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Rabbit Ridge is Being Evicted

by Kerana Todorov
August 25, 2021

Rabbit Ridge Winery and Vineyards in Paso Robles has to move out of the property it currently occupies, according to a court order filed this week.

Under the order U.S. Bankruptcy Judge Mark Wallace signed Monday in Santa Ana, Rabbit Ridge has to leave the premises on San Marcos Road in Paso Robles, according to the document filed in U.S. Bankruptcy Court for the Central District of California. Its lease is terminated, according to the court filing.

It Is unclear what happens next. The winery could not be reached to comment on the situation. As of Tuesday, tastings could still be scheduled.

The entity that owned the properties where Rabbit Ridge is located, Northern Holding LLC, filed for bankruptcy under Chapter 11 on Oct. 28, 2020. It did so a day after the Tustin-based company acquired the assets from Erich Russell, owner and founder of Rabbit Ridge, according to court filings.

However, the case did not remain a reorganization matter under Chapter 11 after a U.S. Trustee overseeing the proceedings raised a number of questions, including alleging that Northern Holding had failed to provide “crucial financial information,” according to court records.

In June, Wallace converted the case into Chapter 7; the properties previously owned by winery Rabbit Ridge would have to be liquidated under Chapter 7 of the U.S. Bankruptcy Code, according to court filings..

Northern Holding’s assets include the 5,000 square-foot winery that can produce up to 400,000 cases of wine a year and 450-acre of potential vineyard land; a 7,500-square-foot house, home to Erich Russell and family and a guest house on 160 acres. About 135 acres are planted in vineyards, according to court records.

Wallace’s order Monday reiterated an agreement between Chapter 7 Trustee Richard Marshack and Leroy Codding, managing member of Northern Holding, earlier this summer, according to court filings. Codding signed the document on July 27 as chief executive officer of Rabbit Ridge Wine Sales Inc. Rabbit Ridge had to move out by July 31, according to the stipulation. Marshack was appointed after Wallace converted the into a Chapter 7.

Rabbit Ridge founder Erich Russell told the Paso Robles Daily News in June that Rabbit Ridge was only a tenant of the property and has never been in bankruptcy proceedings.

However, in the order signed Monday, Wallace said Rabbit Ridge, the entity named in the lease agreement terminated Monday, has to move out of the premises, according to court records.

The U.S. Marshals could be called to move Rabbit Ridge, according to the order. “In the event Rabbit Ridge does not vacate and turn over possession of the Property by the Turnover Deadline, and upon Trustee’s request, the Clerk may issue a writ of assistance authorizing the United States Marshals Service to remove and lock Rabbit Ridge out of the Property,” according to the court order. The Trustee could not be reached to comment.

The Chapter 7 trustee has also taken steps to evict Russell and his family from the residential estate on Live Oak Road, according to court records.  None of the Russells, including two adult children, pay rent, the trustee argued in court filings. Delinquent property taxes on that asset add up to more than $3 million, according to court filings.

However, the Russells have claimed they cannot be evicted because the Centers for Disease Control and Prevention in August extended a moratorium on evictions due to the Covid-19 global Pandemic, according to court filings.

An attorney for Trustee Marshack argued in a court filing  the CDC moratorium does not apply to “bankruptcy turnover proceedings,” according to the court records. A hearing is set for Aug. 30 in Santa Ana. Attorneys for the trustee also asked to have Codding hired to harvest the fruit from the 135 acres planted in vineyards, according to court filings. Codding has worked in the wine industry since the 1990s, according to the court filing.

According to court filings, Northern Holding paid $25.5 million in October 2020 to buy the winery, residence and vineyards from Erich Russell, according to court filings filed in court earlier this year.

Editor's note, Steven Jones, Chief Financial Officer, Rabbit Ridge Winery emailed the following statment on Wednesday morning 

Rabbit Ridge has been fully cooperating with the US Trustee in the Northern Holdings, LLC Chapter 7 bankruptcy case. In that spirit of cooperation and in effort to assist the Trustee in getting the highest market value for the benefit of all the creditors in the case, we voluntarily entered into an agreement to terminate our lease. That agreement was ratified by the court this week. Rabbit Ridge has been a tenant on the property and is not party to the Chapter 7.

Rabbit Ridge has contingency plans in place to provide for continuity of operations in wine production.

Farming operations are continuing under a separate agreement with the Trustee.

 


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