Dewey & LeBoeuf LLP: Application (the “Application”) for entry of an order directing the United States Trustee (the “U.S. Trustee”) to disband the official committee of former partners

Document Sample
Dewey & LeBoeuf LLP: Application (the “Application”) for entry of an order directing the United States Trustee (the “U.S. Trustee”) to disband the official committee of former partners Powered By Docstoc
					12-12321-mg         Doc 539       Filed 10/10/12 Entered 10/10/12 18:49:39           Main Document
                                                Pg 1 of 16


 TOGUT, SEGAL & SEGAL LLP                                     HEARING DATE:      October 30, 2012 at 10:00 a.m.
 One Penn Plaza                                         OBJECTION DEADLINE:      October 23, 2012 at 4:00 p.m.
 Suite 3335
 New York, New York 10119
 (212) 594-5000
 Albert Togut
 Scott E. Ratner
 Steven S. Flores
 Samantha J. Rothman

 Counsel to the Debtor and Debtor in Possession

 UNITED STATES BANKRUPTCY COURT
 SOUTHERN DISTRICT OF NEW YORK
 ---------------------------------------------------------------X
                                                                :
 In re:                                                         :   Chapter 11
                                                                :
 DEWEY & LEBOEUF LLP,                                           :   Case No. 12-12321 (MG)
                                                                :
                                        Debtor.                 :
                                                                :
 ---------------------------------------------------------------X


                    DEBTOR’S APPLICATION FOR AN ORDER
                  DIRECTING THE UNITED STATES TRUSTEE TO
            DISBAND THE OFFICIAL COMMITTEE OF FORMER PARTNERS

 TO      THE HONORABLE MARTIN GLENN,
         UNITED STATES BANKRUPTCY JUDGE:

                  Dewey & LeBoeuf LLP, as debtor and debtor in possession (the “Debtor”

 or the “Firm”), makes this Application (the “Application”) for entry of an order

 directing the United States Trustee (the “U.S. Trustee”) to disband the official

 committee of former partners appointed in the above-captioned case (the “FPC” or

 “Former Partners Committee”) and, in support of this Application, respectfully states:


                                              INTRODUCTION

                  Shortly after the Chapter 11 filing, the U.S. Trustee appointed the FPC as

 the second official committee in this bankruptcy case. A second official committee is

 extraordinary and rare in even the most complex mega cases (and a former partners
12-12321-mg     Doc 539       Filed 10/10/12 Entered 10/10/12 18:49:39                 Main Document
                                            Pg 2 of 16


 committee is unprecedented in a law firm case).1 The appointment, in order to survive

 challenge, must be “necessary” and based upon a determination that its constituents are

 “in the money” and cannot be adequately represented by other fiduciaries already

 involved in the case. The decision to appoint a second committee is subject to de novo

 review by this Court.

               The Debtor respectfully submits that the FPC should be disbanded

 because a second official committee is not “necessary” for several reasons, including,

 among other things:

               o       First, FPC claims for retirement and/or separation benefits would,
                       even if allowed as claims, be subordinated to what the Debtor
                       estimates to be at least $500 million in allowed secured and general
                       unsecured claims. There is no dispute that this $500 million in
                       claims will not be paid in full. Thus, it is highly unlikely that the
                       constituency this official committee is supposed to represent has
                       any legitimate financial stake in this bankruptcy case, and are “out
                       of the money.” The only cognizable economic interest this
                       committee appears to have is avoiding liability for some sub-set of
                       its constituents as putative “claw back” defendants in actions that
                       will likely be brought in the future.

               o       Second, even if the Debtor’s former partners (the “Former
                       Partners”) are general unsecured claimants to be paid pari passu
                       with the rest of the unsecured creditors, the Official Creditors
                       Committee (defined below) has been adequately representing the
                       interests of the FPC’s constituency and the U.S. Trustee has already
                       made clear that the FPC is not to represent the interests of Former
                       Partners as general unsecured creditors.

               o       Third, two of the members of the FPC have signed on to the partner
                       contribution plan (“PCP”) and, as a consequence, have agreed to
                       waive any claims they may have against the estate. Furthermore,
                       two additional members of the FPC recently resigned their
                       memberships.


