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1 Jonathan A. Backman E-filed: April 18, 2012
Law Office of Jonathan A. Backman
2 117 N. Center Street
Bloomington, Illinois 61701-5001
3 (309) 820-7420
4 Ogonna M. Atamoh, Esq.
SANTORO, DRIGGS, WALCH,
5 KEARNEY, HOLLEY & THOMPSON
400 South Fourth Street, Third Floor
6 Las Vegas, Nevada 89101
Counsel for the Liquidating Trustee
IN THE UNITED STATES BANKRUPTCY COURT
9 DISTRICT OF NEVADA
IN RE: ) Chapter 11
XYIENCE INCORPORATED, ) No. BK-S-08-10474-MKN
12 a Nevada corporation, )
) Hearing: May 16, 2012
13 Debtor. ) 9:30 a.m.
LIQUIDATING TRUSTEE’S MOTION FOR APPROVAL
15 OF A SETTLEMENT AND COMPROMISE
16 Plaintiff David Herzog, as Liquidating Trustee (the “Trustee”) for the post-
17 confirmation liquidating trust estate (the “Trust Estate”) of Xyience Incorporated (the
18 “Debtor”), the former debtor and debtor in possession the above-captioned Chapter 11 case
19 (the “Bankruptcy Case” or the "Case"), hereby moves this Court, pursuant to Section 8
20 § 13(i) of the Liquidating Trust Agreement (as further described below), for the entry of an
21 Order approving: (i) the Trustee’s settlement and dismissal of his claims against the
22 remaining defendants in the adversary proceeding styled Herzog v. Zyen, LLC, Adversary
23 Case No. 09-1402-MKN (the “Adversary Proceeding”) — i.e., Zyen, LLC (“Zyen”), Fertitta
24 Enterprises, Inc. (“Fertitta Enterprises”), and William Bullard (“Bullard,” and collectively
25 with Fertitta Enterprises and Zyen, the “Defendants”); (ii) a series of compromises of the
26 administrative claims of KL Gates, LLP (“KL Gates”), Fennemore Craig, P.C.
27 (“Fennemore Craig”), and Sierra Consulting Group, LLC (“Sierra”); (iii) the subordination
28 of the $6.0 million unsecured claim of Zuffa Marketing, LLC (“Zuffa Marketing”) to the
claims of the former Debtor’s unsecured creditors; and (iv) a compromise of the fees of the
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1 Trustee’s undersigned counsel, Jonathan A. Backman, all as documented substantially in
2 the form of Exhibit A hereto (collectively, the “Proposed Settlement”). This motion is
3 made and based on the points and authorities herein, and all pleadings and papers filed in
4 both the Bankruptcy Case and the Adversary Proceeding, judicial notice of which are
5 respectfully requested.
6 In support of his motion, the Trustee states as follows:
1. On January 18, 2008 (the “Petition Date”), the Debtor filed in this
Court its voluntary petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C.
§ 101 et. seq. (the “Bankruptcy Code” or the “Code”).
2. Pursuant to an Order entered January 31, 2008 (the “Avoidance
Date Order”), the Court dismissed, with prejudice, an involuntary petition for relief under
Chapter 11 of the Bankruptcy Code that had been filed against the Debtor on January 3,
2008, as Case No. BK-S-08-10049-MKN.
3. The Avoidance Date Order provided that, in this Case, the period for
avoidance actions under the applicable provisions of the Bankruptcy Code would be
measured as if the petition date in this Case were January 3, 2008.1
4. From January 18, 2008, through the October 23, 2008 confirmation
of the Debtor’s plan of reorganization (the “Plan”), the Debtor operated and managed its
business affairs as a debtor in possession pursuant to Sections 1107 and 1108 of the
26 On April 7, 2010, the Court ruled that the Avoidance Date Order was not
authorized by the Bankruptcy Code. As a result, the preference claim at issue here
27 against Fertitta Enterprises, as discussed further below, involves a transfer that falls
outside the ordinary 90-day preference reach-back period and requires that the Trustee
28 prove that Fertitta Enterprises was an insider at the time of the transfer.
