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Full title: First Response opposed to (related document(s): 828 Notice of intent to abandon filed by Trustee Diane G. Reed) filed by Creditor TLG Family Management, LLC. (Clark, Katharine)

Document posted on Aug 16, 2021 in the bankruptcy, 13 pages and 0 tables.

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Meanwhile, without first seeking to lift the automatic stay, Origin tried for more than a year to actively recoup rights and property Origin alleges belong to this estate in an attempt to control estate property and/or collect on the debt LaSalle owes to Origin (and also to gain a litigation advantage in ongoing state-court actions over JMFM and Mitchell W. Warren).Despite an apparent assertion that it was taking action against property of the Debtor, Origin did not seek stay relief from this Court before doing so, did not file a copy of the Disposition Letter (as defined in the Lift Stay Response) in this bankruptcy, did not approve the Trustee’s filing of a notice of abandonment (despite such notice apparently having been ready for filing well in advance of the noticed disposition), and otherwise did not provide notice to the service list in this case of Origin’s intent to sell the Subject Ownership Interest.4 As described in the Lift Stay Response, JMFM and Mitchell W. Warren were forced to obtain first a Temporary Restraining Order and then a Temporary Injunction in order to (a) protect the rights of the Debtor due to Origin’s breach of the automatic stay and potential harm from Origin’s non-existent sales or marketing process for the Subject Ownership Interest and (b) protect their respective rights as to the Subject Ownership Interest—Mitchell W. Warren’s personal property right and JMFM’s closely held and family owned business status.The Trustee asserts that the “Assets,” including the Subject Ownership Interest, are collateral of Origin as reflected in Origin’s UCC Financing Statement filed on January 19, 2018, which secures a debt owed to Origin Bank of at least $7,8345,467.00.The 2018 Texas Action puts directly at issue the propriety of Origin’s attempted disposition of the Subject Ownership Interest under applicable Texas law, as well as the extent, validity, and priority of Origin’s lien, if any, in the Subject Ownership Interest currently in the hands of Mitchell W. Warren.

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Katharine Battaia Clark Thompson Coburn LLP 2100 Ross Avenue, Suite 600 Dallas, Texas 75201 Tel Phone: (972) 629-7100 Fax: (972) 629-7171 KClark@ThompsonCoburn.com Counsel for J&M Family Management, LLC UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION IN RE: § § Chapter 7 THE LASALLE GROUP, INC. § Case No. 19-31484-SGJ-7 § Debtor. J&M FAMILY MANAGEMENT, LLC’S RESPONSE TO TRUSTEE’S NOTICE OF INTENT TO ABANDON J&M Family Management, LLC f/k/a TLG Family Management Company LLC (“JMFM”) files this response (the “Response”) to the Notice of Intent to Abandon Certain Property of the Estate [Dkt. No. 828] (the “Abandonment Notice”) filed by Diane G. Reed, Chapter 7 Trustee. In support of this filing, JMFM respectfully shows as follows: RELEVANT BACKGROUND A. The LaSalle Group, Inc.’s Bankruptcy Case Procedural Background 1. On May 2, 2019 (the “Petition Date”), The LaSalle Group, Inc. (“LaSalle” or the “Debtor”) filed with this Court a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. 2. On May 30, 2019, the Debtor filed its schedules and statements. As disclosed in the Statement of Financial Affairs, the Debtor conveyed its minority ownership interest in affiliate JMFM’s RESPONSE TO NOTICE OF INTENT TO ABANDON Page 1

