February 5, 2023
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Letter: Clarifying NCHC’s winding-down process


Dear Editor:

Your article about Nordman Cormany Hair & Compton LLP on Oct. 4 is inaccurate in several material respects and misleads the reading public as to the liquidation process employed by NCHC.
NCHC selected the assignment process because it is generally faster and virtually always less expensive than the alternative of bankruptcy. And, despite your alleged reporting on how the two processes work, it is expected that the assignment process will provide greater benefits for NCHC’s former employees and creditors than a bankruptcy proceeding.

An assignment for the benefit of creditors, also known as general assignment, is a statutory process permissible under California law. It involves the transfer of all of NCHC’s assets in trust to be held by Equitable Transitions, Inc., liquidated and the proceeds distributed to creditors. NCHC continues in existence to complete its ethical obligations to its now-former clients, but as a business entity its sole endeavor is winding down its business affairs for the benefit of its former employees and creditors.

NCHC in part selected Equitable Transitions because its CEO, David R. Haberbush, served as a Chapter 7 bankruptcy trustee in the Central District of California from 1987 until 2002. He also served as the standing Chapter 12 trustee for the Central District of California for nearly two years and as a Chapter 11 trustee in several cases. Haberbush and Equitable Transitions have served as the liquidating trustee in more than 80 liquidations.

The general assignment is initiated by the execution of a contract for the general assignment. Creditors may, but are not required to, participate in the general assignment process by submitting claims whereby they agree to be bound by the terms of the contract for the general assignment. The contract for the general assignment of NCHC includes provisions for the treatment of the landlord’s claim which are identical to the bankruptcy code sections which limit the landlord’s claim. Therefore, should the landlord submit a claim it will be limited in exactly the same way it would be limited in bankruptcy.

We are somewhat surprised you reached so many of the incorrect conclusions you included in the article because your publication is one of the creditors of NCHC and received a copy of the entire general assignment agreement. That communication laid out all the aspects of the general assignment described in this communication, among others.

The misstatements in the article included the alleged information about “vendors who sold goods to the company.” However, the provisions in the law concerning reclamation mentioned in the article involve only sellers and buyers of goods as defined under the Uniform Commercial Code as adopted in California. NCHC is not and has never been a buyer of goods and, therefore, no vendor of goods is a creditor impacted by the general assignment. Moreover, the making of a general assignment would in no event deprive a vendor of goods of their reclamation rights.

Yet another misstatement in your article is the timing of the McGrath family lawsuit against NCHC. That came after we informed them responsibly of our unavoidable decision to liquidate. Our decision had nothing to do with their action, as we did not know it was going to be filed until after they were informed of our decision.

Perhaps the most disturbing conclusion expressed in the article is that NCHC has somehow mistreated its employees because it made an assignment for the benefit of creditors. The right of priority in payment provided for employees’ earnings, both the under the Bankruptcy Code and California law, is limited to those earnings which arise within the 90 days before either the bankruptcy filing or the making of the general assignment. Earnings which arose before the 90 days before the commencement of a bankruptcy or general assignment have no right of priority and get treated the same as all other general claims. All rank-and-file employees were paid all of their earnings prior to NCHC’s entering into the contract for the assignment for the benefit of creditors.

Finally, starting perhaps two-plus years ago, we saw in the press articles about how various partners departed NCHC. What was missed in those reports, and what was missed again in your article, is that the partners of NCHC who departed starting two-plus years ago were the ones, if anyone, who walked out on NCHC’s obligations to the employees and creditors. The ones who stayed on for the past two years actually were the ones who tried at great personal sacrifice to preserve the firm so that it might continue honor those obligations.

Contrary to the negative light in which your article attempts to paint the last remaining NCHC partners, we regret deeply that, in the end, we were unable to overcome the economic challenges with which we were left.

— Joel Mark

Managing Partner in liquidation at Nordman, Cormany, Hair & Compton;
Of counsel at Hathaway, Perrett, Webster, Powers, Chrisman & Gutierrez