Erosol, aka Department Store, closes amid bankruptcy filing, lawsuit

Luis Carreras, owner of Erosol, the Old Fourth Ward nightlife spot also known as ‘Department Store’Dustin Chambers/CL File

After Erosol opened in May 2014, the rugged, red-brick structure on the corner of Edgewood Avenue and Boulevard groundhttp://www.clatl.com/news/article/13078728/erosol-gets-funky-in-o4w” rel=”external”>became a stomping ground for famous rappers and aspiring artists. Also known as “Department Store” because of its location in a 1900s variety store, the venue made its mark as one of Edgewood Avenue’s hottest nightlife spots, with lines out the door.

But those days might be over. On July 21, Erosol’s more than 20 employees were shocked to learn that the bar and venue had closed. The locks on the doors had been changed, a move that surprised staff, patrons, and apparently even the bar’s owner, Luis Carreras. Erosol LLC is now in bankruptcy court and a legal battle with its landlord. Its bank accounts and material assets have been frozen or seized by the U.S. Bankruptcy Court, according to court documents. But Carreras says he has no plans to say farewell to Edgewood Avenue.

The company’s bankruptcy news came as a surprise to some staffers — as did the news that Crushpad Properties LLC, its landlord, was suing to force Erosol out of the two-story building. That lawsuit, filed on March 1, alleged Erosol refused to vacate when the lease expired at the end of February. Crushpad also claimed Erosol violated multiple terms of its lease agreement and was at that point overstaying its contractual welcome.

On April 28, a few hours before a trial was set to begin to address Crushpad’s case, Erosol filed for Chapter 11 bankruptcy, giving the company time to reorganize its debts. The filing also put the landlord’s lawsuit on the back burner.

Erosol’s most recent lease with Crushpad ended on Feb. 29, but the club continued to operate. When Crushpad filed suit at the beginning of March, Erosol countersued, claiming the landlord “failed to provide proper notice of its intent not to extend the lease” and didn’t demand repossession of the property after the lease expired. Carreras also alleged the landlord tried to tarnish his reputation when he was searching for a new business location nearby.

On May 31, court trustee Guy Gebhardt said his review of the company’s accounts found “questionable transfers including credit card payments, transactions at a toy store, check cashing, travel expenses, and transfers to an undisclosed bank account.” Among Erosol’s transactions is a two-year lease for a candy-red Maserati that Carreras claims he still has.

Gebhardt also said Erosol failed to provide court-requested financial records, “including tax returns, listings of disbursements, insurance information, a projected cash budget, and operating reports.” The IRS and the Georgia Department of Revenue, in the same motion, claim Erosol didn’t file required tax returns or make proper tax payments. Legal documents filed by one creditor say Erosol “failed to participate in the orderly process of reorganization.”

Carreras denies almost all of the claims against him and says the allegations of bankruptcy code violations are false. “The only records that were not provided were ones turned in late because I was in Cuba,” he told CL. As for a few no-shows to court summonses, Carreras said his attorney was stuck in traffic one of those times.

On June 23, according to documents, the court froze Erosol’s bank accounts. Swift Capital Corporation said it loaned $75,000 to Erosol in early April. James Hays, Swift’s lawyer, alleged Carreras’ company “has been operating its business on a cash basis without reporting proceeds from sales, without utilizing an appropriate debtor-in-possession account and without respect to its rights to cash collateral.” Swift claimed it is owed more than $90,000, according to the June 15 motion to freeze Erosol’s accounts.

In Erosol’s bankruptcy filing, Carreras said that his business owed $24,000 to Swift. He told CL he’s paid off more of the loan. He also said he took out the loan as a last-ditch effort to throw parties to bring in cash before the court proceedings.

On July 18, the court trustee filed a motion to convert the case to one under Chapter 7, meaning all company assets would be liquidated to pay off debts. Three days later the trustee changed the building’s locks. The bankruptcy judge approved the trustee’s motion on July 28.

Carreras said the changing of the locks caught him off guard. “It was completely and totally unexpected,” he said. “My whole objective is to get my employees back working.” Carreras claims he had a manager inform the staff of the bar’s closure. Some employees say word didn’t spread until the day after the locks were changed.

Scrill, a Reinhardt University graduate student who worked as Erosol’s head sound engineer, had planned a big event for July 21. When he showed up to a closed and locked club, he said, “It was like the ground was taken from beneath me.” Scrill said he was the first to send the word out to colleagues. “I sent out a Tweet that said ‘Department Store is closed.’ I was on damage control… We were all scrambling.”

“We’ve been planning TrapAnime (a party) for a month and a half, and I didn’t get any warning before I showed up to work. Now I’m looking for more sound jobs,” he said. “I guess I’m just a regular sound tech now.”

Scrill said he and his music group, Free Life Entertainment, missed out on hundreds of dollars of profits expected from the party’s ticket and alcohol sales. Two other FLE shows had to be cancelled because of Erosol’s closure.

“Clubs come and go, but we didn’t know it would be like this,” Scrill said. “We didn’t look at it like some super club. It was a home to us. It’s not just some corner store closing down. This was a home base for a lot a people. A lot of stuff — a lot of great acts — Department Store started.”

Erosol was originally meant to be a restaurant, not a nightclub, Carreras said. He received a City Hall business license for a “bar, restaurant.” Erosol’s alcohol licenses and occupancy permits cite the business as a “restaurant.” Carreras also acquired food service permits from the Fulton County department of health and wellness, although the club never served any food.

“I applied as a restaurant because we were originally going to be a restaurant,” he said. “I just paid the renewal fees; I didn’t go in there and change anything.” A former employee, who asked not to be named, said Carreras’ original idea was for a Cuban-themed restaurant and lounge with a “big focus on rum and craft cocktails. Then we pivoted to the PBR and Jameson crowd. It was a pretty obvious shift. That’s what we needed.”

Atlanta City Councilmember Kwanza Hall, an acquaintance of Carreras and an occasional patron at the club, said the opportunity that Erosol provided for the local music community needs to live on, whether in the same spot or elsewhere.

“I always thought Luis was trying to do some good for the community,” he said. “They were doing a great service in terms of offering young artists the location and opportunity to perform and get seen or get signed and take things to the next level; get ‘em the proper exposure.”

“Music is powerful,” Scrill said. “Department Store will be some legacy-type shit, like a ‘I used to perform at Department Store’ kinda thing. A lotta dreams came true; a lot of fairy tale shit..” He said plenty of local growing artists found their groove at Erosol. “Two-9, Key, Father, the whole Awful Records group, 21-Savage, Makonnen. For a while, it was their home base.”

Carreras has faith that he will reclaim the original Edgewood Avenue location and continue to grow Department Store’s brand. He said he owns the name’s trademark, and he started a GoFundMe page on August 1 to “Save Department Store, Save Culture.” He told CL he’ll use the takings to pay off debts through court trustees. He’s reeled in $105 of the $60,000 goal since the page was made.

If the court declares Erosol bankrupt and returns the property to Crushpad, Carreras said he has a few other professional ventures in the works. He claims he’s secured a lease across the street at 444 Edgewood, a former adult daycare facility, to start the restaurant that Erosol was meant to be.