1011-00002 · Meridian Consumer Brands LLC · Court Filings & Demands

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

RESPONSE OF MERIDIAN CONSUMER BRANDS LLC TO DEBTOR'S MOTION FOR ENTRY OF AN ORDER (I) AUTHORIZING THE DEBTOR TO PAY PREPETITION CLAIMS OF CERTAIN CRITICAL VENDORS AND (II) GRANTING RELATED RELIEF

Meridian Consumer Brands LLC ("Meridian" or "MCB"), by and through its undersigned counsel, Calderwood & Harkness LLP, hereby submits this Response (the "Response") to the Motion of Cascadia Home & Lifestyle Inc. (the "Debtor" or "Cascadia") for Entry of an Order (I) Authorizing the Debtor to Pay Prepetition Claims of Certain Critical Vendors and (II) Granting Related Relief [Dkt. No. 27] (the "Critical Vendor Motion" or the "Motion"), filed on October 16, 2025. In support of this Response, Meridian respectfully represents as follows:

I. PRELIMINARY STATEMENT

1. Meridian Consumer Brands LLC is a Delaware limited liability company headquartered at 575 Lexington Avenue, 22nd Floor, New York, New York 10022. Meridian develops, manufactures, and distributes a diversified portfolio of branded consumer products, including household cleaning products, personal care items, and small kitchen appliances, which are sold through major national retailers across the United States. Meridian is one of the largest unsecured trade creditors of Cascadia Home & Lifestyle Inc., holding approximately $14,726,418.37 in pre-petition trade receivables arising from the sale of goods delivered to the Debtor in the ordinary course of business.

2. On October 28, 2025, the Office of the United States Trustee for Region 3 appointed the Official Committee of Unsecured Creditors (the "Committee") in this Chapter 11 case. Meridian was appointed as a member of the Committee, reflecting the significant magnitude of Meridian's unsecured claims against the Debtor's estate. Although Meridian serves on the Committee, this Response is filed solely in Meridian's individual capacity as a trade creditor of the Debtor, and nothing in this Response should be construed as reflecting the views, positions, or recommendations of the Committee.

3. On October 16, 2025, two days after the petition date, the Debtor filed the Critical Vendor Motion, requesting authority under Sections 105(a) and 363(b)(1) of Title 11 of the United States Code (the "Bankruptcy Code") to pay pre-petition claims of certain vendors that the Debtor has identified as "critical" to the continued operation of the Debtor's retail business, in an aggregate amount not to exceed $35,000,000.00.

4. The Debtor has designated Meridian as one of its critical vendors under the Critical Vendor Motion. Pursuant to the Motion, the Debtor proposes to pay Meridian $2,500,000.00 of Meridian's pre-petition claims in exchange for Meridian's commitment to continue to supply goods to the Debtor on what the Debtor characterizes as "customary trade terms." The proposed payment of $2,500,000.00 represents a fraction—approximately seventeen percent (17%)—of Meridian's total pre-petition claim of $14,726,418.37, leaving a balance of $12,226,418.37 in pre-petition trade receivables that would remain unpaid and subject to general unsecured creditor treatment.

5. Meridian does not oppose the Critical Vendor Motion in its entirety. To the contrary, Meridian supports its designation as a critical vendor and acknowledges the importance of the continued supply relationship between Meridian and the Debtor to the preservation of the Debtor's going-concern value and, ultimately, the value of the estate for the benefit of all creditors. Meridian's branded products are prominently featured across the Debtor's 347 retail locations and e-commerce platform, and a disruption in the supply of these products would cause material harm to the Debtor's operations and to the recovery prospects of the unsecured creditor constituency.

6. However, while Meridian agrees in principle with the critical vendor framework proposed by the Debtor, Meridian respectfully submits this Response to request that the Court condition the relief granted under the Critical Vendor Motion upon certain additional protections that are necessary to safeguard Meridian's interests and to ensure that the proposed critical vendor arrangement is both fair and equitable. These protections include, among other things: (a) express administrative expense priority for all goods shipped by Meridian to the Debtor post-petition; (b) modification of payment terms from the pre-petition Net 60 to Net 30, with a cash-on-delivery backstop upon any payment default; (c) the right to suspend or terminate shipments upon payment default without further court order; (d) adequate assurance against disgorgement of the critical vendor payment in the event the case is converted to Chapter 7; and (e) an express reservation of all of Meridian's claims, rights, and remedies, including its Section 503(b)(9) administrative expense claim, its reclamation rights under Section 546(c), and its rights under its trade credit insurance policy.

7. Meridian emphasizes that acceptance of the proposed $2,500,000.00 critical vendor payment—a partial payment representing only approximately seventeen percent (17%) of Meridian's total pre-petition claim—should not prejudice, waive, release, or diminish any of Meridian's other claims, rights, or remedies against the Debtor, the estate, or any third party. The conditions and modifications requested herein are reasonable, narrowly tailored, and consistent with protections that bankruptcy courts routinely afford to critical vendors in complex Chapter 11 cases.

II. RELEVANT BACKGROUND

A. The Chapter 11 Case

8. Cascadia Home & Lifestyle Inc. is a Delaware corporation headquartered in Portland, Oregon. The Debtor operates approximately 347 retail stores across 38 states and maintains an e-commerce platform under the "Cascadia Home" and "Lifestyle by Cascadia" brand names. The Debtor's retail stores offer a broad range of home furnishing, lifestyle, and consumer products, including household goods, home décor, kitchen and dining products, personal care and wellness items, and seasonal merchandise.

9. The Debtor was founded in 1994 by Roland Trask, who grew the business from a single retail location in Portland, Oregon into a nationally recognized retail brand. The Debtor went public in 2006, listing its common stock on the New York Stock Exchange. In 2019, the Debtor was taken private in a leveraged buyout led by Pinecrest Equity Group, a New York-based private equity firm. The leveraged buyout was valued at approximately $2.1 billion, with Pinecrest Equity Partners III, LP contributing approximately $740 million in equity and the balance funded through a combination of first lien, second lien, and unsecured debt. The significant leverage incurred in connection with the 2019 leveraged buyout has been a principal contributor to the Debtor's current financial distress.

10. For the fiscal year ending January 31, 2025, the Debtor reported revenue of approximately $1.87 billion, a net loss of approximately $214 million, and negative EBITDA of approximately ($42 million). These financial results reflect the significant challenges facing the Debtor, including declining comparable store sales, margin compression, increased competition from e-commerce retailers, and the burden of servicing an overleveraged capital structure.

11. As of the petition date, the Debtor's funded indebtedness totaled approximately $1.379 billion, structured as follows:

(a) First Lien Revolving Credit Facility: A senior secured revolving credit facility in the aggregate principal amount of $225 million, of which approximately $189 million was drawn as of the petition date. The administrative agent for the First Lien Revolving Credit Facility is Ridgeline National Bank, N.A.

(b) First Lien Term Loan B: A senior secured term loan in the aggregate outstanding principal amount of approximately $625 million. The administrative agent for the First Lien Term Loan B is also Ridgeline National Bank, N.A.

(c) Second Lien Term Loan: A second lien secured term loan in the aggregate outstanding principal amount of approximately $350 million. The agent for the Second Lien Term Loan is Thornfield Capital Management LP.

(d) 8.75% Senior Unsecured Notes due 2027: Senior unsecured notes in the aggregate outstanding principal amount of approximately $215 million. The indenture trustee for the Senior Unsecured Notes is Pacific Continental Trust Company.

12. The Debtor filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code on October 14, 2025, in this Court (Case No. 25-12087). The case has been assigned to the Honorable Christine M. Aldridge.

13. The Debtor's senior management includes Margaret "Meg" Fontaine, Chief Executive Officer; Vikram Patel, Chief Financial Officer; and Philip Kellner of Kellner & Associates LLC, who was engaged as the Debtor's Chief Restructuring Officer in connection with the Chapter 11 filing. The Debtor's legal counsel in this case is Brindoval Baines & Lord LLP, with Harrison Caldwell serving as lead partner, and Borwick Sato LLP, with Michael Donnelly serving as Delaware co-counsel. The Debtor's financial advisor is Ashworth Partners LLC, with Sandra Ng serving as lead managing director.

14. On October 16, 2025, the Debtor filed a motion seeking approval of a debtor-in-possession financing facility (the "DIP Facility") in the aggregate amount of $275 million, consisting of $150 million in new money term loans and a $125 million roll-up of pre-petition first lien revolving credit facility obligations. Ridgeline National Bank, N.A. serves as the DIP Agent. An interim hearing on the DIP motion was held on October 17, 2025, at which the Court authorized the Debtor to access approximately $100 million on an interim basis. A final hearing on the DIP motion is currently scheduled for November 14, 2025.

B. Meridian's Relationship with the Debtor

15. As noted above, Meridian Consumer Brands LLC develops, manufactures, and distributes a portfolio of branded household cleaning products, personal care items, and small kitchen appliances. Meridian's products are sold through major national retailers across the United States, including mass merchandisers, home improvement retailers, grocery chains, and specialty retail outlets such as the Debtor's stores. Meridian is a portfolio company of Briarstone Capital Partners Fund IV, LP, which holds an approximately 78% equity interest in Meridian, acquired in 2021 in a transaction valued at approximately $680 million. For its fiscal year 2024 (calendar year ending December 31, 2024), Meridian reported revenue of approximately $1.24 billion and EBITDA of approximately $167 million.

16. Cascadia has historically been one of Meridian's most significant retail customers. For fiscal year 2024, Cascadia ranked as Meridian's fourth-largest customer by revenue, accounting for approximately $58.3 million in annual purchases. This figure represents a substantial and important portion of Meridian's overall revenue base. Meridian's products—spanning multiple product lines of branded household cleaning products, personal care items, and small kitchen appliances—are prominently featured in Cascadia's retail stores and on its e-commerce platform. These products constitute an important component of Cascadia's merchandise assortment in the relevant product categories and are well recognized by Cascadia's customer base.

17. The commercial relationship between Meridian and Cascadia spans more than a decade and has been conducted on standard trade terms, including Net 60 payment terms with a 2% early payment discount available at Net 15. Throughout the history of the relationship, Meridian has consistently supplied Cascadia with high-quality branded products on a timely basis, and the parties have maintained a constructive and mutually beneficial commercial partnership.

C. Meridian's Claims Against the Debtor

18. As of the petition date of October 14, 2025, Meridian holds $14,726,418.37 in outstanding pre-petition trade receivables owed by the Debtor. These receivables are comprised of 83 unpaid invoices dated between July 18, 2025 (Invoice No. MCB-092174, in the amount of $212,600.00) and October 10, 2025 (Invoice No. MCB-095301, in the amount of $187,440.50). The receivables arose in the ordinary course of business and represent the unpaid purchase price for goods manufactured and delivered by Meridian to the Debtor prior to the petition date.

19. In addition to its general unsecured claim, Meridian has asserted reclamation rights under Section 546(c) of the Bankruptcy Code with respect to approximately $3,218,650.00 in goods delivered to the Debtor within the 45-day period preceding the petition date (i.e., from August 30, 2025 through October 14, 2025). A written reclamation demand letter was delivered to the Debtor on October 16, 2025, in accordance with the requirements of Section 546(c). Meridian reserves all rights with respect to its reclamation demand, including the right to seek a lien or administrative expense claim as a substitute for reclamation to the extent that the reclamation demand cannot be satisfied in kind.

