First Security Bank has asked a Washington County Circuit judge to prevent women’s clothing company Lauren James Enterprises Inc. of Fayetteville from going forward with a “sham” foreclosure sale on Aug. 7.
The Searcy bank said in a court filing Tuesday that the foreclosure sale of all Lauren James’ assets being conducted by LJ Apparel Inc. “is a sham foreclosure being conducted by an insider of Lauren James….”
First Security sued Lauren James in June, saying the bank was entitled to take immediate possession of Lauren James’ collateral to repay an alleged defaulted $338,720 business loan. First Security also sued Lauren James’ owners, married couple Lauren and Lance Stokes, who personally guaranteed the loan.
“The [foreclosure] sale is being conducted for the sole purpose of attempting to extinguish First Security’s lien on the Inventory and permitting Lauren James to continue operating under a new entity, LJ Apparel,” the bank’s filing said.
“LJ Apparel was formed as a shell corporation by an individual who desired to invest in Lauren James and who intends to continue operating the Lauren James brand notwithstanding the fact of Lauren James’s imminent financial failure,” the lawsuit said.
The lawsuit didn’t name the investor.
A spokesman for Lauren James told Arkansas Business on Wednesday that the complaint has no merit. “LJ Apparel is a third-party investor that has no affiliation to the current owners or officers of Lauren James Enterprises, and the public has been notified of the upcoming sale as required by law,” the spokesman said in an email.
The spokesman declined to comment further.
LJ Apparel was formed as a Nevada corporation on May 31. On July 27, it obtained authorization from the Arkansas Secretary of State to conduct business in Arkansas, the First Security lawsuit said.
A Lauren James spokesman on Tuesday said in an email to Arkansas Business that, “We have a responsibility to our customers and obligation to our creditors to position this company for continued success. We believe this is the best means to maintain the quality and excellence customers expect from the Lauren James brand.”
First Security said in its court filing that Lauren James “is purporting to be an ongoing business without a care in the world, as evidenced by its up to the minute advertising of merchandise on Facebook and other media platforms …”
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