Sporting goods retailer Sports Authority has won approval in U.S. bankruptcy court to pay $1.5 million in executive bonuses to three unnamed staffers, the Wall Street Journal reports.
Judge Mary Walrath blocked Sports Authority's earlier proposal to distribute $2.85 million in executive bonus payouts amid objections from the U.S. Justice Department’s Trustee, agreeing with the Trustee’s arguments that executives were going to be unduly rewarded for jobs done by others. But Walrath reversed course Wednesday, approving the bonuses on grounds that the tasks still facing Sports Authority require tough negotiations that call for senior management.
Sports Authority filed for bankruptcy on Mar. 1. The company’s liquidation means some 14,000 lost jobs.
Federal bankruptcy watchdog Andrew Vara and his legal team last week called Sports Authority’s planned executive bonuses "unseemly" in light of how many creditors won’t be paid under bankruptcy protection, and “illusory” considering that their tasks may never be completed or will be accomplished by other employees.
That argument was successful when the bonuses added up to $2.85 million, and one executive exited Sports Authority's ranks in the aftermath of the court’s decision to block them. But now the bonuses will go through, though the trustee’s team remained skeptical about the dollar amount in a Chapter 11 context that have left workers unemployed and creditors poorly compensated. Sports Authority senior executives are seeking to be paid extra simply for doing “what they are required to do,” Hannah McCollum, Vara's attorney, told the Wall Street Journal.
Sports Authority's Chapter 11 proceedings have been marked with various legal tussles, including more than 160 lawsuits the retailer filed in March. At issue then was some $85 million worth of winter gear and other goods being sold at Sports Authority stores — items suppliers wanted returned because they feared not getting paid. The company also started the process hobbled by debt, made worse by an unusual and costly stadium naming deal that required the retailer to pay the NFL's Denver Broncos $6 million a year, rather than a one-time deal.
That all stymied Sports Authority's efforts to sell more stores and forced the company to liquidate instead. During its latest earnings call, executives at Dick's Sporting Goods said they were still deciding which of the 31 Sports Authority locations it purchased the company will keep.