20. Meridian has also filed, or intends to file, a motion seeking allowance of an administrative expense claim in the amount of $1,847,200.00 under Section 503(b)(9) of the Bankruptcy Code. This claim is based on the value of goods received by the Debtor in the ordinary course of business within the 20-day period preceding the petition date (i.e., from September 24, 2025 through October 14, 2025). Section 503(b)(9) provides an administrative expense priority for the value of goods received by the debtor within 20 days before the petition date, and Meridian's claim under this provision is entitled to priority treatment as an administrative expense of the estate.

21. Meridian also maintains trade credit insurance coverage with respect to a portion of its exposure to the Debtor. Specifically, Meridian is the holder of a trade credit insurance policy issued by Clearwater Surety & Insurance Co. (Policy No. TCI-2024-00783), which includes a Cascadia sub-limit of $5,000,000. The policy is subject to a 10% co-insurance retention of $500,000, yielding a net expected insurance recovery of $4,500,000 in the event of an uncured default by Cascadia. After giving effect to the anticipated insurance recovery, Meridian's uninsured claim balance is approximately $10,226,418.37. Meridian's rights under its trade credit insurance policy are independent of, and should not be affected by, its participation in the critical vendor program.

D. Meridian's Role on the Committee

22. On October 28, 2025, the Office of the United States Trustee for Region 3, District of Delaware, appointed the Official Committee of Unsecured Creditors in this case. The Committee is composed of six members, each of which holds a significant unsecured claim against the Debtor:

(a) Meridian Consumer Brands LLC (claim of approximately $14.7 million);

(b) Wavecrest Logistics Corp. (claim of approximately $9.1 million);

(d) Ironwood Property Holdings LLC (aggregate lease rejection claims of approximately $22 million);

(e) Northstar Textiles Ltd. (claim of approximately $11.3 million); and

(f) Redmond & Park Advertising LLC (claim of approximately $4.8 million).

23. The Committee has retained Garvey & Holbrook LLP, with Diana Prescott serving as lead partner, as its legal counsel, and Broadleaf Advisory Group LLC, with Robert Tanaka serving as managing director, as its financial advisor. The Committee is in the early stages of its investigation of the Debtor's business, operations, financial condition, and prepetition transactions, and has not yet taken a formal position with respect to the Critical Vendor Motion.

24. As noted above, Meridian files this Response in its individual capacity as a trade creditor of the Debtor, and not on behalf of or in its capacity as a member of the Committee. Nothing in this Response should be construed as representing the views or positions of the Committee or any other member thereof.

III. THE CRITICAL VENDOR MOTION

25. On October 16, 2025, two days after the petition date, the Debtor filed the Critical Vendor Motion [Dkt. No. 27], seeking entry of an order, pursuant to Sections 105(a) and 363(b)(1) of the Bankruptcy Code, authorizing the Debtor to pay pre-petition claims of certain vendors that the Debtor has identified as "critical" to the continued operation of the Debtor's business. The Critical Vendor Motion seeks authority to make such payments in an aggregate amount not to exceed $35,000,000.00.

26. In support of the Motion, the Debtor asserts that the identified critical vendors supply goods and services that are essential to the Debtor's ongoing retail operations, and that the failure to pay pre-petition claims owed to these vendors could result in the disruption of the Debtor's supply chain, the loss of goods necessary for the continued operation of the Debtor's 347 retail stores and e-commerce platform, and a diminution of the Debtor's going-concern value. The Debtor further asserts that many of these critical vendors are sole-source or limited-source suppliers of products that cannot be readily replaced, and that the loss of these vendor relationships would cause irreparable harm to the Debtor's business and to the value of the estate.

27. The Debtor has designated Meridian as a critical vendor under the Critical Vendor Motion. Pursuant to the Motion, the Debtor proposes to pay $2,500,000.00 of Meridian's pre-petition claims of $14,726,418.37, representing approximately 17% of the total amount owed. In exchange for this partial payment, the Debtor requires that Meridian commit to continue to supply goods to the Debtor on what the Motion characterizes as "customary trade terms."

28. The Critical Vendor Motion provides that the "customary trade terms" applicable to each critical vendor shall be the trade terms in effect between the Debtor and such vendor as of the petition date. For Meridian, the pre-petition trade terms were Net 60, with a 2% early payment discount available at Net 15.

29. Critically, under the terms proposed in the Critical Vendor Motion, vendors accepting critical vendor payments are required to agree that the critical vendor payment constitutes "full and final satisfaction" of the vendor's pre-petition claim, unless the proposed order expressly provides otherwise. This provision, if applied to Meridian without modification, could be interpreted to extinguish Meridian's remaining $12,226,418.37 pre-petition claim, its $1,847,200.00 Section 503(b)(9) administrative expense claim, and its $3,218,650.00 reclamation claim in exchange for a payment of only $2,500,000.00. Such a result would be manifestly unjust and is not a condition that Meridian can accept without the protections requested herein.

IV. MERIDIAN'S POSITION

A. Support for Critical Vendor Designation

30. Meridian does not object to its designation as a critical vendor under the Critical Vendor Motion. Meridian acknowledges that its products are integral to the Debtor's retail merchandise mix and that a disruption in the supply of Meridian's branded household cleaning products, personal care items, and small kitchen appliances would materially harm the Debtor's retail operations and going-concern value. Meridian's product lines are well established in the Debtor's stores, and the sudden absence of these products from store shelves and the e-commerce platform would cause customer confusion, lost sales, and damage to the Debtor's competitive position.

31. Meridian further acknowledges that the continued supply of its products to the Debtor is in the interest of the estate and all creditors. A functioning supply chain is essential to the Debtor's ability to generate revenue during the pendency of the Chapter 11 case and to preserve the going-concern value of the Debtor's business, whether the case ultimately proceeds through a plan of reorganization or a sale process under Section 363 of the Bankruptcy Code. Meridian is prepared to continue supplying goods to the Debtor, provided that Meridian receives adequate protections for its post-petition shipments and that acceptance of the critical vendor payment does not prejudice Meridian's other claims, rights, and remedies.

32. The legal framework governing critical vendor payments is well established. In In re Kmart Corp., 359 F.3d 866 (7th Cir. 2004), the Seventh Circuit Court of Appeals held that critical vendor payments are permissible under the Bankruptcy Code where the debtor can demonstrate that the payment is necessary to preserve the going-concern value of the debtor's business and that all creditors benefit from the payment—not merely the favored vendors. The Kmart decision further requires that the debtor demonstrate that the vendor would refuse to supply goods absent the critical vendor payment and that the disruption in supply would cause harm to the estate that outweighs the cost of the payment. Meridian submits that these conditions are satisfied here with respect to its designation as a critical vendor, provided that the conditions requested by Meridian are incorporated into the Critical Vendor Order.

B. Requested Conditions and Modifications

33. Meridian requests that any order granting the Critical Vendor Motion (the "Critical Vendor Order") be conditioned upon the following protections and modifications as they pertain to Meridian:

1. Administrative Expense Priority for All Post-Petition Shipments.

34. Meridian requests that the Critical Vendor Order expressly provide that all goods shipped by Meridian to the Debtor post-petition shall be accorded administrative expense priority under Section 503(b)(1)(A) of the Bankruptcy Code. While this priority should attach as a matter of law to goods and services provided to the estate in the ordinary course of business, Meridian requests that the Critical Vendor Order expressly confirm this status to eliminate any ambiguity and to provide Meridian with the assurance necessary to continue supplying goods to the Debtor on an ongoing basis.

35. This protection is of critical importance given the scale of Meridian's post-petition supply obligations. Based on the Debtor's requested ongoing supply levels and the historical purchasing patterns between the parties, Meridian estimates that it will ship approximately $4,800,000 per month in goods to the Debtor post-petition, or approximately $57.6 million on an annualized basis. Without the express assurance that these post-petition shipments will be treated as administrative expenses of the estate entitled to priority payment under Sections 503(b)(1)(A) and 507(a)(2) of the Bankruptcy Code, Meridian would face substantial and unacceptable exposure as a post-petition trade creditor with no security or priority for its post-petition claims.

36. The risk that administrative expense claims may go unpaid in this case is not merely theoretical. The Debtor's capital structure is heavily leveraged, with approximately $1.379 billion in funded debt, and the Debtor reported a net loss of approximately $214 million and negative EBITDA of approximately ($42 million) for its most recent fiscal year. In the event that administrative expenses exceed the estate's ability to pay—a scenario that is not improbable given the magnitude of the Debtor's secured obligations and the uncertain prospects for the case—Meridian's post-petition claims could be at risk absent express administrative expense priority treatment.

2. Enhanced Payment Terms: Net 30 with COD Backstop.

37. Meridian requests that the Critical Vendor Order provide that post-petition trade terms between Meridian and the Debtor shall be Net 30 (i.e., payment due within 30 days of invoice date), rather than the pre-petition trade terms of Net 60. The Debtor's Critical Vendor Motion requires vendors accepting critical vendor payments to continue supply on "customary trade terms," which for Meridian were Net 60 terms. However, those pre-petition terms were established in the context of a non-distressed, going-concern relationship with a creditworthy counterparty. The Debtor is now a debtor-in-possession operating in Chapter 11, with a deeply leveraged balance sheet and uncertain prospects for reorganization. The credit risk inherent in supplying a debtor-in-possession is materially different from the credit risk that existed pre-petition, and the trade terms should reflect this change in circumstances.

38. Net 30 payment terms are commercially reasonable and customary in the post-petition supply context. Numerous bankruptcy courts have approved critical vendor orders that incorporate shortened payment terms to reflect the enhanced credit risk faced by post-petition vendors. Net 30 terms would reduce Meridian's rolling exposure from approximately $9.6 million (representing two months of shipments at Net 60) to approximately $4.8 million (representing one month of shipments at Net 30), thereby significantly limiting the magnitude of any administrative expense claim that Meridian might need to assert in the event of a payment default.

39. In addition, Meridian requests that the Critical Vendor Order provide that, in the event of any payment default by the Debtor on post-petition invoices (i.e., failure to pay any invoice within 30 days of the invoice date), Meridian shall have the right to immediately impose cash-on-delivery ("COD") terms for all subsequent shipments. The COD backstop is a standard and reasonable protection for post-petition vendors and is designed to prevent the accumulation of unpaid post-petition claims while allowing the supply relationship to continue on a cash basis.

3. Right to Cease Shipments Upon Payment Default Without Further Court Order.

40. Meridian requests that the Critical Vendor Order expressly provide Meridian with the right to suspend or terminate all shipments to the Debtor upon any payment default exceeding five (5) business days, without the need for further court order, motion practice, or other judicial intervention. The right to cease shipments should be exercisable upon written notice to the Debtor and its counsel, Brindoval Baines & Lord LLP and Borwick Sato LLP, with a five-business-day cure period during which the Debtor may cure the payment default and restore the supply relationship.

41. This self-help remedy is a standard and well-established protection for post-petition vendors in critical vendor orders. Without such a provision, Meridian could find itself involuntarily locked into a supply relationship in which it is compelled to continue shipping goods—at the rate of approximately $4,800,000 per month—while accumulating unpaid administrative claims that may ultimately prove difficult or impossible to collect. The burden and expense of filing a separate motion and obtaining a court order before suspending shipments would create an unacceptable delay during which Meridian's exposure would continue to grow. The five-business-day cure period provides the Debtor with a reasonable opportunity to cure any default before shipments are suspended, while protecting Meridian from the risk of open-ended, uncollectible post-petition obligations.

