Publishers sue Family Christian Stores over bankruptcy plan

A group of Christian publishers that stands to lose $20 million is fighting back against part of Family Christian Stores’ bankruptcy plan. Twenty-seven companies filed a joint lawsuit in federal bankruptcy court Friday to protect products Family Christian Stores has on its shelves but hasn’t yet paid for.

The companies provided the so-called “consignment inventory” to Family Christian Stores (FCS) under a contract that required it to pay for their products after customers buy them from stores. Under a traditional retail arrangement, retailers buy products first, then resell them. The plaintiffs in the lawsuit—a who’s who of Christian publishers, including Baker Book House, David C. Cook, and Intervarsity Press—say they still own some of the books and other products in FCS locations.

The dispute arose because in its bankruptcy petition, filed last month, FCS stated it wants to include the consignment inventory—at least what it had on hand before the bankruptcy filing—when it sells off its assets to pay creditors. According to court documents, FCS owes banks and vendors about $97 million, not including the $20 million in consignment inventory.

“What is happening … is that Family is basically saying that they will take ownership of that product so that they can sell it,” said Mark Kuyper, president of the Evangelical Christian Publishers Association (ECPA), which has been monitoring the bankruptcy for member publishing companies and keeping them informed of issues that affect them.

The plaintiffs have asked the bankruptcy judge to order Family Christian Stores not to include the consignment goods in its proposed asset sell-off and to either pay for the products or return them.

The dispute over consignment items is just one piece of the complex financial puzzle in the Family Christian Stores bankruptcy. The nation’s largest Christian bookstore, FCS has 266 stores in 36 states. The bankruptcy case pulls Christian publishers in two different directions. As creditors, they want to recover money the bookstore chain owes them, but as suppliers, they want the stores to stay open and profitable so they can sell their products in the future.

“The publishers would like to see Family succeed,” Kuyper said. “The challenge is the financial situation is also significant.”

A representative of Family Christian Stores said the company would not comment on the bankruptcy case while it remains in progress. Attorneys for the plaintiffs also declined to comment on a pending case.