 1
       Indeed, other law firm bankruptcy cases have not deemed a second official committee to be
       necessary. See, e.g., In re Dreier LLP, No. 08-15051 (SMB) (Bankr. S.D.N.Y); In re Coudert Bros. LLP,
       No. 06-12226 (RDD) (Bankr. S.D.N.Y.); In re Finley, Kumble, Wagner, Heine, Underberg, Manley,
       Myerson & Casey, 85 B.R. 13 (Bankr. S.D.N.Y. 1988) (holding general partners were not entitled to
       form a official committee); In re Howrey LLP, No. 11-31376 (Bankr. N.D. Cal.); In re Ruden
       McClosky P.A., No. 11-40603 (S.D. Fla.); In re Heller Ehrman LLP, No. 08-32514 (Bankr. N.D. Cal.).



                                                    2
12-12321-mg      Doc 539      Filed 10/10/12 Entered 10/10/12 18:49:39               Main Document
                                            Pg 3 of 16


                o       Fourth, the FPC has not contributed in a productive way to this
                        bankruptcy case. Instead, the FPC has consistently taken positions
                        that are detrimental to the orderly administration of this case and
                        contrary to the efforts of the Debtor’s bona fide stakeholders (i.e., the
                        Secured Lenders2 and general unsecured creditors) and the FPC has
                        only sought to frustrate the Chapter 11 process without any
                        tangible benefit to its constituents, or more importantly, the estate.

                o       Fifth, if the FPC is disbanded, Former Partners may continue to
                        appear and be heard on any issue in the case individually or as a
                        group, as evidenced by the existence and involvement of the Ad
                        Hoc Committee of Retired Partners of LeBoeuf, Lamb, Leiby &
                        MacRae (the “Ad Hoc Committee”) who continued to be vocal in
                        the case despite the FPC’s appointment. In fact, as further
                        described below, the only remaining members of the FPC who have
                        not already agreed to waive whatever claims they possess against
                        the Debtor’s estate are founding members of the Ad Hoc
                        Committee and, until recently, were on the steering committee that
                        directs the Ad Hoc Committee’s actions.

                The Debtor considered making this Application immediately after the FPC

 formation but refrained from doing so for the practical reason that unless a PCP could

 be agreed upon by the required majority of partners, the Chapter 11 case was likely to

 have been converted to a Chapter 7 proceeding. Even though there was an additional

 expense associated with the FPC, it was believed that the costs of litigating the

 propriety of having a FPC in this case would have exceeded the costs of simply

 allowing it to continue to exist.

                This Court approved the Debtor’s Motion for entry of an order approving

 the PCP (the “PCP Settlement Motion”) on October 9, 2012. The PCP is a monumental

 achievement supported by a majority, measured by dollars contributed, of the Former

 Partners whom the FPC purports to represent.

                It is stunning to the Debtor, the Official Creditors Committee and the

 Secured Lenders that the FPC’s response to the PCP was to oppose it. There is no

 2
         “Secured Lenders” means parties to a secured credit agreement dated as of April 16, 2010 (the
        “Credit Agreement”), together with holders of senior secured notes issued by the Debtor.



                                                   3
12-12321-mg      Doc 539      Filed 10/10/12 Entered 10/10/12 18:49:39                Main Document
                                            Pg 4 of 16


 question that the PCP is in the best interests of all of the Former Partners of the Debtor,

 as reflected by the fact that a majority of partners have signed onto the PCP.

                The FPC’s opposition to the PCP and related support for the Ad Hoc

 Committee’s motion for the appointment of a trustee or examiner (the “Examiner

 Motion”) has been costly and unproductive. The FPC has generated an estimated

 $779,000 in legal fees through August 31, 20123 alone, without any corresponding

 benefit to the estate. Enough is enough. The FPC’s aggressive litigation tactics have

 also caused the Debtor and several other parties in interest to incur hundreds of

 thousands of dollars in legal fees that should have been avoided. Now that the PCP has

 been accepted by nearly every key stakeholder in the case, and approved by this Court,

 it is clear that the unprecedented decision to empower an official former partners’

 committee, paid from the limited assets of the estate, was a misstep that needs to be

 corrected.


