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Full title: Joint Opposition of the Debtors and the Official Committee of Unsecured Creditors to the Motion of In One Ear LLC and Kathi P. Lentzch for Entry of Order Compelling Debtor to Assume or Reject Consulting Agreement (ECF No. 620) Filed by WILLIAM M. NOALL on behalf of GUMP'S BY MAIL, INC., GUMP'S CORP., GUMP'S HOLDINGS, LLC, THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS (Related document(s)620 Motion to Compel filed by Interested Party KATHI LENTZSCH, Interested Party IN ONE EAR LLC.) (NOALL, WILLIAM) (Entered: 05/20/2021)

Document posted on May 19, 2021 in the bankruptcy, 20 pages and 0 tables.

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In its order denying Ms. Lentzsch’s Motion for Entry of Order Compelling Debtor 23 to Assume or Reject Consulting Agreement (“Order Denying MTC”), the Court ruled: “Lentzsch 24 therefore lacks standing under Section 365(d)(2) to compel Debtors to assume or reject the 25 Consulting Agreement.”On December 11, 2020, the Court entered its Order on Motion of Defendant Kathi 8 Lentzsch to (A) Stay Adversary Proceeding Pending Arbitration; or, Alternatively, (B) Compel a 9 More Definitive Statement Pursuant to FRCP Rule 12(e), wherein the Court granted Lentzsch’s 10 motion for a stay of the Adversary Proceeding as against Lentzsch, pending completion of 11 mediation and arbitration pursuant to arbitration provisions of Section 15 of the Consulting 12 Agreement.On March 22, 2021, the Court issued an order denying the Lentzsch Motion on the 24 ground that Lentzsch did not have standing under Section 365(d)(2) of the Bankruptcy Code to 25 seek an order compelling assumption or rejection of the Consulting Agreement, because Ms. 26 27 5 Case No. 18-14683-mkn, ECF No. 76, p. 12; Case No. 18-14684-mkn, ECF No. 48, p. 317; Case No. 18-14685-mkn, ECF No. 40, p. 364. 9 The Supreme Court’s construction of arbitration agreements set forth within larger Container 10 Contracts as severable from the same is in line with this Circuit’s construction of 11 U.S.C. § 365, 11 which permits severable contracts set forth in larger Container Contracts to be rejected or assumed 12 separately.3 WHEREFORE, for the foregoing reasons and in consideration of the above authority, the 4 Debtors and the Committee respectfully requests that the Court: (1) deny the Motion in its entirety 5 as the Consulting Agreement is not an executory contract; (2) find that Ms. Lentzsch has waived 6 their right to arbitration; and (3) grant any further relief the Court deems necessary or appropriate.

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1 Samuel A. Schwartz, Esq. 2 Nevada Bar No. 10985 Athanasios E. Agelakopoulos, Esq. 3 Nevada Bar No. 14339 Emily D. Anderson, Esq. 4 Nevada Bar No. 13814 601 East Bridger Avenue 5 Las Vegas, NV 89101 6 Telephone: 702.385.5544 Facsimile: 702.385.2741 7 Attorneys for The Official Committee of Unsecured Creditors 8 and 9 GARMAN TURNER GORDON LLP WILLIAM M. NOALL 10 Nevada Bar No. 3549 E-mail: wnoall@gtg.legal 11 GABRIELLE A. HAMM Nevada Bar No. 11588 12 E-mail: ghamm@gtg.legal 7251 Amigo Street, Suite 210 13 Las Vegas, Nevada 89119 Telephone (725) 777-3000 14 Facsimile (725) 777-3112 15 Attorneys for Debtors 16 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEVADA 17 In re: Case No.: 18-14683-MKN 18 Chapter 11 GUMP’S HOLDINGS, LLC, 19 Affects this Debtor. Jointly administered with: 20 Affects all Debtors. Case No.: 18-14684-MKN (In re Gump’s Corp); 21 Case No.: 18-14685-MKN (In re Gump’s By Mail, Inc.) In re: 22 GUMP’S CORP., 23 Affects this Debtor. 24 In re: Hearing Date: June 3, 2021 GUMP’S BY MAIL, INC., 25 Hearing Time: 9:30 a.m. Affects this Debtor. 26 JOINT OPPOSITION OF THE DEBTORS AND THE OFFICIAL COMMITTEE OF 27 UNSECURED CREDITORS TO THE MOTION OF IN ONE EAR LLC AND 28 KATHI P. LENTZSCH FOR ENTRY OF ORDER COMPELLING DEBTOR TO ASSUME OR REJECT CONSULTING AGREEMENT (ECF NO. 620)

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1 2 Inc. (“Direct,” and, together with Holdings and Retail, the “Debtors”) and the Official Committee 3 of Unsecured Creditors (the “Committee”) appointed in the Debtors’ above-captioned chapter 11 4 cases, each by and through their respective counsel of record, Schwartz Law, PLLC for the 5 Committee and Garman Turner Gordon LLP for Debtors, hereby file their opposition (the 6 “Opposition”) to the Motion of In One Ear LLC and Kathi P. Lentzsch for Entry of Order 7 Compelling Debtor to Assume or Reject Consulting Agreement (ECF No. 620) (the “Motion”) 8 filed by Kathi P. Lentzsh (“Movant or Lentzsch”) and In One Ear LLC (“Movant or IOE” and, 9 together with Lentzsch, the “Movants”). For the reasons set forth below, Debtors and the 10 Committee respectfully submit that the Opposition should be sustained, and the Motion should be 11 denied. In support of the Opposition, Debtors and the Committee respectfully state and represent 12 as follows:1 13 I. INTRODUCTION. 14 1. Movants intentionally conflate the purported rights and obligations of Ms. Lentzsch 15 and IOE to obscure the fact that neither has standing to prosecute this Motion. Indeed, this Motion 16 must fail for the same reason that Ms. Lentzsch’s original motion failed: Movants lack standing 17 to obtain the relief they seek. (See Docket Nos. 563, 607). Standing embraces two constituent 18 components: (i) standing under Article III of the U.S. Constitution’s case or controversy 19 requirement, and (ii) so-called “statutory standing” or, put somewhat differently, whether a given 20 movant or plaintiff falls within a statute’s zone of interests by belonging to the class of persons 21 encompassed by a federal statute as either beneficiaries or those who may seek relief thereunder. 22 2. In its order denying Ms. Lentzsch’s Motion for Entry of Order Compelling Debtor 23 to Assume or Reject Consulting Agreement (“Order Denying MTC”), the Court ruled: “Lentzsch 24 therefore lacks standing under Section 365(d)(2) to compel Debtors to assume or reject the 25 Consulting Agreement.” (See ECF No. 607, pg. 3 of 4). This Court, therefore, has already ruled 26 that Ms. Lentzsch does not have standing to invoke 11 U.S.C. § 365(d)(2) because she is not a 27 1 The Committee also joins in the arguments set forth in the Debtors’ Opposition to the Motion for the reasons 28 stated therein, the papers and pleadings on file herein, and any oral argument that the Court may entertain at the time

