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Full title: Objection to Claim Number by Claimant Wind-Down Trustee's Second Omnibus Objection to Certain Proofs of Claim (Reclassified, Late-Filed, and No Liability Claims) Hearing scheduled for 10/6/2021 at 10:00 AM at telephone and video conference. (Attachments: # 1 Proposed Order)(Moak, Paul) (Entered: 08/20/2021)
Document posted on Aug 19, 2021 in the bankruptcy, 22 pages and 0 tables.
Bankrupt11 Summary (Automatically Generated)
Because of the large number of claims in these cases, the Wind-Down Trustee and the Liquidation Trustee sought and were granted approval to file omnibus objections to certain claims in accordance with the procedures set forth in the Order Approving Omnibus Claims Objection Procedures and Filing of Substantive Omnibus Claims Objections [Docket No. 1230]The Reviewing Parties have determined that each such claim should be reclassified in part or in its entirety as general unsecured claims because they do not meet the standards for priority treatment, as detailed herein.Additionally, priority claims for wages, salaries, or commissions may only be asserted by individuals or non-individual assignees of such claims.The Wind-Down Trustee objects to DRC Claim Nos. 335 and 386 identified on Schedule 2 to the Order (collectively, the “No Liability Claims”) because each of the relevant claims is unenforceable against the debtor and property of the debtor, see 11 U.S.C. § 502(b)(1), and was (a) filed without sufficient documentation to substantiate the claim asserted therein as required by Bankruptcy Rule 3001 and/or (b) failed to specify the asserted claim amount.In evaluating the Reclassified Claims, the Reviewing Parties have reviewed the Debtors’ books and records, the claim information provided by the Claims Agent, the relevant authorities, and the relevant proofs of claim and determined that each Reclassified Claims should be categorized in part or in their entirety as general unsecured claims.
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Document ContentsIN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION ) In re: ) Chapter 11 ) BJ SERVICES, LLC, et al.,1 ) Case No. 20-33627 (MI) ) Debtors. ) (Jointly Administered) ) WIND-DOWN TRUSTEE’S SECOND OMNIBUS OBJECTION TO CERTAIN PROOFS OF CLAIM (RECLASSIFIED, LATE-FILED, AND NO LIABILITY CLAIMS) THIS IS AN OBJECTION TO YOUR CLAIM. THIS OBJECTION ASKS THE COURT TO CATEGORIZE THE CLAIM THAT YOU FILED IN THIS BANKRUPTCY CASE AS A GENERAL UNSECURED CLAIM OR DISALLOW YOUR CLAIM. IF YOU DO NOT FILE A RESPONSE WITHIN 30 DAYS AFTER THE OBJECTION WAS SERVED ON YOU, YOUR CLAIM MAY BE RECLASSIFIED OR DISALLOWED WITHOUT A HEARING. A HEARING WILL BE CONDUCTED ON THIS MATTER ON OCTOBER 6, 2021 AT 10:00 A.M. COURTROOM 404, 515 RUSK 4TH FLOOR, HOUSTON, TEXAS 77002. PARTICIPATION AT THE HEARING WILL ONLY BE PERMITTED BY AN AUDIO AND VIDEO CONNECTION. AUDIO COMMUNICATION WILL BE BY USE OF THE COURT’S DIAL-IN FACILITY. YOU MAY ACCESS THE FACILITY AT (832) 917-1510. ONCE CONNECTED, YOU WILL BE ASKED TO ENTER THE CONFERENCE ROOM NUMBER. JUDGE ISGUR’S CONFERENCE ROOM NUMBER IS 954554. VIDEO COMMUNICATION WILL BE BY USE OF THE GOTOMEETING PLATFORM. CONNECT VIA THE FREE GOTOMEETING APPLICATION OR CLICK THE LINK ON JUDGE ISGUR’S HOME PAGE. THE MEETING CODE IS “JUDGEISGUR”. CLICK THE SETTINGS ICON IN THE UPPER RIGHT CORNER AND ENTER YOUR NAME UNDER THE PERSONAL INFORMATION SETTING. HEARING APPEARANCES MUST BE MADE ELECTRONICALLY IN ADVANCE OF BOTH ELECTRONIC AND IN-PERSON HEARINGS. TO MAKE YOUR APPEARANCE, CLICK THE “ELECTRONIC APPEARANCE” LINK ON JUDGE ISGUR’S HOME PAGE. SELECT THE CASE NAME, COMPLETE THE REQUIRED FIELDS, AND CLICK “SUBMIT” TO COMPLETE YOUR APPEARANCE. CLAIMANTS RECEIVING THIS OBJECTION SHOULD LOCATE THEIR NAMES AND CLAIMS ON SCHEDULE 1, SCHEDULE 2, or SCHEDULE 3 TO THE ORDER ATTACHED TO THIS OBJECTION. 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: BJ Services, LLC (3543); BJ Management Services, L.P. (8396); BJ Services Holdings Canada, ULC (6181); and BJ Services Management Holdings Corporation (0481). The Debtors’ service address is: 11211 Farm to Market 2920 Road, Tomball, Texas 77375.