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1 5. By order entered on April 7, 2008 [Doc 1782], the Court approved the
2 Debtor’s sale its business and substantially all of its operating assets to Manchester
3 Capital, Inc.
4 6. On May 19, 2008, the Debtor filed its Plan [Doc 191], which provided,
5 among other things, that the Debtor’s remaining assets, including all of its pre-petition
6 claims, rights and causes of action, and all of its right and powers to pursue avoidance
7 actions under Chapter 5 of the Bankruptcy Code, would be transferred to and would vest
8 in a Liquidating Trust for the benefit of various creditors groups.
9 7. The Plan further provided that, upon its Effective Date, a
10 Liquidating Trustee would represent the Trust Estate.
11 8. On October 23, 2008, the Court entered an Order approving the
12 Debtor’s Disclosure Statement in connection with the Plan, and confirming the Plan [Doc
14 9. On November 12, 2009, the Court entered an Order authorizing the
15 Trustee to accept his appointment as Liquidating Trustee under the Liquidating Trust
16 Agreement (as described further below), and the Trustee accepted the appointment on
17 that day [Doc 356]. The Trustee’s extensive qualifications and experience in bankruptcy
18 matters were set forth in an attachment to a declaration he filed in support of his
19 appointment [Doc 346]. Among other matters, the Trustee has served as a standing
20 Chapter 7 trustee in the Northern District of Illinois for approximately twenty five (25)
21 years and also an adjunct professor of law at the John Marshal Law School where he has
22 taught courses in bankruptcy, sales and commercial paper.
23 10. On November 20, 2009, the Trustee caused notice of his appointment
24 to be filed and served, and as a result, on November 23, 2009, the Plan became effective
25 [Docs 359 and 360].
All reference to “Doc” are to the docket in the Debtor’s Bankruptcy Case,
28 and all references to “Adv. Doc.” are to the docket in the Adversary Proceeding.
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1 11. At or about the same time as the Trustee’s appointment, he retained
2 as his primary litigation counsel the Law Office of Jonathan A. Backman. After
3 graduating from Harvard Law School in 1987, Mr. Backman began his legal career as a
4 judicial clerk to Judge Brian Barnett Duff of the U.S. District Court for the Northern
5 District of Illinois. Thereafter, Mr. Backman entered private practice and for the first
6 eleven (11) years of his career worked for large law firms in Chicago handling numerous
7 corporate bankruptcy and related litigation matters. In 2001, Mr. Backman opened his
8 own law practice where he has continued representing both debtors and creditors in a
9 wide variety of corporate restructuring, bankruptcy and commercial litigation matters.
10 Mr. Backman has more than twenty (20) years of experience in complex bankruptcy and
11 related litigation matters.
PERTINENT TRUST AGREEMENT PROVISIONS
12. The Liquidating Trust Agreement authorizes the Trustee, among
other things, to pursue — and where appropriate, to compromise and settle — claims,
rights and causes of action on behalf of the Trust Estate. Liquidating Trust Agreement
(“LTA”) at 7-8 §§ 13(f) and 13(i) [Doc 308; Exhibit 4].
13. The Trust Agreement further provides that, where a settlement
involves a claim of $25,000 or more, the Trustee must obtain this Court’s approval of the
settlement. LTA at 8 § 13(i). Still, inasmuch as there no longer exist any creditors of the
Debtor, but instead beneficiaries of the Trust Estate, neither the Trust Agreement nor any
provision of the Plan provides for the parties who will receive notice of motions for such
approval; thus, service of such motions and the notices of the hearings thereon historically
have been served upon to the general case service list (including the Office of the United
States Trustee) as well as counsel to the Creditors’ Advisory Committee as appointed and
designated by the Trust Agreement.
