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UNITED STATES BANKRUPTCY COURT 

SOUTHERN DISTRICT OF FLORIDA 

MIAMI DIVISION 

www.flsb.uscourts.gov 

In re: Case No. 20-20259-RAM 

 (Jointly Administered) 

It’Sugar FL I LLC, et al., 

 Chapter 11 

 Debtors. 

_______________________________/

DEBTORS’ EXPEDITED MOTION TO TREAT NASSAU 

CANDY DISTRBUTORS, INC. AS CRITICAL VENDOR AND 

AUTHORIZING PAYMENT OF PREPETITION CLAIM 

(Hearing respectfully requested on March 10, 2021 along with other matters)

The Debtors respectfully request that this Motion be heard on an expedited basis 

on March 10, 2021. Nassau is the Debtors’ largest supplier by providing 50% of 

the products sold by the Debtors, including approximately 90% of the bulk candy 

it sells. While other suppliers exist, it would create a material hardship on the 

Debtors if they switched suppliers. There is no doubt that Nassau is a critical 

vendor of the Debtors. Post-petition, the Debtors have been unable to reach 

favorable purchasing terms with Nassau and have been forced to prepay for all 

product, which is no longer economically sustainable and putting at risk the 

employees, creditors and other stakeholders. As discussed herein, the Debtors, 

with the support of the Committee, have reached an agreement with Nassau, and 

request that this Motion be heard immediately so that, if approved, the Debtors 

can take immediate advantage of more favorable purchasing terms to prevent 

potential irreparable harm. 

It’Sugar FL I LLC, It’Sugar LLC, It’Sugar Atlantic City LLC, and It’Sugar FLGC LLC 

(collectively, the “Debtors”), pursuant to 11 U.S.C. §§ 105(a) and 363, file this motion (the 

“Motion”) seeking the entry of an Order authorizing the Debtors to pay a significant portion of 

the prepetition claim of Nassau Candy Distributors, Inc. (“Nassau”), as Nassau and its continued 

sales to the Debtors is critical to the continued operations of the Debtors’ business and the 

Debtors’ reorganization efforts. 

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I. Jurisdiction

1. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 1334 

and 157. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). 

2. Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. 

3. The statutory predicates for the relief sought herein are Sections 105(a) and 363 

of the Bankruptcy Code, Rule 6003 of the Federal Rules of Bankruptcy Procedure (the 

“Bankruptcy Rules”) and Local Rule 9013-1(I). 

II. Procedural Background 

1. On September 22, 2020 (the “Petition Date”), the Debtors filed voluntary 

petitions for relief under Chapter 11 of the Bankruptcy Code. 

2. The Debtors manage and operate their business as debtors in possession pursuant 

to §§ 1107 and 1108 of the Bankruptcy Code. No trustee or examiner has been appointed. 

3. The Debtors operate as a single business and are known throughout the industry 

as It'Sugar. It'Sugar is a specialty candy retailer whose products include bulk candy, candy in 

giant packaging, and licensed and novelty items. It'Sugar’s portfolio includes approximately 100 

retail locations across 28 states. 

4. On October 20, 2020, the joint committee of unsecured creditors (the 

“Committee”) was formed. ECF No. 110. 

5. Nassau is a scheduled creditor holding a $659,679.04 general unsecured claim 

against Debtor It’Sugar LLC (the “Claim”).1

 Nassau is a member of the Committee. 

1

 See ECF No. 15 in 20-20261-RAM. 

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III. Relief Requested and Basis Therefor 

A. Pre-Petition Critical Vendor Claim 

6. The Debtors seek authority to pay a large portion of the Claim, as Nassau’s 

services are critical to the Debtors’ continued operations and accordingly must be paid 

immediately. Nassau provides the Debtors with bulk candy and other products for the Debtors’ 

stores and is their largest vendor. Approximately 50% of the Debtors’ sales are of products that 

Nassau provides to the Debtors. Nassau provides approximately 90% of the Debtors’ bulk candy, 

plus substantial amounts of the Debtors’ packaged assortments. Using its refrigerated trucking 

network, Nassau distributes product to the Debtors’ stores on a weekly basis. Other distributors 

use FedEx or UPS to deliver product, and only if enough volume is ordered is it feasible for the 

product to be delivered via refrigerated truck. Nassau is the only distributor that is capable of 

providing enough of the Debtors’ product to make delivery by refrigerated truck practical and 

affordable. If the Debtors sought to replace the volume of product supplied by Nassau, it would 

be very difficult and time consuming to find replacement vendors, negotiate with those vendors, 

and then receive the supply of the product amount and mix the Debtors’ require. During such a 

delay, the Debtors would not receive most of their candy effectively causing its inventory levels 

to drop to a small fraction of what it needs to keep consumers coming to their stores. The 

Debtors believe (as does the Committee) that the lack of candy in the stores would put at serious 

risk the Debtors’ reorganization efforts, and put at risk the livelihood of the Debtors’ employees, 

and the recovery for the Debtors’ creditors and other stakeholders. 