1Scott A. Rinaldi, in his capacity as Trustee of the BJ Services Wind-Down Trust (the “Wind-Down Trustee”), and as the sole representative of the above-captioned debtors (collectively, the “Debtors”) respectfully represents as follows in support of this omnibus claims objection (this “Objection”), and submits the Declaration of Scott A. Rinaldi in Support of Wind-Down Trustee’s Second Omnibus Objection to Certain Proofs of Claim attached hereto as Exhibit A (the “Rinaldi Declaration”): Relief Requested 1. By this Objection, the Wind-Down Trustee seeks entry of the proposed order (the “Order”) attached hereto, pursuant to section 502(b) of title 11 of the United States Code (the “Bankruptcy Code”), rule 3007 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) and the Objection Procedures (as defined herein), (a) modifying and adjusting the claims identified on Schedule 1 to the Order (collectively, the “Reclassified Claims”), and (b) disallowing and expunging the claims identified on Schedule 2 (collectively, the “No Liability Claims”) and Schedule 3 (collectively, the “Late-Filed Claims”) to the Order. Jurisdiction, Venue, and Procedural Background 2. The United States Bankruptcy Court for the Southern District of Texas (the “Court”) has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. The Wind-Down Trustee confirms his consent, pursuant to Bankruptcy Rule 7008, to the entry of a final order by the Court in connection with this Objection to the extent that it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. 3. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
24. The bases for the relief requested herein are sections 105(a) and 502(b) of the Bankruptcy Code, Bankruptcy Rule 3007, and rules 9013-1 and 3007-1 of the Bankruptcy Local Rules for the Southern District of Texas (the “Local Rules”). 5. On July 20, 2020 (the “Petition Date”), each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. On the Petition Date, the Court entered an order [Docket No. 13] granting procedural consolidation and joint administration of these chapter 11 cases pursuant to Bankruptcy Rule 1015(b). No request for the appointment of a trustee or examiner has been made in these chapter 11 cases. On July 28, 2020, the United States Trustee for the Southern District of Texas (the “U.S. Trustee”) appointed an official committee of unsecured creditors pursuant to section 1102 of the Bankruptcy Code (the “Committee”) [Docket No. 199]. 6. A detailed description of the Debtors and their businesses and the facts and circumstances surrounding the Debtors’ chapter 11 cases are set forth in greater detail in the Declaration of Warren Zemlak, Chief Executive Officer of BJ Services, LLC, in Support of Chapter 11 Petitions and First Day Motions [Docket No. 22], filed contemporaneously with the Debtors’ voluntary petitions. 7. On November 6, 2020, the Court entered the Order Confirming the Debtors’ Combined Disclosure Statement and Joint First Amended Chapter 11 Plan [Docket No. 1093] (the “Confirmation Order”).2 The effective date for the Debtors’ Joint First Amended Chapter 11 Plan [Docket No. 1084] (the “Plan”) occurred on the same date.3 2 The Liquidation Trust Agreement and the Wind-Down Trust Agreement were among the documents contained in the Plan Supplement, which were expressly approved by the Confirmation Order. See Confirmation Order ¶ 6. 3 See Notice of (A) Entry of Order Confirming the Debtors’ Joint First Amended Chapter 11 Plan and (B) Occurrence of the Effective Date [Docket No. 1101].
38. Under the Plan and the Wind-Down Trust Agreement [Docket No. 1114], the Wind-Down Trustee was appointed sole representative of the Debtors and, on behalf of the Wind-Down Trust, is responsible for (among other things) resolving Administrative, Priority, and Other Secured Claims filed against the Debtors’ estates.4 Under the Plan and the Liquidation Trust Agreement [Docket No. 1119], the Liquidation Trustee, on behalf of the Liquidation Trust, is tasked with, among other things, filing and prosecuting objections to general unsecured claims.5 The Claims Reconciliation Process 9. On September 3, 2020, the Debtors filed their respective statements of financial affairs and schedules of assets and liabilities [Docket Nos. 569–576], pursuant to Bankruptcy Rule 1007 and the Order (I) Extending Time to File Schedules of Assets and Liabilities, Schedules of Current Income and Expenditures, Schedules of Executory Contracts and Unexpired Leases, and Statements of Financial Affairs, and (II) Granting Related Relief [Docket No. 271]. 10. On September 2, 2020, the Court entered an Order (I) Setting Bar Dates for Filing Proofs of Claim, Including Requests for Payment Under Section 503(b)(9), (II) Establishing Amended Schedules Bar Date and Rejection Damages Bar Date, (III) Approving the Form of and Manner for Filing Proofs of Claim, Including Section 503(b)(9) Requests, (IV) Approving Notice of Bar Dates, and (V) Granting Related Relief [Docket No. 547] (the “Bar Date Order”). Pursuant to the Bar Date Order, the Court, among other things, established October 2, 2020, at 5:00 p.m. (prevailing Central Time), as the deadline for all nongovernmental entities to file proofs of claim (the “General Bar Date”). The deadline for all governmental units to file proofs of claim was January 19, 2021, at 5:00 p.m. (prevailing Central Time). 4 See Plan, art. VI(F)(1); Wind-Down Trust Agreement, Art. 2.2. Anthony C. Schnur was originally appointed as Wind-Down Trustee and Scott A. Rinaldi was subsequently appointed Wind-Down Trustee pursuant to Article 2.6 of the Wind Down Trust Agreement. See Docket No. 1264. 5 See Plan, art. VI(F)(1); Liquidation Trust Agreement, Art. 3.3.