4. Adequate Assurance Against Disgorgement Upon Conversion.

42. Meridian requests that the Critical Vendor Order provide adequate assurance that critical vendor payments made to Meridian will not be subject to disgorgement, clawback, or recovery in the event the Debtor's Chapter 11 case is converted to a case under Chapter 7 of the Bankruptcy Code.

43. The risk of conversion in this case is real and cannot be dismissed. The Debtor reported negative EBITDA of approximately ($42 million) and a net loss of approximately ($214 million) for the fiscal year ending January 31, 2025. The Debtor's total funded debt of approximately $1.379 billion represents an unsustainable capital structure that may not be capable of reorganization, particularly in the current economic environment for brick-and-mortar retail. The Debtor's DIP financing facility of $275 million includes a $125 million roll-up of pre-petition first lien revolving credit facility obligations, which further diminishes the unencumbered assets available to pay administrative and unsecured creditors. If the Debtor is unable to confirm a Chapter 11 plan or consummate a value-maximizing sale, conversion to Chapter 7 is a realistic possibility.

44. In the event of conversion, a Chapter 7 trustee would be empowered to investigate and potentially seek to recover pre-plan distributions, including critical vendor payments, as impermissible transfers to the extent that such payments were made outside the ordinary priority scheme established by the Bankruptcy Code. Without adequate assurance against disgorgement, Meridian would be exposed to the risk that the $2,500,000 critical vendor payment—received in exchange for Meridian's continued supply of goods to the Debtor—could be clawed back by a Chapter 7 trustee, leaving Meridian with nothing but an unsecured claim in a liquidation.

45. Meridian respectfully requests that the Critical Vendor Order include an express provision that critical vendor payments made to Meridian shall not be subject to disgorgement or clawback in the event the case is converted to Chapter 7. To the extent the Court is not willing to provide a blanket anti-disgorgement provision, Meridian requests that the Critical Vendor Order at minimum provide that any disgorgement claim against Meridian shall be limited to the net benefit received by Meridian—that is, the $2,500,000 critical vendor payment less the value of goods delivered post-petition by Meridian to the Debtor in reliance on the critical vendor designation. This net benefit limitation recognizes that Meridian will have provided substantial value to the estate in the form of post-petition goods supplied in reliance on the critical vendor arrangement, and that it would be inequitable to require Meridian to disgorge the critical vendor payment without crediting the value of goods supplied.

5. Reservation of All Claims and Rights.

46. Meridian requests that the Critical Vendor Order expressly provide that acceptance of the $2,500,000.00 critical vendor payment does not constitute a waiver, release, satisfaction, or compromise of the balance of Meridian's pre-petition claim of $14,726,418.37. Specifically, the Critical Vendor Order should provide that the $2,500,000.00 payment is a partial payment on account of Meridian's pre-petition claim and does not constitute full satisfaction thereof. After giving effect to the critical vendor payment, Meridian's remaining pre-petition claim would be $12,226,418.37, plus any accrued interest, fees, or other amounts that may be allowed under the Bankruptcy Code.

47. In addition, acceptance of the critical vendor payment must not prejudice or constitute a waiver of any of the following claims, rights, and remedies:

(a) Meridian's administrative expense claim of $1,847,200.00 under Section 503(b)(9) of the Bankruptcy Code for the value of goods received by the Debtor in the ordinary course of business within the 20-day period preceding the petition date (September 24, 2025 through October 14, 2025);

(b) Meridian's reclamation rights under Section 546(c) of the Bankruptcy Code with respect to approximately $3,218,650.00 in goods delivered to the Debtor within the 45-day period preceding the petition date (August 30, 2025 through October 14, 2025);

(c) Meridian's right to file a proof of claim asserting the full amount of its pre-petition claim of $14,726,418.37, including the portion satisfied by the critical vendor payment, by the estimated general bar date of January 15, 2026 (or such other date as may be established by the Court);

(d) Meridian's right to assert any and all defenses to potential preference actions under Section 547 of the Bankruptcy Code, including the ordinary course of business defense, the new value defense, and the contemporaneous exchange defense;

(e) Meridian's right to pursue its trade credit insurance claim under Clearwater Surety & Insurance Co. Policy No. TCI-2024-00783, including the right to receive insurance proceeds without offset, reduction, or subrogation related to the critical vendor payment; and

(f) All other claims, rights, defenses, and remedies available to Meridian under applicable law, the Bankruptcy Code, and the Federal Rules of Bankruptcy Procedure.

48. Meridian further requests that the Critical Vendor Order specify that the $2,500,000.00 critical vendor payment shall be applied first to the oldest outstanding invoices in Meridian's accounts receivable and shall not be applied against invoices supporting Meridian's Section 503(b)(9) administrative expense claim (i.e., invoices for goods received by the Debtor during the period from September 24, 2025 through October 14, 2025). This allocation is important to preserve the integrity of Meridian's Section 503(b)(9) claim, which is entitled to administrative expense priority and should not be satisfied by a general critical vendor payment that would otherwise be applied to ordinary unsecured claims.

V. PROPOSED MODIFICATIONS TO THE CRITICAL VENDOR ORDER

49. Meridian respectfully requests that the following provisions be included in the proposed Critical Vendor Order with respect to Meridian. Meridian has prepared, and will submit under separate cover if requested by the Court, proposed redline language for insertion into the Debtor's proposed form of order:

(a) Administrative Expense Priority for Post-Petition Obligations. A paragraph providing that all post-petition obligations of the Debtor to Meridian arising from the sale and delivery of goods by Meridian to the Debtor after the petition date shall constitute administrative expenses of the estate under Section 503(b)(1)(A) of the Bankruptcy Code, entitled to priority of payment under Section 507(a)(2) of the Bankruptcy Code.

(b) Modified Payment Terms. A paragraph providing that payment terms for all post-petition shipments from Meridian to the Debtor shall be Net 30 (payment due within 30 days of invoice date), and that in the event of any payment default by the Debtor (i.e., failure to pay any post-petition invoice within 30 days of the invoice date), Meridian shall have the right to impose cash-on-delivery ("COD") terms for all subsequent shipments until such time as all outstanding post-petition invoices are paid in full.

(c) Right to Suspend or Terminate Shipments. A paragraph providing that Meridian shall have the right, upon written notice to the Debtor and its counsel (Brindoval Baines & Lord LLP and Borwick Sato LLP), to suspend or terminate all shipments to the Debtor upon any payment default on post-petition invoices exceeding five (5) business days, without the need for further order of this Court, motion practice, or other judicial intervention, subject to a five-business-day cure period commencing upon delivery of such written notice.

(d) Anti-Disgorgement Protection. A paragraph providing that critical vendor payments made to Meridian pursuant to the Critical Vendor Order shall not be subject to disgorgement, clawback, or recovery in the event this case is converted from Chapter 11 to Chapter 7, or, in the alternative, that any disgorgement claim against Meridian shall be limited to the net benefit received by Meridian (i.e., the $2,500,000.00 critical vendor payment less the value of goods delivered post-petition by Meridian in reliance on the critical vendor designation).

(e) Reservation of Claims and Rights. A paragraph providing that the $2,500,000.00 critical vendor payment to Meridian constitutes a partial payment on account of Meridian's pre-petition claim of $14,726,418.37 and does not constitute a waiver, release, satisfaction, or compromise of any other claims, rights, or remedies available to Meridian, including without limitation Meridian's Section 503(b)(9) administrative expense claim of $1,847,200.00, Meridian's reclamation rights under Section 546(c) for approximately $3,218,650.00 in goods, Meridian's right to file a proof of claim for the full amount of its pre-petition claim, Meridian's right to assert all available defenses to preference actions under Section 547, and Meridian's rights under its trade credit insurance policy with Clearwater Surety & Insurance Co. (Policy No. TCI-2024-00783).

(f) Application of Payment. A paragraph providing that the $2,500,000.00 critical vendor payment shall be applied to the oldest outstanding invoices in Meridian's accounts receivable and shall not be applied to invoices supporting Meridian's Section 503(b)(9) administrative expense claim (i.e., invoices for goods received by the Debtor during the period from September 24, 2025 through October 14, 2025).

VI. LEGAL ARGUMENT

A. The Court Has Authority to Impose Conditions on Critical Vendor Payments

50. The conditions and modifications requested by Meridian are well within the Court's authority under the Bankruptcy Code. Section 105(a) of the Bankruptcy Code provides that "[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). This provision vests the Court with broad equitable powers to fashion relief that serves the interests of the estate and its creditors, including the authority to impose conditions on orders authorizing the use of estate property.

51. Section 363(b)(1) of the Bankruptcy Code provides that "[t]he 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). The payment of pre-petition claims to critical vendors constitutes a use of property of the estate outside the ordinary course of business, and the Court's authority to approve such payments necessarily includes the authority to impose conditions on such payments to protect the interests of the estate and its creditors.

52. Courts routinely impose conditions on critical vendor payments to ensure that such payments serve the interests of all creditors and do not result in unfair preferential treatment of selected vendors at the expense of the general unsecured creditor body. In In re Kmart Corp., 359 F.3d 866, 874 (7th Cir. 2004), the Seventh Circuit emphasized that critical vendor payments must be justified by a showing that the payment benefits all creditors, not merely the favored vendors, and that the debtor must demonstrate that the vendor would refuse to supply goods absent the payment and that the resulting disruption in supply would cause harm to the estate outweighing the cost of the payment. The Kmart framework implicitly recognizes the Court's authority to impose conditions on critical vendor payments to ensure that the payments achieve their intended purpose—the preservation of the debtor's going-concern value—while protecting the rights of the estate and its other creditors.

53. The conditions requested by Meridian are narrowly tailored and designed to achieve three objectives: (i) to ensure that Meridian's continued supply of goods to the Debtor does not expose Meridian to undue and unacceptable administrative expense risk; (ii) to preserve the estate's ability to maintain its supply chain by providing Meridian with sufficient assurance and protection to justify continued supply; and (iii) to protect Meridian's pre-existing claims, rights, and remedies against impairment or waiver as a result of Meridian's participation in the critical vendor program. These objectives are fully consistent with the purposes of the Bankruptcy Code and the equitable principles that govern critical vendor practice.

B. Administrative Priority for Post-Petition Shipments Is Required by the Bankruptcy Code

54. Goods and services provided to the estate post-petition in the ordinary course of business constitute administrative expenses under Section 503(b)(1)(A) of the Bankruptcy Code. See 11 U.S.C. § 503(b)(1)(A) (providing that "the actual, necessary costs and expenses of preserving the estate" are allowable as administrative expenses); see also In re Sunbeam-Oster Co., 284 B.R. 459, 464 (Bankr. D. Del. 2002) (holding that post-petition obligations incurred in the ordinary course of the debtor's business are administrative expenses). The express confirmation of administrative expense status in the Critical Vendor Order is not a grant of new rights to Meridian but rather a reaffirmation of protections already afforded by the Bankruptcy Code. Such express confirmation is necessary to avoid any ambiguity regarding the priority of Meridian's post-petition claims and to ensure that Meridian's post-petition shipments—estimated at approximately $4,800,000 per month—receive the priority treatment to which they are entitled.