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1 2 by that statute as she does not fall within the class of persons whose interests the statute was 3 intended by Congress to protect. See id. Because Lentzsch lacks statutory standing under 11 4 U.S.C. § 365(d)(2), any potential impact from this Court’s disposition of the Motion for standing 5 purposes must take into consideration only the interests of, and impact(s) upon (if any), IOE. 6 3. Nonetheless, Movants have erroneously included Lentzsch as a party to this Motion 7 despite the fact that she has no standing and failed to appeal the Order Denying MTC under 28 8 U.S.C.§ 158(a)(1). The Court’s disposition of the Lentzsch’s prior motion constituted a separately 9 appealable, discrete, and independent proceeding encompassed by 28 U.S.C. § 158(a)(1) and, 10 therefore, was immediately appealable as of right under that statute. As the time to appeal has 11 passed, the Order Denying MTC is final. As such, Ms. Lentzsch’s lack of standing is law of the 12 case and the Motion must be denied as to Ms. Lentzsch. 13 4. IOE also has a standing problem that mandates denial of the Motion. Indeed, IOE 14 is not a party to the Adversary Proceeding2 and no arbitration has been initiated against it. As 15 presented, IOE has not suffered any injury this Court can redress, and only Lentzsch stands to 16 benefit from the Court’s resolution of the Motion. Thus, while Lentzch’s standing fails under 11 17 U.S.C. § 365(d)(2), IOE’s fails under Article III. 18 5. The Motion is also fatally defective because the Consulting Agreement terminated 19 in January of 2017 (or, under Movants’ argument, December 2017 at the latest). A contract that 20 expired by its own terms pre-petition is not executory and may not be assumed or rejected. 21 6. Further, the Consulting Agreement may not be assumed or rejected because it does 22 not meet the definition of an executory contract contemplated by Section 365 of the Bankruptcy 23 Code—Indeed, there are no material obligations left for either party that, if unperformed, would 24 excuse the performance of the other party. Put simply, not every alleged or potential breach of a 25 contractual provision excuses the non-breaching party’s performance, especially when the central 26 27 2 As plead in the Complaint and discussed in the Opposition to the Motion to Compel Arbitration, Ms. Lentzsch had fiduciary obligations to the Debtors Retail and Direct by operation of law, separate and apart from the Interim 28 CEO Consulting Agreement with Debtor Holdings. See Case No. 20-01085-mkn (Gump’s v. Lopez, et al.) (the

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1 2 terminated in 2017. Thus, because the parties fully performed on the material obligations 3 comprising the Consulting Agreement, such that performance could not and would not be excused, 4 the Consulting Agreement does not meet the definition of executory and the Motion must be 5 denied. 6 7. Finally, the Arbitration Provision is severed by operation of law as a separate 7 executory contract (subject to rejection under the Plan in its own right) from the Consulting 8 Agreement and, therefore, cannot form a basis upon which the Consulting Agreement itself is 9 deemed executory. The arbitration clause qualifies as a severed executory contract rejected by 10 operation of 11 U.S.C. § 365(g)(1) and section 6.1 of Debtors’ Plan on the Effective Date of the 11 Plan. 12 II. RELEVANT FACTS. 13 8. Lentzsch began her services to the Debtors in October 2016. On October 3, 2016, 14 Ms. Lentzsch, on behalf of IOE, executed the Interim CEO Consulting Agreement (the 15 “Consulting Agreement”) with Debtor Holdings.3 16 9. Lentzsch was compensated weekly under the Consulting Agreement. (Id. at Sec. 17 3). 18 10. The Consulting Agreement’s term ended on January 27, 2017 or, at the latest, in 19 December 2017—either way, it was terminated prepetition. (Id. at Sec. 2). 20 III. PROCEDURAL BACKGROUND. 21 11. Each of the Plaintiffs filed a voluntary petition on August 3, 2018, in the United 22 States Bankruptcy Court for the District of Nevada, commencing the Bankruptcy Case4 under 23 Chapter 11 of the Bankruptcy Code, to which the Adversary Proceeding relates. 24 12. The deadline by which creditors were required to file proofs of claim was October 25 2, 2018. The deadline for filing proofs of claim by governmental units was January 30, 2019. Both 26 27 3 See Consulting Agreement, at Docket No. 562-2. 28 4 See Case No. 18-14863-mkn (Holdings); Case No. 18-14864-mkn (Retail); and Case No. 18-14865-mkn

