Kirby?s Bankruptcy Uncovers Few Assets

Three companies filed suit Feb. 2 in U.S. Bankruptcy Court in Fayetteville to force Kirby’s Inc. into bankruptcy, claiming the corporation owed them $572,072 for food that was provided to the restaurant chain and never paid for.

The alleged creditors and amount owed include: Alliant Foodservice Inc. of Little Rock, $353,245; White Swan Inc., doing business as U.S. Foodservice of Oklahoma City, $210,308; and Metropolitan Foods Inc. of Little Rock, $8,519.

Kirby Walker, president of Kirby’s Inc., says the vendors filed for bankruptcy “to see my hand.” The Chapter 7 bankruptcy calls for liquidation of assets.

“My clients just had so much money that was lost,” says J.R. Buzbee, a Little Rock lawyer representing the three food companies that forced Kirby’s Inc. into bankruptcy. “The way one of my clients put it is ‘If the company is dead, we want to do an autopsy and see what the cause of death is.’ … We just want to bury the dead.

“There’s not going to be anything left it looks like right now,” adds Buzbee.

“We don’t thing there will be any assets available,” says Walker. “There were no hard feelings with any of those things. Kirby’s Inc. didn’t have enough money for an attorney so it went through bankruptcy without legal representation. The debts were extremely heavy. At one point, we were in excess of a million dollars in debt.”

Jill Jacoway, a trustee appointed by the Bankruptcy Court, says liquidation of Kirby’s Inc. assets may bring in $10,000, but the trustee and accountant must be paid from the money collected.

Jacoway says Kirby’s Inc. has $3,600 in the bank and, a $5,000 certificate of deposit (if that’s not claimed by the state first for taxes). Also, Kirby’s Inc. has a storage shed with items that may bring in $3,000 to $7,000 after they are sold at auction, she says.

Jacoway says Walker has been “extremely cooperative” during the bankruptcy proceedings.

“I don’t always get that,” she says. “I don’t think Kirby did anything improper. I don’t think the real estate got transferred out for less than the reasonable value. So I don’t plan to file any lawsuits pertaining to this bankruptcy.”

Jacoway says involuntary bankruptcies — where creditors force a debtor into court — are rare. Out of 4,000 bankruptcy cases she’s handled in her 20-year career, Jacoway says, only five of them have been involuntary bankruptcies. The case of Kirby’s Inc. is also unusual because there are some assets available, although they won’t come anywhere close to covering the debts owed by the corporation, she says.

Buzbee says he was suspicious because Walker “did take a rather healthy salary” from his restaurant business.

According to information Walker provided to Jacoway and Buzbee, Walker’s pay increased steadily during Kirby’s Inc.’s profitable years. He paid himself $60,000 in fiscal year 1991-92 and the same amount the next year. By 1993-94, his pay had increased to $87,500. A year later, he was earning $99,000, and in 1996-97 his salary had increased to $125,000. During each of those years, Walker paid himself a bonus of between $2,000 and $4,000.

In June 1997, with the business in trouble, Walker lowered his annual salary to $99,500 and took no bonus. Since Kirby’s Inc. failed before the end of that fiscal year, Walker didn’t received the total amount of annual salary. Between Nov. 17, 1997 (when he closed the restaurants), and Feb. 28, 1998, Walker says he paid himself a total of $18,144, which compensated him for work related to closing the eateries.

In the bankruptcy proceedings, Walker said the pay was justified, producing a restaurant trade journal’s classified advertising section as proof that he was not paying himself a salary above the national average for the general manager of comparable restaurants. Average pay for a general manager was between $75,000 and $125,000 per year, Walker argued, and the pay could go as high as $200,000 per year for the manager of multiple restaurants, as Walker had been.

Buzbee says the bankruptcy proceedings pertain to the corporation, not Walker as an individual.

“It was a corporation,” says Buzbee. “He’s not personally liable for any of Kirby’s debts with us.”

But one of Buzbee’s clients, U.S. Foodservice, has filed suit in Washington County through another lawyer against Kirby’s Inc. and Walker as an individual to try to collect the debt. Southwestern Bell Yellow Pages has also sued Kirby’s Inc. to try to collect $9,217 in debt.