Punch Bowl Social reopening remains unclear as litigation continues

Restaurant may need to replace glassware, foosball tables, bowling balls

Nov 24, 2021 2:17 pm

Punch Bowl Social in downtown Milwaukee.

The impending reopening of Punch Bowl Social‘s location in downtown Milwaukee’s Deer District is still in limbo after the latest hearing in a bankruptcy case pitting the restaurant’s former operator against its new operator and landlord, the Milwaukee Bucks. The focus of the ongoing legal dispute is property that was left inside the 24,500-square-foot building

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The impending reopening of Punch Bowl Social's location in downtown Milwaukee's Deer District is still in limbo after the latest hearing in a bankruptcy case pitting the restaurant's former operator against its new operator and landlord, the Milwaukee Bucks. The focus of the ongoing legal dispute is property that was left inside the 24,500-square-foot building after Punch Bowl shut its doors in March 2020 due to the COVID-19 pandemic. Punch Bowl’s parent company later went bankrupt and was sold out of bankruptcy earlier this year to its lender, Texas-based CrowdOut Capital, which has reopened all 15 Punch Bowl Social locations but the one in the Deer District. New Punch Bowl Milwaukee LLC, an affiliate of CrowdOut Capital, struck a lease deal with the Bucks in July, with plans to reopen the fully furnished venue in fall. That came after former operator Eatertainment Milwaukee LLC, previously known as Punch Bowl Milwaukee LLC, defaulted on its lease, prompting the Bucks to terminate the tenant’s possession of the premises. But Eatertainment Milwaukee has argued that it owns much of the fixtures and equipment in the building and therefore has the right to remove and relocate the items to New Orleans for use in a new restaurant concept there, according to court documents. Eatertainment filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for Wisconsin’s Eastern District on Oct. 29, the day Punch Bowl intended to restart operations. Last week, Judge Katherine Maloney Perhach ruled on the two main questions of the case. First, did Eatertainment abandon its personal property at the location? And second, if the business did not abandon the property, which items are considered fixtures of the building (and therefore not Eatertainment's property) and which items are removable (and therefore considered Eatertainment's personal property)? The court decided that Eatertainment did not abandon the property, disproving New Punch Bowl's argument that all property located at the venue was abandoned and essentially theirs to use. Based on Wisconsin case law, items that couldn't be removed "without material damage the building" are deemed fixtures and will remain at the building. They include:

The kitchen's exhaust hood, including the rooftop unit, fire suppression system, and stainless steel portion
The venue's three bars and foot railings
All walk-in coolers, beer coolers, walk-in freezer and beer system
Bowling alleys, pin setters, and bowling shoe cage
Server sinks, bathroom sinks and toilets
Tables that are bolted down, stairwell, and built-in furniture

Items determined to be personal property of Eatertainment include:

Handheld radios, computers, and speakers located in the karaoke rooms
Smallware such as glasses, chafing dishes and plates
Movable chairs, foosball tables, bowling shoes, and bowling balls
Fryers, ovens, grills and griddles
Small coolers behind all bars

The court was unable to make a decision on other items due to lack of evidence, saying they were "very vaguely described" in a listing of property filed by New Punch Bowl In an email following the court's ruling, New Punch Bowl's attorney reached out to Eatertainment's attorney asking when they could discuss "where we go from here." Later, Eatertainment's attorney wrote that he's been directed to "make immediate arrangements to move out the equipment that the judge clearly determined was property of the estate." He said the plan was to contact movers on Monday and schedule the earliest move-out date, noting "anything not attached will be packed up and moved to preserve the debtor's interest." On Monday, New Punch Bowl filed an emergency motion for a status conference call to discuss concerns that Eatertainment would be disregarding the court's order by removing items that have not yet been classified as fixture or personal property. The company also raised questions of Eatertainment's ability to to pay for any damage that might be done in the process of removing equipment and other items from the building. "New Punch Bowl is not aware of any separate funding that would enable the debtor to remediate any damage caused by the removal. To the contrary, New Punch Bowl believes this estate to be administratively insolvent given the lack of ongoing operations and lack of any DIP (debtor in possession) funding," according to case documents. In a response filed Tuesday, Eatertainment called New Punch Bowl's claim "inaccurate," saying said it's in the process of establishing its DIP account and it has secured a source of funding to "pay for property insurance, moving costs, and other costs incurred during this bankruptcy case." The company claimed it will hire removal professionals to help ensure the process goes smoothly and that damage is avoided. It also poked holes in New Punch Bowl's argument by noting that a "distinguishing feature of personal property, as compared to fixtures, is that it can be removed without material damage to the premises." In a telephone hearing on Tuesday, New Punch Bowl's attorney Nick Hendrix doubled down on its lingering concerns: "We have not reopened the restaurant and have no present intention to do so until we reach some finality here, but we still have some pretty serious concern that we still don't have answers to in terms of how the debtor might pay for any damage caused." Meanwhile Eatertainment's attorney Paul Swanson said their intention to remove the property urgently is in the best interest of both sides. Swanson recalled that before signing New Punch Bowl as the new tenant, the Bucks had been negotiating a deal with Eatertainment to store its equipment on the premises for around $2,000 per day. "I don't know what New Punch Bowl would charge us to store our equipment there, but it seems kind of crazy to argue that we shouldn't get it out of there, because they want to open and they're going to have to replace (the equipment). We're going to take it and use it in another operation," he said, later adding, "I think we should just get on with this, make a deal to get our people in." U.S. Trustee attorney Michelle Kramer said the department shares some concerns about Eatertainment's bankruptcy protection. "We do have some concerns about the debtors positioning in Chapter 11, especially because it has no business, it has no employees, it has some personal property and it doesn't have any operating capital," said Kramer. New Punch Bowl and the Bucks, operating as MKE BLK4L2 LLC, plans to file a motion to dismiss; a hearing is scheduled for Dec. 20. The court at that time will also make a decision on remaining property items.

Punch Bowl Social reopening remains unclear as litigation continues

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