                                          BACKGROUND

                1.      On May 28, 2012 (the “Petition Date”), the Debtor filed a voluntary

 petition in this Court for relief under Chapter 11 of title 11 of the United States Code

 (the “Bankruptcy Code”).

                2.      On May 31, 2012, the U.S. Trustee took the extraordinary step of

 appointing the FPC [Dkt. No. 44] -- in addition to the Official Committee of Unsecured

 Creditors (the “Official Creditors Committee”) -- in this bankruptcy case. On June 4,

 2012, the FPC selected as its counsel Kasowitz, Benson, Torres & Friedman LLP

 (“Kasowitz”). As the Official Creditors Committee is responsible for the interests of


 3
        This $779,000 is more than twice as much as what the cash collateral budget allows for this period
        and was incurred with complete disregard of the budget. And more is expected.



                                                    4
12-12321-mg      Doc 539      Filed 10/10/12 Entered 10/10/12 18:49:39                Main Document
                                            Pg 5 of 16


 unsecured creditors in this case, it was unclear from the outset what the purpose of the

 FPC was to be.

                3.      On June 11, 2012, Kasowitz sought “further clarification” regarding

 the scope of the FPC’s constituency and the interests the FPC is charged with protecting.

 The U.S. Trustee responded two days later, explaining that the FPC represents neither

 the interests of former partners as equity nor as holders of unsecured claims:

                For clarity, the constituency of the [Former Partners
                Committee] comprises former partners of the debtor or its
                predecessor firms who assert rights to payment either under
                pension plans or under separation agreements or contracts.
                The constituency does not include current or former equity
                partners as equity partners. Finally, the constituency does
                not include general unsecured creditors, whose rights are
                represented by the Official Committee of Unsecured
                Creditors.

 Declaration of Steven S. Flores, Esq., dated October 10, 2012 (“Flores Decl.”) Exhibit (“Exh.”)

 1 (emphasis added).

                4.      Unfortunately, the U.S. Trustee’s letter only created more confusion

 because it did not clarify precisely what interests are being represented (i.e. it only states

 that the constituency is not represented in their capacity as equity holders or general

 unsecured creditors).

                5.      Upon information and belief, the remaining members of the FPC

 are David P. Bicks (“Bicks”), Cameron F. MacRae (“MacRae”), Stuart Hirshfield

 (“Hirshfield”), and E. Ann Gill (“Gill”).4

                6.      Lack of necessity aside, key facts support a conclusion that certain

 FPC members are motivated only by a desire to reduce their own “claw back” liability
 4
        Two members of the FPC recently resigned their positions. By letter, dated October 5, 2012 (Dkt.
        No. 527), John P. Campo (“Campo”) and John S. Kinzey (“Kinzey”) resigned from the FPC so that
        they can pursue their own agenda without any regard to fiduciary responsibilities – – a
        recognition that former partners can protect their own individual interests without the need of an
        official committee.



                                                    5
12-12321-mg     Doc 539     Filed 10/10/12 Entered 10/10/12 18:49:39         Main Document
                                          Pg 6 of 16


 to this estate -- which is clearly not a sufficient reason to endow them with official

 committee status. First, Bicks and MacRae are founding members of the Ad Hoc

 Committee, and were on the steering committee that controls the Ad Hoc Committee’s

 actions. See the Verified Statement of Dorsey & Whitney LLP Regarding Representation

 of Ad Hoc Committee. [Dkt. No. 39 at ¶ 9, Exhibit C]. Second, Bicks and MacRae (and

 Kinzey and Campo) each entered into extraordinary arrangements with the Firm.

