The main Joann lawsuit is a fraud case brought in May 2025 by six former suppliers against seven executives of the collapsed fabric and craft chain, seeking more than $78 million. The vendors allege the executives misrepresented Joann’s finances after its first bankruptcy to keep merchandise shipping on credit, then left suppliers unpaid when the company filed a second time and liquidated. In June 2026, a Delaware bankruptcy judge ruled the case can move forward against the executives personally.
Who Is Suing and Who Is Being Sued
The plaintiffs are six suppliers who sold goods to Joann on credit: Advantus Corp., Fairfield Processing Corp., Gwen Studios LLC, Low Tech Toy Club LLC, Ormo Ithalat Ihracat A.S. (a Turkish company), and Springs Creative Products Group LLC. They originally filed in the Court of Common Pleas of Summit County, Ohio, in May 2025.1Yahoo News. Joann Suppliers Want Day in Court
The complaint names seven former Joann executives personally, not the company itself:
- Michael Prendergast, interim CEO and a managing director at consulting firm Alvarez & Marsal
- Jeffrey Dwyer, interim CFO, also from Alvarez & Marsal
- Robert Will, Chief Merchandising Officer
- Christopher DiTullio, Executive Vice President and Chief Customer Officer
- Heather Holody, Vice President, General Merchandising Manager of sewing
- Michael Kennedy, Vice President, General Merchandise Manager
- Melissa Bowers, Director of Accounting Operations
Because the suit targets the individuals rather than Joann as a corporate entity, the bankruptcy did not automatically stop it.1Yahoo News. Joann Suppliers Want Day in Court
What the Vendors Allege
According to the complaint, after Joann emerged from its first Chapter 11 in April 2024, executives told suppliers the company was on solid footing: $505 million in debt had been eliminated through a prepackaged reorganization, and 96% of stores were cash-flow positive. Relying on those representations, the vendors kept extending credit and shipping merchandise.2Wall Street Journal. Joann Suppliers Allege Executives Hid Its Dire Financial State1Yahoo News. Joann Suppliers Want Day in Court
The vendors say those projections concealed the company’s true condition and that the executives knew, or should have known, Joann was headed for a second collapse. When Joann filed again in January 2025 and moved to liquidate, the suppliers were left holding unpaid invoices.
The complaint contains 12 counts, including common law fraud, fraudulent misrepresentation, negligent misrepresentation, and innocent misrepresentation under Ohio law. The plaintiffs allege more than $40 million in direct losses and seek total relief above $78 million, plus court costs.3Crain’s Cleveland Business. Supplier Lawsuit Blames Joann Executives for $40 Million Losses1Yahoo News. Joann Suppliers Want Day in Court
Why the Suppliers Were Left Unpaid
The fraud claims sit on top of two bankruptcies filed within ten months of each other.
Joann filed its first Chapter 11 petition on March 18, 2024, in the U.S. Bankruptcy Court for the District of Delaware, reporting $2.44 billion in debts against $2.26 billion in assets. The case was prepackaged. Judge Craig T. Goldblatt approved the reorganization on April 25, 2024, and Joann emerged just 43 days after filing. All 815 stores stayed open, no employees were laid off, and the company came out privately held and owned by its creditors.4Digital Commerce 360. Joann to Emerge From Bankruptcy With No Store Closures5Kroll Restructuring Administration. Joann Inc. Chapter 11 Cases (Case No. 24-10418)
New leadership arrived that summer. Michael Prendergast became interim CEO on June 7, 2024, and Jeffrey Dwyer joined as interim CFO at a flat monthly fee of $150,000. Both came from Alvarez & Marsal.6Retail Dive. Joann Names Interim CEO, New Board Members7Akron Beacon Journal. Joann Seeks Court Permission to Keep Services From Consultant Alvarez and Marsal
The turnaround did not hold. On January 15, 2025, Joann filed for Chapter 11 again, back before Judge Goldblatt, this time reporting $615.7 million in debt.8Kroll Restructuring Administration. Joann Inc. Chapter 11 Cases (Case No. 25-10068)9Retail Dive. Joann Sold, Closing Stores10NPR. Joann Closing Stores Bankruptcy
The Chapter 11 liquidation plan was confirmed on July 10, 2025, and became effective on July 16. Holders of general unsecured claims, the category that covers most trade vendors, were projected to recover between zero and one percent of what they were owed. A GUC Trust was funded with $1.5 million in guarantees and $1 million from certain fees, a fraction of the hundreds of millions owed to trade creditors.11Chapter 11 Cases. Joann Files Liquidation Plan in Second Bankruptcy Case That gap between what suppliers were owed and what the bankruptcy would pay is the financial hole the vendor fraud suit is trying to fill by going after the executives personally.
Where the Case Stands
The first year of litigation was consumed by fights over where the case should be heard. Defense attorneys removed the suit from Ohio state court to federal court in June 2025 and moved to transfer it to the Delaware bankruptcy court. Joann’s wind-down team filed a separate adversary proceeding in Delaware seeking a ruling that the vendors’ claims were property of the bankruptcy estate, which would have meant the claims had been sold off with the rest of Joann’s assets and the vendors had no standing to sue anyone.12U.S. Bankruptcy Court for the District of Delaware. Joann Inc. v. Advantus Corp., Memorandum Opinion
On June 11, 2026, after oral arguments held April 6, Judge Goldblatt issued a memorandum opinion, and the vendors won on nearly every disputed point. Applying the Third Circuit’s standard, the judge held that the vendors’ fraud claims are direct claims belonging personally to each vendor, not derivative claims belonging to the bankruptcy estate. Because each vendor has to prove its own reliance on the alleged misrepresentations, the claims are inherently individual. The sale order does not shield the former officers.12U.S. Bankruptcy Court for the District of Delaware. Joann Inc. v. Advantus Corp., Memorandum Opinion13Law360. Joann Vendors’ Suit to Remain in Del. Bankruptcy Court
Judge Goldblatt also denied the vendors’ request to send the case back to Ohio or to abstain, so the fraud suit against the seven executives will proceed in Delaware bankruptcy court. He allowed the individual defendants to participate as amici on the wind-down team’s motion rather than as full parties, and he refused to dismiss the wind-down team’s own adversary proceeding, noting that an adverse judgment against the executives could exhaust insurance proceeds or trigger indemnity obligations against the estate.12U.S. Bankruptcy Court for the District of Delaware. Joann Inc. v. Advantus Corp., Memorandum Opinion
A Separate Employee Suit in California
The vendor fraud case is not the only Joann litigation. In Faux v. Jo-Ann Stores, LLC (Case No. 22CV023222), filed in Alameda County Superior Court, a plaintiff brought claims under California’s Private Attorneys General Act on behalf of current and former non-exempt hourly employees who worked at California Joann locations from September 30, 2021, onward. The suit alleges the company failed to provide suitable seating during active work periods and during inactive periods including rest breaks, in violation of the California Labor Code. The case remains pending.14Joann Lawsuit. Faux v. Jo-Ann Stores, LLC It is unrelated to the vendor fraud claims and involves different parties, a different court, and a different set of allegations.