Olympus Pools Bankruptcy

Talk about digging yourself into a hole. A developing story about a beleaguered pool company in Tampa, Florida, offers a learning moment about how market trends and questionable practices can lure a business owner into legal quicksand, leaving consumers in need of rescuing.

Since 2019, record numbers of home and property owners, compelled to stay in place due to the coronavirus pandemic, have sought improvement in the quality of their confinement by taking advantage of low interest rates to fund repairs, upgrades and luxury add-on projects. Pool construction companies, particularly, have benefited from this trend with the industry reporting record high orders and revenues during 2019 and 2020.

In the spring of 2021, Tampa-based Olympus Pools, one of Florida’s largest pool construction companies, was riding high on the pandemic swell with hundreds of pool projects across seven counties under contract. The prior year, in Pasco County alone, industry records show that Olympus pulled 356 permits compared with 183 in 2019. In Hillsborough County, the number of Olympus permits surged from 168 to 241. That same year, the Tampa Bay Business Journal recognized Olympus Pools, which was founded by James Staten in 2010, as one of the fastest growing companies in the metro area (“2020 Fast 50”).

In April, the perfect wave crested and came crashing down on the shoulders of Olympus Pools when NBC affiliate WFLA consumer reporter Shannon Behnken drew public attention to a slew of complaints against the company. The story, which was picked up by the local ABC Action News I-Team, featured interviews with Olympus customers standing next to gaping holes in backyards strewn with construction debris. Some of the interviewees, lured by a special discount offer, had paid for their (incomplete) pools up front.

Ultimately, the Florida Department of Business and Professional Regulation (DBPR) and the office of Florida Attorney General Ashley Moody received nearly two hundred grievances against Olympus Pools. The complaints included allegations by suppliers and subcontractors of being stiffed. In May, SCP Distributors LLC, one of the largest pool supply companies in America, announced that, rather than file liens against homeowners with holes in their yards, it was suing Olympus in Pasco County court over more than $1 million in supplies delivered to projects, which were subsequently abandoned.

In July, after complying with a request by the DBPR to relinquish his business license, Staten pulled the plug on Olympus Pools, citing a litany of reasons including supply chain problems, a labor shortage, overzealous sales representatives and negative news coverage. Three months later, on October 6, Staten and his wife, Alexis, filed for Chapter 11 bankruptcy.

Major creditors identified in the couple’s filing include Revenue Recovery Services, an SBA loan through the Florida Business Development Corp., and American Express to which the couple owed $262,994.19. Missing from the list of creditors are Olympus Pool customers. Subsequent to the filing, news reports showed that at least 27 Olympus Pools customers, lenders, suppliers and state regulators filed more than $1 million in claims against the Statens.

Within days of the Chapter 11 filing, Moody filed a civil “Complaint” against Staten and Olympus Pools, Inc. in the 13th Judicial Circuit Court in Hillsborough County. In an online “news alert,” the Florida Attorney General stated that “Olympus allegedly misrepresented the timeline of projects, leaving consumers to wait on jobs that were never completed…failed to pay some subcontractors that resulted in liens and threats of litigation against consumers.” The AG complaint “seeks to permanently ban the defendants from engaging in certain activities related to the pool construction business” and requires the defendants to “provide restitution or reimbursement to affected consumers. In addition, the defendants could be liable for more than $2 million in civil penalties and enhanced civil penalties for violating the Florida Deceptive and Unfair Trade Practices Act.” The AG’s civil lawsuit estimates damages at more than $8 million.

“The AG was only able to proceed forward with the suit after first obtaining relief from the automatic stay in the bankruptcy,” explained David Jennis, founder and bankruptcy law specialist at Jennis Morse Etlinger. “The Bankruptcy Court conferred the relief so that the AG could seek injunctive relief, as well as a monetary judgment, including but not limited to restitution in connection with the allegations.”

In January, according to reporting by WFLA’s Behnken, Joel Aresty, Staten’s attorney, filed documents that moved the Florida AG’s case to federal bankruptcy court. Among other conditions, the filing objects to damages sought by Olympus customers described in the AG’s complaint and seeks to disallow a $1.4 million fine imposed by the DBPR, which Staten must pay before he can apply for another pool contractor’s license. Multiple news reports quote Aresty as saying that Staten should not be held personally liable for losses incurred by the business he owned.

“There is no basis to strike those claims or disallow financial penalties,” said Jennis. “In my experience, corporate liability cannot shield individuals from these types of claims, which allegedly involve taking deposits from homeowners when the company either knew or should have known the pool construction could not be completed in the promised timeframe.”

Another twist in the Olympus saga came in January when SCP Distributors, which is suing the pool company for more than $1 million worth of supplies delivered for unfinished pool projects, filed a motion to dismiss the entire bankruptcy case. The company accused Staten and his wife of “attempting to abuse the bankruptcy process and completely avoid a legitimate debt they owe to SCP Distributors by pushing forward false claims accusing SCP Distributors of forgery and fraud.”

“Most likely, SCP has proceeded forward with the motion to dismiss for two reasons,” said Jennis. “First, they perceive the bankruptcy as ‘forum shopping’ and believe the state court is the more appropriate venue. Secondly, with the benefit of the debtor’s plan on record, they are concerned about their treatment coming out of bankruptcy.”

As for the multitude of homeowners left with unfinished pools and depleted bank accounts, Jennis suggested as a best course of action forming a “creditors committee.” In many Chapter 11 cases, the United States Trustees Office (UST) appoints a committee comprising a subset of unsecured claimants, which represents all of the unsecured creditors in negotiations and other proceedings.

“A letter by the U.S. trustee should have been sent to all of those Olympus Pools customers who filed as creditors,” Jennis said. “The committee has investigative powers and has standing to object to motions, such as the motion to disallow their claims. A committee creates an aggregate voice, which carries weight, as opposed to a bunch of individual homeowners.”

Hearings on the Statens’ Chapter 11 filing are scheduled for mid-March. Meanwhile, the Attorney General’s action has been removed by the debtor and will proceed forward before the Bankruptcy Court.