The assets of Fayetteville apparel company Lauren James are scheduled to be put up for public auction at a foreclosure sale Aug. 7.
First Security Bank says not so fast.
The Searcy-based lender filed an amended complaint in Fayetteville on Tuesday (July 31), asking Washington County Circuit Judge Doug Martin to issue a restraining order on the auction, alleging it is “not commercially reasonable” and is, in fact, a sham.
The Northwest Arkansas Business Journal reported earlier this week Lauren James Enterprises Inc. was facing a foreclosure sale due to a loan default. The legal notice advertising the sale was published Sunday (July 29) in the Northwest Arkansas Democrat-Gazette.
First Security Bank filed suit against Lauren James on June 7, alleging default on a $500,000 loan it made to the company in February 2017. It listed as defendants Lauren James Enterprises, Lauren Wilkins and Lance Stokes, the husband-wife team who started the business in 2013. They admit to being in default, according to a filing, but dispute the amount of $330,474 claimed by First Security Bank.
As a result of the default, First Security Bank claims it is entitled to the Lauren James accounts and inventory. A hearing is scheduled Aug. 9 before Judge Martin.
In Tuesday’s filing authored by Conway attorney Gary Jiles, First Security Bank alleges LJ Apparel LLC — the lender that has claim to first priority lien, according to the published legal notice — is an insider of Lauren James Enterprises Inc.
“The alleged sale is a sham foreclosure designed only to attempt to extinguish First Security’s lien in the inventory so that Lauren James may continue to operate as a new entity, LJ Apparel,” the filing states.
LJ Apparel was formed as a Nevada corporation on May 31, according to the filing, and on July 27, LJ Apparel obtained authorization from the Arkansas Secretary of State to conduct business in Arkansas.
“[The auction] appears to be, at best, a friendly foreclosure designed to attempt to eliminate First Security Bank’s lien in the collateral at issue, or at worst, a sham transaction designed to permit Lauren James Enterprises Inc. to continue its operations as LJ Apparel LLC,” the filing states.
First Security Bank also claims in Tuesday’s filing that Legacy National Bank of Springdale — which filed a motion to intervene in the lawsuit on June 13, alleging it had a greater interest in Lauren James’ inventory and accounts — has assigned its lien to LJ Apparel, a transaction “done solely for the express purpose of circumventing” First Security’s lien.
A spokesman for Lauren James gave the following statement to the Northwest Arkansas Business Journal on the company’s behalf.
“This complaint has no merit. LJ Apparel is a third-party investor that has no affiliation to the current owners or officers of Lauren James Enterprises, and the public has been notified of the upcoming sale as required by law.”
Lauren James is being represented by Fayetteville attorney Suzanne Clark.