14. Under the Trustee’s engagement agreement with undersigned
counsel (the “Engagement Agreement”), a third of any settlement, as well as counsel’s
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1 expenses (including the fees and expenses of local counsel), incurred in connection with all
2 avoidance actions (under section 547, 548, etc.) — including those at issue in this
3 proceeding — are payable to counsel before the settlement proceeds vest in the Trust
4 Estate. See Engagement Letter (Exhibit B to the Notice of (1) Liquidating Trustee’s
5 Acceptance of Liquidating Trust Agreement, and (2) Effectiveness of Engagement Letter,
6 filed November 20, 2009) at 4 § 7.B [Doc 359].
7 15. On the other hand, counsel’s fees and expenses incurred in
8 connection with claims against Zyen for lender liability and related alleged wrongdoing
9 (the “Zyen Claims”) would be paid only if the Trustee and counsel have prevailed on and
10 received proceeds in excess of $475,000 in connection with such claims.3 Id. at 3-4 § 7.
16. The Trustee commenced the Adversary Proceeding on December 29,
2010, by filing his original Complaint (the “Original Complaint”).
17. By Order dated April 8, 2010 [Adv. Doc. 48], and after extensive
briefing of the issues by the parties, the Court dismissed all of the claims against Zyen
and Fertitta Enterprises (including breach of fiduciary duty, equitable subordination and
substantive consolidation), except that the Court (i) allowed the Trustee to continue to
As the Court and the parties may recall, the Trustee’s counsel’s fee
20 arrangement in the adversary proceeding styled Herzog v. ARC Investment Partners,
LLC, Adversary Case No. 10-01009 (the “ARC Proceeding“), was identical to the fee
21 arrangement for avoidance actions as set forth in the immediately preceding paragraph
regarding avoidance actions. The Trustee settled, with Court approval, a portion of the
claims in the ARC Proceeding for $325,000, which would have entitled the Trustee’s
23 counsel to a fee of $108,333. Nevertheless, given the early stages at the time of the
current Adversary Proceeding, and the possibility that the Zyen Claims might turn out to
24 have merit, the Trustee’s counsel contributed $25,000 of his $108,333 fee towards the
expenses that he might need to incur in pursuing the Zyen Claims, and thus accepted a
25 fee for the settlement in the ARC Proceeding of only $83,333. Even though, as discussed
26 below, questions exist as to whether any portion of the expenses that the Trustee’s counsel
has incurred in the instant Adversary Proceeding are properly attributable to the Zyen
27 Claims, the Trustee’s counsel is not seeking any reimbursement of the $25,000 that he
contributed to the expenses relating to the pursuit of those claims, so such $25,000 will
28 inure to the benefit of the Trust Estate.
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1 pursue a section 547 preference claim against Fertitta Enterprises, and (ii) allowed the
2 Trustee to amend his section 548 and related state law fraudulent transfer claim against
3 Zyen (which pertained to the alleged wrongful intent of the Debtor, not any of the
5 18. On May 3, 2010, in accordance with the Court’s April 8, 2010 Order,
6 the Trustee filed an Amended Complaint [Adv. Doc. 54] that amended the section 548
7 fraudulent transfer claims against Zyen.
8 19. On June 27, 2010, the Trustee sought leave to file a proposed Second
9 Amended Complaint [Adv. Doc. 75] adding four claims — two each against Zyen and
10 Fertitta Enterprises — alleging that each had aided and abetted, and conspired with,
11 certain of the Debtor’s officers and directors in their alleged breaches of fiduciary duty,
12 which the Court granted by order entered on August 18, 2010 [Adv. Doc. 85].
13 20. On August 22, 2010, the Trustee filed the Second Amended
14 Complaint [Adv. Doc. 87], and the parties were at issue on all pending claims in this case
15 involving the Trustee and the Defendants here.
DISCOVERY AND EVIDENCE
21. Over the next nearly two years, the parties exchanged tens of
thousands of documents and engaged in 15 depositions regarding the claims at issue here.
