Receivership Order precludes whiskey maker’s effort to obtain bankruptcy relief

On March 19, 2026, the United States Bankruptcy Court for the Eastern District of Tennessee (Bankruptcy Court) dismissed the Chapter 11 cases filed by whiskey company Uncle Nearest, Inc. (Uncle Nearest) and certain affiliates, concluding that a prior federal Receivership Order over Uncle Nearest had divested company management of authority to seek bankruptcy relief. In dismissing the cases, the Bankruptcy Court held that the power to determine whether to commence a voluntary bankruptcy case rested exclusively with the court-appointed receiver, not with displaced management of Uncle Nearest and its affiliates.

Factual background¹ 

Uncle Nearest, a whiskey distiller headquartered in Shelbyville, Tennessee, was founded in 2017. The company took its name from Nathan “Nearest” Green, who taught a young Jack Daniel how to make Tennessee whiskey using a special sugar maple charcoal filtering process known as the Lincoln County Process. This process, which removes impurities and produces a unique smoothness, was central to the creation of a product line that helped propel the company to national prominence.

By 2021, Uncle Nearest had become the fastest growing whiskey brand in the US. By October 2022, the company had reached $100 million in sales since inception, and its products were sold in all fifty states. The company’s growth was funded in part through loans under a credit facility provided by Farm Credit Mid-America, PCA (Farm Credit), documented by a credit agreement dated July 22, 2022 (Credit Agreement), by and among Uncle Nearest and certain affiliates as borrowers (Borrowers), Farm Credit as administrative agent and lender, and the other lenders. The Credit Agreement contemplated borrowing capacity of up to $55 million, secured by liens on substantially all of the Borrowers’ assets. 

Over the next eighteen months, the Credit Agreement was amended seven times, including to provide additional liquidity and to permit the purchase of certain real property located on Martha’s Vineyard. In January 2025, Farm Credit learned that funds borrowed under the Credit Agreement had been used to purchase the property through an entity that was not a Borrower under the Credit Agreement and that the property had been mortgaged to another lender. Both actions were asserted to violate the Credit Agreement. In the same month, Uncle Nearest also reported that the borrowing base for the loans was approximately $44 million, while the outstanding revolving loan balance exceeded $65 million. As a result, Uncle Nearest was obligated under the terms of the Credit Agreement to immediately repay more than $20 million.

These developments led to a forbearance agreement dated April 15, 2025 (Forbearance Agreement), by and among (i) Farm Credit, as administrative agent, (ii) the Borrowers, (iii) the lenders party to the Credit Agreement, and (iv) Fawn Weaver and Keith Weaver, as credit support parties (together, the Credit Support Parties). Under the Forbearance Agreement, the Borrowers acknowledged specified defaults under the Credit Agreement and that the administrative agent had the right to exercise remedies available under the Credit Agreement, the other loan documents, and applicable law.

Under the Forbearance Agreement, Farm Credit and the other lenders agreed to forbear from exercising remedies until May 30, 2025, subject to potential extensions if no additional events of default occurred and that the Borrowers complied with the agreement’s terms. The Forbearance Agreement also contemplated that the Borrowers would pursue a recapitalization or refinancing transaction in accordance with specified milestones, with a target closing date of November 26, 2025. 

In addition, the Forbearance Agreement required the Borrowers to appoint an independent director by April 25, 2025, pay a forbearance fee, and provide weekly cash-flow reporting. As a condition precedent, the Credit Support Parties were also required to obtain subordinated debt financing in an amount of not less than $12,526,270, and to pay $7.5 million to Farm Credit. The parties executed the Forbearance Agreement on April 15, 2025, and the Borrowers made the $7.5 million payment on that date.  

The Borrowers defaulted under the Forbearance Agreement shortly thereafter by failing to timely deliver certain required security documents and by failing to appoint an independent director.

On July 28, 2025, Farm Credit filed a Complaint in the US District Court for the Eastern District of Tennessee (District Court) seeking the appointment of a receiver over the Borrowers and their assets, as well as damages for alleged breaches of the Credit Agreement.

Receivership proceedings

In a memorandum opinion and order dated August 14, 2025, the District Court determined that the appointment of a receiver was necessary. After evaluating the proposed candidates, the District Court entered a Receivership Order on August 22, 2025 appointing an independent receiver (Receiver) over Uncle Nearest, Nearest Green Distillery, Inc., and Uncle Nearest Real Estate Holdings, LLC (Receivership Entities).

