Hancock wants lawsuit in Lee County

The fabrics retailer began its action in circuit court in March, but PwC had it moved to federal court a month later.
By Patsy R. Brumfield and Carlie Kollath
Daily Journal
OXFORD – Baldwyn-based Hancock Fabrics wants its lawsuit against its former accountant, PricewaterhouseCoopers, moved back to Circuit Court in Lee County.
Its attorneys formally asked for that Friday in the U.S. District Court of Northern Mississippi.
Hancock sued PwC recently, claiming its longtime accountant caused financial problems that ultimately led to Hancock’s bankruptcy.
“Put simply, this matter belongs in Mississippi state court,” the motion states.
Specifically, it says Hancock’s claims are based entirely on state-law causes, don’t raise federal questions and don’t relate to its bankruptcy proceedings in the U.S. Bankruptcy Court in Delaware.
Hancock began its lawsuit in circuit court March 13, but PwC had it moved to federal court a month later.
Friday filings also included a motion to oppose transfer of the case to Delaware.
Hancock Fabrics seeks $30 million in damages and fees from PwC. The total, according to Hancock attorney Jason Collins, represents Hancock’s out-of-pocket costs caused by PwC’s requirement in 2005 that the retailer change the way it inventoried fabric at its more than 400 stores. The requirement, he said, then led to financial problems.
Missed deadline
Hancock said because PwC made the inventory change almost at the end of the fiscal year, it caused the retailer to miss its deadline to file required paperwork with the U.S. Securities and Exchange Commission. Hancock’s vendors then tightened their credit terms because of the missed deadline.
After multiple missed filings, Hancock was delisted from the New York Stock Exchange. It also defaulted on its revolving loan.
Then on March 21, 2007, the company filed for Chapter 11 bankruptcy protection.
During bankruptcy, the company caught up on its filings and secured $100 million in exit financing. The retailer emerged in August 2008 and now operates 263 stores.
Hancock also has hired a new accounting firm, San Francisco-based Burr, Pilger and Mayer.

 

Patsy Brumfield