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1 2 the Consulting Agreement was not listed in any of the bankruptcy cases as an executory contract.5 3 13. Despite Gump’s having given notice, Movants have failed to file a proof of claim 4 in any of the Debtors’ cases.6 The Adversary Proceeding was commenced on August 1, 2020, 5 pursuant to Rule 7001, et seq. of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy 6 Rules”). 7 14. On December 11, 2020, the Court entered its Order on Motion of Defendant Kathi 8 Lentzsch to (A) Stay Adversary Proceeding Pending Arbitration; or, Alternatively, (B) Compel a 9 More Definitive Statement Pursuant to FRCP Rule 12(e), wherein the Court granted Lentzsch’s 10 motion for a stay of the Adversary Proceeding as against Lentzsch, pending completion of 11 mediation and arbitration pursuant to arbitration provisions of Section 15 of the Consulting 12 Agreement. (Case No. 20-01085-MKN, Docket No. 60). 13 15. On January 6, 2021, Ms. Lentzsch filed a separate motion seeking the same relief 14 requested herein, and the Debtors and the Committee filed opposition to Ms. Lentzsch’s motion. 15 Docket No. 562. 16 16. On March 5, 2021, Debtors filed Debtors’ Joint Plan of Liquidation (as Revised) 17 (the “Plan”). (Case No. 18-14683, ECF No. 585). Section 6.1 of the Plan provides as follows: 18 Executory Contracts. Except for Executory Contract and Unexpired Leases specifically addressed in this Plan, assumed pursuant to prior 19 order of the Bankruptcy Court, or set forth on the schedule of Assumed Executed Contracts and Unexpired Leases attached as Schedule 6.1 20 hereto (which may be supplemented and amended up to the Confirmation Date), all Executory Contracts and Unexpired Leases that 21 exist on the Confirmation Date shall be deemed rejected by Debtors on the Effective Date. 22 (See id. at pg. 25 of 31, § 6.1) (emphasis added). 23 17. On March 22, 2021, the Court issued an order denying the Lentzsch Motion on the 24 ground that Lentzsch did not have standing under Section 365(d)(2) of the Bankruptcy Code to 25 seek an order compelling assumption or rejection of the Consulting Agreement, because Ms. 26 27 5 Case No. 18-14683-mkn, ECF No. 76, p. 12; Case No. 18-14684-mkn, ECF No. 48, p. 317; Case No. 18-14685-mkn, ECF No. 40, p. 364. 28 6

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1 2 of 4). On April 26, 2021, the Movants filed the Motion, which requests the same relief as ECF 3 No. 562 but adds IOE as a Movant. 4 18. On April 29, 2021, the Court (i) approved the Disclosure Statement Concerning 5 The Debtors’ Joint Plan Of Liquidation (as Revised) and (ii) confirmed Debtors’ Second Amended 6 Joint Plan Of Liquidation (as Revised). A proposed form of confirmation order confirming the 7 Plan has been lodged with the Court. 8 IV. LEGAL ARGUMENT. 9 A. MOVANTS LACK STANDING TO PROSECUTE THIS MOTION. 10 19. As explained above, to establish their own, independent standing to seek the relief 11 requested in the Motion, Movants must establish both (i) standing under Article III of the U.S. 12 Constitution’s case and controversy requirement, and (ii) so-called “statutory standing” or, put 13 somewhat differently, whether a given movant or plaintiff falls within a statute’s zone of interests 14 by belonging to the class of persons encompassed by a federal statute as either beneficiaries or 15 those who may seek relief thereunder. See, e.g. In re Jackson, 451 B.R. 24, 27-28 (Bankr. E.D. 16 Cal. 2011) (citations omitted); see also Bank of N.Y. Mellon v. 2298 Driftwood Tide Trust (In re 17 Barrett), 833 Fed. Appx. 668, 670 (9th Cir. Oct. 28 2020) (applying the zone of interests test from 18 Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 129 (2014) in the context of 19 bankruptcy litigation under the automatic stay) (citing Sierra Club v. Trump, 929 F.3d 670, 700 20 (9th Cir. 2019)). 21 20. The Court’s prior Order Denying MTC is dispositive as to Lentzsch on the discrete 22 issue of her lack of statutory standing under 11 U.S.C. § 365(d)(2) – purely an issue or question of 23 law. The Opposition must be sustained and the Motion must be denied as to Lentzsch on this basis 24 alone. The Order Denying MTC was never appealed or challenged and became final on direct 25 review. See Ritzen Grp., Inc. v. Jackson Masonry, LLC, ___U.S. ___, 140 S. Ct. 582, 589-590 26 (2020); see also FED.R. BANKR. P. 6006(a) and 9014. 27 21. Therefore, under governing law, Lentzsch’s lack of statutory standing to prosecute 28 this Motion is the law of this case. Pursuant to the law of the case doctrine “a court is generally

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1 2 the identical case.” Milgard Tempering v. Selas Corp. of Am., 902 F.2d 703, 715 (9th Cir. 1990); 3 accord FDIC v. Kipperman (In re Commer. Money Ctr., Inc.), 392 B.R. 814, 832-33 (B.A.P. 9th 4 Cir. 2008). “The law-of-the-case doctrine generally provides that when a court decides upon a 5 rule of law, that decision should continue to govern the same issues in subsequent stages in the 6 same case.” See, e.g., Mussacchio v. United States, ___ U.S. ___, 136 S. Ct. 709, 716 (2021) 7 (citations and internal quotations omitted); see also Thomas v. Bible, 983 F.2d 152, 154 (9th Cir. 8 1992 (formulating the law of the case doctrine to precluding consideration of previously decided 9 issues). Accordingly, any rights or obligations attributed specifically to Lentzsch, or any potential 10 benefit from this Court’s adjudication of the Motion flowing to Lentzsch must be disregarded for 11 purposes of this Motion. 12 22. Similarly, IOE does not have standing under Article III to prosecute this Motion. 13 Article III standing requires (i) an injury in fact that is particularized and concrete, (ii) that is 14 caused or fairly traceable to the defendant, and (iii) that is redressable through the federal court’s 15 determination and judgment. See, e.g., Lujan v. Defs. of Wildlife, 504 U.S. 555, 561, 112 S. Ct. 16 2130, 2136 (1992) (“[I]t must be likely, as opposed to merely speculative, that the injury will be 17 redressed by a favorable decision.”) (internal quotations omitted). 18 23. Once the rights and obligations of Ms. Lentzsch and IOE lacks are untangled, it 19 becomes clear that IOE does not have Article III standing because it has not alleged, let alone 20 established the presence of, any of the elements of standing under Article III. The provisions 21 emphasized by Movants demonstrate IOE does not have a redressable injury. 22  Confidentiality: “Lentzsch has entered into a Confidentiality Agreement with the Company, which is attached as Exhibit A to 23 this Agreement.” Notably, “The Consultant, on behalf of itself and its members, covenants and agrees that it shall not, at any time 24 during or after termination of this Agreement . . . .”7 25 24. This provision does not give IOE a redressable injury because it has not been 26 injured by the inability to divulge confidential conformation. Accordingly, it is difficult to imagine 27 how IOE could be injured or how the Court would redress such an injury by granting the Motion. 28 7

