Nearly four months after it was auctioned off in a bankruptcy sale, the fate of the Carlyle and Co. jewelry chain is still in question, as the parties involved battle it out in federal court.

 

Documents filed March 1 in U.S. Bankruptcy Court for the Southern District of New York show that a suit filed by Carlyle and Co. along with its debtors and debtors in possession, is aiming to get Adamas Partners LLC to make good on an agreement to buy what remains of the Carlyle and Co. business, which was liquidated after parent company Finlay Enterprises went bankrupt. 

 

The suit names Adamas and its principal Russell Cohen, a member of the family that founded Carlyle and Co., and who also served as its owner prior to its 2005 acquisition by Finlay. Cohen remained as chief executive officer after Finlay bought the chain.

The attorney for Adamas did not immediately respond to request for comment. According to court documents, however, Adamas and Cohen have not honored the deal to buy Carlyle and are now trying to "abandon" the sale because a key vendor has backed out.

 

The Finlay-Carlyle and Co. saga started in August, when the economic downturn forced Finlay to file for Chapter 11 bankruptcy protection. Finlay's retail stores, which included the venerable Bailey Banks and Biddle brand as well as the Carlyle and Co. chain, were subsequently liquidated and its assets auctioned off in November.

 

At that sale, Adamas emerged as the winning bidder for the assets of Carlyle and Co.

 

Court documents state that on Nov. 23 the court entered a sale order "unconditionally obligating" Adamas to purchase, among other things: lease designation rights for 14 of the debtors' retail locations and the Carlyle service center in Greensboro, N.C., the furniture fixture and equipment in each of these locations and Carlyle's intellectual property and information technology.

 

As part of the deal, Adamas was to assume between $625,000 and $650,000 of employee liabilities or pay the debtors cash that equals the difference between the amount of assumed liabilities and $625,000; pay Carlyle and Co. $25,000 in cash and post a $250,000 cash deposit to secure its obligation to fund the assumed liabilities.

 

According to court papers, the Adamas bid for these assets was "not conditioned on the outcome of the unperformed due diligence by the bidder, board approval, or any financing contingency" and the resulting sale order, which was drafted with Cohen and his counsel's input and consent, contained no conditions to closing.

 

In addition, court documents show that in a separate sale order dated Dec. 17, Adamas had agreed to purchase all inventory, parts, spare parts, supplies and other goods used or useful in the operation of the service center, plus two Rolex clocks owned by Carlyle, as well as assume the lease designation rights for two more stores.

 

There were no contingencies on this sale agreement either.

 

Despite the agreements, Carlyle and Co. claims in the suit that Adamas won't honor its end of the deal.

 

"In the three months following the entry of the November Sale Order, the debtors and their professionals have made countless attempts to bring Mr. Cohen to consummate his unconditional obligations to these estates," court papers state. "At every juncture, however, Mr. Cohen and his advisors either ignored the debtors' requests, or flatly refused to honor the unconditional and explicit terms of the sale orders, while throwing up new and irrelevant obstacles in an effort to avoid their obligations to close."

 

On Feb. 22, court papers state that counsel for Adamas, "informed the debtors [Carlyle and Co.] that one of the vendors it had hoped would participate in its business has determined not to proceed and therefore Mr. Cohen had decided to abandon any efforts to comply with the court's sale orders."

 

The company is now asking the court to compel Adamas and Cohen to comply with the sale orders, paying Carlyle and Co. more than $740,000 and all court costs associated with attempting to get them to comply.