 These agreements had at least one thing in common: they allowed each of these four

 “fiduciaries” to receive retirement payments from the Firm, even though they were

 actively engaged in the practice of law (which was prohibited under the relevant

 retirement plans). See Flores Decl. Exhs. 2, 3 (Section 10.3 of the nonqualified, unfunded

 LeBoeuf, Lamb, Leiby & MacRae Partners’ Retirement Plan, as amended and restated

 effective as of November 15, 1990 (the “1990 Plan”), which was later amended in 2009

 (the “2009 Amendment” and, collectively with the 1990 Plan, the “Retirement Plan”)

 states “all of a retired Partner's rights to payments under this Plan shall be forfeited if

 such retired Partner . . . shall, without the prior written consent of the Executive

 Committee, engage in the private practice of law for compensation and in competition

 with the Firm's practice.”). Third, the lucrative terms of these special exceptions make

 Bicks and MacRae (and Kinzey and Campo) obvious putative defendants in “claw

 back” actions likely to be pursued by the Debtor or other representatives of the Debtor’s

 estate. Fourth, Gill and Hirshfield, who did not receive this valuable special exception,

 supported the PCP by signing PCP agreements and agreeing to pay the estate in

 exchange for mutual releases. See Flores Decl. Exh. 4.




                                               6
12-12321-mg     Doc 539     Filed 10/10/12 Entered 10/10/12 18:49:39         Main Document
                                          Pg 7 of 16


                     JURISDICTION AND STATUTORY PREDICATES

               7.      This Court has jurisdiction to consider this matter pursuant to 28

 U.S.C. §§ 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue

 is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.


                                   RELIEF REQUESTED

               8.      The Debtor respectfully requests that this Court enter the proposed

 order attached hereto at Exhibit “A” directing the U.S. Trustee to immediately disband

 the FPC on the basis that, among other things, Former Partners of the Debtor or its

 predecessor firms are adequately represented by the Official Creditors Committee to

 the extent they have claims against the Debtor’s estate.


                             BASIS FOR RELIEF REQUESTED

 A.     Appointing A Second Committee Is Extraordinary
        And Is Subject To De Novo Review By This Court

               9.      Section 1102(a)(2) of the Bankruptcy Code provides that the court

 "may order the appointment of additional committees of creditors or of equity security

 holders if necessary to assure adequate representation of creditors or of equity security

 holders. The United States trustee shall appoint any such committee." 11 U.S.C.

 § 1102(a)(2) (emphasis added).

               10.     Appointment of an additional official committee is widely regarded

 as an “extraordinary” remedy or a “rare” exception. See, e.g., In re Eastman Kodak Co.,

 No. 12–10202, 2012 WL 2501071, slip op. at 1 (Bankr. S.D.N.Y. June 28, 2012) (“[T]here

 appears to be uniform recognition that such an appointment constitutes extraordinary

 relief and is the exception rather than the rule in chapter 11 cases.”); In re Williams

 Commc'ns Group, Inc, 281 B.R. 216, 223 (Bankr. S.D.N.Y. 2002) (“The appointment of


                                               7
12-12321-mg     Doc 539     Filed 10/10/12 Entered 10/10/12 18:49:39          Main Document
                                          Pg 8 of 16


 official equity committees should be the rare exception.”); In re Enron Corp., 279 B.R.

 671, 685 (Bankr. S.D.N.Y. 2002) (recognizing that the appointment of additional

 committees is an extraordinary remedy).

               11.    Determinations of whether an additional official committee is

 “necessary” turn on whether the constituency at issue is adequately represented

 without the appointment of an additional committee. While "adequate representation"

 is not defined in the Bankruptcy Code, courts have considered various factors when

 determining whether an additional official committee should be appointed, including:

 (i) the ability of the committee to function; (ii) the nature of the case; (iii) the standing

 and desires of the different constituencies; (iv) the ability for creditors to participate in

 the case even without an official committee and the potential to recover expenses under

 section 503(b) of the Bankruptcy Code; (v) the motivation of the movant; (vi) the delay

 and additional cost of granting the motion; (vii) the tasks the committee is to perform;

 (viii) whether there appears to be a substantial likelihood that the second committee’s

 constituency will receive a meaningful distribution in the case; and (ix) any other

 relevant factors. See, e.g., In re Eastman Kodak Co., 2012 WL 2501071, slip op. at 1; In re

 Park West Circle Realty, LLC, No. 10-12965 (AJG), 2010 WL 3219531, at *2 (Bankr.