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1 2 Holdings assumed or rejected it, the obligation to keep this information confidential would remain. 3  Indemnification: “The Company shall, to the maximum extent permitted by law and its corporate governing documents, 4 indemnify and hold the Consultant and its managing member Lentzsch . . . harmless . . . .” Further, “[t]his indemnification 5 obligation shall survive the termination of Consultant's engagement with the Company and this Agreement.”8 6 25. This provision does not give IOE a redressable injury because it has not been 7 injured by Holdings’ purported obligation to indemnify IOE from an Adversary Proceeding to 8 which it is not a party. Accordingly, unless and until IOE is named in a lawsuit that is not covered 9 by insurance that it must pay to defend, IOE has not been injured and there is nothing for the Court 10 to redress. Further, because the provision cited above survives termination according to Movants, 11 whether Holdings assumed or rejected it, the purported obligation to indemnify IOE would remain. 12  D & O Insurance: “The Company shall obtain and maintain in 13 effect liability insurance coverage for Consultant and Lentzsch . . .” “both during the Term of Consultant's engagement and 14 thereafter while potential liability exists.”9 15 26. This provision does not give IOE a redressable injury because it has not been 16 injured by Holdings following through on its contractual obligation to purchase D & O Insurance 17 and then Holdings renewing said D & O Insurance during the course of the Bankruptcy Case. 18 Accordingly, unless and until IOE is named in a lawsuit that is not covered by insurance that it 19 must pay to defend, IOE has not been injured through any alleged conduct cause or fairly traceable 20 to Debtors, and, furthermore, there is nothing for the Court to redress. Further, because the 21 provision cited above survives termination according to Movants, whether Holdings assumed or 22 rejected it, the obligation to continue renewing the policy would remain. 23  Arbitration: “Any dispute or claim relating to or arising out of this Agreement (between the Parties or its employees or members, 24 who are deemed third party beneficiaries of this arbitration provision) . . . .”10 25 26 27 8 Id. at Sec. 10. 9 Holdings Operating Agreement at Sec. 10. 28 10

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1 2 or arbitration as to IOE in this case. Notably, this provision does not survive termination. Further, 3 the Arbitration Provision at best constitutes an independent, severable executory contract slated to 4 be rejected on the effective date of the Plan, thereby excusing any obligation of specific 5 performance from Debtors, any estate representative under 11 U.S.C. §§ 323 and 1123(b)(3)(B) 6 (as otherwise appropriate) or there successor(s) under the confirmed Plan. 7  Attorneys’ Fees and Costs: “Should any Party institute any action or proceeding to enforce this Agreement or any provision 8 hereof . . . .”11 9 28. This provision does not give IOE a redressable injury because it has not been 10 required to expend any attorneys’ fees or costs. IOE is not a party to the Adversary Proceeding, 11 and IOE will not be affected by Holdings potential rejection of the Consulting Agreement. 12 Accordingly, unless and until IOE is named in a lawsuit that is not covered by insurance that it 13 must pay to defend, IOE has not been injured and there is nothing for the Court to redress. Further, 14 should the Court determine that the Consulting Agreement and the Arbitration Provision are 15 executory contracts, they will be rejected on the effective date of the Plan. 16  Execution of Additional Documents: “During and after the term of this Agreement, Consultant shall, upon Company's request” 17 however, “to the extent Consultant does not do so, Consultant hereby authorizes officers of Company to sign such documents 18 on Consultant's behalf.12 19 29. This provision does not give IOE a redressable injury because it contains a remedy 20 that allows Holdings to bypass IOE; thus, it is an illusory obligation and cannot cause a redressable 21 injury. Further, because the provision cited above survives termination according to Movants, 22 whether Holdings assumed or rejected it, the ability of Holdings to execute documents pursuant to 23 the foregoing section remains. Accordingly, IOE has not been injured and there is nothing for the 24 Court to redress. 25 30. As the foregoing analysis demonstrates, IOE cannot establish standing under 26 Article III. At best, any request by IOE is not yet ripe for the Court’s consideration; at worst, IOE 27 11 Id. at Sec. 18. 28 12

