In what has proved to be a complex turn of events, the temporary receiver appointed by a North Carolina business court judge to the four boat brands—Baja Marine, Donzi Marine, Fountain Powerboats and Pro-Line Boats—announced in a press release in late October that efforts are underway to resume operations for the popular boatbuilders.
Lender First Capital is seeking $61.04 million in damages from Fountain Powerboats and other entities for the “borrower defendants’ ” breach of loan agreements, according to documents filed this week in North Carolina Business Court.
Additionally, First Capital said Fountain has ceased operations in violation of its obligations to its lender and is asking the court to appoint a receiver to “preserve the value of the collateral securing FCC’s loans from further diminution and economic waste.”
The documents, filed Wednesday, said operations at Fountain’s plant, where Donzi and Pro-Line boats are also built, ceased Oct. 7 and that the executive management and production manager resigned. Employees were told to go home and not report to work until further notice.
Calls to the plant by Soundings Trade Only were not immediately returned.
In its court papers, First Capital also alleges misappropriation of funds. “For example, the Fountain defendants received approximately $150,000 from the sale of four boats in February 2011 and failed to remit these funds to FCC as required by the Fountain loan agreement,” according to court papers.
Additionally, the borrower defendants received about $490,547 from service activities and about $306,582 from parts sales and failed to remit these funds to FCC as required, the complaint states.
The complaint identifies the borrower defendants as American Marine Holdings, Donzi Marine, AMH Government Services, Pro-Line Boats, Fountain Powerboats LLC, Fountain Powerboat Industries, Fountain Powerboats Inc., Fountain Dealers’ Factory Superstore, Baja by Fountain, Palmetto Park Financial, 50509 Marine, Liberty Acquisition FPB, and Joseph G. Wortley.
First Capital said in its filings that it and American Marine Holdings have a lending relationship dating from 2007. In early 2010, Wortley requested that First Capital provide financing to the Fountain defendants.
Fountain Powerboats and the other defendants Thursday filed a motion to dismiss the complaint. They said the court does not have personal jurisdiction over the defendants and that the plaintiff failed to properly serve them.
A hearing was held Thursday on the complaint, but no decision has been made. According to local media, a decision is expected early next week.
Last week, Liberty Associates announced that it had ceased providing management services to American Marine Holdings and Liberty’s affiliate transferred its nominee ownership interest in American Marine to First Capital, a portfolio company of HIG Capital.
“Liberty has enjoyed its part in steering the company through the very difficult times that the boat manufacturing industry has experienced recently and wishes FCC continued success with AMH in the future,” the company said in a statement.
After Fountain Powerboats filed for bankruptcy in 2009, Liberty Associates and Fountain filed a joint reorganization plan and Liberty acquired the company. Former owner and founder Reggie Fountain was initially retained as CEO, but the two parted ways at the end of 2010.
Earlier this year, Reggie Fountain filed a lawsuit against his former company for money he says is due him, as well as trophies and pictures from his racing days. Court documents that Fountain filed contain allegations of improper business dealings by Liberty CEO Bill Gates, and Fountain Powerboats is asking the court to strike them from the record.
Fountain Powerboats filed counterclaims against Reggie Fountain, saying Fountain took company property, as well as trade secrets, when he left the company.