Petition Filed to Force Bankruptcy of Colortree Group; More Than $8M Owed to Creditors

On June 3, the Colortree Group abruptly closed its doors without informing employees prior to the closure. Now, the Colortree Group is facing more difficulties as it is confronted with a petition seeking Chapter 7 liquidation, according to a report from Richmond BizSense.

The report explains that the involuntary petition was filed in federal bankruptcy court against Colortree on behalf of three companies seeking outstanding payments — Lindenmeyr Munroe, Domtar Corp., and G.E. Richards Graphic Supplies.

The payments owed to the companies amount to more than $8 million, The Richmond Times-Dispatch reports. Paper supplier Lindenmeyr Munroe says it is owed $8.008 million, whereas paper manufacturer Domtar and equipment and supplies distributor G.E. Richards say they are owed significantly less, $155,731 and $11,041, respectively.

One day after the petition was filed, a class action lawsuit — brought on by a former employee alleging that the Colortree Group did not give enough notice of the closure and resulting terminations in accordance with the WARN Act — was certified by a U.S. District Court, according to Richmond BizSense.

Auction Status Unclear

Less than one week before the petition was filed, it was announced that the assets of the Colortree Group would be auctioned off by PPL Group in a one-day, onsite and online sale of the company's equipment. The auction is planned for Sept. 17, for the benefit of Sterling National Bank, which had provided financing for the company.

The Times-Dispatch reports that on Sept. 13, a lawyer representing Lindenmeyr Munroe, Domtar Corp., and G.E. Richards "filed an automatic notice of stay with the bankruptcy court to stop any creditors from selling off assets or collecting claims."

In response, Sterling — which says it is owed more than $6.8 million from Colortree, according to the Times-Dispatch — filed a motion later that day to allow the auction to proceed as planned.

At the time of publication, PPL Group still lists the auction as a current and upcoming event. This is a developing story.