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1 2 on IOE for the sole benefit of IOE’s principal, Lentzsch. Therefore, the Motion should be denied 3 due to IOE’s lack of Article III standing and lack of statutory standing for Lentzch under 11 U.S.C. 4 § 365(d)(2). 5 B. THE CONSULTING AGREEMENT EXPIRED BY ITS OWN TERMS PREPETITION. 6 31. Section 365 of the Bankruptcy Code provides: “[e]xcept as provided in . . . 7 subsections (b), (c), and (d) of this section, the trustee, subject to the court’s approval, may assume 8 or reject any executory contract or unexpired lease of the debtor.” 11 U.S.C. § 365(a). The first 9 necessary step in employing Section 365 for the purpose of rejection or assumption is determining 10 if the Consulting Agreement is executory. 11 32. Longstanding bankruptcy law provides that once a contract has expired by its own 12 terms, it is not executory and not subject to assumption to rejection under Section 365 of the 13 Bankruptcy Code. See In re Texscan Corp., 107 B.R. 227, 230 (B.A.P. 9th Cir. 1989), aff’d, 976 14 F.2d 1269 (9th Cir. 1992) (“It is axiomatic that before 11 U.S.C. § 365 can apply a contract must 15 exist.”). Indeed, “[c]ontracts that expire by their own terms before a § 365(a) motion is brought 16 or a plan of reorganization providing for assumption is confirmed cannot be assumed because there 17 is nothing left to assume . . . Thus, such contracts are not executory.” Id.; accord In re 47 Hops 18 LLC, No. 17-02440-WLH11, 2020 WL 2485808, at *4 (Bankr. E.D. Wash. May 13, 2020) 19 (“Bankruptcy law does not generally revive contracts that have expired or been terminated 20 pursuant to their own terms.”); In re Jaytee LLC, No. AP 16-00723, 2017 WL 1653153, at *4 21 (Bankr. N.D. Ill. May 1, 2017) (“there is no right to assume a contract which has expired by its 22 own terms. Also, there is no point in assuming a contract the performance of which is impossible”) 23 (quoting In re Mellen, 79 B.R. 385, n.1 (Bankr, N.D. Ill. 1987)). “[W]here the executory contract 24 expires by its own terms during the . . . pre-assumption/rejection period the debtor-in-possession 25 has nothing to assume or reject.” In re Jaytee, 2017 WL 1653153, at *4 (citing In re Nat’l Steel 26 Corp., 316 B.R. 287, 304 (Bankr. N.D. Ill. 2004)). 27 33. Here, the Consulting Agreement unambiguously expired on January 27, 2017 and 28 IOE has provided no written modification, amendment, or extension that alters the explicit

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1 2 Agreement still expired prepetition. The universally accepted bankruptcy authority controlling 3 this issue forecloses the possibility of treating the Consulting Agreement as an executory contract. 4 Thus, the Motion fails and must be denied. 5 C. THE CONSULTING AGREEMENT IS NOT EXECUTORY WITHIN THE MEANING OF SECTION 365 OF THE BANKRUPTCY CODE. 6 34. Even if the Consulting Agreement did not expire by its own terms, it fails to meet 7 the definition of an executory contract for purposes of Section 365. “Although the Bankruptcy 8 Code contains no definition of an executory contract, the Ninth Circuit has adopted the 9 Countryman Test: a contract is executory if the obligations of both parties are so far unperformed 10 that the failure of either party to complete performance would constitute a material breach and 11 thus excuse the performance of the other.” In re Ehmann, 319 B.R. 200, 203–04 (Bankr. D. 12 Ariz. 2005) (emphasis added) (internal quotes omitted) (citing Unsecured Creditors’ Comm. v. 13 Southmark Corp. (In re Robert L. Helms Constr. and Dev. Co., Inc.), 139 F.3d 702, 705 (9th Cir. 14 1998) (Southmark); accord In re Gencor Indus., Inc., 298 B.R. 902, 909 (Bankr. M.D. Fla. 2003) 15 (“[A]n executory contract is a contract under which the obligation of both the bankrupt and the 16 other party to the contract are so far unperformed that the failure of either []to complete 17 performance would constitute a material breach excusing the performance of the other. Thus, 18 unless both parties have unperformed obligations that would constitute a material breach if not 19 performed, the contract is not executory”). 20 35. In this context, for the Consulting Agreement “to be executory there would . . . have 21 to be some material obligation owing to the [counterparty].” Ehmann, 319 B.R. at 204. Further, 22 “such [counterparty]’s obligation must be so material that if the [he or she] did not perform it, [the 23 principal party to the contract] would owe no further obligations to that [counterparty].” Id.; see 24 also In re Spectrum Info. Techs., Inc., 190 B.R. 741, 748 (Bankr. E.D.N.Y. 1996) (citing In re 25 Chateaugay Corp., 102 B.R. 335, 345 (Bankr. S.D.N.Y. 1989)). If the breach of an unperformed 26 obligation would not excuse the other party’s performance but would entitle the breaching party 27 28 13

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1 2 190 B.R. at 748 (finding employment agreement not executory where the debtor received the 3 substantial benefit of its bargain under an employment agreement, i.e., the services rendered, and 4 would be entitled, at most, to injunctive relief and/or money damages in the event of the 5 employee’s breach of his remaining obligations); In re Eustler, No. 15-00870-FPC13, 2017 WL 6 1157114, at *3 (Bankr. E.D. Wash. Mar. 24, 2017) (where debtor’s breach of one of remaining 7 covenants entitle the remaining shareholders to injunctive relief or an award of damages but would 8 not be deemed a material breach excusing future performance, contract found not executory). 9 36. Here, both sides have fully performed their material obligations under the 10 Consulting Agreement. The Debtor and IOE entered into an agreement for it to provide the Debtor 11 certain business services, on an at-will basis, in exchange for compensation.14 IOE has not 12 provided—nor has the Debtor sought—its services in years. To the extent the Consulting 13 Agreement was at one point executory, no material obligation remains on the part of the Debtor 14 such that non-performance would render the Debtor in breach and excuse IOE’s performance. 15 37. IOE, through allegations of injury as to Lentzsch, attempts to support its argument 16 that the Consulting Agreement is executory by referring to the contract provisions requiring 17 (a) insurance coverage, (b) indemnification, (c) the maintenance of confidentiality, (d) attorney’s 18 fees and costs to the prevailing party in a dispute over the Consulting Agreement, (e) execution of 19 additional documents, and (f) arbitration. These provisions, however, do not and cannot revive a 20 terminated contract where the central and overarching purpose of the contract has been completed. 21 38. Furthermore, an indemnification obligation is not an executory contract. Indeed, 22 the Ninth Circuit has held consistently that a contingent indemnification right does not make a 23 contract executory. See In re THC Fin. Corp., 686 F.2d 799, 804 (9th Cir. 1982) (“THC’s 24 agreement to indemnify ERS contains only one obligation: THC is obligated to pay ERS if ERS 25 incurs any loss as a result of the attornment agreement. The consideration for the indemnification 26 was, as stated in the indemnification agreement, ‘the Agreement of (ERS) to attornments requested 27 28 14 Either party was permitted to terminate the Consulting Agreement prior to January 17, 2017, with thirty (30)