55. Express administrative expense priority for post-petition shipments is particularly important in this case given the magnitude of the Debtor's secured debt obligations and the uncertain prospects for the case. With approximately $1.379 billion in funded debt and a DIP financing facility that includes a $125 million roll-up of pre-petition obligations, there is a meaningful risk that the estate's assets may be insufficient to pay all administrative expenses in full. Meridian should not be required to assume the risk of continuing to supply goods at a rate of nearly $5 million per month without an express confirmation of administrative expense priority for those shipments.

C. Net 30 Terms Are Commercially Reasonable in the Post-Petition Context

56. The Debtor's Critical Vendor Motion proposes that critical vendors continue to supply goods on "customary trade terms," which for Meridian were Net 60. While Net 60 terms may have been appropriate in the pre-petition context, when Cascadia was operating as a going concern (albeit one in financial distress), those terms are no longer appropriate given the Debtor's current Chapter 11 status. The credit risk of supplying a debtor-in-possession is materially different from the credit risk that existed pre-petition, and the trade terms should be adjusted accordingly.

57. Net 30 payment terms are commercially reasonable, widely accepted, and standard in the post-petition supply context. Bankruptcy courts in this District and elsewhere have routinely approved critical vendor orders that incorporate shortened payment terms as a condition of continued supply. See, e.g., In re Circuit City Stores, Inc., Case No. 08-35653 (Bankr. E.D. Va. 2008); In re Toys "R" Us, Inc., Case No. 17-34665 (Bankr. E.D. Va. 2017). Net 30 terms represent a reasonable compromise between the Debtor's need for continued supply on reasonable credit terms and Meridian's need to limit its rolling exposure to a manageable level. Under Net 30 terms, Meridian's maximum rolling exposure at any given time would be approximately $4.8 million (representing one month of shipments), compared to approximately $9.6 million under Net 60 terms (representing two months of shipments). This reduction in exposure is significant and is necessary to justify Meridian's continued participation in the critical vendor program.

D. Self-Help Remedies Are Standard and Necessary

58. Courts routinely authorize post-petition vendors to exercise self-help remedies—including the right to suspend or terminate shipments—upon the debtor's failure to pay post-petition invoices in a timely manner, without requiring the vendor to seek further court relief. See, e.g., In re Payless ShoeSource, Inc., Case No. 17-42267 (Bankr. W.D. Mo. 2017) (authorizing vendors to suspend supply upon payment default with 5-day cure); In re Sears Holdings Corp., Case No. 18-23538 (Bankr. S.D.N.Y. 2018) (similar). These self-help remedies are essential to prevent vendors from being involuntarily locked into supply relationships in which they continue to accumulate unpaid administrative claims without an efficient mechanism for recourse.

59. The self-help remedy requested by Meridian is reasonable in scope and carefully balanced to protect the interests of both Meridian and the Debtor's estate. The five-business-day cure period provides the Debtor with a meaningful opportunity to cure any payment default and restore the supply relationship before Meridian exercises its right to suspend shipments. This cure period ensures that temporary payment delays or administrative errors do not result in an immediate disruption of the supply chain, while still providing Meridian with an effective remedy in the event of a sustained payment default.

E. Anti-Disgorgement Protections Are Appropriate

60. In the event that this case is converted from Chapter 11 to Chapter 7, a Chapter 7 trustee would be empowered to investigate and potentially seek to recover transfers made during the Chapter 11 case, including critical vendor payments, to the extent that such payments are deemed to constitute impermissible pre-plan distributions outside the ordinary priority scheme of the Bankruptcy Code. Without adequate assurance against such disgorgement, vendors face the risk that critical vendor payments received during the Chapter 11 case could be clawed back in a subsequent Chapter 7 liquidation, leaving the vendor with nothing but an unsecured claim in a case where unsecured creditor recoveries are likely to be minimal.

61. Courts have recognized the importance of providing adequate assurance against disgorgement to incentivize vendor participation in critical vendor programs. Without such protections, vendors are understandably reluctant to accept critical vendor designations and to commit to continued supply, which would defeat the purpose of the critical vendor motion and undermine the Debtor's ability to maintain its operations during the pendency of the Chapter 11 case. See In re Kmart Corp., 359 F.3d at 873 (emphasizing the importance of ensuring that critical vendor payments serve their intended purpose of preserving the debtor's going-concern value). The anti-disgorgement protections requested by Meridian are designed to provide the certainty and finality necessary to support Meridian's continued participation in the critical vendor program and its ongoing supply of goods to the Debtor.

62. To the extent the Court determines that a blanket anti-disgorgement provision is not appropriate, Meridian respectfully requests that any disgorgement obligation be limited to the net benefit received by Meridian—that is, the $2,500,000 critical vendor payment less the value of goods delivered post-petition by Meridian in reliance on the critical vendor designation. This net benefit limitation is equitable and recognizes the substantial value that Meridian will provide to the estate through its continued supply of goods in reliance on the critical vendor arrangement.

VII. RESERVATION OF RIGHTS

63. Meridian expressly reserves all rights, claims, defenses, and remedies available to it under applicable law, the Bankruptcy Code, and the Federal Rules of Bankruptcy Procedure, including but not limited to:

(a) The right to file a proof of claim asserting the full amount of its pre-petition claim of $14,726,418.37 by the general bar date established in this case (estimated to be January 15, 2026);

(b) The right to assert, prosecute, and collect its administrative expense claim of $1,847,200.00 under Section 503(b)(9) of the Bankruptcy Code for the value of goods received by the Debtor in the ordinary course of business within the 20-day period preceding the petition date;

(c) The right to pursue reclamation of approximately $3,218,650.00 in goods delivered to the Debtor within the 45-day period preceding the petition date, and to seek a lien or administrative expense claim as a substitute for reclamation to the extent reclamation in kind is not available, all in accordance with Section 546(c) of the Bankruptcy Code;

(d) The right to assert all available defenses to any preference action that may be brought against Meridian under Section 547 of the Bankruptcy Code, including the ordinary course of business defense under Section 547(c)(2) (Meridian's historical average payment term was Net 53, compared to a preference period average of Net 58, well within industry norms), the new value defense under Section 547(c)(4), and the contemporaneous exchange defense under Section 547(c)(1);

(e) The right to pursue, and to collect proceeds under, its trade credit insurance claim with Clearwater Surety & Insurance Co. under Policy No. TCI-2024-00783, including the right to receive insurance proceeds without offset, reduction, or subrogation related to the critical vendor payment or any other recovery in this case;

(f) All rights, duties, and obligations as a member of the Official Committee of Unsecured Creditors, including the right to participate in all Committee deliberations and activities;

(g) The right to object to the Debtor's proposed DIP financing, including the terms of the $275 million DIP facility with Ridgeline National Bank, N.A., and the $125 million roll-up of pre-petition first lien revolving credit facility obligations;

(h) The right to object to any plan of reorganization, disclosure statement, or Section 363 sale proposed in this case;

(i) The right to be heard on any other matter arising in this case in which Meridian has a cognizable interest; and

(j) All other rights, claims, defenses, and remedies available to Meridian under applicable law, whether or not specifically enumerated herein.

64. Nothing in this Response, and nothing in Meridian's acceptance of any critical vendor payment, shall be construed as a waiver, release, or modification of any of the foregoing rights, claims, defenses, or remedies.

VIII. CONCLUSION AND PRAYER FOR RELIEF

WHEREFORE, Meridian Consumer Brands LLC respectfully requests that the Court:

1. Grant the relief requested in this Response;

2. Condition any order granting the Critical Vendor Motion on the enhanced protections described herein with respect to Meridian, including:

(a) express administrative expense priority under Section 503(b)(1)(A) of the Bankruptcy Code for all post-petition shipments by Meridian to the Debtor;

(b) Net 30 payment terms for all post-petition shipments, with a cash-on-delivery backstop upon any payment default;

(c) the right to suspend or terminate shipments upon any payment default exceeding five (5) business days, upon written notice to the Debtor and its counsel, without the need for further order of this Court;

(d) adequate assurance against disgorgement or clawback of the critical vendor payment in the event this case is converted to Chapter 7, or in the alternative, a limitation of any disgorgement to the net benefit received by Meridian; and

(e) an express reservation of all of Meridian's claims, rights, defenses, and remedies, including its Section 503(b)(9) administrative expense claim, reclamation rights, proof of claim rights, preference defenses, and trade credit insurance rights;

3. Modify the proposed Critical Vendor Order to include the provisions set forth in Section V of this Response;

4. Grant such other and further relief as the Court deems just and proper.

Respectfully submitted,

Dated: November 4, 2025

CALDERWOOD & HARKNESS LLP

By: ________

Colette Whitman (DE Bar No. 5724) Nathan Ikeda (DE Bar No. 6891) 1105 N. Market Street, Suite 1400 Wilmington, Delaware 19801 Telephone: (302) 658-7200 Facsimile: (302) 658-7210

Email: cwhitman@calderwoodharkness.com

Email: nikeda@calderwoodharkness.com

— and —

200 Park Avenue, 38th Floor New York, New York 10166 Telephone: (212) 403-5000

Counsel to Meridian Consumer Brands LLC

CERTIFICATE OF SERVICE

I, Nathan Ikeda, hereby certify that on November 4, 2025, a true and correct copy of the foregoing Response of Meridian Consumer Brands LLC to Debtor's Motion for Entry of an Order (I) Authorizing the Debtor to Pay Prepetition Claims of Certain Critical Vendors and (II) Granting Related Relief was served via the Court's CM/ECF electronic filing system, which will cause notice of electronic filing to be sent to all registered CM/ECF users, and via first-class mail and/or email upon the following parties:

1. Brindoval Baines & Lord LLP (Harrison Caldwell, Esq. and Julia Wren, Esq.), 51 West 52nd Street, New York, New York 10019 — Counsel to the Debtor

2. Borwick Sato LLP (Michael Donnelly, Esq.), 919 N. Market Street, Suite 600, Wilmington, Delaware 19801 — Delaware Co-Counsel to the Debtor

3. Garvey & Holbrook LLP (Diana Prescott, Esq.), 750 Third Avenue, 30th Floor, New York, New York 10017 — Counsel to the Official Committee of Unsecured Creditors

4. Broadleaf Advisory Group LLC (Robert Tanaka), 1345 Avenue of the Americas, 25th Floor, New York, New York 10105 — Financial Advisor to the Official Committee of Unsecured Creditors

5. Ridgeline National Bank, N.A. (Laura Chin), 600 Travis Street, Houston, Texas 77002 — DIP Agent and Pre-Petition First Lien Agent

6. Office of the United States Trustee, Region 3, District of Delaware, 844 King Street, Suite 2207, Lockbox 35, Wilmington, Delaware 19801

7. All parties who have filed requests for notice in this case pursuant to Federal Rule of Bankruptcy Procedure 2002

________________________________________

Nathan Ikeda (DE Bar No. 6891) CALDERWOOD & HARKNESS LLP 1105 N. Market Street, Suite 1400 Wilmington, Delaware 19801

In re:	Chapter 11
CASCADIA HOME & LIFESTYLE INC.,	Case No. 25-12087 (CMA)
Debtor.	Hon. Christine M. Aldridge