411. Approximately 745 proofs of claim have been filed against the Debtors, totaling over $940 million in the aggregate. Because of the large number of claims in these cases, the Wind-Down Trustee and the Liquidation Trustee sought and were granted approval to file omnibus objections to certain claims in accordance with the procedures set forth in the Order Approving Omnibus Claims Objection Procedures and Filing of Substantive Omnibus Claims Objections [Docket No. 1230] (the “Objection Procedures”). The Wind-Down Trustee and his advisors (collectively, the “Reviewing Parties”) have diligently reviewed the Claims, including any supporting documents filed therewith. For the reasons set forth below, and based on the review to date, the Reviewing Parties determined that the Claims should be reclassified or disallowed and expunged, in part or entirety, as set forth herein. Objection 12. Proofs of claim filed under section 501 are “deemed allowed, unless a party in interest . . . objects.” 11 U.S.C. § 502(a). A chapter 11 debtor has the duty to object to the allowance of any claim that is improper. See 11 U.S.C. § 1106(a)(1), 1107(a); Johnson v. Wasserman (In re Int’l Yacht & Tennis, Inc.), 922 F.2d 659, 661-62 (11th Cir. 1991). The possible grounds for disallowance of a proof of claim are listed in section 502(b) of the Bankruptcy Code. See 11 U.S.C. § 502(b)(1)–(9). 13. Bankruptcy Rule 3001(f) allocates the burden of proof for claims objections. As set forth in Bankruptcy Rule 3001(f), a properly executed and filed proof of claim constitutes prima facie evidence of the validity and the amount of the claim. See McGee v. O’Connor (In re O’Connor), 153 F.3d 258, 260 (5th Cir. 1998); In re Jack Kline Co. Inc., 440 B.R. 712, 737 (Bankr. S.D. Tex. 2010). This is a rebuttable presumption, however—a proof of claim loses the presumption of prima facie validity under Bankruptcy Rule 3001(f) if an objecting party refutes at least one of the allegations that are essential to the claim’s legal sufficiency. See Cal. State Board
5of Equalization v. Official Unsecured Creditors’ Comm. (In re Fidelity Holding Co.), 837 F.2d 696, 698 (5th Cir. 1988). Once such an allegation is refuted, the burden reverts to the claimant to prove the validity of its claim by a preponderance of the evidence. Id. Despite this shifting burden during the claim objection process, “the ultimate burden of proof always lies with the claimant.” Id. Furthermore, the burden of establishing whether an expense is entitled to administrative priority is on the claimant. In re Home Interiors & Gifts, Inc., No. 08-31961-11-BJH, 2008 WL 4772102 at *5 (Bankr. N.D. Tex. Oct. 9, 2008) (citing In re Kmart Corp., 290 B.R. 614, 621 (Bankr. E.D. Ill. 2003)); Toma Steel Supply, Inc. v. TransAm. Nat. Gas Corp. (In re TransAm. Nat. Gas Corp.), 978 F.2d 1409, 1416 (5th Cir. 1992) (the movant had the “burden of proving that its claim was for ‘actual, necessary costs and expenses to preserve the estate’…[a]fter the movant has established a prima facie case, the burden of producing evidence shifts to the objector; but the burden of persuasion, by a preponderance of the evidence, remains with the movant.”); see also Nabors Offshore Corp. v. Whistler Energy II, L.L.C. (In re Whistler Energy II, L.L.C.), 931 F.3d 432, 442 n. 2 (5th Cir. 2019) (“The creditor, of course, retains the burden to satisfy the administrative priority standard”); In re Buttes Gas & Oil Co., 112 B.R. 191, 193 (Bankr. S.D. Tex. 1989) (“The burden of proof is on the movant or applicant in establishing their entitlement to an award under 11 U.S.C. § 503(b) and they must demonstrate by a preponderance of the evidence that a substantial contribution was made.”). A. Reclassified Claims 14. Claims are objectionable when they are, among other things, “unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured. . . .” 11 U.S.C. § 502(b)(1). The Reclassified Claims assert either administrative priority under 11 U.S.C. § 503(b)(9) or priority under 11 U.S.C. § 507(a)(1), (4), (5), (7), or (8). The Reviewing Parties have determined that each
6such claim should be reclassified in part or in its entirety as general unsecured claims because they do not meet the standards for priority treatment, as detailed herein. 1. Administrative Expense Claims Under 11 U.S.C. § 503(b)(9) 15. Section 503(b)(9) of the Bankruptcy Code provides that a claim may qualify for administrative priority treatment if it is for the value of goods received by the debtor within 20 days prior to the commencement of the bankruptcy case if such goods were sold to the debtor in the ordinary course of business. 11 U.S.C. § 503(b)(9). The Uniform Commercial Code defines “goods” as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action.” Tex. Bus. & Com. Code § 2.10; see also Puerto Rico Elec. Power Authority v. Rentas (In re PMC Mktg. Corp.), 517 B.R. 386, 391 (B.A.P. 1st Cir. 2014) (“In the absence of a Code definition, nearly every court to consider the issue . . . has concluded that the meaning of ‘goods’ under § 503(b)(9) ‘is primarily informed by the meaning of goods under Article 2 of the UCC.’” (emphasis in original)) (citing cases). Claimants are not entitled to priority treatment under section 503(b)(9) for services rendered. In re Pilgrim’s Pride Corp., 421 B.R. 231, 237 n. 7 (Bankr. N.D. Tex. 2009). 16. Each of the Reclassified Claims asserting 503(b)(9) administrative priority6 are not entitled to such priority because they (a) are for services (i.e., not goods) and/or (b) do not relate to the value of good received by one of the Debtors within 20 days of the Petition Date (i.e., from June 30, 2020, through July 19, 2020). 6 DRC Claim Nos. 226, 390, 265, 211, 365, 287, 269, 371, 394, 283, 284, 296, 181, 417, 297, 282, 278, 410, 407, 435, and 216.