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1 2 the agreement was not executory.”); accord In re THC Financial Corp., 446 F.Supp. 1329, 1331 3 (D. Haw. 1977); Van Dyke Research Corp. v. SCM Corp. (In re Van Dyke Research Corp.), 13 4 B.R. 487 (Bankr. D.N.J. 1981). Indeed, “[a]n obligation by Debtors to defend and indemnify alone 5 without any other material remaining obligations is insufficient to characterize these . . . 6 [a]greements as executory.” In re Chateaugay Corp., 102 B.R. 335, 348 (Bankr. S.D.N.Y. 1989). 7 39. The crux of indemnification is similar to what the Ninth Circuit considered in 8 Southmark, in which the Court clarified that not all option contracts are executory. Southmark, 9 139 F.3d at 706; Indeed, the Ninth Circuit held: 10 We therefore reject Easebe’s broad rule that all options are executory contracts. Instead, we look to outstanding obligations at the time the 11 petition for relief is filed and ask whether both sides must still perform. Performance due only if the optionee chooses at his discretion to 12 exercise the option doesn't count unless he has chosen to exercise it. An option may on occasion be an executory contract, for instance, where 13 the optionee has announced that he is exercising the option, but not yet followed through with the purchase at the option price. 14 The question thus becomes: At the time of filing, does each party have 15 something it must do to avoid materially breaching the contract? 16 Id. 17 40. Here, the obligations of indemnification, confidentiality, payment of fees and costs, 18 execution of additional documents, and arbitration are all obligations that were contingent when 19 the Bankruptcy Case was filed. Unlike in Southmark, where the Court opined that an option 20 contract that was exercised before the petition date would be executory (because it was no longer 21 contingent), none of the provisions cited by Movants has been invoked or exercised. Id. Put 22 simply, because they were contingent neither Movants nor Debtors had something each must do 23 to avoid materially breaching the contract. 24 41. Supposing, arguendo, that an indemnification agreement could constitute an 25 executory contract—contrary to the weight of authority—IOE’s argument would still fail, as the 26 Debtor fully performed by maintaining D&O Coverage.15 IOE does not complain of any claims 27 brought against IOE that are subject to indemnification from Holdings in the first instance. As 28 15

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1 2 with the absence of any indemnifiable claims against IOE, Holdings’ full performance as to IOE 3 renders assumption or rejection unnecessary. 4 42. Further, none of the obligations cited by Movants—(a) arbitration, 5 (b) confidentiality, (c) insurance coverage, (d) indemnification, (e) payment attorney’s fees and 6 costs, and (f) execution of additional documents—are sufficiently material that breach would 7 excuse the non-breaching party of its obligation to perform. Rather, they are akin to the obligations 8 that the Chateaugay court found “immaterial, de minimis, remote and contingent” and, therefore, 9 insufficient to make the agreements executory under Section 365, as they were “merely designed 10 to implement the various indemnification obligations of the Debtors and thus cannot be considered 11 as independent obligations of [the non-debtor counterparty] which are material in nature.” In re 12 Chateaugay Corp., 102 B.R. 335, 347–48 (Bankr. S.D.N.Y. 1989). 13 43. Instead, these obligations merely constitute obligations to pay money, only giving 14 rise to a claim in the bankruptcy case. Thus, even if the “monetary obligations did in fact constitute 15 a material remaining performance obligation, it is clear that such obligations merely represent 16 obligations for the payment of money only and are therefore insufficient to make these . . . 17 [a]greements executory.” Id. at 347; see Matter of Newcomb, 744 F.2d 621, 624 (8th Cir. 1984) 18 (escrow’s obligation to turn over money is insufficient to render the agreement executory); THC 19 Financial Corp., 686 F.2d at 804 (“courts have consistently held that contracts that only required 20 payment by the debtor are not executory”); In re Unishops, Inc., 422 F.Supp. 75, 78–80 (Bankr. 21 S.D.N.Y. 1975). 22 44. In addition, with respect to the confidentiality provisions in the Consulting 23 Agreement, “A majority of cases have held that restrictive covenants in employment contracts, 24 such as non-compete, confidentiality and non-interference are not sufficiently material to render 25 a contract executory under the Countryman test. In re Sjoquist, 484 B.R. 207, 214 (Bankr. C.D. 26 Cal. 2012); see also Shults & Tamm v. Brown (In re Hawaiian Tecom Communs., Inc.), 2012 27 Bankr. LEXIS 380 at *11 (Bankr. D. Haw. Jan. 30 2012). 28 45. Finally, as to the indemnification claims pressed by Movants (again, Lentzsch lacks

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1 2 treat, as a matter of law, indemnification claims by directors and officers stemming from lawsuits 3 based on their prepetition conduct (as is the case here) as general unsecured claims; but, somehow 4 the assertion of the very same indemnity claims by the Movants here somehow transforms the 5 Consulting Agreement into an executory contract. See Christian Life Center Litig. Defense Comm. 6 v. Silva (In re Christian Life Center), 821 F.2d 1370, 1373 (9th Cir. 1987) (holding that officers’ 7 indemnity/contribution claims for litigation costs were not an administrative expense because 8 litigation was based upon prepetition services and conduct). The incongruity between Movants’ 9 asserted position on this issue of indemnification and the governing circuit law treating the very 10 same types of claims as those asserted here as prepetition claims requires the Court to hold that 11 such an obligation—even if it is properly before the Court—cannot transform the Consulting 12 Agreement into an executory contract. 13 46. Based on the foregoing, the terms cited by IOE do not meet the Countryman 14 definition. Even when taken in the aggregate these terms are not consequential enough to excuse 15 the performance of the other party. Thus, the Consulting Agreement does not satisfy the definition 16 of executory under Section 365. 17 D. IF THE ARBITRATION PROVISION CONSTITUTE A SEPARATE AND INDEPENDENT EXECUTORY CONTRACT THAT (I) IS REJECTED 18 PURSUANT TO THE PLAN AND (II) INVALIDATED BY THE PLAN’S RETENTION OF JURISDICTION PROVISIONS. 19 47. The purpose of the Federal Arbitration Act is to place arbitration agreements on 20 equal or even footing with other contracts, not in an exalted category of their own that is treated 21 better than other contracts that are subject to rejection in bankruptcy. See Prima Paint Corp. v. 22 Flood & Conklin Mfg. Co., 388 U.S. 395, 403-404 (1967) (expressly recognizing that the goal of 23 the Federal Arbitration Act “to make arbitration agreements as enforceable as other contracts, but 24 not more so.”). 25 48. The arbitration clause in the purported Consulting Agreement qualifies as a 26 separable/severable executory contract. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 27 U.S. 395, 403-404 (1967) (“[A]rbitration clauses as a matter of federal law are separable from the 28 contracts in which they are embedded . . . .”); accord, Buckeye Check Cashing, Inc. v. Cardegna,