 S.D.N.Y. Aug. 11, 2010) (applying same standard to address creditor’s request to be

 added to an official committee); In re Williams Commc'ns, 281 B.R. at 220–21.

               12.    The U.S. Trustee’s decision to appoint the FPC is subject to de novo

 review by this Court. See, e.g., In re Enron Corp., 279 B.R. at 684 (reviewing de novo the

 decision not to appoint an additional committee); In re Williams Commc'ns, 281 B.R. at

 219-20 (“The bankruptcy court reviews the UST's decision de novo”); In re McLean

 Indus., Inc., 70 B.R. 852, 857-58 (Bankr. S.D.N.Y. 1987) (“Congress expressly retained in

 the bankruptcy courts the ability to decide de novo the question of whether additional

                                                8
12-12321-mg     Doc 539     Filed 10/10/12 Entered 10/10/12 18:49:39       Main Document
                                          Pg 9 of 16


 committees are necessary to assure adequate representation.”); In re Texaco Inc., 79 B.R.

 560, 566 (Bankr. S.D.N.Y. 1987) (rejecting application of “abuse of discretion” standard).

 B.     The FPC Cannot Show That The Extraordinary Remedy
        Of A Second Official Committee Is Necessary In This Case

               13.    Given the extraordinary nature of appointing a second official

 committee, the FPC cannot establish that an additional official committee is necessary

 for the adequate representation of Former Partners.

        i.     FPC Members Are Unlikely To Receive A
               Distribution On Account Of Their Claims

               14.    Two of the four members of the FPC have released any claims they

 may have against the estate as part of the PCP. The other two members are asserting a

 right to payment under the Retirement Plan. See Exhibit A to the Amended Verified

 Statement of Dorsey & Whitney LLP Regarding Representation of the Ad Hoc

 Committee. [Dkt. No. 490-1] (summary chart addressing proofs of claim filed by Bicks

 and MacRae). See also Flores Decl. Exhs. 2, 3 (including 1990 Plan and 2009 Amendment).

 Pursuant to Section 8.2(b) of the 2009 Amendment, benefits provided to Former

 Partners under the Retirement Plan were payable out of the Firm’s net income.

 Moreover, pursuant to Section 8.2(b) of the 2009 Amendment, unpaid benefits are

 forfeited and do not constitute an obligation of the Firm. See Flores Decl. Exh. 3 (“Any

 amounts not paid due to the 10% Cap [defined in 8.2(b)] shall be forfeited and shall

 cease to represent an obligation of the Firm under this Plan . . . .”).

               15.    Assuming that the FPC’s constituents have any allowable claims

 against the Debtor’s estate for retirement benefits (or right to payments under the

 Retirement Plan by reason of a special separation agreement, as in the case of former

 FPC members Campo and Kinzey), the Debtor believes such claims would be

 subordinated to what the Debtor estimates to be at least $500 million in allowed secured

                                               9
12-12321-mg      Doc 539    Filed 10/10/12 Entered 10/10/12 18:49:39         Main Document
                                         Pg 10 of 16


 and general unsecured claims. There is no dispute that these claims will not be paid in

 full.

         ii.    The Official Creditors Committee Represents
                The Interests Of The FPC’s Constituency

                16.   Whether or not Former Partners are to be paid pari passu with

 general unsecured creditors, the Official Creditors Committee adequately represents the

 interests of the FPC’s constituents -- to the extent those interests are those of creditors.

 See, e.g., In re Williams Commc'ns, 281 B.R. at 222-23 (finding that the creditors committee

 had “sufficiently aligned or parallel interests” with shareholders to preclude the need

 for an additional committee); In re Leap Wireless Int’l, Inc., 295 B.R. 135, 139-40 (Bankr.