72. Priority Unsecured Claims Under 11 U.S.C. § 507(a) 17. In determining whether a general unsecured claim is afforded priority status under section 507 of the Bankruptcy Code, courts are “guided by the Bankruptcy Code’s objective of securing equal distribution among creditors.” Howard Delivery Serv., Inc. v. Zurich Am. Ins. Co., 547 U.S. 651, 653 (2006). Since “preference for claims not intended by Congress to have priority would dilute the value of the intended priority and thus frustrate the intent of Congress,” “priority should not be afforded unless it is founded on a clear statutory purpose . . . .” In re Jartran, Inc., 732 F.2d 584, 586 (7th Cir. 1984); see Howard Delivery Serv., Inc., 547 U.S. at 667 (citing Cramer v. Mammoth Mart, Inc. (In re Mammoth Mart, Inc.), 536 F.2d 950, 953 (1st Cir. 1976)). Statutory priorities are narrowly construed. Joint Indus. Bd. v. United States, 391 U.S. 224, 228 (1968); TransAm. Nat. Gas Corp., 978 F.2d at 1416; Trs. of Amalgamated Ins. Fund v. McFarlin’s, Inc., 789 F.2d 98, 100 (2d Cir. 1986); Mammoth Mart, 536 F.2d at 953. 3. Section 507(a)(1)—Domestic Support Obligations 18. Domestic support obligations are entitled to first priority in bankruptcy cases. See 4 Collier on Bankruptcy ¶ 507.02[a] (Richard Levin & Henry J. Sommer eds., 16th ed.). Such obligations are those that are “in the nature of alimony, maintenance, or support.” 11 U.S.C. § 101(14A); see In re Resendiz, No. 12-10603, 2013 WL 6152921 (Bankr. S.D. Tex. Nov. 20, 2013). 19. DRC Claim No. 189 asserting priority under section 507(a)(1) improperly does so because, rather than asserting a claim “in the nature of alimony, maintenance, or support,” the claim was filed by an entity for services provided by such entity to the applicable Debtor. The claim is not entitled to priority as a domestic support obligation, and must be reclassified as a general unsecured claim.
84. Sections 507(a)(4) and (a)(5)—Employee Claims 20. Employees are awarded fourth and fifth priority status pursuant to Congress’s recognition that the continued contribution of employee labor is integral to debtors experiencing financial difficulty and to alleviate the hardship on former employees caused by loss of income. See 4 Collier on Bankruptcy ¶ 507.06; In re Idearc Inc., 442 B.R. 513, 521 (Bankr. N.D. Tex. 2010) (“[Section 507(a)(4)] priority was designed to protect employees of financially distressed companies who might find themselves continuing to work but unpaid during the 180 days prior to their employer’s bankruptcy filing.”). In awarding priority to claims of employees, Congress made a “key distinction [ ] between those claimants who are truly engaged in a master/servant relationship with the debtor and those who are engaged in a contractual relationship with the debtor.” In re Grant Indus. Inc., 133 B.R. 514, 514–15 (Bankr. W.D. Mo. 1991). Congress “did not see fit” to provide the same priority to those who, instead of serving as employees, “provided goods and services to the debtor even though, in some cases, those businesses and independent contractors may be highly dependent upon the debtor for their economic livelihood.” Id. at 514. 21. Furthermore, priority amounts under sections 507(a)(4) and (5) are subject to a $13,650 cap. Amounts exceeding the cap are not entitled to priority and are only afforded status as general unsecured claims. See In re Univ. Gen. Hosp. Sys., Inc., No. 15–31086, 2015 WL 1542646, at *2 (Bankr. S.D. Tex. Mar. 31, 2015) (“The excess over the priority limit is a general unsecured claim which should share payment pro rata with other general unsecured claims”). a. 11 U.S.C. § 507(a)(4) 22. Additionally, priority claims for wages, salaries, or commissions may only be asserted by individuals or non-individual assignees of such claims. See 11 U.S.C. § 507(a)(4)(A) (providing for priority for such amounts “earned by an individual . . .”) (emphasis added); In re Bender Shipbuilding & Repair Co., Inc., No. 09–12616, 2013 WL 3546296, at *3 (Bankr. S.D.