Based on this discovery, the Trustee developed the firm belief that the preference claim
against Fertitta Enterprises — albeit by no means a certainty given the need to prove that
Fertitta Enterprises was either a statutory or non-statutory insider at the time of that it
received a roughly $1.03 million payment from the Debtor (outside the 90-day standard
preference period) — had at least a material chance of prevailing.4
26 Although the Trustee argued during his initial summary judgment
pleadings that Fertitta Enterprises qualified as an insider both (i) as person in control of
27 the Debtor shortly before the October 4, 2007, $12.0 million Zyen loan, and (ii) as non-
statutory insider based on the pari passu provisions of certain promissory notes that had
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1 22. On the other hand, Fertitta Enterprises argued that, even if it were
2 liable for a preference, which it firmly denied, it was entitled to more than a $400,000
3 “offset” against its preference liability because at the time of the alleged preferential
4 transfer, it possessed a perfected security interest in the bank accounts from which the
5 alleged preferential payments were made. Accordingly, Fertitta Enterprises has
6 steadfastly argued that its maximum exposure — even if the Trustee could prove that it
7 qualified as an insider — is approximately $600,000.
8 23. Additionally, the Defendants assigned virtually no value — for
9 settlement purposes or otherwise — to the allegations that it had aided and abetted, or
10 conspired in, a breach of fiduciary duty by the Debtor’s officers or directors.
11 24. The Trustee has reached the essentially the same conclusion. That
12 is, whereas certain of the Debtor’s officers and directors made some questionable business
13 judgments after they effectively took over operational control of the Debtor in June 2007,
14 they were acting in what they thought were the best interests of the company. And the
15 fact that the Board of Directors unanimously approved and ratified all of their conduct —
16 even the independent Board member William Underhill — rendered a breach of fiduciary
17 duty claim against them virtually impossible to prove (with a claim that the Defendants
18 here aided and abetted or conspired with such a breach therefore equally or even more
20 25. What’s more, although as indicated above, the Trustee brought
21 various claims against the Defendants, the basis of bringing such claims was based upon
22 information provided to the Trustee by various third parties. After completing discovery,
25 been executed by Fertitta Enterprises and two of the Debtor’s insiders in July 2007 (which
26 prevented them from being repaid without Fertitta Enterprises being paid as well), it
appeared by the conclusion of the summary judgment briefing that the case law would not
27 support a finding of Fertitta Enterprises as a statutory insider, and that the Debtor’s best
opportunity for prevailing on the preference claim lay in the somewhat unique provisions
28 of the July 2007 notes.
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1 the Trustee has determined that the evidence does not support claims of misconduct,
2 breaches of fiduciary duties and conspiracy by the Defendants and as such, those claims
3 are being dismissed as part of the Settlement Agreement.
4 26. Indeed, based on the evidence, the Trustee for some time has
5 believed that the only remaining claim besides the preference claim on which he might
6 have a significant chance of prevailing upon at trial is the fraudulent transfer claim
7 grounded upon section 548 of the Bankruptcy Code. This claim is based on the old
8 Supreme Court decision in Dean v. Davis, 242 U.S. 438, 37 S.Ct. 130 (1917), and involves
9 the fraudulent intent of the Debtor in connection with the transfer of assets prior to a
10 bankruptcy case. The Trustee, however, has determined, after extensive discovery, that
11 differences exist between this case and the facts in Dean that would make it substantially
12 difficult to prevail on this claim. Thus, the Trustee has substantial doubts about his
13 ability to prevail on his section 548 claim under the Dean v. Davis theory.
14 27. Finally, and perhaps most significantly in terms of the Trustee’s
15 decision to settle for the amounts at issue here, and described in the next Section, lies in
16 the Trustee’s difficulty to prove damages even were he to prevail on the Dean v. Davis
18 28. This is so because the Trustee’s own expert report, which assigned a
19 potential $41 million value to the Debtor as of September 2007, required for this valuation
20 that the Debtor had raised $10 million in working capital before entering into the Zyen
21 loan. Yet, despite the efforts not only of the Debtor’s officers, but also of their Board
22 members and observers, no one could locate an entity willing to make such an investment
23 in the company during this time period. And the Trustee’s own damages expert also
24 reported that, as of October 5, 2007, the Debtor was substantially insolvent — based in
25 part on the fact that, that as of September 30, 2007, the Debtor’s cash balance was
26 approximately $68,000 and its liabilities were approximately $39.3 million, and after the
27 Zyen Loan, on October 5, 2007, the Debtor’s cash balance was approximately $76,000 and
28 its liabilities were approximately $38.8 million.
