Former investor calls for dismissal of JQH Chap. 11 filing

The Chapter 11 bankruptcy filing in June by John Q. Hammons Hotels & Resorts and more than 70 affiliates has come under fire from a law firm representing former JQH investor Jonathan Eilian.

Jed Schwartz, an attorney with New York-based Milbank, Tweed, Hadley & McCloy LLP representing Eilian’s JD Holdings LLC, filed a motion on Monday with the U.S. Bankruptcy Court in Kansas City, Kan., requesting the court dismiss JQH’s filing, abstain from hearing the case and lift the automatic stay in a pending Delaware lawsuit.

JQH’s bankruptcy filing came one month before the next scheduled court date in a Delaware trial to determine if JD Holdings could purchase JQH’s portfolio of 35 hotels, based on a 2005 agreement between investor Eilian and hotelier John Q. Hammons. JQH also faces a suit in Illinois filed by a company tied to a $300 million line of credit extended by Eilian to Hammons.

The Chapter 11 filing enacted an automatic stay in the Delaware and Illinois trials. Monday’s filing asserts JQH lacked the authorization and is not entitled to file for bankruptcy reorganization, stating the company’s motivation for doing so “was to avoid the upcoming trial in the Delaware litigation and not to reorganize their debts for the benefit of creditors.”

The motion cites a JQH news conference held June 27, when CEO Jacquie Dowdy referred to the company and its affiliates as financially stable. At the conference, company officials said restructuring would allow it to halt and work through the ongoing litigation.

The filing this week arrived the same day as the first in a series of monthly omnibus hearings, described in court documents as nonevidentiary proceedings, scheduled through Dec. 12 to address all of the filings in JQH’s bankruptcy case.

During a status conference held in court July 15, a U.S. judge allowed JQH to continue paying critical vendors and using cash collateral through Oct. 1, with another status conference set for Sept. 26. A meeting of JQH creditors is scheduled for Aug. 1 in the Kansas City, Kan., court.