9Ala. July 11, 2013); In re Wang Lab., Inc., 164 B.R. 404, 405 (Bankr. D. Mass. 1994); In re EcoSmart, Inc., No. 15–27139, 2015 WL 9274245, at *6 (Bankr. C.D. Cal. Dec. 18, 2015) (“11 U.S.C. § 507(a)(4) refers to “individuals,”… a limiting term to exclude artificial entities…”). 23. Claims for “wages, salaries, or commissions” are generally only awarded priority under 11 U.S.C. § 507(a)(4)(A) when asserted by employees of the debtor. See Gyalpo v. Holbrook Dev. Corp., 577 B.R. 629, 637 (E.D.N.Y. 2017); In re Trump Ent. Resorts, Inc., No. 14–12103, 2015 WL 1084294, at *5 (Bankr. D. Del. Mar. 9, 2015) (“Section 507(a)(4) is clearly meant to encompass employment-based compensation.”); In re Hinesley Fam. Ltd. P'ship No. 1, No. 10–61822, 2013 WL 4040756, at *3 (Bankr. D. Mont. Aug. 7, 2013) (“An employee seeking a priority for wages or salary must be a direct employee of the debtor and have a direct claim against the debtor arising from such employment. In determining whether an individual is an employee of the debtor, the court should look to state law.”) (quoting 4 Collier on Bankruptcy, ¶ 307.06[a] (16th ed.)). Independent contractors are only entitled to priority under 11 U.S.C. § 507(a)(4) if, during the 12 months preceding the petition date or cessation of the debtor’s business, at least 75 percent of the amount that the individual or corporation earned by acting as an independent contractor in the sale of goods or services was earned from the debtor. See 11 U.S.C. § 507(a)(4)(B). 24. While priority under section 507(a)(4) applies to vacation, severance, and sick pay, it does not extend to obligations that are not specifically identified as priority claims, like reimbursement of moving expenses. See Keim v. Growers Seed Ass’n, 49 B.R. 17 (Bankr. N.D. Tex. 1985). Additionally, in order for wages to be entitled to priority within the meaning of section 507(a)(4), they must have been earned within 180 days before the petition date. In re Idearc Inc., 442 B.R. 513, 520 (Bankr. N.D. Tex. 2010). The relevant date is the time that the services are performed, rather than the time the right to payment vests. Id.
1025. The Reclassified Claims asserting priority under section 507(a)(4)7 are not entitled to priority status because they are not either (a) asserted by (i) one of the Debtors’ current or former employees or (ii) an independent contractor that derived at least 75 percent of its business from the Debtors within the year preceding the Petition Date, or (b) asserted by an individual or a non-individual assignee of the claim. Most of the claims are for goods and services provided to the Debtors by third-party corporate vendors with contractual relationships with the Debtors. Such claims constitute ordinary trade claims not entitled to priority. b. 11 U.S.C. § 507(a)(5) 26. A claim will only qualify for priority under section 507(a)(5) if it is for a contribution to an employee benefit plan. See 11 U.S.C. § 507(a)(5). Employee benefit plans eligible for priority under section 507(a)(5) generally consist of (a) self-insured plans or (b) employer-maintained insurance programs. See 4 Collier on Bankruptcy ¶ 507.07 (Richard Levin & Henry J. Sommer eds., 16th ed.). 27. The Reclassified Claims asserting priority under section 507(a)(5)8 improperly do so because they are not for contributions to employee benefit plans, like pension plans, health insurance plans, and life insurance plans. Rather, such claims are for services provided by non-employees to the Debtors, which are not entitled to priority. 5. Section 507(a)(7)—Consumer Deposits 28. Section 507(a)(7) provides priority for allowed unsecured claims of individuals arising from the prepetition deposit of money with the debtor “in connection with the purchase, lease, or rental of property, or the purchase of services, for the personal, family, or household use of such individuals,” where such property or services were not delivered or provided. 7 DRC Claim Nos. 287, 257, 386, 371, and 296. 8 DRC Claim Nos. 51, 52, and 257.
1111 U.S.C. § 507(a)(7); 4 Collier on Bankruptcy ¶ 507.09; see In re Superior Air Charter, LLC, 627 B.R. 241, 248–254 (Bankr. D. Del. 2021) (discussing deposits made to a debtor and the requirements of establishing 507(a)(7) priority). The priority is capped at $3,025. 11 U.S.C. § 507(a)(7). 29. DRC Claim No. 471, asserting priority under section 507(a)(7), is improper because the claim does not stem from a prepetition deposit of money with the debtor in connection with the purchase, lease, or rental of property. The asserted bases for the claim are “Rent Allowance, and Early Termination Fees.” Neither the Debtors’ books and records, nor the claimant’s claim provide that a deposit was ever provided to the Debtors in any manner. Fees owed by a claimant to a third party non-debtor under a lease are not entitled to priority pursuant to section 507(a)(7). Because it is not entitled to priority status, the claim should be entirely reclassified as a general unsecured claim. 6. Section 507(a)(8)—Governmental Taxes 30. By its plain terms, 11 U.S.C. § 507(a)(8) only applies to claims of “governmental units.” The Bankruptcy Code defines “governmental unit” as the “United States” or a “State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States (but not a United States trustee while serving as a trustee in a case under this title), a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government.” 11 U.S.C. § 101(27). 31. The Reclassified Claims asserting priority status under section 507(a)(8)9 are not entitled to such priority because none of the claimants asserting Reclassified Claims are governmental units under the Bankruptcy Code. 9 DRC Claim Nos. 226, 265, 287, 269, 257, 297, and 310.
