GEORGE F. LEE / GLEE@STARBULLETIN.COM
The Crazy Shirts Waikele store is among 40 outlets under
review by proposed buyer Waikiki Trader Corp.

Judge dismisses
objections to
Crazy Shirts sale

Artists trying to protect copyrighted
designs lose their argument

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By Tim Ruel
truel@starbulletin.com

A bankruptcy judge has paved the way for the sale of Crazy Shirts to Aiea retail group Waikiki Trader Corp. by dismissing several objections made by local artists.

U.S. Bankruptcy Judge Lloyd King yesterday ruled against the artists, who had created copyrighted designs for Crazy Shirts and wanted to continue receiving royalties after the sale of the company. The contracts the artists had with Crazy Shirts are not "executory," King ruled, meaning the agreements won't be effective. King based his decision on a previous ruling from a royalties case involving the late actor George C. Scott.

The sale of Crazy Shirts to Waikiki Trader is expected to close Nov. 15, said Michael Morris, bankruptcy attorney for Crazy Shirts. An order for approval of the sale is expected to be submitted today. Upon King's approval, Waikiki Trader will have two weeks to tell Crazy Shirts what stores won't be become part of the purchase. Crazy Shirts has about 40 stores in several states.

Under the deal, Waikiki Trader will pay $6.75 million in cash for Crazy Shirts plus $1.5 million for the company's Halawa facility. Waikiki Trader will also pay an undetermined amount based on store sales for the next two years.

Originally, Crazy Shirts was supposed to be sold to Santa Barbara, Calif.-based T-shirt company Big Dog Holdings for $10 million. As part of a Sept. 10 deal with Big Dog, Crazy Shirts filed for Chapter 11 reorganization in Hawaii. A day later, terrorists struck the World Trade Center and the Pentagon. Hawaii's tourism plunged and Crazy Shirt's sales fell 30 percent. Big Dog dropped its deal, and Crazy Shirts was auctioned last week.

When it filed bankruptcy, Crazy Shirts had debts of roughly $24 million, mostly held by Bank of Hawaii and Congress Financial Corp. Crazy Shirts' unsecured creditors -- primarily vendors -- are not likely to get much repayment, Judge King said. "It doesn't look optimistic in my quick evaluation," he said.