Yesterday, Signature Styles, LLC asked the Delaware bankruptcy court for authority to pay an almost $900,000 pre-petition claim owed to Google, Inc. for Signature Styles’ pre-petition use of Google’s online search advertising (AdWords) to market its Spiegel, Newport News and Shape Fx products through their websites. Google, which is a member of the Official Committee of Unsecured Creditors in the bankruptcy cases, has cut off Signature Styles’ access to its online advertising services and has refused to allow the company to use AdWords “unless it is named as a critical vendor and its prepetition claim is paid in full” according to court filings.
In 2010, online sales accounted for approximately 60% of all of Signature Styles’ gross revenues, and the company predicts that online sales will account for 75% of its 2011 sales. Signature Styles asserts that “Google is critical to their ability to advertise its products and maintain their internet presence” and that Google cutting the company’s access to AdWords has “had a dramatic negative impact on the Debtors’ business.” Court filings do not quantify, however, the sales decline that the company attributes to its inability to advertise with Google. Court filings also do not specify the amount that Signature Styles spends on Google’s advertising services, but only state that the $889,243 outstanding pre-petition claim resulted from the company’s inability to keep current on Google’s invoices as a result of “the Debtors’ severe liquidity issues.”
The Google motion is the latest in a series of motions filed by Signature Styles seeking authority to pay pre-petition claims of certain vendors that the company has deemed critical to its business. In earlier motions, Signature Styles sought to pay up to $814,000 to vendors of intellectual property (such as photographers, designers, models and modelling agencies) and approximately $4,000 to Vizion Logistics, LLC, which was a shipper that had asserted a possessory lien and “refused to release and deliver the Debtors’ goods in its possession and control until” its claims had been paid.
The bankruptcy court agreed to hear the motion to pay Google on shortened notice. The motion will be heard on August 3, 2011 at a hearing beginning at 2:00 p.m. (Eastern).
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