CPI trustee moves to OK lawsuit settlement with directors and officers

By Sheri Kasprzak

New York, May 9 – CPI Corp. Chapter 7 trustee Charles A. Stanziale Jr. moved Monday to approve a settlement with the company’s directors and officers, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

The trustee filed a lawsuit in late April against the directors and officers alleging they breached their fiduciary duties by “facilitating and engaging in a pattern and practice of draining assets from the CPI entities.” The litigation included fraudulent conveyance claims against former officer Renato Cataldo.

The specific counts brought against the defendants include avoidance of fraudulent conveyance, breach of duty of loyalty, breach of duty of care, aiding and abetting breach of fiduciary duty, corporate waste, civil conspiracy, unlawful issuance of dividends and disallowance of claims.

In his suit, Stanziale alleges the directors and officers continued to authorize and pay dividends at a time when CPI was in a pattern of financial decline.

Under the terms of the settlement, the directors and officers will pay or caused to be paid $3.25 million, excluding the Cataldo claims. As a result, the trustee will be unable to take any further legal action against the defendants and the defendants will be fully acquitted and discharged of all claims related to the suit.

A hearing on the matter is scheduled for June 23.

CPI, based in St. Louis, is a portrait studio operator. The company filed for bankruptcy on May 1, 2013 under Chapter 7 case number 13-11158.

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