1232. Accordingly, the Wind-Down Trustee objects to the Reclassified Claims identified on Schedule 1 to the Order. As set forth herein and in the Rinaldi Declaration, the Reviewing Parties reviewed the Reclassified Claims and determined that the Reclassified Claims, as filed, do not properly assert a basis for classification as administrative expenses or priority claims. 33. Instead, the Wind-Down Trustee believes that each of the Reclassified Claims should be reclassified as general unsecured claims. The Wind-Down Trustee believes that this classification represents the appropriate classification for each respective Reclassified Claim, consistent with the Debtors’ books and records and/or from the information provided by the claimants. Failure to modify such claims could result in the relevant claimants receiving disparate treatment from other similarly situated creditors, even though such recovery is not warranted. B. Expunged Claims 1. Insufficient Documentation/No Liability 34. The Objection Procedures Order provides that “[n]otwithstanding anything to the contrary in the Bankruptcy Code and Bankruptcy Rules, and pursuant to Bankruptcy Rule 3007(c) and Bankruptcy Local Rule 3007-1 . . ., the Wind-Down Trustee . . . may file Omnibus Objections that include objections to claims on any basis provided for in Bankruptcy Rule 3007(d) . . . .” Objection Procedures Order at ¶ 1. Bankruptcy Rule 3007(d)(6) provides that an objection to more than one claim may be joined in an omnibus objection if the objections are based on the grounds that the claims should be disallowed because “they were presented in a form that does not comply with applicable rules, and the objection states that the objector is unable to determine the validity of the claim because of the noncompliance. . . .” Id. at 3007(d)(6). In turn, rule 3001(c)(1) provides that where a claim is based on a writing, “a copy of the writing shall be filed with the proof of claim.” Fed. R. Bankr. P. 3001(c)(1); see also In re High Standard Mfg. Co., Inc., No. 15-
1333794 (MI), 2016 WL 5947244, at *2 (Bankr. S.D. Tex. Oct. 13, 2016) (“Ultimately, a proof of claim must fulfill its ‘essential purpose of providing objecting parties with sufficient information to evaluate the nature of the claims.’”) (quoting In re Wyly, 552 B.R. 338, 378 (Bankr. N.D. Tex. 2016)). Accordingly, the Wind-Down Trustee may object to any claim based on a writing that does not include sufficient documentation to allow him to determine the validity of the claim. 35. Moreover, the Objection Procedures provide that the Wind-Down Trustee may file an omnibus objection to claims that “fail to specify the asserted claim amount (other than ‘unliquidated’).” Objection Procedures at ¶ 1(b). 36. The Wind-Down Trustee objects to DRC Claim Nos. 335 and 386 identified on Schedule 2 to the Order (collectively, the “No Liability Claims”) because each of the relevant claims is unenforceable against the debtor and property of the debtor, see 11 U.S.C. § 502(b)(1), and was (a) filed without sufficient documentation to substantiate the claim asserted therein as required by Bankruptcy Rule 3001 and/or (b) failed to specify the asserted claim amount. In addition, the Wind-Down Trustee has reviewed the Debtors’ books and records and, after reasonable efforts, has been unable to locate any records or information that would substantiate the validity of the No Liability Claims, whether in full or in part. The No Liability Claims, therefore, fail to provide prima facie evidence of the validity and amount of the claim they assert, as required by Bankruptcy Code section 502 and Bankruptcy Rule 3001(f). Further, the Debtors’ records indicate that they have no liability to those claimants. 37. Therefore, the Wind-Down Trustee respectfully requests that the Bankruptcy Court enter the Order disallowing and expunging the No Liability Claims identified on Schedule 2 to the Order.