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JMFM to Mitchell W. Warren (the “Subject Ownership Interest”) prior to the Petition Date. SeeDkt. No. 109 at p. 191 of 386. 3. Origin Bancorp, Inc. d/b/a Origin Bank (“Origin”) asserted a blanket lien on the assets of the Debtor. On September 11, 2019, this Court entered the Final Order Authorizing Debtors’ Use Of Cash Collateral And Providing Partial Adequate Protection (the “Cash Collateral Order”). Dkt. No. 390. In the Order, the Court affirmed Origin’s lien rights, whatever they were, prior to LaSalle’s bankruptcy filing, but did not grant Origin a lien on Chapter 5 causes of action, which remain unencumbered. Id. 4. On June 30, 2020, the Debtor filed with this Court a motion to convert the Debtor’s Chapter 11 case to Chapter 7 of the Bankruptcy Code. Dkt. No. 694. 5. On September 16, 2020 (the “Conversion Date”), this Court granted the Debtor’s motion and converted the Debtor’s bankruptcy case to Chapter 7. Dkt. No. 780. 6. On conversion, Diane G. Reed was appointed as the Chapter 7 trustee (the “Trustee”) of the Debtor’s bankruptcy estate and remains in that role. 7. On June 18, 2021, the Trustee filed its initial Notice of Intent to Abandon Certain Property of the Estate. Dkt. No. 815. 8. On July 2, 2021, Dallas Capital Bank filed its Statement to the Abandon Notice [Dkt. No. 816], highlighting certain points of dispute with respect to the Subject Ownership Interest. 9. On the same date, the Trustee filed a Withdrawal of the Notice of Intent to Abandon Certain Property of the Estate. Dkt. No. 817. 10. On July 15, 2021, Origin filed a Motion Pursuant to Bankruptcy Rule 4001(d) for Order Granting Relief from Automatic Stay (the “Lift Stay Motion”). JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 2

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11. On July 29, 2021, JMFM filed its response to the Lift Stay Motion [Dkt. No. 827] (the “Lift Stay Response”), highlighting certain points of dispute with respect to Origin’s requested relief and giving notice of Origin’s violation of the automatic stay/failure to disclose the relief it is seeking is nunc pro tunc in nature. 12. The Lift Stay Motion will be heard on August 23, 2021. Dkt. No. 823. 13. On August 3, 2021, the Trustee filed a second Abandonment Notice. Relevant Facts 14. Prior to the Conversion Date, Origin did not provide a debtor-in-possession loan to the Debtor; rather, Origin relied on others—principally JMFM—to carry the water, so to speak, as to any and all expenses that arose during the case that the Debtor would have ordinarily been obligated to pay. For example, JMFM provided extensive assistance to the Debtor’s estate at the Debtor’s request as further described in JMFM’s Motion For Allowance And Payment of Administrative Expenses Pursuant To 11 U.S.C. § 503(B)(1). See Dkt. Nos. 304 (JMFM Motion) and 305 (Declaration of Erica Bramer). 15. JMFM is a family owned and operated company that provides vital management services to memory care facilities both in and outside of Texas, pursuant to various contracts. JMFM has been an operating business since 2008. LaSalle was the employer of record for all employees across its memory care facility footprint prior to and even after its bankruptcy filing, as JMFM assumed that role as of January 1, 2020. JMFM presently employs approximately 300 individuals. 16. While the Debtor entered bankruptcy with the expectation that it would file a liquidating plan to wind up its affairs across its 40+ memory care facility footprint in an orderly JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 3

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fashion [see Karen Nicolaou Declaration, Dkt. No. 13, at ¶ 43], the Debtor was not able to achieve a plan. 17. Among other things, Origin rejected the Debtor’s desire to sell or transfer assets of low or no value, such as the Debtor’s minority interest in non-debtor memory care facilities, despite Origin never articulating what value it sought to protect for itself in blocking the Debtor’s exercise of its business judgment as to such de minimus assets. Cf. Order Granting in Part Motion to Approve Procedures for De Minimis Asset Transactions (“De Minimis Assets are defined in this Order to exclude any equity interests owned by [Debtors]. Entry of this order expressly reserves the right of the Debtors to seek a further hearing on the applicability of these procedures to such equity interests.”). Dkt. No. 501, at ¶ 2. 18. LaSalle’s bankruptcy proceeded in fits and bursts, with Origin pushing back against multiple exit strategies and proposals. Those assets that were liquidated pre-Conversion Date were largely disposed of through foreclosure by the non-debtor facilities’ lenders and without any possibility of recover to the large body of creditors of LaSalle.119. Conversely, three of the related-debtor entities (Cinco Ranch, Pearland, and West Houston) confirmed plans of reorganization in partnership with the involved lender, as did another facility that sought bankruptcy protection in the Western District of Texas. Case Nos. 19-31486, 19-31488, 19-31485 (affiliated cases to this Debtor), and 19-52375 (Bankr. W.D. Tex.). Origin was not the lender to any of those debtor facilities at the time of plan confirmation. 20. Even after the Conversion Date, Origin blocked the Trustee’s ability to dispose of assets, whether by abandonment, sale, or otherwise. For instance, Origin asked the Trustee to 1 As of the filing of this Response, much of LaSalle’s remaining interests remain idle, subjecting the Trustee to multiple demands for information, lawsuit notices, and discovery subpoenas, including from Origin itself. JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 4