7. Pre-petition, Nassau provided its services and products on favorable purchasing 

terms to the Debtors, which were and are extremely important to the operation of the Debtors’ 

business. Since the Petition Date, Nassau has advised it will not provide It’Sugar with those 

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same or similar purchasing terms absent some pay down of the Claim, and that refusal has 

significantly impacted the Debtors’ continued operations and availability of cash. Without 

purchasing terms, the Debtors have had to prepay Nassau for all product. Prepaying for product 

has had, and continues to have, a significant burden on the Debtors, and simply, is no longer 

sustainable. 

8. Given the above, Nassau is critical to the Debtors’ ability to successfully 

reorganize and continue and maintain operations. As a result of substantial negotiations, and 

subject to the Court granting this Motion, the Debtors have agreed to pay $600,000 of the Claim 

immediately (the “Critical Vendor Payment”), and in return, Nassau has agreed that: (1) it will 

grant the Debtors the same favorable purchasing terms it provided pre-petition to purchase 

product for its stores; (2) it will support the Debtors’ plan of reorganization; and (3) it will make 

a $200,000 payment as a vendor contribution in November 2021 for the Debtors’ anticipated 

new store in Ala Moana, Hawaii. The remaining unpaid portion of the Claim, $59,679.04, will 

remain a general unsecured claim and be treated in accordance with the priorities of the 

Bankruptcy Code. The Debtors believe that payment of the Critical Vendor Payment is fair and 

reasonable for the services provided, which are essential to the Debtors’ business. 

B. Authority for Relief Requested 

9. Section 363(b)(1) of the Bankruptcy Code provides: "The trustee, after notice and 

a hearing, may use, sell or lease, other than in the ordinary course of business, property of the 

estate." 11 U.S.C. § 363(b)(1). Section 105(a) of the Bankruptcy Code provides: 

The court may issue any order, process, or judgment that is necessary or 

appropriate to carry out the provisions of this title. No provision of this title 

providing for the raising of an issue by a party in interest shall be construed to 

preclude the court from, sua sponte, taking any action or making any 

determination necessary or appropriate to enforce or implement court orders or 

rules, or to prevent the abuse of process. 

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11 U.S.C. § 105(a). Section 105(a) of the Bankruptcy Code grants bankruptcy courts broad 

authority and discretion to enforce the provisions of the Bankruptcy Code. 

10. A bankruptcy court’s use of its equitable powers to “authorize the payment of a 

prepetition debt when such payment is needed to facilitate the rehabilitation of the debtor is not a 

novel concept.” In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989). This 

equitable common law principle “was first articulated by the United States Supreme Court in 

Miltenberger v. Logansport, C. & SW R. Co., 106 U.S. 286 (1882) and is commonly referred to 

as either the ‘doctrine of necessity’ or the ‘necessity of payment rule.’” Ionosphere Clubs, 98 

B.R. at 175-76; see also In re Just For Feet, Inc., 242 B.R. 821, 824 (D. Del. 1999) (“Certain 

prepetition claims by employees and trade creditors . . . may need to be paid to facilitate a 

successful reorganization.”) (citing 11 U.S.C. § 105(a)). 

11. Federal courts have consistently permitted postpetition payment of prepetition 

obligations where necessary to preserve the going-concern value of a Debtor’s business, thereby 

facilitating reorganization. See, e.g., Miltenberger v. Logansport, Crawfordsville and 

Southwestern Ry. Co., 106 U.S. 286, 311 (1882); In re Lehigh & New England Ry. Co.., 657 F.2d 

570, 581 (3d Cir. 1981); In re Penn Cent. Transp. Co., 467 F.2d 100, 102 (3d Cir. 1972); Just 

For Feet, 242 B.R. 821 at 825 (D. Del. 1999) (“The Supreme Court, the Third Circuit and the 

District of Delaware all recognize the court’s power to authorize payment of prepetition claims 

when such payment is necessary for the survival during Chapter 11.”). 