Related Docket No. 27

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
RESPONSE OF MERIDIAN CONSUMER BRANDS LLC TO DEBTOR'S MOTION FOR ENTRY OF AN ORDER (I) AUTHORIZING THE DEBTOR TO PAY PREPETITION CLAIMS OF CERTAIN CRITICAL VENDORS AND (II) GRANTING RELATED RELIEF
Meridian Consumer Brands LLC ("Meridian" or "MCB"), by and through its undersigned counsel, Calderwood & Harkness LLP, hereby submits this Response (the "Response") to the Motion of Cascadia Home & Lifestyle Inc. (the "Debtor" or "Cascadia") for Entry of an Order (I) Authorizing the Debtor to Pay Prepetition Claims of Certain Critical Vendors and (II) Granting Related Relief [Dkt. No. 27] (the "Critical Vendor Motion" or the "Motion"), filed on October 16, 2025. In support of this Response, Meridian respectfully represents as follows:
I. PRELIMINARY STATEMENT
1. Meridian Consumer Brands LLC is a Delaware limited liability company headquartered at 575 Lexington Avenue, 22nd Floor, New York, New York 10022. Meridian develops, manufactures, and distributes a diversified portfolio of branded consumer products, including household cleaning products, personal care items, and small kitchen appliances, which are sold through major national retailers across the United States. Meridian is one of the largest unsecured trade creditors of Cascadia Home & Lifestyle Inc., holding approximately $14,726,418.37 in pre-petition trade receivables arising from the sale of goods delivered to the Debtor in the ordinary course of business.
2. On October 28, 2025, the Office of the United States Trustee for Region 3 appointed the Official Committee of Unsecured Creditors (the "Committee") in this Chapter 11 case. Meridian was appointed as a member of the Committee, reflecting the significant magnitude of Meridian's unsecured claims against the Debtor's estate. Although Meridian serves on the Committee, this Response is filed solely in Meridian's individual capacity as a trade creditor of the Debtor, and nothing in this Response should be construed as reflecting the views, positions, or recommendations of the Committee.
3. On October 16, 2025, two days after the petition date, the Debtor filed the Critical Vendor Motion, requesting authority under Sections 105(a) and 363(b)(1) of Title 11 of the United States Code (the "Bankruptcy Code") to pay pre-petition claims of certain vendors that the Debtor has identified as "critical" to the continued operation of the Debtor's retail business, in an aggregate amount not to exceed $35,000,000.00.
4. The Debtor has designated Meridian as one of its critical vendors under the Critical Vendor Motion. Pursuant to the Motion, the Debtor proposes to pay Meridian $2,500,000.00 of Meridian's pre-petition claims in exchange for Meridian's commitment to continue to supply goods to the Debtor on what the Debtor characterizes as "customary trade terms." The proposed payment of $2,500,000.00 represents a fraction—approximately seventeen percent (17%)—of Meridian's total pre-petition claim of $14,726,418.37, leaving a balance of $12,226,418.37 in pre-petition trade receivables that would remain unpaid and subject to general unsecured creditor treatment.
5. Meridian does not oppose the Critical Vendor Motion in its entirety. To the contrary, Meridian supports its designation as a critical vendor and acknowledges the importance of the continued supply relationship between Meridian and the Debtor to the preservation of the Debtor's going-concern value and, ultimately, the value of the estate for the benefit of all creditors. Meridian's branded products are prominently featured across the Debtor's 347 retail locations and e-commerce platform, and a disruption in the supply of these products would cause material harm to the Debtor's operations and to the recovery prospects of the unsecured creditor constituency.
6. However, while Meridian agrees in principle with the critical vendor framework proposed by the Debtor, Meridian respectfully submits this Response to request that the Court condition the relief granted under the Critical Vendor Motion upon certain additional protections that are necessary to safeguard Meridian's interests and to ensure that the proposed critical vendor arrangement is both fair and equitable. These protections include, among other things: (a) express administrative expense priority for all goods shipped by Meridian to the Debtor post-petition; (b) modification of payment terms from the pre-petition Net 60 to Net 30, with a cash-on-delivery backstop upon any payment default; (c) the right to suspend or terminate shipments upon payment default without further court order; (d) adequate assurance against disgorgement of the critical vendor payment in the event the case is converted to Chapter 7; and (e) an express reservation of all of Meridian's claims, rights, and remedies, including its Section 503(b)(9) administrative expense claim, its reclamation rights under Section 546(c), and its rights under its trade credit insurance policy.
7. Meridian emphasizes that acceptance of the proposed $2,500,000.00 critical vendor payment—a partial payment representing only approximately seventeen percent (17%) of Meridian's total pre-petition claim—should not prejudice, waive, release, or diminish any of Meridian's other claims, rights, or remedies against the Debtor, the estate, or any third party. The conditions and modifications requested herein are reasonable, narrowly tailored, and consistent with protections that bankruptcy courts routinely afford to critical vendors in complex Chapter 11 cases.
II. RELEVANT BACKGROUND
A. The Chapter 11 Case
8. Cascadia Home & Lifestyle Inc. is a Delaware corporation headquartered in Portland, Oregon. The Debtor operates approximately 347 retail stores across 38 states and maintains an e-commerce platform under the "Cascadia Home" and "Lifestyle by Cascadia" brand names. The Debtor's retail stores offer a broad range of home furnishing, lifestyle, and consumer products, including household goods, home décor, kitchen and dining products, personal care and wellness items, and seasonal merchandise.
9. The Debtor was founded in 1994 by Roland Trask, who grew the business from a single retail location in Portland, Oregon into a nationally recognized retail brand. The Debtor went public in 2006, listing its common stock on the New York Stock Exchange. In 2019, the Debtor was taken private in a leveraged buyout led by Pinecrest Equity Group, a New York-based private equity firm. The leveraged buyout was valued at approximately $2.1 billion, with Pinecrest Equity Partners III, LP contributing approximately $740 million in equity and the balance funded through a combination of first lien, second lien, and unsecured debt. The significant leverage incurred in connection with the 2019 leveraged buyout has been a principal contributor to the Debtor's current financial distress.
10. For the fiscal year ending January 31, 2025, the Debtor reported revenue of approximately $1.87 billion, a net loss of approximately $214 million, and negative EBITDA of approximately ($42 million). These financial results reflect the significant challenges facing the Debtor, including declining comparable store sales, margin compression, increased competition from e-commerce retailers, and the burden of servicing an overleveraged capital structure.
11. As of the petition date, the Debtor's funded indebtedness totaled approximately $1.379 billion, structured as follows:
(a) First Lien Revolving Credit Facility: A senior secured revolving credit facility in the aggregate principal amount of $225 million, of which approximately $189 million was drawn as of the petition date. The administrative agent for the First Lien Revolving Credit Facility is Ridgeline National Bank, N.A.
(b) First Lien Term Loan B: A senior secured term loan in the aggregate outstanding principal amount of approximately $625 million. The administrative agent for the First Lien Term Loan B is also Ridgeline National Bank, N.A.
(c) Second Lien Term Loan: A second lien secured term loan in the aggregate outstanding principal amount of approximately $350 million. The agent for the Second Lien Term Loan is Thornfield Capital Management LP.
(d) 8.75% Senior Unsecured Notes due 2027: Senior unsecured notes in the aggregate outstanding principal amount of approximately $215 million. The indenture trustee for the Senior Unsecured Notes is Pacific Continental Trust Company.
12. The Debtor filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code on October 14, 2025, in this Court (Case No. 25-12087). The case has been assigned to the Honorable Christine M. Aldridge.
13. The Debtor's senior management includes Margaret "Meg" Fontaine, Chief Executive Officer; Vikram Patel, Chief Financial Officer; and Philip Kellner of Kellner & Associates LLC, who was engaged as the Debtor's Chief Restructuring Officer in connection with the Chapter 11 filing. The Debtor's legal counsel in this case is Brindoval Baines & Lord LLP, with Harrison Caldwell serving as lead partner, and Borwick Sato LLP, with Michael Donnelly serving as Delaware co-counsel. The Debtor's financial advisor is Ashworth Partners LLC, with Sandra Ng serving as lead managing director.
14. On October 16, 2025, the Debtor filed a motion seeking approval of a debtor-in-possession financing facility (the "DIP Facility") in the aggregate amount of $275 million, consisting of $150 million in new money term loans and a $125 million roll-up of pre-petition first lien revolving credit facility obligations. Ridgeline National Bank, N.A. serves as the DIP Agent. An interim hearing on the DIP motion was held on October 17, 2025, at which the Court authorized the Debtor to access approximately $100 million on an interim basis. A final hearing on the DIP motion is currently scheduled for November 14, 2025.
B. Meridian's Relationship with the Debtor
15. As noted above, Meridian Consumer Brands LLC develops, manufactures, and distributes a portfolio of branded household cleaning products, personal care items, and small kitchen appliances. Meridian's products are sold through major national retailers across the United States, including mass merchandisers, home improvement retailers, grocery chains, and specialty retail outlets such as the Debtor's stores. Meridian is a portfolio company of Briarstone Capital Partners Fund IV, LP, which holds an approximately 78% equity interest in Meridian, acquired in 2021 in a transaction valued at approximately $680 million. For its fiscal year 2024 (calendar year ending December 31, 2024), Meridian reported revenue of approximately $1.24 billion and EBITDA of approximately $167 million.
16. Cascadia has historically been one of Meridian's most significant retail customers. For fiscal year 2024, Cascadia ranked as Meridian's fourth-largest customer by revenue, accounting for approximately $58.3 million in annual purchases. This figure represents a substantial and important portion of Meridian's overall revenue base. Meridian's products—spanning multiple product lines of branded household cleaning products, personal care items, and small kitchen appliances—are prominently featured in Cascadia's retail stores and on its e-commerce platform. These products constitute an important component of Cascadia's merchandise assortment in the relevant product categories and are well recognized by Cascadia's customer base.
17. The commercial relationship between Meridian and Cascadia spans more than a decade and has been conducted on standard trade terms, including Net 60 payment terms with a 2% early payment discount available at Net 15. Throughout the history of the relationship, Meridian has consistently supplied Cascadia with high-quality branded products on a timely basis, and the parties have maintained a constructive and mutually beneficial commercial partnership.
C. Meridian's Claims Against the Debtor
18. As of the petition date of October 14, 2025, Meridian holds $14,726,418.37 in outstanding pre-petition trade receivables owed by the Debtor. These receivables are comprised of 83 unpaid invoices dated between July 18, 2025 (Invoice No. MCB-092174, in the amount of $212,600.00) and October 10, 2025 (Invoice No. MCB-095301, in the amount of $187,440.50). The receivables arose in the ordinary course of business and represent the unpaid purchase price for goods manufactured and delivered by Meridian to the Debtor prior to the petition date.
19. In addition to its general unsecured claim, Meridian has asserted reclamation rights under Section 546(c) of the Bankruptcy Code with respect to approximately $3,218,650.00 in goods delivered to the Debtor within the 45-day period preceding the petition date (i.e., from August 30, 2025 through October 14, 2025). A written reclamation demand letter was delivered to the Debtor on October 16, 2025, in accordance with the requirements of Section 546(c). Meridian reserves all rights with respect to its reclamation demand, including the right to seek a lien or administrative expense claim as a substitute for reclamation to the extent that the reclamation demand cannot be satisfied in kind.
