The Chapter 11 bankruptcy cases filed on behalf of Uncle Nearest, Inc. and two affiliated entities were dismissed by the United States Bankruptcy Court for the Eastern District of Tennessee on March 19, 2026, just two days after the petitions were filed. Chief United States Bankruptcy Judge Suzanne H. Bauknight ruled that the company's chief executive officer lacked authority to commence bankruptcy proceedings because a prior federal receivership order had vested exclusive decision-making power in a court-appointed receiver. The ruling came after an expedited hearing on competing motions to dismiss filed by both the receiver and the company's primary secured lender, Farm Credit Mid-America, PCA, which is owed more than $108 million in outstanding loans.
Background: The Company and the Receivership
Uncle Nearest, Inc. is an American whiskey company with products available in all 50 states and 12 countries, with a presence in more than 50,000 stores, bars, hotels, and restaurants, according to a press release filed as an exhibit in the case. The company's Nearest Green Distillery in Shelbyville, Tennessee welcomes approximately 200,000 visitors annually.
On July 28, 2025, Farm Credit Mid-America, PCA filed a verified complaint and request for appointment of a receiver against the Uncle Nearest entities and two individual defendants in the United States District Court for the Eastern District of Tennessee, seeking to recover more than $108 million in outstanding loans and to preserve collateral securing those loans. On August 22, 2025, District Judge Charles E. Atchley entered an Order Appointing Receiver, designating a restructuring attorney from Thompson Burton PLLC to serve as receiver over Uncle Nearest, Inc., Nearest Green Distillery, Inc., and Uncle Nearest Real Estate Holdings, LLC.
The Receivership Order granted broad authority to the receiver. Paragraph 9 provided that the receiver would be "exclusively vested" with all the powers of officers, directors, members, and managers of the entities. Paragraph 10(q) specifically authorized the receiver to commence proceedings under title 11 of the United States Code on behalf of the entities. The order also enjoined all officers, directors, employees, and agents from interfering with the receiver's actions. The only carve-out permitted the company's founders to continue marketing products and managing the brand, subject to the receiver's supervision.
In December 2025, the District Court struck filings that had been made on behalf of the entities without the receiver's authorization, ruling that only the receiver could represent the companies' interests in the pending litigation.
The Bankruptcy Filing and Response
On March 17, 2026, the company's chief executive officer signed and filed voluntary Chapter 11 petitions for all three entities in the Bankruptcy Court for the Eastern District of Tennessee. A press release issued simultaneously through the company's holding entity announced that the filing had brought the receivership to an end and that the company would pursue claims and counterclaims against its lender through the bankruptcy process. The press release stated that unsecured obligations totaled approximately $13.2 million, that the outstanding principal balance owed to Farm Credit was approximately $102.5 million, and that the company's enterprise assets were estimated at approximately $529 million.
The receiver contacted the debtors' bankruptcy counsel, forwarded the Receivership Order, and requested that the petitions be withdrawn. Counsel for the debtors responded with awareness of the receivership order but declined to withdraw the petitions, contending that the order authorized the receiver to file bankruptcy but did not make that authority exclusive or prohibit the debtors from filing.
The Receiver's Motion to Dismiss
On March 18, 2026, the receiver filed an expedited motion to dismiss the bankruptcy cases or, in the alternative, to be recognized as the exclusive authorized representative of the debtors. The motion advanced two primary arguments.
First, the receiver argued the court lacked subject matter jurisdiction because the petitions were filed by an individual without authority under applicable law to bind the entities. The receiver contended that the Receivership Order vested exclusive authority in the receiver through Paragraph 9's grant of all powers of officers, directors, members, and managers, and that Paragraph 10(q) specifically designated the receiver as the party authorized to file bankruptcy. The receiver further noted that the order's injunctive provisions explicitly prohibited officers and directors from interfering with the receiver's administration.
Second, the receiver argued dismissal was warranted for bad faith under 11 U.S.C. § 1112(b). Applying the Sixth Circuit's multi-factor totality-of-the-circumstances test, the receiver contended that the petitions were filed in violation of the District Court's injunction and represented an attempt to evade the receivership. The receiver noted that the chief executive officer had publicly announced that the filing ended the receivership. The receiver further disclosed that it was approximately four months into a marketing campaign for the sale of the entities as a going concern and that dismissal, rather than conversion to Chapter 7, would serve the best interests of creditors.