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1 2 law, an arbitration provision is severable from the remainder of the contract.”); see also Janvey v. 3 Alguire, 2014 U.S. Dist. LEXIS 193394, **97, 117-119 (N.D. Tex. July 30, 2014) (using 4 bankruptcy case law as precedent to conclude that receiver in federal receivership proceeding 5 could reject arbitration clauses in contracts as separate, severable executory contracts). 6 49. As the Supreme Court noted in Prima Paint, arbitration agreements within other 7 contracts (the “Container Contract”) are severable from the remainder of the Container Contract. 8 See 388 U.S. at 403-404 (using the concepts of “severability” and “separability” interchangeably). 9 The Supreme Court’s construction of arbitration agreements set forth within larger Container 10 Contracts as severable from the same is in line with this Circuit’s construction of 11 U.S.C. § 365, 11 which permits severable contracts set forth in larger Container Contracts to be rejected or assumed 12 separately. See, e.g., Otto Preminger Films, Ltd. v. Qintex Entm’t, Inc. (In re Qintex Entm’t, Inc.), 13 950 F.2d 1492, 1496 (9th Cir. 1991); see also In re Plitt Amusement Co. of Wash., Inc., 233 B.R. 14 837, 839 (Bankr. C.D. Cal. 1999). California law is to the same effect on the issues of the 15 severability of a contract or lease. See, e.g., In re Pollack, 139 B.R. 938, 940 (B.A.P. 9th Cir. 16 1992) (recognizing that the issue of contractual severability must first be answered by reference to 17 applicable state law and then holding that California law allows contracts to be severed into 18 separately assumable and/or rejectable parts.). 19 50. “Viewed as an independent contractual obligation of the parties, an arbitration 20 agreement is a classic executory contract since neither party has substantially performed the 21 arbitration agreement at the time enforcement is sought.” Jay Lawrence Westbrook, The Coming 22 Encounter: International Arbitration and Bankruptcy, 57 Minn. L. Rev. 595, 622 (1983) (emphasis 23 added). And that is exactly the case here, as neither party has substantially performed under the 24 arbitration clause set forth in the purported Consulting Agreement. (See ECF No. 85-1, pgs. 6-7 of 25 8, ¶ 22). 26 51. Once the Arbitration Provision is severed from the Consulting Agreement, it will 27 be rejected automatically by operation of law as of the effective date of the Plan. At that point, 28 the Debtors’ bankruptcy estates would be relieved from having any further performance

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1 2 of an executory contract under 11 U.S.C. § 365 is that it excuses the estate’s representative from 3 any and obligation(s) to provide specific performance, with the exception of the specific provisions 4 of 11 U.S.C. § 365, not appliable here, that compel specific performance notwithstanding rejection. 5 See, e.g., 11 U.S.C. § 365(h). 6 52. The rights of IOE as a party to the Consulting Agreement to expect specific 7 counterparty performance from any of the Debtors, if any, would be reduced to a prepetition 8 damages claim. See, e.g., 11 U.S.C. §§ 365(g)(1) and 502(g); see also Mission Prod. Holdings v. 9 Tempnology, LLC, ___ U.S. ___, 139 S. Ct. 1652, 1659 (2019) (“A rejection convert[s] a debtor’s 10 unfulfilled obligations to a pre-petition damages claim.”) (internal quotation marks and citations 11 omitted); Sunbeam Prods. v. Chi. Am. Mfg., LLC, 686 F.3d 372, 376-377 (7th Cir. 2012) 12 (Easterbrook, J.) (“What § 365(g) does by classifying rejection as breach is establish that in 13 bankruptcy, as outside of it, the other party’s rights remain in place. After rejecting a contract, a 14 debtor is not subject to an order of specific performance.) (emphasis added) (citing NLRB v. 15 Bildisco & Bildisco, 465 U.S. 513, 531 (1984)). 16 53. As Judge Easterbrook explained in Sunbeam, rejection does not vaporize the 17 contract; rather, a debtor’s unfulfilled obligations are treated as prepetition obligations that give 18 rise to a damages that may be treated like other prepetition debts in the same class. Sunbeam, 686 19 F.3d at 377 (emphasis added) (internal quotation marks and citation omitted); see also Mission 20 Prod. Holdings, ___ U.S. at ___; 139 S. Ct. at 1659, 1662 (largely adopting Judge Easterbrook’s 21 analysis). 22 54. Any rejection of the Arbitration Provision or the Consulting Agreement under 11 23 U.S.C. § 365(g)(1) does not fundamentally change anything with respect to indemnification rights 24 (if any) they had on the petition date. Either way, the most Movants could hope for by way of the 25 Arbitration Provision or the Consulting Agreement’s indemnification clause for indemnification 26 claims based on the claims asserted in the Complaint predicated upon IOE’s prepetition services 27 is a prepetition general unsecured claim. See, e.g., Christian Life Center, 821 F.2d at 1373. 28 Moreover, to the extent that the Consulting Agreement is enforceable (which it is not), Debtors