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prepare an abandonment notice months ago, but apparently did not authorize the Trustee to file the June 18, 2021 abandonment notice [Dkt. No. 815] until nearly nine months after the Conversion Date (and only after Origin suffered a state-court loss vis-à-vis Mitchell W. Warren as guarantor of the Debtor’s debt to Origin). 21. JMFM has approached the Trustee on multiple occasions (by telephone and through formal e-mail offers) regarding a purchase of estate assets and/or settlement of any potential chapter 5 causes of action. The Trustee has been reluctant to open any such discussions apparently due to the perceived overhang of Origin on this case, despite (1) there being no lien on chapter 5 causes of action, (2) Origin’s lien securing assets of no market value, and (3) Origin’s lien right as to the Subject Ownership Interest (and others) being in dispute. In other words, the Trustee has declined to accept offers of cash settlement of at least some of the potential causes of action and rights for the benefits of the estate. 22. Meanwhile, without first seeking to lift the automatic stay, Origin tried for more than a year to actively recoup rights and property Origin alleges belong to this estate in an attempt to control estate property and/or collect on the debt LaSalle owes to Origin (and also to gain a litigation advantage in ongoing state-court actions over JMFM and Mitchell W. Warren). JMFM incorporates ¶¶ 30-45, 50-52 of its Lift Stay Response (giving notice of Origin’s stay violations). Seealso Ex. B to the Lift Stay Response. 23. Just one month prior to the filing of this Response, Origin doubled down on its state-court efforts, through its state-court counsel, Sbaiti & Company PLLC, with Origin filing a Plea in Intervention in an existing action having nothing to do with Origin (Cause No. 348-292835-17 in the District Court of Tarrant County, Texas (348th Judicial District)) (the “Tarrant County Interpleader”). JMFM did not receive notice of the interpleader, as JMFM is not a party to the JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 5

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underlying suit, yet Origin seeks extensive relief against JMFM and other entities that apparently also did not receive notice of the action until a notice of hearing was recently sent, setting a hearing for September 3, 2021. 24. The Tarrant County Interpleader expressly seeks to impact property of three debtor entities with confirmed plans of reorganization/plan injunctions in place: Cinco Ranch Autumn Leaves dba Cinco Ranch Memory Care, LLC, Pearland Autumn Leaves dba Pearland Memory Care, LLC [debtors before this Court] and Stone Oak Autumn Leaves dba Stone Oak Memory Care, LLC [debtor in the Western District of Texas].2 25. As more fully described in JMFM’s Lift Stay Response, on April 23, 2020, Origin filed a new state-court action, Origin Bancorp, Inc. v. J&M Family Management, LLC, et al., Case No. DC-20-06036, in the District Court of Dallas County, Texas (160th Judicial District) (the “2020 Texas Action”). 26. As part of its complaint in the 2020 Texas Action3, Origin continues to seek, among other things:  Foreclosure on and repossession of LaSalle’s alleged interest in the Subject Ownership Interest;  Any and all voting and management rights LaSalle enjoyed as a managing member through its ownership of the Subject Ownership Interest as follows: 2 The same action further includes entities Origin knows or should know are empty shells, including Riverstone Autumn Leaves dba RIVERSTONE MEMORY CARE, LLC (which was previously a debtor before this Court). 3 The complaint in the 2020 Texas Action was last amended one day before the filing of this Response to apparently remove a claim for judicial foreclosure, but it still seeks the relief set forth in this paragraph. JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 6