20. Meridian has also filed, or intends to file, a motion seeking allowance of an administrative expense claim in the amount of $1,847,200.00 under Section 503(b)(9) of the Bankruptcy Code. This claim is based on the value of goods received by the Debtor in the ordinary course of business within the 20-day period preceding the petition date (i.e., from September 24, 2025 through October 14, 2025). Section 503(b)(9) provides an administrative expense priority for the value of goods received by the debtor within 20 days before the petition date, and Meridian's claim under this provision is entitled to priority treatment as an administrative expense of the estate.
21. Meridian also maintains trade credit insurance coverage with respect to a portion of its exposure to the Debtor. Specifically, Meridian is the holder of a trade credit insurance policy issued by Clearwater Surety & Insurance Co. (Policy No. TCI-2024-00783), which includes a Cascadia sub-limit of $5,000,000. The policy is subject to a 10% co-insurance retention of $500,000, yielding a net expected insurance recovery of $4,500,000 in the event of an uncured default by Cascadia. After giving effect to the anticipated insurance recovery, Meridian's uninsured claim balance is approximately $10,226,418.37. Meridian's rights under its trade credit insurance policy are independent of, and should not be affected by, its participation in the critical vendor program.
D. Meridian's Role on the Committee
22. On October 28, 2025, the Office of the United States Trustee for Region 3, District of Delaware, appointed the Official Committee of Unsecured Creditors in this case. The Committee is composed of six members, each of which holds a significant unsecured claim against the Debtor:
(a) Meridian Consumer Brands LLC (claim of approximately $14.7 million);
(b) Wavecrest Logistics Corp. (claim of approximately $9.1 million);
(c) Summit Packaging Solutions Inc. (claim of approximately $6.4 million);
(d) Ironwood Property Holdings LLC (aggregate lease rejection claims of approximately $22 million);
(e) Northstar Textiles Ltd. (claim of approximately $11.3 million); and
(f) Redmond & Park Advertising LLC (claim of approximately $4.8 million).
23. The Committee has retained Garvey & Holbrook LLP, with Diana Prescott serving as lead partner, as its legal counsel, and Broadleaf Advisory Group LLC, with Robert Tanaka serving as managing director, as its financial advisor. The Committee is in the early stages of its investigation of the Debtor's business, operations, financial condition, and prepetition transactions, and has not yet taken a formal position with respect to the Critical Vendor Motion.
24. As noted above, Meridian files this Response in its individual capacity as a trade creditor of the Debtor, and not on behalf of or in its capacity as a member of the Committee. Nothing in this Response should be construed as representing the views or positions of the Committee or any other member thereof.
III. THE CRITICAL VENDOR MOTION
25. On October 16, 2025, two days after the petition date, the Debtor filed the Critical Vendor Motion [Dkt. No. 27], seeking entry of an order, pursuant to Sections 105(a) and 363(b)(1) of the Bankruptcy Code, authorizing the Debtor to pay pre-petition claims of certain vendors that the Debtor has identified as "critical" to the continued operation of the Debtor's business. The Critical Vendor Motion seeks authority to make such payments in an aggregate amount not to exceed $35,000,000.00.
26. In support of the Motion, the Debtor asserts that the identified critical vendors supply goods and services that are essential to the Debtor's ongoing retail operations, and that the failure to pay pre-petition claims owed to these vendors could result in the disruption of the Debtor's supply chain, the loss of goods necessary for the continued operation of the Debtor's 347 retail stores and e-commerce platform, and a diminution of the Debtor's going-concern value. The Debtor further asserts that many of these critical vendors are sole-source or limited-source suppliers of products that cannot be readily replaced, and that the loss of these vendor relationships would cause irreparable harm to the Debtor's business and to the value of the estate.
27. The Debtor has designated Meridian as a critical vendor under the Critical Vendor Motion. Pursuant to the Motion, the Debtor proposes to pay $2,500,000.00 of Meridian's pre-petition claims of $14,726,418.37, representing approximately 17% of the total amount owed. In exchange for this partial payment, the Debtor requires that Meridian commit to continue to supply goods to the Debtor on what the Motion characterizes as "customary trade terms."
28. The Critical Vendor Motion provides that the "customary trade terms" applicable to each critical vendor shall be the trade terms in effect between the Debtor and such vendor as of the petition date. For Meridian, the pre-petition trade terms were Net 60, with a 2% early payment discount available at Net 15.
29. Critically, under the terms proposed in the Critical Vendor Motion, vendors accepting critical vendor payments are required to agree that the critical vendor payment constitutes "full and final satisfaction" of the vendor's pre-petition claim, unless the proposed order expressly provides otherwise. This provision, if applied to Meridian without modification, could be interpreted to extinguish Meridian's remaining $12,226,418.37 pre-petition claim, its $1,847,200.00 Section 503(b)(9) administrative expense claim, and its $3,218,650.00 reclamation claim in exchange for a payment of only $2,500,000.00. Such a result would be manifestly unjust and is not a condition that Meridian can accept without the protections requested herein.
IV. MERIDIAN'S POSITION
A. Support for Critical Vendor Designation
30. Meridian does not object to its designation as a critical vendor under the Critical Vendor Motion. Meridian acknowledges that its products are integral to the Debtor's retail merchandise mix and that a disruption in the supply of Meridian's branded household cleaning products, personal care items, and small kitchen appliances would materially harm the Debtor's retail operations and going-concern value. Meridian's product lines are well established in the Debtor's stores, and the sudden absence of these products from store shelves and the e-commerce platform would cause customer confusion, lost sales, and damage to the Debtor's competitive position.
31. Meridian further acknowledges that the continued supply of its products to the Debtor is in the interest of the estate and all creditors. A functioning supply chain is essential to the Debtor's ability to generate revenue during the pendency of the Chapter 11 case and to preserve the going-concern value of the Debtor's business, whether the case ultimately proceeds through a plan of reorganization or a sale process under Section 363 of the Bankruptcy Code. Meridian is prepared to continue supplying goods to the Debtor, provided that Meridian receives adequate protections for its post-petition shipments and that acceptance of the critical vendor payment does not prejudice Meridian's other claims, rights, and remedies.
32. The legal framework governing critical vendor payments is well established. In In re Kmart Corp., 359 F.3d 866 (7th Cir. 2004), the Seventh Circuit Court of Appeals held that critical vendor payments are permissible under the Bankruptcy Code where the debtor can demonstrate that the payment is necessary to preserve the going-concern value of the debtor's business and that all creditors benefit from the payment—not merely the favored vendors. The Kmart decision further requires that the debtor demonstrate that the vendor would refuse to supply goods absent the critical vendor payment and that the disruption in supply would cause harm to the estate that outweighs the cost of the payment. Meridian submits that these conditions are satisfied here with respect to its designation as a critical vendor, provided that the conditions requested by Meridian are incorporated into the Critical Vendor Order.
B. Requested Conditions and Modifications
33. Meridian requests that any order granting the Critical Vendor Motion (the "Critical Vendor Order") be conditioned upon the following protections and modifications as they pertain to Meridian:
1. Administrative Expense Priority for All Post-Petition Shipments.
34. Meridian requests that the Critical Vendor Order expressly provide that all goods shipped by Meridian to the Debtor post-petition shall be accorded administrative expense priority under Section 503(b)(1)(A) of the Bankruptcy Code. While this priority should attach as a matter of law to goods and services provided to the estate in the ordinary course of business, Meridian requests that the Critical Vendor Order expressly confirm this status to eliminate any ambiguity and to provide Meridian with the assurance necessary to continue supplying goods to the Debtor on an ongoing basis.
35. This protection is of critical importance given the scale of Meridian's post-petition supply obligations. Based on the Debtor's requested ongoing supply levels and the historical purchasing patterns between the parties, Meridian estimates that it will ship approximately $4,800,000 per month in goods to the Debtor post-petition, or approximately $57.6 million on an annualized basis. Without the express assurance that these post-petition shipments will be treated as administrative expenses of the estate entitled to priority payment under Sections 503(b)(1)(A) and 507(a)(2) of the Bankruptcy Code, Meridian would face substantial and unacceptable exposure as a post-petition trade creditor with no security or priority for its post-petition claims.
36. The risk that administrative expense claims may go unpaid in this case is not merely theoretical. The Debtor's capital structure is heavily leveraged, with approximately $1.379 billion in funded debt, and the Debtor reported a net loss of approximately $214 million and negative EBITDA of approximately ($42 million) for its most recent fiscal year. In the event that administrative expenses exceed the estate's ability to pay—a scenario that is not improbable given the magnitude of the Debtor's secured obligations and the uncertain prospects for the case—Meridian's post-petition claims could be at risk absent express administrative expense priority treatment.
2. Enhanced Payment Terms: Net 30 with COD Backstop.
37. Meridian requests that the Critical Vendor Order provide that post-petition trade terms between Meridian and the Debtor shall be Net 30 (i.e., payment due within 30 days of invoice date), rather than the pre-petition trade terms of Net 60. The Debtor's Critical Vendor Motion requires vendors accepting critical vendor payments to continue supply on "customary trade terms," which for Meridian were Net 60 terms. However, those pre-petition terms were established in the context of a non-distressed, going-concern relationship with a creditworthy counterparty. The Debtor is now a debtor-in-possession operating in Chapter 11, with a deeply leveraged balance sheet and uncertain prospects for reorganization. The credit risk inherent in supplying a debtor-in-possession is materially different from the credit risk that existed pre-petition, and the trade terms should reflect this change in circumstances.
38. Net 30 payment terms are commercially reasonable and customary in the post-petition supply context. Numerous bankruptcy courts have approved critical vendor orders that incorporate shortened payment terms to reflect the enhanced credit risk faced by post-petition vendors. Net 30 terms would reduce Meridian's rolling exposure from approximately $9.6 million (representing two months of shipments at Net 60) to approximately $4.8 million (representing one month of shipments at Net 30), thereby significantly limiting the magnitude of any administrative expense claim that Meridian might need to assert in the event of a payment default.
39. In addition, Meridian requests that the Critical Vendor Order provide that, in the event of any payment default by the Debtor on post-petition invoices (i.e., failure to pay any invoice within 30 days of the invoice date), Meridian shall have the right to immediately impose cash-on-delivery ("COD") terms for all subsequent shipments. The COD backstop is a standard and reasonable protection for post-petition vendors and is designed to prevent the accumulation of unpaid post-petition claims while allowing the supply relationship to continue on a cash basis.
3. Right to Cease Shipments Upon Payment Default Without Further Court Order.
40. Meridian requests that the Critical Vendor Order expressly provide Meridian with the right to suspend or terminate all shipments to the Debtor upon any payment default exceeding five (5) business days, without the need for further court order, motion practice, or other judicial intervention. The right to cease shipments should be exercisable upon written notice to the Debtor and its counsel, Brindoval Baines & Lord LLP and Borwick Sato LLP, with a five-business-day cure period during which the Debtor may cure the payment default and restore the supply relationship.
