Previous Page: The Decision to Cancel

Going Bankrupt
The other onerous aspect of the contract was a severe liquidated-damages clause. For canceling, they had to pay the hotel $600,000 in liquidated damages. And if they didn’t cancel before January 1, 2009, they would have owed the hotel $900,000 in damages, since it was based on a sliding scale. A bad economy, after all, is not covered under a force majeure clause.

NCSEA’s problem was that it didn’t have the resources to pay the bill. If it did pay, the association wouldn’t have enough money for normal operating expenses, given the depletion of the reserves and the decline in revenues from the previous annual meeting. NCSEA attempted to work out an arrangement with the hotel, but was unable to reach an agreement, she says.

After reviewing all options, NCSEA hired a bankruptcy attorney and proceeded to file for bankruptcy protection under Chapter 11. “It seemed to be the only option to salvage the situation,” says Eubanks. In a letter to members written in February 2009, Eubanks wrote: “We want to be very clear that the reason we filed at this time is for protection from the liquidated damages from the conference hotel.”

NCSEA filed a voluntary petition for bankruptcy protection, which was granted by the court on January 15, 2009. From that point, the association has 300 days to present a plan to the court to pay off its creditors, the largest being the Marriott Marquis. The second-largest creditor is a third-party meeting planning company hired to work the conference. The court must then approve the plan and the creditors must accept it.

Once that happens, NCSEA must execute the plan and pay off its debts. Until all debts are paid, the association will be under court supervision.

Next Page: Re-Emergence