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1 29. So even if the Court found liability on the Dean v. Davis claim (which
2 for the reasons stated above, the Trustee believes could have been difficult to sustain
3 under his burden of proof), the Trustee’s proof of damages could have required a level of
4 speculation by the Court as to the Debtor’s value prior to the Zyen loan. As a result, the
5 Trustee recognizes that the evidence may not be sufficient to find the level of damages
6 suggested by the Trustee’s damages expert.
7 30. In short, the only two claims that the Trustee believes that he might
8 have prevailed on at trial were the preference and, to a lesser extent, the section 548 Dean
9 v. Davis claim. And even if the Trustee prevailed on these claims, the evidence suggests
10 that the net recovery to the Estate would have been only slightly more than the amount
11 the Defendants are paying to settle this case (and, as described below, substantially less
12 than the net value of this settlement to the estate).
13 31. In November and December 2011, the parties extensively briefed
14 cross motions for summary judgment on various claims in the Second Amended Complaint
15 [Adv. Docs. 133, 134, 136, 137, 146, 147, 151, 152, 157, and 159]. By order and
16 memorandum dated December 13, 2011 [Adv. Docs. 167 and 168], the Court denied all
17 parties’ requests for summary judgment on all claims. This extensive briefing gave the
18 Trustee further insight into the validity and likelihood of the claims and legal theories
19 involved, and also meant that any recovery would require a lengthy and expensive trial.
20 Finally, in preparing for trial, which was originally set to commence on April 9, 2012, the
21 Trustee reviewed and considered the relevant evidence and legal theories in even greater
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1 THE PROPOSED SETTLEMENT
2 32. Over the course of the last few months, the parties engaged in
3 extensive settlement discussions in good faith and at arms’ length in order to determine
4 whether a mutually agreeable compromise of some or all of the claims was possible, which
5 culminated in the Proposed Settlement at issue here.
6 33. In order to ensure some value for the unsecured creditors of the
7 former Debtor, the Proposed Settlement involves a number of parties and compromises.
8 34. Fertitta Enterprises will pay a total of $525,000, which in
9 Defendants’ view, represents payment for the only claim on which they believe they have
10 some exposure — i.e., the preference claim.
11 35. Fennemore Craig will reduce its $142,239.10 administrative claim to
12 $25,000 (for a savings to the Estate of $117,239.10).
13 36. KL Gates will reduce its $347,181.10 administrative claim to
14 $100,000 (for a savings to the Estate of $247,181.10).
15 37. Sierra will reduce its $18,951.41 administrative claim to $5,000
16 ($18,951.41) (for a savings to the Estate of $13,951.41).
17 38. Mr. Backman will contribute to the Trust Estate $50,000 of the
18 $175,000 fee to which he would be entitled under the Engagement Agreement, with the
19 understanding that Mr. Backman will be allowed to reduce this $50,000 (i) by the amount,
20 if any, that any party interest successfully asserts, against him or the Trustee, that the
21 Trust’s expenses were excessive or should have been paid by the Trustee or Mr. Backman
22 personally, and (ii) to the extent that a party appeals the approval of the Proposed
23 Settlement, in which case Mr. Backman may charge $200 per hour and expenses against
24 this $50,000.
25 39. Zuffa Marketing will subordinate its $6.0 million claim against the
26 Trust Estate to the claims of all of unsecured creditors of the former Debtor (i.e., now
27 beneficiaries of the Trust Estate).
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1 40. The foregoing reductions in administrative claims (even without
2 taking into account Mr. Backman’s $50,000 contribution of his fee to the Estate) come to
4 41. In addition, beyond the financial components of the settlement, the
5 Defendants have agreed that Mr. Michael Levy, the former Chief Financial Officer of the
6 Debtor who now works for one of the Defendants’ affiliates, will be authorized to expend
7 up 12 hours per month, not to exceed 60 hours total (but exclusive of time Mr. Levy
8 spends traveling to or testifying in any court proceeding relating to the Liquidating
9 Trust), assisting the Trustee in the claims objection process that the Proposed Settlement,
10 if approved, will necessitate.