41. This self-help remedy is a standard and well-established protection for post-petition vendors in critical vendor orders. Without such a provision, Meridian could find itself involuntarily locked into a supply relationship in which it is compelled to continue shipping goods—at the rate of approximately $4,800,000 per month—while accumulating unpaid administrative claims that may ultimately prove difficult or impossible to collect. The burden and expense of filing a separate motion and obtaining a court order before suspending shipments would create an unacceptable delay during which Meridian's exposure would continue to grow. The five-business-day cure period provides the Debtor with a reasonable opportunity to cure any default before shipments are suspended, while protecting Meridian from the risk of open-ended, uncollectible post-petition obligations.
4. Adequate Assurance Against Disgorgement Upon Conversion.
42. Meridian requests that the Critical Vendor Order provide adequate assurance that critical vendor payments made to Meridian will not be subject to disgorgement, clawback, or recovery in the event the Debtor's Chapter 11 case is converted to a case under Chapter 7 of the Bankruptcy Code.
43. The risk of conversion in this case is real and cannot be dismissed. The Debtor reported negative EBITDA of approximately ($42 million) and a net loss of approximately ($214 million) for the fiscal year ending January 31, 2025. The Debtor's total funded debt of approximately $1.379 billion represents an unsustainable capital structure that may not be capable of reorganization, particularly in the current economic environment for brick-and-mortar retail. The Debtor's DIP financing facility of $275 million includes a $125 million roll-up of pre-petition first lien revolving credit facility obligations, which further diminishes the unencumbered assets available to pay administrative and unsecured creditors. If the Debtor is unable to confirm a Chapter 11 plan or consummate a value-maximizing sale, conversion to Chapter 7 is a realistic possibility.
44. In the event of conversion, a Chapter 7 trustee would be empowered to investigate and potentially seek to recover pre-plan distributions, including critical vendor payments, as impermissible transfers to the extent that such payments were made outside the ordinary priority scheme established by the Bankruptcy Code. Without adequate assurance against disgorgement, Meridian would be exposed to the risk that the $2,500,000 critical vendor payment—received in exchange for Meridian's continued supply of goods to the Debtor—could be clawed back by a Chapter 7 trustee, leaving Meridian with nothing but an unsecured claim in a liquidation.
45. Meridian respectfully requests that the Critical Vendor Order include an express provision that critical vendor payments made to Meridian shall not be subject to disgorgement or clawback in the event the case is converted to Chapter 7. To the extent the Court is not willing to provide a blanket anti-disgorgement provision, Meridian requests that the Critical Vendor Order at minimum provide that any disgorgement claim against Meridian shall be limited to the net benefit received by Meridian—that is, the $2,500,000 critical vendor payment less the value of goods delivered post-petition by Meridian to the Debtor in reliance on the critical vendor designation. This net benefit limitation recognizes that Meridian will have provided substantial value to the estate in the form of post-petition goods supplied in reliance on the critical vendor arrangement, and that it would be inequitable to require Meridian to disgorge the critical vendor payment without crediting the value of goods supplied.
5. Reservation of All Claims and Rights.
46. Meridian requests that the Critical Vendor Order expressly provide that acceptance of the $2,500,000.00 critical vendor payment does not constitute a waiver, release, satisfaction, or compromise of the balance of Meridian's pre-petition claim of $14,726,418.37. Specifically, the Critical Vendor Order should provide that the $2,500,000.00 payment is a partial payment on account of Meridian's pre-petition claim and does not constitute full satisfaction thereof. After giving effect to the critical vendor payment, Meridian's remaining pre-petition claim would be $12,226,418.37, plus any accrued interest, fees, or other amounts that may be allowed under the Bankruptcy Code.
47. In addition, acceptance of the critical vendor payment must not prejudice or constitute a waiver of any of the following claims, rights, and remedies:
(a) Meridian's administrative expense claim of $1,847,200.00 under Section 503(b)(9) of the Bankruptcy Code for the value of goods received by the Debtor in the ordinary course of business within the 20-day period preceding the petition date (September 24, 2025 through October 14, 2025);
(b) Meridian's reclamation rights under Section 546(c) of the Bankruptcy Code with respect to approximately $3,218,650.00 in goods delivered to the Debtor within the 45-day period preceding the petition date (August 30, 2025 through October 14, 2025);
(c) Meridian's right to file a proof of claim asserting the full amount of its pre-petition claim of $14,726,418.37, including the portion satisfied by the critical vendor payment, by the estimated general bar date of January 15, 2026 (or such other date as may be established by the Court);
(d) Meridian's right to assert any and all defenses to potential preference actions under Section 547 of the Bankruptcy Code, including the ordinary course of business defense, the new value defense, and the contemporaneous exchange defense;
(e) Meridian's right to pursue its trade credit insurance claim under Clearwater Surety & Insurance Co. Policy No. TCI-2024-00783, including the right to receive insurance proceeds without offset, reduction, or subrogation related to the critical vendor payment; and
(f) All other claims, rights, defenses, and remedies available to Meridian under applicable law, the Bankruptcy Code, and the Federal Rules of Bankruptcy Procedure.
48. Meridian further requests that the Critical Vendor Order specify that the $2,500,000.00 critical vendor payment shall be applied first to the oldest outstanding invoices in Meridian's accounts receivable and shall not be applied against invoices supporting Meridian's Section 503(b)(9) administrative expense claim (i.e., invoices for goods received by the Debtor during the period from September 24, 2025 through October 14, 2025). This allocation is important to preserve the integrity of Meridian's Section 503(b)(9) claim, which is entitled to administrative expense priority and should not be satisfied by a general critical vendor payment that would otherwise be applied to ordinary unsecured claims.
V. PROPOSED MODIFICATIONS TO THE CRITICAL VENDOR ORDER
49. Meridian respectfully requests that the following provisions be included in the proposed Critical Vendor Order with respect to Meridian. Meridian has prepared, and will submit under separate cover if requested by the Court, proposed redline language for insertion into the Debtor's proposed form of order:
(a) Administrative Expense Priority for Post-Petition Obligations. A paragraph providing that all post-petition obligations of the Debtor to Meridian arising from the sale and delivery of goods by Meridian to the Debtor after the petition date shall constitute administrative expenses of the estate under Section 503(b)(1)(A) of the Bankruptcy Code, entitled to priority of payment under Section 507(a)(2) of the Bankruptcy Code.
(b) Modified Payment Terms. A paragraph providing that payment terms for all post-petition shipments from Meridian to the Debtor shall be Net 30 (payment due within 30 days of invoice date), and that in the event of any payment default by the Debtor (i.e., failure to pay any post-petition invoice within 30 days of the invoice date), Meridian shall have the right to impose cash-on-delivery ("COD") terms for all subsequent shipments until such time as all outstanding post-petition invoices are paid in full.
(c) Right to Suspend or Terminate Shipments. A paragraph providing that Meridian shall have the right, upon written notice to the Debtor and its counsel (Brindoval Baines & Lord LLP and Borwick Sato LLP), to suspend or terminate all shipments to the Debtor upon any payment default on post-petition invoices exceeding five (5) business days, without the need for further order of this Court, motion practice, or other judicial intervention, subject to a five-business-day cure period commencing upon delivery of such written notice.
(d) Anti-Disgorgement Protection. A paragraph providing that critical vendor payments made to Meridian pursuant to the Critical Vendor Order shall not be subject to disgorgement, clawback, or recovery in the event this case is converted from Chapter 11 to Chapter 7, or, in the alternative, that any disgorgement claim against Meridian shall be limited to the net benefit received by Meridian (i.e., the $2,500,000.00 critical vendor payment less the value of goods delivered post-petition by Meridian in reliance on the critical vendor designation).
(e) Reservation of Claims and Rights. A paragraph providing that the $2,500,000.00 critical vendor payment to Meridian constitutes a partial payment on account of Meridian's pre-petition claim of $14,726,418.37 and does not constitute a waiver, release, satisfaction, or compromise of any other claims, rights, or remedies available to Meridian, including without limitation Meridian's Section 503(b)(9) administrative expense claim of $1,847,200.00, Meridian's reclamation rights under Section 546(c) for approximately $3,218,650.00 in goods, Meridian's right to file a proof of claim for the full amount of its pre-petition claim, Meridian's right to assert all available defenses to preference actions under Section 547, and Meridian's rights under its trade credit insurance policy with Clearwater Surety & Insurance Co. (Policy No. TCI-2024-00783).
(f) Application of Payment. A paragraph providing that the $2,500,000.00 critical vendor payment shall be applied to the oldest outstanding invoices in Meridian's accounts receivable and shall not be applied to invoices supporting Meridian's Section 503(b)(9) administrative expense claim (i.e., invoices for goods received by the Debtor during the period from September 24, 2025 through October 14, 2025).
VI. LEGAL ARGUMENT
A. The Court Has Authority to Impose Conditions on Critical Vendor Payments
50. The conditions and modifications requested by Meridian are well within the Court's authority under the Bankruptcy Code. Section 105(a) of the Bankruptcy Code provides that "[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). This provision vests the Court with broad equitable powers to fashion relief that serves the interests of the estate and its creditors, including the authority to impose conditions on orders authorizing the use of estate property.
51. Section 363(b)(1) of the Bankruptcy Code provides that "[t]he 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). The payment of pre-petition claims to critical vendors constitutes a use of property of the estate outside the ordinary course of business, and the Court's authority to approve such payments necessarily includes the authority to impose conditions on such payments to protect the interests of the estate and its creditors.
52. Courts routinely impose conditions on critical vendor payments to ensure that such payments serve the interests of all creditors and do not result in unfair preferential treatment of selected vendors at the expense of the general unsecured creditor body. In In re Kmart Corp., 359 F.3d 866, 874 (7th Cir. 2004), the Seventh Circuit emphasized that critical vendor payments must be justified by a showing that the payment benefits all creditors, not merely the favored vendors, and that the debtor must demonstrate that the vendor would refuse to supply goods absent the payment and that the resulting disruption in supply would cause harm to the estate outweighing the cost of the payment. The Kmart framework implicitly recognizes the Court's authority to impose conditions on critical vendor payments to ensure that the payments achieve their intended purpose—the preservation of the debtor's going-concern value—while protecting the rights of the estate and its other creditors.
53. The conditions requested by Meridian are narrowly tailored and designed to achieve three objectives: (i) to ensure that Meridian's continued supply of goods to the Debtor does not expose Meridian to undue and unacceptable administrative expense risk; (ii) to preserve the estate's ability to maintain its supply chain by providing Meridian with sufficient assurance and protection to justify continued supply; and (iii) to protect Meridian's pre-existing claims, rights, and remedies against impairment or waiver as a result of Meridian's participation in the critical vendor program. These objectives are fully consistent with the purposes of the Bankruptcy Code and the equitable principles that govern critical vendor practice.
B. Administrative Priority for Post-Petition Shipments Is Required by the Bankruptcy Code
