Suppliers to Joann Inc. are suing to recoup more than $40 million that they say executives of the arts and crafts company caused them to lose after the Hudson-based company emerging from 2024 bankruptcy proceedings as a privately owned entity.
Lawyers representing the executives, however, are petitioning the federal judge assigned to the case to move it out of Akron — arguing that Joann’s 2025 bankruptcy filing effectively shields them from this litigation here.
In a complaint filed in the Summit County Court of Common Pleas in May, six suppliers said they shipped goods to Joann on credit after relying on the seven defendants’ “misrepresentations, particularly in light of their longtime business relationships” with Joann.
The vendors claimed the executives misled them after Joann emerged from its 2024 reorganization up to its second filing for bankruptcy protection in January and its sale at auction in February. Under new ownership, the arts and crafts company has since closed all of its stores and sold its intellectual property and private label brands to Michaels.
The case was moved on June 16 to the U.S. District Court for the Northern District of Ohio, according to court records. Defendants’ attorneys filed a motion that same day to change the venue to a federal court in Delaware, where a bankruptcy court is overseeing proceedings dissolving Joann. It was assigned to Judge John Adams in Akron.
The Wall Street Journal first reported on the suppliers’ suit against the executives.
The plaintiffs are Jacksonville, Florida-based Advantus Corp.; Danbury, Connecticut-based Fairfield Processing Corp.; Fort Mill, South Carolina-based Gwen Studios LLC; Chapel Hill, North Carolina-based Low Tech Toy Club LLC; Istanbul, Turkey-based Ormo Ithalat Ihracat A.S.; and Rock Hill, South Carolina-based Springs Creative Products Group LLC.
The names the Joann defendants as Michael Prendergast, interim CEO; Jeffrey Dwyer, interim chief financial officer; Robert Will, chief merchandising officer; Christopher DiTullio, executive vice president and chief customer officer; Heather Holody, vice president, general merchandising manager of sewing; Michael Kennedy, vice president, general merchandise manager; and Melissa Bowers, director of accounting operations.
Attorneys for the plaintiffs declined to comment for this story. Attorneys for the defendants did not immediately respond to a Beacon Journal reporter’s request for comment.
When Joann emerged from its 2024 bankruptcy, the plaintiffs wrote, the company had a “prepackaged reorganization plan” that included the elimination of $505 million in debt, $132 million of new capital and the status of 96% of Joann stores as “cash flow positive.” Then, the company projected 2025 adjusted earnings before interest, earnings before interest, taxes, depreciation, and amortization (EBITDA) at $152 million and 2026 adjusted EBITDA at $201 million.
The complaint lists a total of 12 alleged counts by specific plaintiffs against specific defendants and in five cases against all defendants. The cases cite laws of various states, including common law fraud, fraudulent misrepresentation, negligent misrepresentation and innocent misrepresentation.
Total relief that plaintiffs seek in the case is more than $78 million, plus court costs.
Attorneys for Joann filed a memo in the company’s federal bankruptcy case in Delaware asking that court to absorb the Akron lawsuit to help shield the executives from “a race to the courthouse” among plaintiffs seeking to recoup losses.
Parties to the 2025 bankruptcy case have until June 27 to file objections to the Joann resolution plan in the Delaware court. Another hearing related to the bankruptcy plan is scheduled for July 10.
Patrick Williams covers growth and development for the Akron Beacon Journal. He can be reached by email at pwilliams@gannett.com or on X @pwilliamsOH. Sign up for the Beacon Journal’s business and consumer newsletter, “What’s The Deal?”
This article originally appeared on Akron Beacon Journal: Joann suppliers want their day in court against company execs. Which court will it be?
Reporting by Patrick Williams, Akron Beacon Journal / Akron Beacon Journal
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