ARGUMENT FOR APPROVAL
42. As described above, the Liquidating Trust Agreement authorizes the
Trustee to settle and compromise disputes, subject to bankruptcy court approval, where
the claim amount at issue exceeds $25,000. See Plan at 15 § 7.2(i); LTA at 8 § 13(i);
compare In re Holywell Corp., 913 F.2d 873, 881 (11th Cir. 1990) (where a liquidating trust
agreement does not require bankruptcy court approval for settlements by the liquidating
trustee, the trustee need not seek approval for any such settlements).
43. In ruling on an approval motion, courts allow trustees broad
discretion in negotiating and reaching such settlements, and grant the motions so long as
they are fair and equitable and in the best interests of the debtor’s creditors and its estate.
Protective Committee for Independent Stockholders of TMT Trailer Ferry v. Anderson,
390 U.S. 414 (1968); Arden v. Motel Partners (In re Arden), 156 F.3d 729 (9th Cir. 1999);
see generally 9 Collier on Bankruptcy, ¶9019 (15th Edition 1990) (noting that
compromises are favored in bankruptcy cases).
44. The Ninth Circuit has directed that, “[i]n determining the fairness,
reasonableness and adequacy of a proposed settlement agreement, the court must
consider: (a) the probability of success in the litigation; (b) the difficulties, if any to be
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1 encountered in the matter of collection; (c) the complexity of the litigation involved, and
2 the expense, inconvenience and delay necessarily attending it; and (d) the paramount
3 interest of the creditors and a proper deference to their reasonable views in the premises.”
4 Martin v. Kane (In re A&C Properties), 784 F.2d 1377, 1381 (9th Cir. 1986).
5 45. Furthermore, “[a] precise determination of likely outcomes is not
6 required,” since “an exact judicial determination of the values at issue would defeat the
7 purpose of compromising the claim.” In re Telesphere Comm’s, Inc., 179 B.R. 544, 553
8 (Bankr. N.D. Ill. 1994). The Court’s role is not “finally to determine the numerous
9 questions of law and fact raised . . . but rather to canvass the issue and see whether the
10 settlement ‘fall[s] below the lowest point in the range of reasonableness.” In re Lion
11 Capital Group, 49 B.R. 163, 175 (Bankr. S.D.N.Y. 1985).
12 46. Here, the Trustee has considered each of the four A&C Properties
13 factors in reaching the foregoing settlement with the Defendants, and submits that they
14 strongly support the Proposed Settlement.
15 47. As set forth above, the Trustee has concluded that the only claim on
16 which he has a significant chance of prevailing would be the preference claim, and even if
17 he did so — which remains uncertain given his need to prove that one of more of the
18 Defendants were insiders of the Debtor at the time of the payment — his likely recovery
19 from such claim would be in the range of $600,000 to $650,000 due to Fertitta Enterprises’
20 right to offset the amount of the payment that was secured.
21 48. By contrast, the value to the Estate of the Proposed Settlement —
22 i.e., the $525,000 payment plus the savings of $378,371.61 in administrative claims — will
23 provide the Estate with a benefit of approximately $903,370 (again, without taking into
24 account Mr. Backman’s contribution of $50,000 of the fee to which he would be entitled
25 from the preference recovery5).
27 The $903,370 figure also does not take into account the $125,000 fee to
which Mr. Backman will be entitled from the Proposed Settlement, for the obvious reason
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1 49. Regarding the second factor — the difficulty of collection — the
2 Trustee did not consider this factor a significant one in his determination as to an
3 appropriate settlement amount, because he assumes that, within limits, the Defendants
4 would have been able to pay more than the $525,000 in cash that they are paying under
5 the Proposed Settlement. Still, it bears noting that the only the claim aside from the
6 preference claim as to which the Trustee, at one point, saw a reasonable chance of
7 prevailing is the section 548 claim against Zyen, and significant doubt exists as to Zyen’s
8 ability to pay a substantial judgment in view of what the Trustee understands about its
9 current financial condition and the fact that, were the Court to avoid the transfer and
10 order the Zyen assets returned to the Trust Estate, the Trustee could face substantial
11 difficulty in monetizing those assets.
