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More than a decade of wrangling between a bankrupt agricultural specialty retailer and the Internal Revenue Service ended on Tuesday when the U.S. Supreme Court ruled severance pay is taxable under the Federal Insurance Contributions Act (FICA), the Wall Street Journal reported yesterday. In a case that has caught the eye of tax practitioners and restructuring advisers, the High Court said that the government gets to collect FICA contributions on severance pay handed out by Quality Stores Inc., which was pushed into bankruptcy in 2001. The ruling is a loss for those in charge of collecting money for Quality Stores' creditors, and it is a lesson to those designing severance-pay plans for companies undergoing restructuring, in and out of bankruptcy. Quality's lump-sum severance payments to people who lost their jobs weren't linked to receipt of state unemployment benefits, the high court noted, and varied according to job seniority and time in service to the company. The company's program was aimed at discouraging leaders and long-term employees from fleeing in the crucial final months of Quality's corporate life. Before filing for chapter 11 bankruptcy, Quality closed about 63 stores and nine distribution centers. During the bankruptcy, the remaining 311 stores and three distribution centers were closed. All told, more than 4,000 employees lost their jobs involuntarily due to Quality's struggles from 1999 through 2002, court records say.

In a victory for the banking industry, a U.S. appeals court on Friday struck down a district court decision that ordered the Federal Reserve to rewrite its rules governing fees that banks collect each time a debit card is swiped, the Washington Post reported today. The ruling reverses a July decision by U.S. District Court Judge Richard Leon, who said that the central bank set the cap too high under pressure from the banking lobby. The Fed gave banks the thumbs-up to charge retailers as much as 21 cents a transaction, about half the previous 44-cent charge per swipe. Consumers will not feel any immediate impact from the ruling since banks and merchants operated under the Fed’s cap throughout the legal battle. The appeals court decision is a blow to merchants who have fought for nearly four years to limit the interchange fee, or “swipe fee.” Merchants have argued that consumers are the ultimate victims of these fees because the costs are usually passed on to them in the form of higher prices.

Quiznos’ proposed reorganization plan, filed in bankruptcy court on Friday provides for holders of claims under the company’s first-lien credit facility to receive pro rata shares of an amended $200 million first-lien credit facility and 100 percent of the reorganized company’s equity, subject to dilution, Forbes.com reported yesterday. The first-lien credit facility has $444.7 million outstanding, according to court filings. The amended $200 million term facility would have a five-year term, and carry interest at 15 percent for the first 18 months, in-kind, and 10 percent thereafter, in cash, according to a proposed term sheet filed with the bankruptcy court.

Lawyers for Quiznos are asking a bankruptcy judge to allow the company’s more-than 2,000 stores to honor gift certificates, Groupons and other promotional discounts, the Wall Street Journal reported on Saturday. According to a court filing, there are more than $67,000 worth of gift certificates still to be redeemed, plus another $350,670 in Groupons. Bankruptcy Judge Peter J. Walsh has slated a hearing for this week on Quiznos’s initial bankruptcy requests.

Quiznos Corp. filed for pre-packaged chapter 11 protection on Friday after struggling for years with high debt and rising competition, Reuters reported on Friday. The sandwich chain said that restructuring would cut its debt by more than $400 million, and it listed liabilities of between $500 million and $1 billion in its bankruptcy petition. All except seven of its nearly 2,100 restaurants are independently owned and operated by franchisees and will not be affected by the bankruptcy. The company has received $15 million in debtor-in-possession financing from its senior lenders in order to keep functioning during its restructuring period. The case is In re The Quiznos Global LLC, U.S. Bankruptcy Court, District of Delaware, No.14-10557.

Camera and photo supply retailer Calumet Photographic Inc. has filed for bankruptcy court protection, The Chicago Sun-Times reported yesterday. Calumet Photographic filed a chapter 7 petition on Wednesday in the U.S. Bankruptcy Court for the Northern District of Illinois. The company had 14 stores in the U.S. In its bankruptcy filing, the company estimated that it has more than 200 creditors and that it owes between $10 million and $50 million. Its assets were valued at between $50 million and $100 million.

Men's Wearhouse Inc. said Tuesday that it is buying its rival Jos. A. Bank Clothiers Inc. for $1.8 billion, The Associated Press reported yesterday. The company will pay $65 a share, a 5 percent premium to Jos. A. Bank's Monday closing price of $61.83. Jos. A. Bank also said that it is terminating its deal to acquire the parent company of Eddie Bauer, which sells rugged outerwear. On Tuesday, shares of both companies rose on the news: Men's Wearhouse's stock was up nearly 5 percent to $57.14, while shares of Jos. A. Bank increased nearly 4 percent to $64.22. The acquisition comes after months of the two chains publicly fighting over who would acquire whom. Industry-watchers had speculated that a merger was inevitable given the challenges the companies face in the competitive menswear landscape. With more than 1,700 U.S. stores and $3.5 billion in annual sales, the combined company's reach in men's clothing will fall behind only Macy's, Kohl's and J.C. Penney. The transaction is expected to close by the third quarter.

The Men's Wearhouse will buy Jos. A. Bank Clothiers in a cash deal worth $1.8 billion, or $65 a share, USA Today reported today. Boards of directors of the companies have unanimously approved the transaction. The companies have been volleying competing offers for each other since the fall, when Jos. A. Bank made an unsolicited offer to buy Men's Wearhouse for $48 a share. Men's Wearhouse rejected the bid and countered with its own to buy Jos. A. Bank for $55 a share. Most recently, Men's Wearhouse raised its bid to $63.50 a share two weeks ago. Combining the companies will allow both to maximize merchandise offerings and store locations, the companies said in a statement. Jos. A. Bank will retain its name.

Pizza chain Sbarro LLC has filed for bankruptcy protection for the second time in three years after struggling with too much debt and fewer customers in malls that house many of its restaurants, Reuters reported yesterday. Lenders would take control of the Melville, N.Y.-based company under a pre-packaged chapter 11 reorganization, which Sbarro on Monday said could allow it to made a "quick exit" from bankruptcy before May 7. Sbarro expects to cut its debt load by more than 80 percent, and said nearly all its lenders support its restructuring, which requires court approval.

RadioShack Corp., after reporting a much wider than expected fourth-quarter loss, said on a conference call yesterday that it's not considering "prepackaged bankruptcy" because it has "sufficient" liquidity to meet its obligations, MarketWatch.com reported yesterday. The company, which plans to shut up to 1,100 stores, made that comment after a question on whether it would follow a prepackage strategy to get out of store leases quicker. Chief Executive Joseph Magnacca admitted that the company was partly to blame for the disappointing results despite a challenging retail environment. He added the most recent quarter's results didn't reflect the turnaround progress the company has made.