The Secured Lender's Motion to Dismiss
Farm Credit Mid-America filed its own motion to dismiss on March 19, 2026, raising similar arguments regarding lack of authority and bad faith, with additional factual assertions. The lender alleged that under the prior management of the company's founders, the entities had failed to file tax returns for at least five years, incurred excessive debt with no viable path to repayment, sold future revenues at a discount, operated at a cash flow deficit, lacked financial controls, and failed to maintain reliable financial records.
The lender's motion also alleged that the chief executive officer had diverted $20 million in proceeds from convertible promissory notes executed with an outside investor to a separate entity and had testified under oath that the transfer was made to prevent the lender from reaching those funds. The lender argued this conduct constituted fraud warranting appointment of a Chapter 11 trustee if the cases were not dismissed.
As alternative relief, the lender requested that the receiver be appointed as Chapter 11 trustee, citing the receiver's eight months of familiarity with operations and the need for continuity.
The Debtors' Opposition
The debtors filed their response in opposition to the receiver's motion on March 18, 2026, raising several counterarguments.
On the jurisdictional question, the debtors argued that the receiver conflated corporate authority with jurisdiction, contending that the filing of a bankruptcy petition invokes jurisdiction under 28 U.S.C. § 1334 and that disputes about filing authority are resolved within that jurisdiction rather than as a basis to defeat it.
On the authority question, the debtors relied on In re 530 Donelson, LLC, a 2024 decision from the Bankruptcy Court for the Middle District of Tennessee, arguing that a receivership does not divest bankruptcy authority unless the order contains clear language eliminating that right. The debtors contended that the Receivership Order only authorized the receiver to file bankruptcy but did not make that authority exclusive or expressly prohibit the debtors from filing. The debtors argued that courts distinguish between grants of authority and grants of exclusive authority, and that the absence of express prohibitory language was dispositive.
The debtors also raised federal preemption concerns, arguing that the right to seek bankruptcy relief arises under the Constitution's Bankruptcy Clause and that any attempt to restrict access to bankruptcy would conflict with federal law.
On the bad faith question, the debtors argued that they are operating businesses with ongoing operations and multiple stakeholders, not single-asset entities. They contended that the filing was made in good faith to preserve going-concern value after business performance deteriorated during the receivership period, and they submitted exhibit data showing declines in retail sales performance and distillery visitation following the receiver's appointment.
Business Performance Data
The debtors' opposition included NielsenIQ retail scan data and distillery visitor trend data as exhibits. The retail data showed that Uncle Nearest had outperformed the broader market by more than 31 percentage points in January 2025, with positive growth continuing through mid-2025. Following the receiver's appointment in late August 2025, the data showed sustained negative growth, with the brand underperforming the market by 18.3 percentage points by January 2026 and by 16 points by February 2026, a reversal of approximately 47 points from January 2025.
The distillery visitor data showed a similar pattern. During the pre-receivership period, combined merchandise and tour revenue grew at an aggregate rate of 9 percent, with tour and tasting attendance growing at 11 percent. Post-receivership, combined revenue declined 20 percent and attendance fell 22 percent. By early 2026, weekly merchandise revenue had declined as much as 90 percent and attendance had dropped as much as 89 percent compared to prior-year periods.
The Court's Ruling
The court held an expedited hearing on March 19, 2026, at which counsel for the debtors, the receiver, and Farm Credit presented oral argument. The parties agreed that there were no factual disputes and that the court needed only to interpret the Receivership Order in light of applicable law.
In its ruling, the court found that the Receivership Order left no doubt regarding who had authority to act on behalf of the debtors. The court determined that Paragraph 9's exclusive vesting of all powers of officers, directors, members, and managers in the receiver was the operative provision, and that Paragraph 10(q) — authorizing the receiver to commence bankruptcy proceedings — was simply a clarification that such exclusive authority included bankruptcy. The court found it immaterial that Paragraph 10(q) did not itself use the word "exclusive" because Paragraph 9 had already established exclusivity, with only a narrow carve-out for marketing duties under the receiver's supervision.
The court further noted that the Receivership Order expressly authorized only the receiver to take actions that must be authorized by a board of directors or members, including filing bankruptcy.
On the basis that the chief executive officer had no authority to file the petitions, the court granted both motions to dismiss in part. The order entered in the lead case, Uncle Nearest, Inc. (Case No. 3:26-bk-30470-SHB), dismissed that Chapter 11 case, and the court's reasoning applied equally to the two affiliated cases. The dismissal mooted all other matters that had been set for hearing.
This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of approximately 73 pages of court filings in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.