12. While the “necessity of payment” doctrine originally developed in the context of 

railroad reorganizations under the Bankruptcy Act, it has been applied in nonrailroad 

bankruptcies. See In re Gulf Air, Inc., 112 B.R. 152, 153 (Bankr. W.D. La. 1989); In re EaglePicher Indus., Inc., 124 B.R. 1021, 1023 (Bankr. S.D. Ohio 1991) (“[T]o justify payment of a 

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prepetition unsecured creditor, debtor must show that the payment is necessary to avert a serious 

threat to the Chapter 11 process.”). 

13. Under the doctrine of necessity, a bankruptcy court may exercise its equitable 

power to authorize a debtor to pay certain critical prepetition claims, even though such payment 

is not explicitly authorized under the Bankruptcy Code. Such authority is derived from section 

363(b)(1) of the Bankruptcy Code. “Satisfaction of a pre-petition debt in order to keep ‘critical’ 

supplies flowing is a use of property other than in the ordinary course of administering an estate 

in bankruptcy under section 363(b)(1) of the Bankruptcy Code.” In re Tropical Sportswear Int’l 

Corp., 320 B.R. 15, 17 (Bankr. M.D.Fla. 2005) (quoting In re Kmart Corp., 359 F.3d 866, 872 

(7th Cir. 2004)).1

14. Specifically, an order authorizing the payment of pre-petition amounts to critical 

vendors is appropriate if (a) the payments are necessary to the reorganization process; (b) a 

sound business justification exists in that the critical vendor(s) refuse to continue to do business 

with the debtor absent being afforded critical vendor status; and (c) the disfavored creditors are 

at least as well off as they would have been had the critical vendor order not been entered. In re 

Tropical Sportswear Int’l Corp., 320 B.R. 15, 17 (Bankr. M.D. Fla. 2005). 

15. Payment of the Critical Vendor Payment is vital to the Debtors’ continued 

operations. Nassau provides approximately 50% of the Debtors’ product, and is the only 

distributor which can deliver product to the Debtors’ stores on a weekly basis using refrigerated 

trucks. Currently, Nassau requires the Debtors to prepay for product, which results in a 

substantial cash burden on the Debtors and is no longer sustainable. Nassau has advised the 

1

The Seventh Circuit decision in In re Kmart Corp., 359 F.3d. 866 (7th Cir. 2004) is not binding on this Court and is 

clearly distinguishable from this case. Here, the Debtors seek authority to pay a specific creditor a specific amount 

to allow the Debtors to purchase candy on terms, without having to prepay, which provides a substantial cash flow 

benefit to the Debtors particularly while in bankruptcy.

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Debtors that it will not give the Debtors purchasing terms absent payment of the Critical Vendor 

Payment. No other distributors of the size and importance of Nassau will give the Debtors these 

favorable terms, and no other distributors similar to Nassau are able to provide the Debtors with 

all the various products it requires as well as weekly delivery to stores via refrigerated truck. For 

all these reasons, sound business justifications exist for the relief requested. 

16. If the Critical Vendor Payment is approved, the Debtors’ business will be 

stabilized preventing irreparable harm that could put all creditors, secured and unsecured, and the 

Debtors’ employees, at substantial risk. The Debtors’ entire business is selling candy, and 

obtaining that candy and other products on favorable purchasing terms is beneficial to all of its 

stakeholders. 

17. The Committee supports the relief in this Motion. 

 WHEREFORE, the Debtors respectfully request that the Court enter an Order (i) 

granting the relief requested in this Motion; (ii) authorizing the Debtor to pay the Critical Vendor 

Payment, and (iii) granting such other relief as the Court deems just and proper. 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

 

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CERTIFICATE OF SERVICE 

I HEREBY CERTIFY that a true and correct copy of the foregoing was served on 

March 5, 2021, via the Court's Notice of Electronic Filing upon Registered Users set forth on the 

attached Exhibit 1. 

 s/Joshua W. Dobin 

Joshua W. Dobin, Esquire 

Florida Bar No. 93696 

jdobin@melandbudwick.com

Meaghan E. Murphy, Esquire 

Florida Bar No. 102770 

mmurphy@melandbudwick.com 

MELAND BUDWICK, P.A. 

3200 Southeast Financial Center 

200 South Biscayne Boulevard 

Miami, Florida 33131 

Telephone: (305) 358-6363 

Telecopy: (305) 358-1221 

Attorneys for Debtors 

Case 20-20259-RAM Doc 275 Filed 03/05/21 Page 8 of 10
   

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Exhibit 1 

Mailing Information for Case 20-20259-RAM 

Electronic Mail Notice List

The following is the list of parties who are currently on the list to receive email notice/service 

for this case. 

