Cosi restaurant. (Photo: Coolcaesar via Wikimedia Commons)
Fast-casual restaurant chain Cosi Inc. and its subsidiaries filed for bankruptcy in Boston on Wednesday. The company, famous for its homemade flatbread, listed assets of $31.24 million and liabilities of about $20 million in its Chapter 11 petition.
Boston-based Cosi is being advised in its bankruptcy case by Mirick, O’Connell, DeMallie & Lougee, a firm based in Westborough, Massachusetts that celebrated its 100th anniversary this summer. In bankruptcy papers, Cosi also lists a nearly $147,000 debt to New York’s oldest firm.
Cadwalader, Wickersham & Taft, which confirmed Thursday the closure of its offices in China, is the second claimant named on a list of Cosi’s 20 largest unsecured creditors. The firm is listed as being owed $146,942.66 for legal services. Cadwalader, one of several firms this month to find itself as an unsecured creditor in bankruptcy court, has long done work for Cosi.
Martin Seidel, Cadwalader’s corporate litigation chair until leaving the firm this week for Willkie Farr & Gallagher, led Cosi’s defense team in a 2003 securities class action suit brought by shareholders claiming that the company made false statements in connection with its initial public offering the year before. The suit was dismissed in 2005. (Cadwalader also handled Cosi’s 2002 IPO, one that securities filings show yielded $475,000 in legal fees and expenses.)
Cosi, which first opened in the U.S. back in 1996, operated 72 company-owned and 35 franchised locations in the country prior to its bankruptcy filing Wednesday. Cosi, whose general counsel is former DLA Piper associate Vicki Baue, also has 1,555 employees.
Due to a decline in sales revenue and delayed responses by the company to address changing consumer trends, Cosi was forced to begin bankruptcy proceedings, said the company’s interim CEO and president Patrick Bennett in a declaration to the court.
Cosi’s board of directors—chaired by former Miles & Stockbridge partner Mark Demilio—fired former CEO Robert Dourney in August, claiming in its Chapter 11 petition that his “failure to appreciate the severity of the company’s problems resulted in the company’s failure to address operational issues in a methodical and efficient manner,” Bennett said in his declaration. (Dourney is listed as Cosi’s largest creditor with an unsecured claim of $383,077 in severance pay.)
In order to remain viable, Cosi said this week it would close 29 of its company-owned locations and let go of 450 employees, Bennett said in court papers. The debtor has entered into a tentative agreement to sell itself to investment firm Milfam II LP and lenders AB Opportunity Fund LLC and AB Value Partners LP. (Brown Rudnick is advising the stalking-horse bidder group.)
Mirick O’Connell partners Joseph Baldiga, Paul Carey and Christine Devine are counseling Cosi in its Chapter 11 proceedings. Court filings show that the firm received a $145,000 retainer from Cosi prior to the start of its bankruptcy case. Mirick O’Connell, a full-service firm, has also been paid another $50,000 retainer by Cosi to be held during the company’s bankruptcy case.
Baldiga is billing Cosi at $425 an hour for its his services, while Carey and Devine have hourly rates of $410. Associates at Mirick O’Connell are billing between $270 and $290 per hour.