 S.D. Cal. 2003) (“The economic interests of the bondholders and shareholders appear to

 be the same—that is, to find the highest realistic value for the company. And it is the

 fiduciary duty of the [Creditors’ Committee] to do so.”).

                17.   There is no dispute that counsel for the Official Creditors

 Committee is experienced and capable. [Dkt. No. 115, Exhibit A] (describing the

 experience and qualifications of counsel to the Official Creditors’ Committee); see also

 Flores Decl. Exh. 5 (Hr’g Tr. 152: 20-21, THE COURT: “Mr. Weisfelner is not known for

 leaving a dollar on the table.”). The FPC has not shown -- and cannot show -- why

 representation by counsel to the Official Creditors Committee is inadequate here.

         iii.   The Secured Lenders And The Official Creditors
                Committee Oppose The Existence Of The FPC

                18.   Courts are free to consider other factors, such as the desires of other

 constituencies in the case, when determining whether to permit a second official

 committee. The Secured Lenders are funding this case through the consensual use of

 cash collateral. The Official Creditors Committee has fiduciary duties to all unsecured



                                               10
12-12321-mg     Doc 539     Filed 10/10/12 Entered 10/10/12 18:49:39        Main Document
                                         Pg 11 of 16


 creditors. Both of these constituencies strongly support this Application to disband the

 FPC.

        iv.    The FPC Has Caused Administrative Costs to
               Skyrocket With Wasteful Litigation Tactics

               19.    The FPC has cost the stakeholders in this case much more than the

 estimated $779,000 in legal fees that the FPC has generated through August alone. See

 Flores Decl. Exh. 6. Rather than work for an efficient and fair resolution of this

 bankruptcy case, the FPC has aggressively sought to frustrate the Chapter 11 process.

 In approximately the last 60 days alone, the FPC:

               o      Sought the Appointment of an Examiner Despite Universal
                      Opposition from the Debtor’s True Stakeholders. (Compare
                      Statement of the FPC with Respect to Motion of Ad Hoc Committee
                      for Appointment of a Trustee or, in the alternative, for the
                      Appointment of an Examiner [Dkt. No. 348, at 2] with Objection of
                      the Official Creditors Committee to the Motion of Ad Hoc
                      Committee for Appointment of a Trustee or, in the alternative, for
                      the Appointment of an Examiner [Dkt. No. 392, at ¶ 7] (“The
                      Official Committee has investigated the Debtor’s pre- and post-
                      petition transactions and has been an active watch-dog over the
                      Debtor’s conduct. The Official Committee will continue to monitor
                      closely the Debtor’s management . . . .”))

               o      Objected to the Debtor’s Motion to Approve PCPs Despite
                      Widespread Support for the Motion. (Compare Objection of the
                      FPC to the PCP (the “PCP Objection”) [Dkt. No. 464] with Statement
                      of the Official Committee of Unsecured Creditors in Support of the
                      PCP [Dkt. No. 441, at ¶ 1] (“Approval of the Motion is a first and
                      important step in formulating and effectuating a consensual
                      chapter 11 plan that the Committee believes is the best and only
                      way to achieve a reasonably prompt, albeit meager, recovery for
                      unsecured creditors.”))


               20.    These positions (and subsequent actions taken by the FPC) have

 materially increased administrative costs. By way of example, prior to the hearings

 held on September 20 and 21, 2012 in connection with the PCP Settlement Motion, the

 FPC served burdensome discovery requests which required the production of


                                              11
12-12321-mg     Doc 539    Filed 10/10/12 Entered 10/10/12 18:49:39         Main Document
                                        Pg 12 of 16


 documents in a mere eight days, and the FPC served four deposition notices on the

 Debtor requiring that the Debtor’s key wind-down personnel and/or professionals sit

 for time-consuming depositions on extremely short notice. See Flores Decl. Exh. 7

 (discovery requests); Flores Decl. Exh. 8 (deposition notices). In response, the Debtor

 (along with its professionals) was forced to collect more than 70,000 pages of documents

 from multiple sources and to process and produce more than 22,000 pages on an

 expedited schedule. Additionally, the Debtor produced all requested deponents for

 testimony, which took two full days to complete.