The Receivership Order granted the Receiver exclusive control over all assets of the Receivership Entities, which were designated as Receivership Assets. The Receivership Order:

• Vested the Receiver with the full powers and authority of a receiver at equity, including powers conferred under 28 U.S.C. §§ 754, 959, and 1692 and Federal Rule of Civil Procedure 66, as well as authority to sell Receivership Assets pursuant to 28 U.S.C. §§ 2001, 2002, and 2004
  
  
• Vested the Receiver with all powers of officers, directors, members, and managers of the Receivership Entities, including authority to take or refrain from taking actions on their behalf and to exercise governance and decision-making rights with respect to affiliated entities 
  
  
• Authorized the Receiver to commence bankruptcy proceedings on behalf of Uncle Nearest and its affiliates
  
  
• Enjoined the Receivership Entities and their officers, directors, employees, agents, and other persons from interfering with or obstructing the Receiver’s administration of the estate, and broadly restrained parties with actual or constructive notice of the Receivership Order from disturbing or affecting the Receivership Assets or the administration of the receivership estate

The Receivership Order further stated that these injunctions were intended to function in a manner consistent with the protections afforded by the automatic stay under the Bankruptcy Code² and that actions taken in violation of the Receivership Order would be deemed null and void.

Bankruptcy filing

Notwithstanding the prohibitions in the Receivership Order, on March 17, 2026, Fawn Weaver, the chief executive officer of Uncle Nearest, caused Chapter 11 bankruptcy petitions to be filed on behalf of the Receivership Entities (hereafter, Debtors) in the Bankruptcy Court.

The Receiver promptly provided the Debtors’ bankruptcy counsel with a copy of the Receivership Order and requested dismissal of the cases. Debtors’ counsel acknowledged awareness of the Receivership Order but declined to withdraw the bankruptcy petitions.  

Later the same day, the Receiver filed an expedited motion to dismiss the bankruptcy cases or, in the alternative, to recognize the Receiver as the authorized representative of the Debtors. The motion asserted that, under Tennessee law and the Receivership Order, authority to file bankruptcy petitions rested exclusively with the Receiver, not with displaced management. The Receiver relied in part on the express transfer of corporate governance authority set forth in the Receivership Order, as well as a December 2025 order of the District Court limiting representation of the Receivership Entities to the Receiver.

On March 18, 2026, Debtors’ counsel filed an objection, asserting that the appointment of a receiver does not, by itself, divest a debtor or its management of the ability to seek relief under the Bankruptcy Code absent clear and specific language in the appointing order. The objection contended that the Receivership Order contained no language expressly prohibiting the Debtors or their managers from seeking bankruptcy protection.

The objection next posited that the right to seek bankruptcy protection is a constitutional right embodied in a federal statute, and that interpreting the Receivership Order to grant the Receiver exclusive authority to file bankruptcy would therefore raise federal preemption concerns.

The Bankruptcy Court granted an expedited hearing and scheduled a hearing on the motion to dismiss for the morning of March 19, 2026. Shortly before the hearing, Farm Credit filed its own motion to dismiss the Debtors’ Chapter 11 cases, which was set to be heard contemporaneously.

Bankruptcy Court ruling

After the Bankruptcy Court heard argument on the motion to dismiss at the March 19, 2026 hearing, it issued a bench opinion granting the motion. The Bankruptcy Court later issued a Supplemental Memorandum Opinion on Motion to Dismiss on March 23, 2026.

At the outset, the Bankruptcy Court rejected the Debtors’ contention that the authorities they cited constituted controlling precedent. The court acknowledged that, as a general matter, an order appointing a receiver and enjoining interference with the receiver does not necessarily affect a debtor’s or its management’s ability to seek bankruptcy relief. However, the court emphasized that the Receivership Order at issue was not a typical receivership order because it vested the Receiver with exclusive corporate governance authority.

In addressing this distinction, the Bankruptcy Court cited In re 530 Donelson, LLC³, a case it expressly noted was not binding, and identified two governing principles drawn from that decision and related authorities:

• If a court intends in a receivership order to deprive a company of the right to file bankruptcy, it must expressly state its intent to deviate from the general rule that a receivership will not affect bankruptcy rights or ordinary exercise of entity governance rights
  
  
• Provisions purporting to prohibit bankruptcy filings altogether may raise preemption concerns under the US Bankruptcy Code

The Bankruptcy Court noted that the Receivership Order did not deprive the Receivership Entities of the ability to seek bankruptcy protection. Rather, it transferred decision-making authority from management to the Receiver by vesting the Receiver with exclusive corporate governance powers. In the court’s view, the critical inquiry was therefore not whether bankruptcy relief was barred, but who was authorized to decide whether to seek it.

