On Politics

Coverage of Virginia politics and the 2014 election.

RSS feed of this blog

Federal judge dismisses slavery museum bankruptcy case

MORE: Read more news from Fredericksburg

A federal judge in Richmond has dismissed the bankrupt U.S. National Slavery Museum’s bankruptcy case.

Judge Douglas O. Tice Jr. made the ruling this morning, after museum lawyer Sandra Robinson filed a motion to dismiss the case. Robinson’s motion also promises that an anonymous donor will pay off –within days — the nearly $300,000 the museum owes to the city of Fredericksburg for unpaid taxes.

It was that tax debt that led to the museum filing bankruptcy nearly a year ago; the city was preparing to auction the museum’s 38 acres at Celebrate Virginia to recoup the tax debt.

Tice said the case was not appropriate for conversion to Chapter 7 — liquidation — because, in part, of the restrictive use covenants attached to the land’s deed. Those covenants, put in place when Celebrate Virginia donated the land a decade ago, restrict the land’s use to an African American history museum or educational use. Robinson has proposed selling part of the land and says the museum thinks the use covenants are invalid.

That’s an issue likely to end up in a state court in the future. For now, the museum is free to continue trying to reorganize without court supervision.

Robinson said the museum has pledged donations of about $100,000, which she expects will be paid now that the threat of liquidation is off the table.

Robinson made her motion to dismiss the case because of Tice’s ruling Wednesday that Celebrate Virginia could be a party to the case.

Celebrate Virginia had filed a motion to dismiss or convert the case to liquidation, which was due to be heard in court this morning.

“The Debtor believes that it is in the best interest of its creditors and the estate to dismiss this case rather than to convert it to a Chapter 7″ wrote Robinson in her filing. “Should the case be converted to a Chapter 7, a substantial diminution of the estate is expected and will be unavoidable.”

If the case was converted to liquidation, Robinson wrote, the museum could incur thousands of dollars in fees, and she herself would be unable to continue representing the museum for free due to other obligations. After Tice dismissed the case, Robinson said her representation of the museum is at an end.

“If the case is dismissed, however, the Debtor can “capture” all of the pledges that it has been receiving but which are being held to ‘see what [this] Court does’,” Robinson wrote. “The threat of the case being converted to a Chapter 7 liquidation case, in and of itself, operates as a lag on actual receipts.”

She said the museum has received $100,000 in pledged donations.