12 50. As for the third A&C Properties factor — the complexity of the
13 litigation and the delay in pursuing it — the Trustee submits that, as with the first factor,
14 it weighs strongly in favor of the Proposed Settlement here. The Adversary Proceeding
15 here involves multiple highly complex claims and defenses — indeed, the Court has
16 bifurcated that case not only between liability and damages on the non-preference claims,
17 but also on the liability issues along regarding the preference and the non-preference
18 claims. And even were the Trustee to prevail, on the preference claim or any other, little
19 question exists that the Defendants would appeal the Court’s ruling, probably at several
20 levels, meaning potentially years more of litigation before the Trust Estate would recover
21 any funds from this litigation.
22 51. Finally, regarding the final A&C Properties factor, the Trustee does
23 not currently know what position the Creditors’ Advisory Committee under the Trust
26 that, whether settled or tried, Mr. Backman would be entitled to a fee — indeed, absent
his $50,000 contribution to the Estate, a potentially significantly larger fee — for his
27 services. At the same time, the figure does not include the significant costs in terms of
expert testimony and other expenses that would be incurred were the case to proceed to
28 trial and appeal.
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1 Agreement will take with respect to the Proposed Settlement. The Trustee has no doubt,
2 however, that certain creditors could be disappointed in what they may view as the
3 relatively low amount that the Proposed Settlement will net for unsecured creditors.
4 52. That being said, the Trustee has litigated the Adversary Proceeding
5 for more than two years with the interests of the unsecured creditors (as well as the other
6 Trust beneficiaries, including the administrative claimants) as his paramount concern.
7 The Trustee not only strongly believes that the Proposed Settlement is the absolute best
8 he could do for all of the beneficiaries, but also that much of the potential disappointment
9 certain creditors may have stems from events and rulings that occurred during the
10 Bankruptcy Case itself, not this Adversary Proceeding, which were beyond the Trustee’s
11 ability to alter or challenge by the time of his appointment. The Trustee’s belief is
12 informed by the documents and evidence adduced in the case, the foregoing legal
13 authorities, and his and his counsel’s extensive experience in bankruptcy and bankruptcy-
14 related litigation. Accordingly, the Trustee believes and submits that the Proposed
15 Settlement satisfies the fourth A&C Properties factor in that it takes into account the
16 paramount interests of all of the Trust’s beneficiaries and obtains for them the best
17 possible results under the difficult circumstances at issue here.
18 53. Accordingly, the Trustee believes and submits that the Proposed
19 Settlement satisfies the fourth A&C Properties factor in that it takes into account the
20 paramount interests of all of the Trust’s beneficiaries and obtains for them the best
21 possible results under the difficult circumstances at issue here.
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WHEREFORE, for all of the reasons set forth above, the Trustee submits
that the Proposed Settlement is reasonable, fair and equitable, and in the best interests of
the Trust Estate and its beneficiaries, and prays that this Court enter an Order
(i) approving the Trustee’s Proposed Settlement, as described above and documented in
Exhibit A hereto, (ii) finding that notice of this motion and of the opportunity to object
thereto were appropriate and sufficient, and (iii) granting the Trustee such other and
further relief as the Court deems just and proper.
Dated: April 18, 2012
/s/ Jonathan A. Backman
Jonathan A. Backman
15 Law Office of Jonathan A. Backman
117 N. Center Street
16 Bloomington, Illinois 61701-5001
17 FAX: (309) 820-7430
Counsel to David Herzog, as Liquidating Trustee for the
19 Estate of Xyience, Incorporated
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1 CERTIFICATE OF SERVICE
2 I, Jonathan A. Backman, hereby certify that on April 18, 2012, I
3 electronically filed the foregoing Liquidating Trustee’s Motion for Approval of a
4 Settlement and Compromise, using the ECF system which will send notification of such
5 filing to the following:
6 SHEENA R. AEBIG
on behalf of Interested Party DARLIS INVEST & TRADE CORP.