142. Late-Filed Claims 38. Proofs of claim are objectionable if they are not timely filed. See 11 U.S.C. § 502(b)(9). The Wind-Down Trustee objects to the claims on Schedule 3 to the Order as late filed (collectively, the “Late-Filed Claims”). The Bar Date Order established a General Bar Date of October 2, 2020, at 5:00 p.m. (prevailing Central Time) for all nongovernmental entities. The Debtors’ claims and solicitation agent, Donlin, Recano & Company, Inc. (the “Claims Agent”), provided notice of the Bar Date Order in accordance with the procedures outlined therein. See Docket No. 612 and 742. The Debtors also caused notice of the General Bar Date to be published in the national edition of The New York Times. See Docket No. 615. The Bar Date Order provides that such notice “constitutes adequate and sufficient notice of [the General Bar Date] and satisfies the requirements of the Bankruptcy Code, the Bankruptcy Rules, and the Local Rules.” Bar Date Order at ¶ 15. 39. The Wind-Down Trustee objects to the Late-Filed Claims identified on Schedule 3 to the Order because the claims: (a) arose before the Petition Date, (b) were subject to the General Bar Date, and (c) were filed after the General Bar Date. Moreover, each claimant asserting a Late-Filed Claim was provided timely notice of the Bar Date Order in accordance with the procedures outlined herein and, therefore, had adequate notice of the General Bar Date. 40. Accordingly, the Wind-Down Trustee respectfully requests that the Bankruptcy Court enter the Order disallowing and expunging the Late-Filed Claims identified on Schedule 3 to the Order. Reservation of Rights 41. This Objection is limited to the grounds stated herein. Accordingly, it is without prejudice to the rights of the Wind-Down Trustee and/or the Liquidation Trustee to object to any claim on any ground whatsoever, and all rights to file further substantive or procedural objections
15are expressly preserved. Nothing contained herein or any actions taken pursuant to such relief is intended or should be construed as: (a) an admission as to the validity of any claim; (b) a waiver of any right of any Debtor, the Wind-Down Trust, the Wind-Down Trustee, the Liquidation Trust, or the Liquidation Trustee to dispute any claim on any grounds; (c) a promise or requirement to pay any claim; (d) an implication or admission that any particular claim is of a type specified or defined in this Motion or any order granting the relief requested in this Motion; (e) a request or authorization to assume any prepetition agreement, contract, or lease pursuant to section 365 of the Bankruptcy Code; or (f) a waiver of any right of any Debtor, the Wind-Down Trust, the Wind-Down Trustee, the Liquidation Trust, or the Liquidation Trustee under the Bankruptcy Code or any other applicable law. Compliance with the Objection Procedures and the Bankruptcy Rules 42. The Wind-Down Trustee respectfully states that the content of this Objection is in full compliance with the Bankruptcy Rules and the Objection Procedures. 43. The Wind-Down Trustee further respectfully states that notice and service of this Objection will be in full compliance with the Bankruptcy Rules for the following reasons: a. This Objection will be filed with the Court and served electronically upon (i) the affected claimant party set forth on each Proof of Claim subject to this Objection or their respective attorney of record, (ii) the U.S. Trustee, and (iii) parties that have filed a request for service of papers under Bankruptcy Rule 2002; b. With respect to service on claimants affected by this Objection, the Wind-Down Trustee will also serve each such claimant with a customized objection notice tailored, as appropriate, to address the particular creditor, claim, and objection;and c. This Objection will request that a hearing be set at least 30 days after filing this Objection.
16Separate Contested Matter 44. To the extent that a response is filed regarding any Claim and the Wind-Down Trustee is unable to resolve any such response, each such Claim and the Objection as it pertains to such Claim will constitute a separate contested matter as contemplated by Bankruptcy Rule 9014. Further, the Wind-Down Trustee requests that any order entered by the Court regarding an objection or other reply asserted in response to this Objection be deemed a separate order with respect to each proof of claim. Notice 45. Notice of the hearing on the relief requested in this Objection will be provided by the Wind-Down Trustee in accordance and compliance with Bankruptcy Rules 4001 and 9014, as well as the Local Rules, and is sufficient under the circumstances. Without limiting the forgoing, due notice was afforded, whether by facsimile, electronic mail, overnight courier or hand delivery, to parties in interest, including: (a) the Office of the U.S. Trustee for the Southern District of Texas; (b) the administrative agent under the Debtors’ prepetition asset-based revolving credit facility and counsel thereto; (c) the administrative agent under the Debtors’ prepetition term loan facility and counsel thereto; (d) the administrative agent under the Debtors’ prepetition real estate loan and counsel thereto; (e) the United States Attorney’s Office for the Southern District of Texas; (f) the Internal Revenue Service; (g) the Environmental Protection Agency and similar state environmental agencies for states in which the Debtors conduct business; (h) the state attorneys general for states in which the Debtors conduct business; (i) the United States Securities and Exchange Commission; (j) any party that has requested notice pursuant to Bankruptcy Rule 2002; and (k) any party whose proof of claim is being objected to via this Objection. The Wind-Down Trustee submits that, in light of the nature of the relief requested, no other or further notice need be given.