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1 2 that they cannot be found to be in material breach of the same agreement. 3 55. With these principles in mind, rejection of the Arbitration Provision or Consulting 4 Agreement, to the extent executory, would give rise only to a prepetition damages claim. It does 5 not give IOE, as Movants seem to suggest, the right to specific performance from the Debtors’ 6 bankruptcy estates (in the form of compelled arbitration) or to have their indemnification claims 7 somehow elevated to administrative expense status. This is simply not the law, and the Movants 8 have certainly not established their entitlement to such treatment in the Motion. 9 56. Indeed, Movants’ own authority concedes that the Arbitration Provision is 10 severable from the terminated Consulting Agreement and that Section 365 of the Bankruptcy Code 11 allows the debtor to reject an arbitration agreement, thereby excusing the estate from any specific 12 performance obligations they would otherwise have had: 13 Furthermore, in addition to being a separate contract, the arbitration clause is executory at the time a petition is filed . . . Now, an arbitration 14 clause is generally an agreement that provides for the reciprocal obligations of each party to refer to arbitration some or all future disputes arising out of 15 the contract in which they are contained. Assuming that no arbitration proceedings were initiated prior to the bankruptcy filing, the reciprocal 16 obligations of the parties to arbitrate said disputes remain outstanding at the time the bankruptcy petition is filed. Furthermore, the failure of either party 17 to abide by their duty to arbitrate would constitute a material breach, as it would go to the essence of the arbitration agreement between the parties 18 and defeat its purpose. Although, for this very reason, the FAA protected arbitration agreements from breach by providing for their specific 19 performance, thereby making material breach an impossibility outside of bankruptcy, § 365 of the Bankruptcy Code allows for such a material 20 breach in the context of bankruptcy, thus making arbitration agreements executory for purposes of the rule. 21 André Albertini, Arbitration in Bankruptcy: Which Way Forward?, 90 Am. Bankr. L.J. 599, 622-22 623 (2016) (footnotes omitted). Therefore, the Arbitration Provision will be rejected by operation 23 of law as a severable executory contract upon the effective date of the Plan. 24 57. Failing to give effect to Debtors’ Plan provision rejecting the arbitration clause 25 would seriously undermine bankruptcy policy. As the Alguire Court observed, if arbitration 26 clauses are severable by governing law under the Federal Arbitration Act from their respective 27 Container Contracts, but they are not permitted to be rejected, then the courts will have essentially 28 created through case law and absent express authorization from Congress in the Bankruptcy Code

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1 2 bankruptcy estate cannot free itself from the obligation of providing its required counterparty 3 performance (in the form of specific performance). Not only does this stand the governing law in 4 bankruptcy discussed above on its head, it also contravenes Congress’s policy in enacting the 5 FAA—namely, to place arbitration agreements on equal or even footing with other contracts, not 6 in an exalted category of their own that is treated better than other contracts subject to rejection in 7 bankruptcy. 8 58. The Arbitration Provision as a separate and severable agreement is currently slated 9 for rejection by operation of 11 U.S.C. § 365(g)(1) and section 6.1 of Debtors’ Plan on the 10 Effective Date of Debtors’ Plan. IOE’s remaining and statutorily mandated remedy for such 11 rejection is the ability to file a proof of claim seeking damages for such breach. See 11 U.S.C. §§ 12 365(g) and 502(g). 13 59. Finally, the Plan includes a provision pursuant to which the Bankruptcy Court will 14 retain jurisdiction over certain matters. (See ECF No. 585, pgs. 30-32 of 37, Art. 10). As relevant 15 here, the Plan specifically provides that the Court shall retain jurisdiction as follows, “[To] hear 16 and decide Causes of Action and to continue to hear and decide pending Causes of Action of the 17 Debtors or the Liquidating Trust[.]” (See id. at pg. 31 of 37, ¶ 13) (emphasis added). Although 18 on notice of the Plan confirmation proceedings, Movants did not object to this provision of the 19 Plan, and it is now binding upon them by operation of 11 U.S.C. § 1141(a). See, e.g. Ernst & 20 Young v. Baker O’Neal Holdings, Inc., 304 F.3d 753, 756 (7th Cir. 2003) (“We believe that in this 21 instance, Ernst & Young’s right to arbitrate is superseded by the terms of the confirmed plan.”). 22 60. Here, the Movants did not object to this provision of the Plan retaining jurisdiction 23 in the Bankruptcy Court to “hear and decide” pending causes of action, including the adversary 24 proceeding initiated by Debtors here against the various officer, director and manager defendants. 25 And, on that basis, Debtors and the Committee respectfully submit that Movants’ right to arbitrate 26 has either been displaced or nullified outright by the Court’s confirmation of the Plan; or, the Court 27 should find that the failure of the Movants to object to this retention of jurisdiction provision 28 amounts to a knowing, voluntary, and intelligent waiver of any right(s) Movants may otherwise

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1 2 V. CONCLUSION. 3 WHEREFORE, for the foregoing reasons and in consideration of the above authority, the 4 Debtors and the Committee respectfully requests that the Court: (1) deny the Motion in its entirety 5 as the Consulting Agreement is not an executory contract; (2) find that Ms. Lentzsch has waived 6 their right to arbitration; and (3) grant any further relief the Court deems necessary or appropriate. 7 Dated May 20, 2021. 8 Respectfully Submitted, 9 /s/ Athanasios E. Agelakopoulos Samuel A. Schwartz, Esq. 10 Nevada Bar No. 10985 11 Athanasios E. Agelakopoulos, Esq. Nevada Bar No. 14339 12 Emily D. Anderson, Esq. Nevada Bar No. 13814 13 601 East Bridger Avenue Las Vegas, NV 89101 14 Telephone: 702.385.5544 15 Facsimile: 702.385.2741 Attorneys for The Official Committee of Unsecured 16 Creditors 17 and 18 GARMAN TURNER GORDON LLP 19 /s/ Gabrielle A. Hamm 20 WILLIAM M. NOALL Nevada Bar No. 3549 21 GABRIELLE A. HAMM Nevada Bar. No. 11588 22 7251 Amigo Street, Suite 210 23 Las Vegas, Nevada 89119 Tel: (725) 777-3000 24 Fax: (725) 777-3112 Attorneys for Debtors 25 26 27 28

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