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W.Va. Tax Department wants Mountain Blue Hotel Group’s bankruptcy case venue changed


The State Journal

CLARKSBURG, W.Va.  — The state tax department wants Mountain Blue Hotel Group’s bankruptcy case transferred to West Virginia, claiming the beleaguered ownership group was “forum shopping” in November when it filed its Chapter 11 petition in Florida.

In its 16-page motion, the state pointed out Mountain Blue managing member William Abruzzino had previously filed a bankruptcy petition in Georgia, where the company was organized, but it had been dismissed with prejudice — meaning it couldn’t be refiled for at least six months — because he failed to obtain necessary insurance coverage. The filing also noted bankruptcy petitions for affiliated companies had been filed in West Virginia, while corporate filings in the Mountain State still show Mountain Blue Hotel Group’s office in Fairmont.

Court-appointed receivers are currently managing three of Abruzzino’s hotel properties — the Hilton Garden Inn in Morgantown, the Hilton Garden Inn in Clarksburg and Hampton Inn in Elkins — at the request of the lenders. The Morgantown property was operated through Mountain Blue Hotel Group, while another of his companies, Mountain West, operated the Clarksburg and Elkins properties.

“With (Abruzzino) having filed affiliated cases now in three different districts in three different states, including the filing (in Georgia) … smacks of blatant forum shopping,” the state argued. “In the interests of justice and for the convenience of the parties, this case should be transferred to the Northern District of West Virginia where the debtor’s business operations and assets are located and where … cases of the debtor’s affiliates remain pending.”

Meanwhile, the tax department also filed a motion in federal court in West Virginia for the release of more than $700,000 in sales taxes collected at the Clarksburg and Elkins hotels, saying the state “has reason to believe that some or all of the unremitted trust taxes passed through and may still remain in the possession” of the ownership group or court-appointed receiver. The state also wants more than $500,000 in collected-but-unremitted sales taxes from the Morgantown hotel.

Deutsch Bank, representing the Mountain West lenders, is opposing the tax department’s intervention in the case, saying that while state and local government have been harmed by the failure to remit the taxes, “that fact alone is not sufficient grounds to allow intervention.”

“This is not a proper forum to address the state’s claims relating to unpaid taxes which pre-date the receivership,” Deutsch Bank said in its brief. “All post-receivership sales taxes have been properly withheld and are being paid …”

In the motion filed in Florida’s bankruptcy court, the state suggested the “financial difficulties surrounding (Abruzzino’s) operations seem to have had their genesis” in the June 2016 flooding that devastated much of West Virginia.

The state’s filing noted the floods wiped out the bridge accessing the Elkview Mall and La Quinta, forcing the “immediate shutdown of all operations at the mall and hotel and led eventually to extensive and intensive litigation with” their creditors. Both Tara Retail, which operated the mall, and Emerald Grande, which ran the La Quinta, filed bankruptcy in January in federal court in West Virginia.

Staff writer Linda Harris can be reached at 304-374-0403 or email [email protected]

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