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and  Damages and other relief as a result of the alleged fraudulent transfer of the Subject Ownership Interest from LaSalle to Mitchell W. Warren, including management rights as follows: 27. Also as more fully described in JMFM’s Lift Stay Response, Origin is in the midst of attempting to foreclose, by nonjudicial foreclosure, the Subject Ownership Interest, which Origin itself alleges is property of the Debtor, The LaSalle Group, Inc. See Ex. D to the Lift Stay Response. Despite an apparent assertion that it was taking action against property of the Debtor, Origin did not seek stay relief from this Court before doing so, did not file a copy of the Disposition Letter (as defined in the Lift Stay Response) in this bankruptcy, did not approve the Trustee’s filing of a notice of abandonment (despite such notice apparently having been ready for filing well in advance of the noticed disposition), and otherwise did not provide notice to the service list in this case of Origin’s intent to sell the Subject Ownership Interest.4 4 The Disposition Letter indicates the “[l]ender [Origin] will be selling, at a public sale, the Debtor’s [LaSalle’s] 5.0% membership interest in J&M Family Management, LLC f/k/a TLG Family Management, LLC. JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 7

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28. As described in the Lift Stay Response, JMFM and Mitchell W. Warren were forced to obtain first a Temporary Restraining Order and then a Temporary Injunction in order to (a) protect the rights of the Debtor due to Origin’s breach of the automatic stay and potential harm from Origin’s non-existent sales or marketing process for the Subject Ownership Interest and (b) protect their respective rights as to the Subject Ownership Interest—Mitchell W. Warren’s personal property right and JMFM’s closely held and family owned business status. See Ex. H to the Lift Stay Response. 29. The Trustee filed the June 18, 2021 abandonment notice the same day the Texas court entered the temporary injunction. B. The Proposed Abandonment 30. On August 3, 2021, the Trustee filed a second Abandonment Notice. The Abandonment Notice identifies certain assets and collateral from the Debtor’s bankruptcy estate that the Trustee intends to abandon. 31. The Abandonment Notice defines the “Assets” it proposes to abandon as follows: “all chattel paper, accounts, notes receivable, interest receivable, contract rights, licenses and general intangibles, including all partnership interests and limited liability company interests; whether any of the foregoing is owned now or acquired later; all accessions, additions, replacements, and substitutions relating to any of the foregoing; all records of any kind relating to the foregoing; all proceeds relating to any of the foregoing including insurance, general intangibles and other account proceeds.” Notice, at ¶ 1. 32. In addition, the Trustee clarifies “Assets” to include “any ownership right in or claim to the 5% membership interest in [JMFM] that was previously owned by LaSalle and JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 8

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transferred to Mitchell Warren, (subject to Origin Bank's perfected security interest in same), on or about April 2, 2019.” Notice, at ¶ 1 (emphasis added). 33. Further, the Notice states that to the extent the transfer of the Subject Ownership Interest in JMFM from Debtor to Mitchell W. Warren constituted a fraudulent transfer under 11 U.S.C. § 548 of the Bankruptcy Code, the Trustee intends to abandon any such unencumbered fraudulent transfer claim. Id. 34. The Trustee asserts that the “Assets,” including the Subject Ownership Interest, are collateral of Origin as reflected in Origin’s UCC Financing Statement filed on January 19, 2018, which secures a debt owed to Origin Bank of at least $7,8345,467.00. Notice, at ¶ 2. 35. Moreover, the Trustee claims she has explored the possibility of selling the Assets, alleging the only purchase offer received was from JMFM for $35,000.00 to purchase the Assets and to compromise, settle, and release all potential claims of the Trustee and the estate against JMFM.5 Notice, at ¶ 2. The Trustee asserts she did not proceed with JMFM’s $35,000.00 offer because, inter alia, Origin would not consent to this sale and the Trustee could not sell the Assets free and clear of Origin’s security interest without its consent. Id. 36. The Abandonment Notice further asserts the “Assets,” including the Subject Ownership Interest, “would bring no funds into the estate for the benefit of creditors except for possibly Origin Bank which has not consented to the sale of its collateral.” Notice, at ¶ 3. As such, the Trustee concluded that “the estate’s interest in the Assets is of inconsequential value and burdensome to the estate.” Id. 5 The Trustee does not reference JMFM’s July 29, 2021 correspondence that discusses JMFM’s most recent settlement offer. JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 9

