesource, Inc., v. The Travelers Companies, Inc., No. 08-3246).
The bankruptcy case is Payless Holdings LLC, Case No. 19-40883 in U.S. Bankruptcy Court, for the Eastern District of Missouri (St. Louis). The Honorable Kathy A. Surratt-States is the presiding judge.
How to Get Insurance Defense Panels
Payless is following in the shoes of other storied retailers that have closed all or many locations, including Toys “R” Us, Charlotte Russe, Things Remembered and Gymboree.
Law firms that are Payless panel counsel members need to scramble to find panel appointments to cover the loss of Payless work. Finding replacement panel appointments will require some focused time and attention, particularly in today’s declining traditional storefront marketplace.
Contact Margaret Grisdela, an insurance defense marketing consultant, at 561-266-1030 or via email to discuss your business development options.
Insurance Defense Marketing Consultant for Law Firms
If your insurance defense law firm is asking how you can get on more insurance panels, give us a call. We have helped more than 150 insurance defense law firms in 36 states pursue new insurance panel counsel clients.
Legal Expert Connections, Inc. offers three key benefits to insurance defense law firms nationwide:
- We are the leading U.S. legal marketing agency specializing in the insurance defense market. We make it our business to identify who you need to contact at an insurance company, corporation or municipality to be considered as a panel counsel member. We accelerate your business development process by helping you focus on introducing your law firm to new prospective clients.
- You get a structured business development process. We guide your law firm through a proven three-step campaign that brings discipline, focus, and productivity to your marketing efforts.
- Increase revenue with professional, Bar-compliant legal marketing campaigns. We do the research to identify insurance panel managers, so you can focus your time on the business development process.
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This article is provided for educational purposes only. It is not to be interpreted as legal advice or a legal opinion regarding any topic discussed. The article should not be used as a substitute for legal advice from a licensed attorney in your state. Every situation is different, and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.