17WHEREFORE, the Wind-Down Trustee respectfully requests that the Court enter the Order, substantially in the form filed with this Objection, granting the relief requested herein and such other and further relief as is just and equitable. Houston, Texas August 20, 2021 /s/ Paul D. Moak GRAY REED & McGRAW LLP Jason S. Brookner (TX Bar No. 24033684) Paul D. Moak (TX Bar No. 00794316) Amber M. Carson (TX Bar No. 24075610) 1300 Post Oak Boulevard, Suite 2000 Houston, Texas 77056 Telephone: (713) 986-7127 Facsimile: (713) 986-5966 Email: firstname.lastname@example.org email@example.com firstname.lastname@example.org Counsel to Scott A. Rinaldi, Trustee of the BJ Services Wind-Down Trust Certificate of Service I certify that on August 20, 2021, I caused a copy of the foregoing document to be served by the Electronic Case Filing System for the United States Bankruptcy Court for the Southern District of Texas. /s/ Paul D. Moak Paul D. Moak
18Exhibit A Rinaldi Declaration
19IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION ) In re: ) Chapter 11 ) BJ SERVICES, LLC, et al.,1 ) Case No. 20-33627 (MI) ) Debtors. ) (Jointly Administered) ) DECLARATION OF SCOTT A. RINALDI IN SUPPORT OF WIND-DOWN TRUSTEE’S SECOND OMNIBUS OBJECTION TO CERTAIN PROOFS OF CLAIM (RECLASSIFIED, LATE-FILED, AND NO LIABILITY CLAIMS) I, Scott A. Rinaldi, hereby declare under penalty of perjury: 1. I am a Managing Director at Ankura Consulting Group, LLC (“Ankura”) and serve as the Trustee of the BJ Services Wind-Down Trust (the “Wind-Down Trustee”) and as the sole representative of the above-captioned debtors (the “Debtors”). 2. I submit this declaration (the “Declaration”) in support of the Wind-Down Trustee’s Second Omnibus Objection to Certain Proofs of Claim (the “Objection”), filed contemporaneously herewith.2 3. I have over 20 years of experience in providing strategic, operational, managerial, and financial solutions to distressed companies, as well as creditors in both in– and out–of–court restructurings. I have worked with financially distressed companies leading relevant workstreams, including, but not limited to, those relating to chapter 11 petitions, “first day” motions/orders, bankruptcy reporting, asset sales, the closure of stores, and assumption/rejection of leases. I have 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: BJ Services, LLC (3543); BJ Management Services, L.P. (8396); BJ Services Holdings Canada, ULC (6181); and BJ Services Management Holdings Corporation (0481). The Debtors’ service address is: 11211 Farm to Market 2920 Road, Tomball, Texas 77375. 2 Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Objection.
20served as plan administrator, trustee, and financial advisor in various insolvency proceedings. I have also managed and supervised various claims reconciliation and resolution processes, including managing and supervising debtor staff and other professionals in preparing all relevant claims analyses and reporting to efficiently and effectively resolve claims. Prior to joining Ankura in 2016, I was a managing director at FTI Consulting, Inc., a business advisory firm. 4. I am generally familiar with the Debtors’ former day-to-day operations, financing arrangements, business affairs, and books and records that reflect, among other things, the Debtors’ liabilities and the amount thereof owed to their creditors as of the Petition Date. All statements in this Declaration are based upon my personal knowledge, my review of relevant documents, or the review of relevant documents by individuals under my supervision, as detailed below. 5. I have read the Objection, and to the best of my knowledge, information, and belief, the assertions made in the Objection are accurate. 6. In evaluating the Reclassified Claims, the Reviewing Parties have reviewed the Debtors’ books and records, the claim information provided by the Claims Agent, the relevant authorities, and the relevant proofs of claim and determined that each Reclassified Claims should be categorized in part or in their entirety as general unsecured claims. I believe that the categorization of the Reclassified Claims on the terms set forth in the Objection is appropriate. 7. The Reviewing Parties determined that each of the Reclassified Claims identified on Schedule 1 to the Order do not accurately reflect the correct classification for each Proof of Claim according to the Debtors’ books and records and relevant authority. I understand that failure to reclassify the Reclassified Claims would result in the applicable claimants receiving recoveries they are not entitled to against the Debtors to the detriment of other similarly situated creditors.
21As such, I believe that the modification and reclassification of the Reclassified Claims on the terms set forth in the Objection and Schedule 1 is appropriate. 8. After reviewing the No Liability Claims identified on Schedule 2 to the Order and the Debtors’ books and records, the Reviewing Parties have determined that the No Liability Claims fail to provide sufficient documentation to substantiate the claims therein. Without supporting documentation, the Reviewing Parties were unable to determine the validity and amount of the No Liability Claims, even after carefully and diligently reviewing the Debtors’ books and records. Further, the Debtors’ books and records to not reflect any liability owing by the Debtors on account of the No Liability Claims. I understand that failure to disallow the relevant claims may result in the allowance and payment of invalid claims to the detriment of claimants with valid claims. As such, I believe that disallowing and expunging the No Liability Claims on the terms set forth in the Objection and Schedule 2 is appropriate. 9. Finally, the Reviewing Parties have determined that each Late-Filed Claim identified on Schedule 3 to the Order was not timely filed. I understand that each claimant asserting a Late-Filed Claim was provided timely notice of the Bar Date Order according to the procedures outlined therein and, therefore, had adequate notice of the General Bar Date. As such, I believe that disallowing and expunging the Late-Filed Claims on the terms set forth in the Objection and Schedule 3 is appropriate. Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the facts set forth in the foregoing Declaration are true and correct to the best of my knowledge, information, and belief. Dated: August 20, 2021 /s/ Scott A. Rinaldi Scott A. Rinaldi Wind-Down Trustee