54. Goods and services provided to the estate post-petition in the ordinary course of business constitute administrative expenses under Section 503(b)(1)(A) of the Bankruptcy Code. See 11 U.S.C. § 503(b)(1)(A) (providing that "the actual, necessary costs and expenses of preserving the estate" are allowable as administrative expenses); see also In re Sunbeam-Oster Co., 284 B.R. 459, 464 (Bankr. D. Del. 2002) (holding that post-petition obligations incurred in the ordinary course of the debtor's business are administrative expenses). The express confirmation of administrative expense status in the Critical Vendor Order is not a grant of new rights to Meridian but rather a reaffirmation of protections already afforded by the Bankruptcy Code. Such express confirmation is necessary to avoid any ambiguity regarding the priority of Meridian's post-petition claims and to ensure that Meridian's post-petition shipments—estimated at approximately $4,800,000 per month—receive the priority treatment to which they are entitled.
55. Express administrative expense priority for post-petition shipments is particularly important in this case given the magnitude of the Debtor's secured debt obligations and the uncertain prospects for the case. With approximately $1.379 billion in funded debt and a DIP financing facility that includes a $125 million roll-up of pre-petition obligations, there is a meaningful risk that the estate's assets may be insufficient to pay all administrative expenses in full. Meridian should not be required to assume the risk of continuing to supply goods at a rate of nearly $5 million per month without an express confirmation of administrative expense priority for those shipments.
C. Net 30 Terms Are Commercially Reasonable in the Post-Petition Context
56. The Debtor's Critical Vendor Motion proposes that critical vendors continue to supply goods on "customary trade terms," which for Meridian were Net 60. While Net 60 terms may have been appropriate in the pre-petition context, when Cascadia was operating as a going concern (albeit one in financial distress), those terms are no longer appropriate given the Debtor's current Chapter 11 status. The credit risk of supplying a debtor-in-possession is materially different from the credit risk that existed pre-petition, and the trade terms should be adjusted accordingly.
57. Net 30 payment terms are commercially reasonable, widely accepted, and standard in the post-petition supply context. Bankruptcy courts in this District and elsewhere have routinely approved critical vendor orders that incorporate shortened payment terms as a condition of continued supply. See, e.g., In re Circuit City Stores, Inc., Case No. 08-35653 (Bankr. E.D. Va. 2008); In re Toys "R" Us, Inc., Case No. 17-34665 (Bankr. E.D. Va. 2017). Net 30 terms represent a reasonable compromise between the Debtor's need for continued supply on reasonable credit terms and Meridian's need to limit its rolling exposure to a manageable level. Under Net 30 terms, Meridian's maximum rolling exposure at any given time would be approximately $4.8 million (representing one month of shipments), compared to approximately $9.6 million under Net 60 terms (representing two months of shipments). This reduction in exposure is significant and is necessary to justify Meridian's continued participation in the critical vendor program.
D. Self-Help Remedies Are Standard and Necessary
58. Courts routinely authorize post-petition vendors to exercise self-help remedies—including the right to suspend or terminate shipments—upon the debtor's failure to pay post-petition invoices in a timely manner, without requiring the vendor to seek further court relief. See, e.g., In re Payless ShoeSource, Inc., Case No. 17-42267 (Bankr. W.D. Mo. 2017) (authorizing vendors to suspend supply upon payment default with 5-day cure); In re Sears Holdings Corp., Case No. 18-23538 (Bankr. S.D.N.Y. 2018) (similar). These self-help remedies are essential to prevent vendors from being involuntarily locked into supply relationships in which they continue to accumulate unpaid administrative claims without an efficient mechanism for recourse.
59. The self-help remedy requested by Meridian is reasonable in scope and carefully balanced to protect the interests of both Meridian and the Debtor's estate. The five-business-day cure period provides the Debtor with a meaningful opportunity to cure any payment default and restore the supply relationship before Meridian exercises its right to suspend shipments. This cure period ensures that temporary payment delays or administrative errors do not result in an immediate disruption of the supply chain, while still providing Meridian with an effective remedy in the event of a sustained payment default.
E. Anti-Disgorgement Protections Are Appropriate
60. In the event that this case is converted from Chapter 11 to Chapter 7, a Chapter 7 trustee would be empowered to investigate and potentially seek to recover transfers made during the Chapter 11 case, including critical vendor payments, to the extent that such payments are deemed to constitute impermissible pre-plan distributions outside the ordinary priority scheme of the Bankruptcy Code. Without adequate assurance against such disgorgement, vendors face the risk that critical vendor payments received during the Chapter 11 case could be clawed back in a subsequent Chapter 7 liquidation, leaving the vendor with nothing but an unsecured claim in a case where unsecured creditor recoveries are likely to be minimal.
61. Courts have recognized the importance of providing adequate assurance against disgorgement to incentivize vendor participation in critical vendor programs. Without such protections, vendors are understandably reluctant to accept critical vendor designations and to commit to continued supply, which would defeat the purpose of the critical vendor motion and undermine the Debtor's ability to maintain its operations during the pendency of the Chapter 11 case. See In re Kmart Corp., 359 F.3d at 873 (emphasizing the importance of ensuring that critical vendor payments serve their intended purpose of preserving the debtor's going-concern value). The anti-disgorgement protections requested by Meridian are designed to provide the certainty and finality necessary to support Meridian's continued participation in the critical vendor program and its ongoing supply of goods to the Debtor.
62. To the extent the Court determines that a blanket anti-disgorgement provision is not appropriate, Meridian respectfully requests that any disgorgement obligation be limited to the net benefit received by Meridian—that is, the $2,500,000 critical vendor payment less the value of goods delivered post-petition by Meridian in reliance on the critical vendor designation. This net benefit limitation is equitable and recognizes the substantial value that Meridian will provide to the estate through its continued supply of goods in reliance on the critical vendor arrangement.
VII. RESERVATION OF RIGHTS
63. Meridian expressly reserves all rights, claims, defenses, and remedies available to it under applicable law, the Bankruptcy Code, and the Federal Rules of Bankruptcy Procedure, including but not limited to:
(a) The right to file a proof of claim asserting the full amount of its pre-petition claim of $14,726,418.37 by the general bar date established in this case (estimated to be January 15, 2026);
(b) The right to assert, prosecute, and collect its administrative expense claim of $1,847,200.00 under Section 503(b)(9) of the Bankruptcy Code for the value of goods received by the Debtor in the ordinary course of business within the 20-day period preceding the petition date;
(c) The right to pursue reclamation of approximately $3,218,650.00 in goods delivered to the Debtor within the 45-day period preceding the petition date, and to seek a lien or administrative expense claim as a substitute for reclamation to the extent reclamation in kind is not available, all in accordance with Section 546(c) of the Bankruptcy Code;
(d) The right to assert all available defenses to any preference action that may be brought against Meridian under Section 547 of the Bankruptcy Code, including the ordinary course of business defense under Section 547(c)(2) (Meridian's historical average payment term was Net 53, compared to a preference period average of Net 58, well within industry norms), the new value defense under Section 547(c)(4), and the contemporaneous exchange defense under Section 547(c)(1);
(e) The right to pursue, and to collect proceeds under, its trade credit insurance claim with Clearwater Surety & Insurance Co. under Policy No. TCI-2024-00783, including the right to receive insurance proceeds without offset, reduction, or subrogation related to the critical vendor payment or any other recovery in this case;
(f) All rights, duties, and obligations as a member of the Official Committee of Unsecured Creditors, including the right to participate in all Committee deliberations and activities;
(g) The right to object to the Debtor's proposed DIP financing, including the terms of the $275 million DIP facility with Ridgeline National Bank, N.A., and the $125 million roll-up of pre-petition first lien revolving credit facility obligations;
(h) The right to object to any plan of reorganization, disclosure statement, or Section 363 sale proposed in this case;
(i) The right to be heard on any other matter arising in this case in which Meridian has a cognizable interest; and
(j) All other rights, claims, defenses, and remedies available to Meridian under applicable law, whether or not specifically enumerated herein.
64. Nothing in this Response, and nothing in Meridian's acceptance of any critical vendor payment, shall be construed as a waiver, release, or modification of any of the foregoing rights, claims, defenses, or remedies.
VIII. CONCLUSION AND PRAYER FOR RELIEF
WHEREFORE, Meridian Consumer Brands LLC respectfully requests that the Court:
1. Grant the relief requested in this Response;
2. Condition any order granting the Critical Vendor Motion on the enhanced protections described herein with respect to Meridian, including:
(a) express administrative expense priority under Section 503(b)(1)(A) of the Bankruptcy Code for all post-petition shipments by Meridian to the Debtor;
(b) Net 30 payment terms for all post-petition shipments, with a cash-on-delivery backstop upon any payment default;
(c) the right to suspend or terminate shipments upon any payment default exceeding five (5) business days, upon written notice to the Debtor and its counsel, without the need for further order of this Court;
(d) adequate assurance against disgorgement or clawback of the critical vendor payment in the event this case is converted to Chapter 7, or in the alternative, a limitation of any disgorgement to the net benefit received by Meridian; and
(e) an express reservation of all of Meridian's claims, rights, defenses, and remedies, including its Section 503(b)(9) administrative expense claim, reclamation rights, proof of claim rights, preference defenses, and trade credit insurance rights;
3. Modify the proposed Critical Vendor Order to include the provisions set forth in Section V of this Response;
4. Grant such other and further relief as the Court deems just and proper.
Respectfully submitted,
Dated: November 4, 2025
CALDERWOOD & HARKNESS LLP
By: ________
Colette Whitman (DE Bar No. 5724) Nathan Ikeda (DE Bar No. 6891) 1105 N. Market Street, Suite 1400 Wilmington, Delaware 19801 Telephone: (302) 658-7200 Facsimile: (302) 658-7210
Email: cwhitman@calderwoodharkness.com
Email: nikeda@calderwoodharkness.com
— and —
200 Park Avenue, 38th Floor New York, New York 10166 Telephone: (212) 403-5000
Counsel to Meridian Consumer Brands LLC
CERTIFICATE OF SERVICE
I, Nathan Ikeda, hereby certify that on November 4, 2025, a true and correct copy of the foregoing Response of Meridian Consumer Brands LLC to Debtor's Motion for Entry of an Order (I) Authorizing the Debtor to Pay Prepetition Claims of Certain Critical Vendors and (II) Granting Related Relief was served via the Court's CM/ECF electronic filing system, which will cause notice of electronic filing to be sent to all registered CM/ECF users, and via first-class mail and/or email upon the following parties:
1. Brindoval Baines & Lord LLP (Harrison Caldwell, Esq. and Julia Wren, Esq.), 51 West 52nd Street, New York, New York 10019 — Counsel to the Debtor
2. Borwick Sato LLP (Michael Donnelly, Esq.), 919 N. Market Street, Suite 600, Wilmington, Delaware 19801 — Delaware Co-Counsel to the Debtor
3. Garvey & Holbrook LLP (Diana Prescott, Esq.), 750 Third Avenue, 30th Floor, New York, New York 10017 — Counsel to the Official Committee of Unsecured Creditors
4. Broadleaf Advisory Group LLC (Robert Tanaka), 1345 Avenue of the Americas, 25th Floor, New York, New York 10105 — Financial Advisor to the Official Committee of Unsecured Creditors
5. Ridgeline National Bank, N.A. (Laura Chin), 600 Travis Street, Houston, Texas 77002 — DIP Agent and Pre-Petition First Lien Agent
6. Office of the United States Trustee, Region 3, District of Delaware, 844 King Street, Suite 2207, Lockbox 35, Wilmington, Delaware 19801
7. All parties who have filed requests for notice in this case pursuant to Federal Rule of Bankruptcy Procedure 2002
________________________________________
Nathan Ikeda (DE Bar No. 6891) CALDERWOOD & HARKNESS LLP 1105 N. Market Street, Suite 1400 Wilmington, Delaware 19801
In re: | Chapter 11
CASCADIA HOME & LIFESTYLE INC., | Case No. 25-12087 (CMA)
Debtor. | Hon. Christine M. Aldridge
Related Docket No. 27