A hyper-local website has gone bankrupt after a lawsuit brought against it by former employees.
The Daily Voice, which covers 41 towns across New York’s Westchester County and Connecticut, has filed for Chapter 11 bankruptcy after three former reporters alleged that they were owed overtime pay. The filing also comes after the site blew through $18 million of investor money since its launch in 2010.
The company, formally called Main Street Connections, was started by former Saturday Review Editor Carll Tucker. Tucker said that the company has run up over $500,000 in legal fees defending the class-action lawsuit, filed under the Fair Labor and Standards Act by the reporters who claim they were not “exempt” employees but rather hourly wage earners entitled to overtime pay.
Tucker called the litigants “mad dog predators who are chasing us.” He said the battle over overtime pay would have been “enough to sink the whole company” and that it prompted the Chapter 11 filing.
Will Mateson, a lawyer for the three reporters seeking class-action status, said, “We think it is unfortunate that the company is seeking to avoid its obligation to pay its reporters overtime by filing for bankruptcy.”
Both sides failed to come to an agreement following mediation.
The company cut its staff of about 100 to 42 in March and shuttered its Massachusetts location.
“It was definitely a rescue operation,” said Tucker, who hopes to continue operations or sell the company. “It hasn’t been cheap getting here, but by August we think we will be able to prove that it’s worked.”
Burned investors include big names from the media, financial and retail worlds, including Tucker and his wife, author and columnist Jane Bryant Quinn, financiers George Soros and Wesley McCain, Saks CEO Steve Sadove and former Bill Blass CEO Haresh Tharani.
Quinn and Tucker control a combined 21.9 percent of the stock, McCain 13.8 percent.
The biggest non-family stockholder is McCain, who contributed more than $3.4 million, including $2.7 million through his investment firm Towneley Capital Management. Soros contributed $3 million through his GeoSor entity, earning a seat on the board and 9.1 percent of the stock, while Michael Gellert contributed $1.1 million for a 3.4 percent stock stake.
Last year, the company rose in revenue from just over $1 million to $1.5 million, but is still not profitable. It expects to lose approximately $185,000 in the two months after filing for reorganization, it said in the filing.