8 JEFFREY R. ALBREGTS
on behalf of Defendant ARLINGTON MID-CITIES WAREHOUSES, INC.
9 firstname.lastname@example.org, email@example.com
10 OGONNA M. ATAMOH
on behalf of Creditor SANTORO, DRIGGS, WALCH, KEARNEY, HOLLEY &
14 KEITH MILES AURZADA
on behalf of Creditor RACKSPACE US, INC.
15 firstname.lastname@example.org, email@example.com
16 TODD L. BICE
on behalf of Defendant ADAM FRANK
17 firstname.lastname@example.org, email@example.com
18 JAMIE S. COGBURN on behalf of Plaintiff XYIENCE INCORPORATED
LAUREL E. DAVIS
20 on behalf of Debtor XYIENCE INCORPORATED
MICHAEL N. FEDER
22 on behalf of Creditor ZUFFA MARKETING,LLC
GREGORY E. GARMAN
24 on behalf of Counter-Defendant FERTITTA ENTERPRISES
DOUGLAS D. GERRARD
26 on behalf of Creditor MJE INVESTMENTS, LLC
Case 08-10474-mkn Doc 687 Entered 04/18/12 06:54:51 Page 17 of 18
1 JAMES D. GREENE
on behalf of Defendant ARC INVESTMENT PARTNERS
4 JEFFREY R. HALL
on behalf of Interested Party DAVID HERZOG
5 firstname.lastname@example.org, email@example.com
6 KEVIN R. HANSEN
on behalf of Defendant BARDO EQUITIES, LLC
8 BRIGID M. HIGGINS
on behalf of Defendant ZINKIN ENTERTAINMENT LLC,
9 firstname.lastname@example.org, email@example.com
10 CARRIE E. HURTIK on behalf of Creditor A. J. ROBBINS, PC
MATTHEW L. JOHNSON
12 on behalf of Creditor THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
PAMELA R. LAWSON
14 on behalf of Creditor HUNTERTON & ASSOCIATES, A PROFESSIONAL
16 JON T. PEARSON
on behalf of Debtor XYIENCE, INCORPORATED
17 firstname.lastname@example.org, email@example.com;firstname.lastname@example.org
18 LUKE KRISTOPHER RATH
on behalf of Interested Party DAVID HERZOG
19 email@example.com, firstname.lastname@example.org
20 SAMUEL A. SCHWARTZ
on behalf of Defendant NATHAN JUDD
21 email@example.com, firstname.lastname@example.org
22 LAWRENCE J SEMENZA
on behalf of Defendant ARC INVESTMENT PARTNERS, LLC
23 email@example.com, firstname.lastname@example.org
24 AMBRISH S. SIDHU
on behalf of Stockholder ALISON NEWMAN
26 ROBERT SPEAR
on behalf of Petitioning Creditor LAWRENCE ABERLE
27 email@example.com, firstname.lastname@example.org;email@example.com
Case 08-10474-mkn Doc 687 Entered 04/18/12 06:54:51 Page 18 of 18
1 U.S. TRUSTEE - LV - 11
S. GARY WERLEY
3 on behalf of Defendant ARLINGTON MID-CITIES WAREHOUSES, INC.
5 on behalf of Defendant PATRICK BRAUCKMANN
STEVEN L ZIMMERMAN
7 on behalf of Creditor A. J. ROBBINS, PC
MATTHEW C. ZIRZOW
9 on behalf of Counter-Defendant FERTITTA ENTERPRISES
11 and I hereby certify that I have delivered the document to the following parties by
12 electronic transmission and United States Priority Mail to:
13 HARLEY J. GOLDSTEIN
MATTHEW E. MCCLINTOCK
14 Goldstein & McClintock LLLP
208 South LaSalle Street
15 Suite 1750
Chicago, IL 60604
16 Phone: (312) 337-7700
on behalf of the Creditors’ Advisory Committee
20 /s/ Jonthan A. Backman