               21.    This burdensome discovery diverted the attention of the Debtor’s

 key personnel and professionals from important goals in this bankruptcy case and

 likely increased administrative costs by more than $300,000.

               22.    And for what? The FPC introduced three exhibits at the hearing to

 consider the PCP Settlement Motion, and this Court denied both the Examiner Motion

 and the PCP Objections on October 9, 2012 (the “PCP Opinion”) [Docket No. 538]. This

 Court specifically found that the PCPs are “well above the lowest point in the range of

 reasonableness”; that “the Examiner Motion was filed for an improper purpose as a

 litigation tactic to try to derail approval of the PCPs”; and that the FPC “failed to offer

 evidence proving there was misconduct in the creation and negotiation of the PCPs.”

 PCP Opinion at p. 9, 17, 18.

               23.    When considering the substantial time all relevant parties

 dedicated to responding to the Examiner Motion, the PCP Objection, the PCP-related

 discovery, and preparing for contested evidentiary hearings, it is likely that the FPC’s

 recent actions cost this estate well in excess of $600,000 (but the FPC has not yet

 disclosed its legal fees for September 2012).



                                              12
12-12321-mg      Doc 539   Filed 10/10/12 Entered 10/10/12 18:49:39        Main Document
                                        Pg 13 of 16


                24.   Whatever that final expense turns out to be, the Court should not

 permit any further costs to be incurred on behalf of interests that do not warrant estate-

 funded representation and, in any event, are already adequately represented. See e.g., In

 re Agway, Inc., 297 B.R. 371, 374-75 (Bankr. N.D.N.Y. 2003) (refusing to appoint an

 additional committee because the additional expense was not warranted despite a

 proposed cap on attorneys’ fees); In re Trans World Airlines, Inc., No. 92-115, 1992 Bankr.

 LEXIS 1344, at *8 (Bankr. D. Del. Mar. 20, 1992) (multiple creditor committees “would

 create significant problems . . . and would needlessly burden the Debtor's estate with

 substantial additional administrative expenses”).

        v.      FPC Constituents Can Fully Participate In This Case
                Without Official Committee Status

                25.   If the FPC is disbanded, the Former Partners may continue to

 appear and be heard in their individual capacities or as a group on any issue in the case,

 as the Ad Hoc Committee has done. See 11 U.S.C. § 1109(b). The Former Partners are

 themselves highly accomplished lawyers, many of whom have already retained their

 own counsel to vigorously represent their interests. See e.g., Dkt. Nos. 146-149, 151, 153,

 154) (Notices of Appearance for various Former Partners).

        vi.     At Least Some Members Of The FPC
                Appear To Be Advancing Their Own Interests

                26.   Some members of the FPC appear to be abusing the “official

 committee” status to speak only for themselves individually or, at best, for a minority of

 Former Partners with retirement benefit “claims,” at the expense of the estate. FPC

 members Gill and Hirshfield -- along with approximately half of the FPC’s constituency

 -- signed and supported the PCPs. See Flores Decl. Exh. 4. Even Messrs. Campo and

 Kinzey in recent correspondence to the Court (Dkt. No. 527) expressed general support

 for the PCP.

                                             13
12-12321-mg     Doc 539     Filed 10/10/12 Entered 10/10/12 18:49:39          Main Document
                                         Pg 14 of 16


               27.    However, the PCP Settlement Motion was vigorously opposed by

 the FPC. The Debtor believes the opposition stemmed, at least in part, from the self-

 serving motives of Messrs. Bicks, MacRae, Kinzey and Campo -- who each received

 pension payments from the Firm while actively engaged in the practice of law, which

 was a special exception granted by the Firm. These lucrative arrangements mean that

 these four “fiduciaries” have material exposure to “claw back” actions that will likely be

 brought in the future. It is well established that committees appointed under section

 1102 of the Bankruptcy Code, such as the FPC, owe fiduciary duties to all of the

 committee's constituents. Those interests should not be ignored for the purpose of

 advancing individual interests -- which appears to be precisely what certain members

 did here. See, e.g., Official Comm. of Equity Security Holders of Adelphia Commc’ns Corp. v.

