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Buffets Inc. bankrupt, may not pay outbreak victim’s damages

A federal court order demanding payment of $11.37 million to a severely injured Salmonella victim may now be worth nothing more than an invitation to a bankruptcy meeting for unsecured creditors.

The March 7 bankruptcy of Texas-based Buffets Inc., its third since 2008, limits the ability of a Nebraska man with life-threatening injures to collect his money, which was awarded because of an infection he acquired in 2010 from dining at an Old Country Buffet restaurant.

Old Country BuffetSix years ago, Christopher Gage, a U.S. military veteran from western Nebraska, stopped off to eat at the Old Country Buffet in Cheyenne, WY, where a local Salmonella outbreak was underway. The salmonella he contracted would wreak havoc internally, resulting in everything from renal failure to brain injury impacting his motor skills.

His injuries are among the most serious of any Salmonella survivor and stem in part from the fact that he had undergone successful GERD surgery in 1997 for treatment of gastroesophageal reflux disease.

With continual medical treatment required, Gage and his wife Heather sued the restaurant chain on Sept. 30, 2014.

Their lawsuit was unusual, however, because the Old Country Buffet in Cheyenne had closed by the time they filed the case and no lawyers appeared on behalf of the Buffets company or its Ovation Brands. The court clerk entered a default judgement against the restaurant chain on Nov. 5, 2014.

The court then awarded the Gages $641,936 and continued the litigation with an evidentiary hearing to determine additional damages. That resulted in an additional award of $10,729,536.

The additions to the judgement, entered on Oct. 22, 2015, included $3.029 for Gage’s future medical expenses and care taking, $6.5 million for past and future pain and suffering, and $1.2 million for Heather Gage’s loss of consortium claim.

The multi-million dollar judgement got the attention of the Buffets chain management, which hired some Casper, WY, lawyers to represent the company in Wyoming federal court. They blamed the company’s earlier failure to appear on a communications mixup between risk manager and lawyers.

On Nov. 19, 2015, the corporate attorneys asked the Wyoming court to stay the $11.37 million judgement. Attorneys for the Gages did not oppose the stay. On Jan. 7 a federal magistrate granted the stay and said the corporation would not be required to post a bond or other security to cover the judgements.

Until the Buffets’ financial meltdown, all of the lawyers were focused on the ownership lineage of the Old Country Buffet in Cheyenne, which went out of business in 2012 during a Buffets bankruptcy proceeding.

But in early February, Buffets began dumping restaurants and that caught the attention of attorneys representing Gage and his wife. They sought an injunction to protect the money that would be needed to pay the couple.

They asked the federal court in Wyoming to stop the “secreting, moving, disposing of, hypothecating, wasting, dissipating or transferring” of any asset. U.S. District Court Judge Scott Skavdahl did not think he had the power to issue such an injunction, according to court documents.

The court did, however, lift the stay on the $11.37 million judgement, and ordered the restaurant chain to pay up. It ordered the company to have a bond secured by March 4.

Three days later, however, the corporate entity filed for bankruptcy protection, triggering an automatic stay effective on that date — March 7. That means neither the Gages nor their attorneys can take any further action to collect the $11.37 million in damages outside of the bankruptcy process.

Inside the bankruptcy process, the Gages are likely to be “general unsecured creditors.” Creditors in that category that often receive only a small percentage of money owed, or nothing at all. The creditors meeting is set for April 11 in San Antonio.

The federal court in Wyoming recognized Buffets LLC was involved in the “liquidation of assets.” Court documents do not, however, say if the bond protecting Gage’s damages award was posted by the March 4 deadline. The record simply shows that it was posted ahead of the bankruptcy.

Of the 166 restaurants Buffets has closed, The Old Country Buffet in Cheyenne and 139 other locations were closed during the in 2012 bankruptcy action. At that time, the company saw debts of $255 million plus $35 million in annual interest payments all forgiven.

Before that, the corporation had a 2008 bankruptcy that lasted 16 months.

This past summer Buffets and Alamo Ovation LLC merged, resulting in a chain of 300 restaurants in 35 states. Its sales were off 22 percent for the year. Buffets management blamed the Wyoming legal judgement for its latest trip to the bankruptcy court.

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