FilCom Center released from contract with caterer

A federal bankruptcy judge approved a business divorce between The Filipino Community Center and a prominent local catering company Monday, though the two will share custody of some clients through the end of the year.

The ruling by Judge Robert Faris in Honolulu severed a contract between the nonprofit community center and Creations in Catering following a contentious relationship in which FilCom Center tried in 2016 to terminate the contract over alleged misdeeds by the catering firm that exclusively booked and serviced special events at the center’s $14 million Waipahu facility.

FilCom failed in its earlier termination effort, in which retired Hawaii Supreme Court Associate Justice James Duffy Jr. rejected the center’s claims against the caterer through arbitration and awarded the contractor about $275,000 that included $193,892 in attorney’s fees and costs.

The center, however, filed Chapter 11 bankruptcy last month claiming that it couldn’t pay its normal business expenses along with roughly $20,000 monthly installments to satisfy the judgment. Under Chapter 11, FilCom committed to repay Creations in Catering its full debt over more time but also sought to break the contract that it claimed was depressing its income by not booking more events that include weddings, birthdays and meetings.

Bankruptcy law allows breaking contracts if it’s in the best interest of the company in bankruptcy.

On Monday in Bankruptcy Court, attorney Jerrold Guben, representing Creations in Catering, argued that FilCom was misstating how much income it was earning through the catering firm led by Michael Rabe, who the Filipino Chamber of Commerce of Hawaii named its entrepreneur of the year in 2006.

Rabe’s company, which includes affiliates Emcube Inc. and Epic Creations LLC, previously argued in the arbitration that FilCom was responsible for rental income losses because of poor maintenance of the property, which resembles a Spanish villa and was built with 50,000 square feet of rentable space in 2002 on the former site of the Oahu Sugar Mill.

Guben suggested that FilCom sought to terminate the contract, which began in 2014 and was supposed to run through 2021, in bad faith or spite, and said an evidentiary hearing should be held so he could show that Creations in Catering was benefiting the center and would continue to do so.

“We believe that Mr. Rabe can show, through his figures and even the figures of the FilCom, that they are doing better now with him and through his reputation for high-end operations than certainly they ever did before he came along,” Guben said. “We think he’s made a vast improvement.”

Guben also said Rabe’s company, which operates out of office and kitchen facilities at the center, has $872,000 in business booked through the end of this year at the center and 30 employees who face uncertainty if the contract is terminated.

Chuck Choi, an attorney representing FilCom, contended that audited financial statements of the nonprofit show the income decline for events and that the contract hurt the center because facility rentals were key to its revenue while the catering firm could earn more by holding fewer events and concentrating on pricier catering options.

Prior to the contract, FilCom booked reservations for the property and left it to customers to pick their own catering firm.

Judge Faris said bankruptcy law allows a debtor to exercise reasonable business judgment over whether to keep or reject contracts.

“I’m satisfied that the debtor has reasonably exercised its business judgment,” he said. “I don’t think this is the product of whim or caprice and so forth. It is clear that in the past there has been distrust, and I’m sure there are bad feelings that have been left, but the debtor has a problem and the only solution is to try something else.”

Choi said customers who have booked events at the center through Creations in Catering will have their reservations honored and that they are free to use the caterer for its services.

Rabe said he was disappointed with the judge’s decision, but added that there have been discussions to possibly amend the contract or sign a new contract with FilCom.