The court further relied on decisions recognizing that receivership orders may designate the party empowered to act on behalf of an entity in bankruptcy proceedings without contravening federal law, including El Torero Licores v. Raile (In re Licores)⁴. In that context, the Bankruptcy Court cited the Supreme Court’s decision in Price v. Gurney⁵, explaining that bankruptcy courts do not confer filing authority on individuals who lack such authority under applicable non bankruptcy law. 

Based on the language of the Receivership Order and the governing legal principles, the Bankruptcy Court concluded that Weaver lacked authority to file bankruptcy petitions on behalf of the Debtors. The court held that because the petitions had been filed without authorization by the Receiver, the Chapter 11 cases would be dismissed.  

Key takeaways of Uncle Nearest

The Bankruptcy Court’s decision in Uncle Nearest highlights several considerations that may be relevant in matters involving receiverships, particularly where questions arise regarding corporate governance authority and access to bankruptcy relief. 

• Receivership orders may differ in scope and effect. Depending on its terms, a receivership order may grant a receiver broad control over an entity or may limit the receiver’s authority to specific aspects of management, governance, business activities, or assets. The scope of a particular receivership order will depend on the underlying facts, the relief sought, and constraints imposed by applicable state law.
  
  
• The legal framework governing a receivership may influence its operation. Federal equity receivership orders arise from a court’s inherent equitable authority and often appear in matters involving allegations of fraud or misconduct affecting interstate commerce. State-law receivership orders, by contrast, are generally governed by statutes that vary significantly by jurisdiction and are commonly used in business-related disputes (e.g., foreclosures, partnership dissolutions, family business disputes, and distressed real estate matters). Given these variations, the impact of a particular receivership order will often turn on the specific terms of the order and the underlying law on which it is based. Receivership orders are not “one-size-fits-all.”
  
  
• Authority to seek bankruptcy relief and access to bankruptcy relief may be analyzed separately. In Uncle Nearest, the Bankruptcy Court concluded that reallocating decision-making authority through a receivership order did not necessarily conflict with federal bankruptcy law. The Receivership Order did not eliminate access to bankruptcy relief; rather, it reassigned authority to determine whether to seek such relief from company management to the Receiver. To effect such a transfer of authority, the Bankruptcy Court emphasized that the terms of a receivership order must be clear and unequivocal.
  
  
• The terms of a receivership order and the governing legal framework may influence how governance authority is allocated in a particular case. As reflected in Uncle Nearest, the Bankruptcy Court’s analysis focused on whether applicable receivership law permitted the reallocation of management authority and whether the Receivership Order clearly reflected that allocation.
  
  
• Creditors may wish to consider clear statements of intent at the receivership application and order drafting stage. Creditors seeking the appointment of a receiver may consider the applicable state or federal law governing receiverships. To the extent applicable receivership laws permit divesting existing management of their governance rights – including the right to seek bankruptcy protection – a clear statement of that intent in a motion seeking the appointment of a receiver and the proposed receivership order may be particularly relevant. A receivership application and order drafted with these considerations in mind, to the extent consistent with applicable law, may protect the rights of a creditor by foreclosing the ability of the debtor to obtain bankruptcy relief without approval of the receiver.

Learn more

For additional information on this ruling or related restructuring matters, please contact the authors or your usual DLA Piper contact.

¹ The facts described in this section are derived primarily from the Verified Complaint and Request of Appointment of Receiver filed by Farm Credit Mid-America, PCA in the US District Court for the Eastern District of Tennessee, Case No. 4:25-cv-00038 (the Complaint)

² 11 U.S.C. § 362

³ In re 530 Donelson, LLC, 660 B.R. 887 (Bankr. M.D. Tenn. 2024)

⁴ El Torero Licores v. Raile (In re Licores), No. SACV 13-00875-VAP, 2013 WL 6834609 (C.D. Cal. Dec. 20, 2013)

⁵ Price v. Gurney, 324 U.S., 100, 107 (1945)