 Official Comm. of Unsecured Creditors of Adelphia Commc’ns Corp. (In re Adelphia Commc'ns

 Corp.), 544 F.3d 420, 424 n.1 (2d Cir. 2008) (citing In re Smart World Techs., LLC, 423 F.3d

 166, 175 n.12 (2d Cir. 2005)) (“[A] committee owes a fiduciary duty to the class it

 represents . . . . ”); ABF Capital Mgmt v. Kidder Peabody & Co., Inc. (In re Granite Partners,

 LP), 210 B.R. 508, 516 (Bankr. S.D.N.Y. 1997) (clarifying Committee does not owe duty to

 any specific creditor or any party other than entire class of creditors); In re Barney's,

 Inc., 197 B.R. 431, 442 (Bankr. S.D.N.Y. 1996) (“[T]he committee and its members have a

 fiduciary duty to all creditors represented by the committee.”); Johns-Manville Sales

 Corp. v. Doan (In re Johns-Manville Corp.), 26 B.R. 919, 924-25 (Bankr. S.D.N.Y. 1983)

 (concluding expansive, crucial duties of Committee toward creditors mandates

 members have “undivided loyalty and allegiance to constituents”).

               28.    While at the beginning of this bankruptcy case, the U.S. Trustee

 could not have predicted the FPC’s inappropriate actions, the FPC’s conduct warrants

 disbanding the committee now. See generally Flores Decl. Exh. 9 (U.S. Trustee objection

                                               14
12-12321-mg     Doc 539     Filed 10/10/12 Entered 10/10/12 18:49:39       Main Document
                                         Pg 15 of 16


 to Motion for entry of an Order Directing Appointment of an Official Committee of

 Former TWA Pilots, filed in In re AMR Corp., No. 11-15463 (SHL) (Bankr. S.D.N.Y. Feb.

 22, 2012) [Dkt. No. 1250] (“Only a committee whose members have an interest beyond

 their own should enjoy ‘official’ status.”)).

               29.    This Debtor should not be required to “pay the freight” for a

 dissident group determined to frustrate the Chapter 11 process with only one

 conceivable goal in mind: eliminating its liability as putative defendants in “claw back”

 actions that will likely be brought in the near future.

               30.    However, even if improper motives are not driving the FPC here, to

 the extent FPC members have legitimate creditor interests, those interests are

 adequately protected by the Official Creditors Committee in this case – – making a

 second official committee entirely unnecessary.

                                           NOTICE

               31.    Notice of this Application has been provided in accordance with

 this Court’s Administrative Order Establishing Case Management Procedures, dated

 May 30, 2012 [Dkt. No. 30]. In light of the nature of the relief requested, the Debtor

 submits that no further notice is necessary.


                                NO PRIOR APPLICATION

               32.    No previous application for the relief sought herein has been made

 to this or any other Court.




                                                 15
12-12321-mg     Doc 539     Filed 10/10/12 Entered 10/10/12 18:49:39   Main Document
                                         Pg 16 of 16




                                       CONCLUSION

               WHEREFORE, the Debtor respectfully requests entry of the order

 annexed hereto directing the U.S. Trustee to immediately disband the FPC, and such

 further and different relief as is just and proper.

 Dated: New York, New York
        October 10, 2012
                                            DEWEY & LEBOEUF LLP,
                                            By its Attorneys
                                            TOGUT, SEGAL & SEGAL LLP
                                            By:
                                            /s/ Albert Togut
                                            ALBERT TOGUT
                                            SCOTT E. RATNER
                                            STEVEN S. FLORES
                                            SAMANTHA J. ROTHMAN
                                            One Penn Plaza, Suite 3335
                                            New York, New York 10119
                                            (212) 594-5000




                                              16

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:67
posted:10/11/2012
language:Latin
pages:16