 Joaquin J Alemany joaquin.alemany@hklaw.com, jose.casal@hklaw.com 

 Scott Andron sandron@broward.org, swulfekuhle@broward.org 

 Joseph H Baldiga bankrupt@mirickoconnell.com 

 Brian S Behar bsb@bgglaw.net 

 David M Blau dblau@clarkhill.com 

 Michael S Budwick mbudwick@melandbudwick.com, 

ltannenbaum@melandbudwick.com;mrbnefs@yahoo.com;mbudwick@ecf.courtdrive.co

m;ltannenbaum@ecf.courtdrive.com;phornia@ecf.courtdrive.com 

 Andrew S Conway aconway@taubman.com 

 Ryan E Davis rdavis@whww.com, 

thiggens@whww.com;thiggens@ecf.courtdrive.com 

 Joshua W Dobin jdobin@melandbudwick.com, 

ltannenbaum@melandbudwick.com;mrbnefs@yahoo.com;ltannenbaum@ecf.courtdrive.c

om;jdobin@ecf.courtdrive.com;ltannenbaum@ecf.courtdrive.com;phornia@ecf.courtdriv

e.com 

 Kate Foley kfoley@mirickoconnell.com 

 Robert C Furr ltitus@furrcohen.com, 

atty_furrcohen@bluestylus.com;cworkinger@furrcohen.com;staff1@furrcohen.com 

 Daniel Gielchinsky dan@dyglaw.com, tatiana@dyglaw.com 

 Ronald E Gold rgold@fbtlaw.com, eseverini@fbtlaw.com;khardison@fbtlaw.com 

 Eric S. Golden egolden@burr.com, jmorgan@burr.com 

 Ilyse M. Homer ihomer@bergersingerman.com, 

efile@bergersingerman.com;mdiaz@bergersingerman.com;efile@ecf.inforuptcy.com 

 Jeannie Kim jekim@sheppardmullin.com, dgatmen@sheppardmullin.com 

 Ian J Kukoff ian.kukoff@blaxgray.com, 

kukoff.assistant@blaxgray.com;isabel.colleran@blaxgray.com 

 David Kupetz dkupetz@sulmeyerlaw.com 

 Robert L LeHane kdwbankruptcydepartment@kelleydrye.com 

 Ilan Markus imarkus@barclaydamon.com, docketing@barclaydamon.com 

 James C. Moon jmoon@melandbudwick.com, 

ltannenbaum@melandbudwick.com;mrbnefs@yahoo.com;jmoon@ecf.courtdrive.com;lta

nnenbaum@ecf.courtdrive.com;phornia@ecf.courtdrive.com 

 Kevin S Neiman kevin@ksnpc.com 

 Ari Newman newmanar@gtlaw.com, 

perezan@gtlaw.com;mialitdock@gtlaw.com;miaecfbky@gtlaw.com 

 Office of the US Trustee USTPRegion21.MM.ECF@usdoj.gov 

Case 20-20259-RAM Doc 275 Filed 03/05/21 Page 9 of 10
   

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 Chad S Paiva trustee.paiva@gmail.com, 

michaelbollingpa@gmail.com,sramirez.fbp@gmail.com 

 Kristen N Pate bk@brookfieldpropertiesretail.com 

 Hampton Peterson legalservices@PBCTax.com 

 Michael S Provenzale michael.provenzale@lowndes-law.com, anne.fisher@lowndeslaw.com 

 Heather L. Ries hries@foxrothschild.com, ralbert@foxrothschild.com 

 Grace E. Robson grobson@mrthlaw.com, 

mrthbkc@gmail.com,lgener@mrthlaw.com,grobson@ecf.courtdrive.com 

 Steven D Schneiderman Steven.D.Schneiderman@usdoj.gov 

 Eric J Silver esilver@stearnsweaver.com, 

jless@stearnsweaver.com;larrazola@stearnsweaver.com;cgraver@stearnsweaver.com;mf

ernandez@stearnsweaver.com;Atty_arrazola@bluestylus.com 

 Steven J. Solomon steven.solomon@gray-robinson.com, Ana.Marmanillo@grayrobinson.com;Amador.Ruiz-Baliu@gray-robinson.com 

 Louis G Spencer louis@alexanderricks.com, dana@alexanderricks.com 

 Ronald M Tucker rtucker@simon.com, 

cmartin@simon.com;bankruptcy@simon.com 

 Michael S Waskiewicz mwaskiewicz@burr.com, sguest@burr.com 

 Gillian D Williston gillian.williston@troutman.com, 

fslecfintake@troutman.com;ethan.ostroff@troutman.com;richard.hagerty@troutman.com

;carter.nichols@troutman.com 

 Stuart F Wilson-Patton stuart.wilson-patton@ag.tn.gov

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