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ARGUMENT A. Abandonment Should be Denied or, Alternatively, Limited in Scope. 37. JMFM objects to the Abandonment Notice for several reasons. 38. First, the definition of “Assets” is vague when it does not have to be. The Debtor filed extensive schedules in this case. Thus, it should clarify what scheduled assets (a) remain in the estate at this time and (b) disclose that those assets are being abandoned. Any further language relating back to Origin’s alleged security interest should be considered, if at all, as catch-all language (not the only language) used to notify creditors of what the estate is abandoning. 39. Second, the value of the Assets is contested, as is the attachment of Origin’s lien right to any remaining asset of LaSalle. JMFM asserts the Subject Ownership Interest is unencumbered by Origin’s lien and/or Origin’s lien could be stripped (as, in fact, Origin’s lien right is being contested as having been waived in the 2018 Texas Action). Thus, the estate’s abandonment of its rights (if any) in the Subject Ownership Interest at the direction of Origin should be denied. 40. Alternatively, the Subject Ownership Interest is not property of the Debtor’s bankruptcy estate, as it was transferred prior to the Petition Date. And whether and to what extent Origin may have a lien against Mitchell W. Warren’s ownership interests is presently a matter of litigation in Texas state court. There is no evidence provided by the Abandonment Notice to demonstrate how or to what extent any alleged lien right of Origin in the Subject Ownership Interest attached to the Subject Ownership Interest in the first instance, followed the interest as it was sold to Mitchell W. Warren, and remained at all or in priority to other creditors of Mitchell W. Warren. JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 10

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41. The 2018 Texas Action puts directly at issue the propriety of Origin’s attempted disposition of the Subject Ownership Interest under applicable Texas law, as well as the extent, validity, and priority of Origin’s lien, if any, in the Subject Ownership Interest currently in the hands of Mitchell W. Warren. See Ex. E to the Lift Stay Response. 42. Accordingly, should abandonment be permitted, no order should be entered that makes any finding or order in respect of the Subject Ownership Interest aside from the Trustee disclaiming all rights, if any, in the Subject Ownership Interest. 43. Third, to the extent the Trustee has determined to assign the estate’s interests, whatever they may be, in the Subject Ownership Interest, to Origin, such assignment should be after notice and hearing pursuant to Section 363 and Origin should provide consideration for the same. See In re Moore, 608 F.3d 253, 259 (5th Cir. 2010) (“Thus, under our precedent, the Texas fraudulent-conveyance actions are property of the estate that the trustee may sell.”). 44. Fourth, the estate should not be permitted to abandon its unencumbered rights as to chapter 5 causes of action related to the Subject Ownership Interest. JMFM and Mitchell W. Warren have made several offers to settle any such unencumbered causes of action to the Trustee. In that (a) it has been more than two years since the transfer of the Subject Ownership Interest, (b) Origin’s lien rights, if any, are economic only, and (c) money damages are available as a remedy for fraudulent transfers, agreeing to a monetary settlement would be an appropriate action for the Trustee to take in settlement of its alleged fraudulent transfer cause of action. Cf. In re Galaz, No. 07-53287-RBK, 2015 WL 457850, at *10 (W.D. Tex. Jan. 23, 2015) (“the court can award an JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 11

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amount of damages necessary to put a claimant in the financial condition in which it would have been before the fraudulent transfer took place.6 45. Therefore, the actions have value, contrary to the Trustee’s assertions in the Abandonment Notice, whether to Origin, as settlement value to JMFM/Mitchell W. Warren, or otherwise, and the estate—which has such minimal unencumbered assets—should not be permitted to abandon its chapter 5 cause of action with respect to the Subject Ownership Interest. Any order should reject the abandonment of the estate’s unencumbered rights. B. ORIGIN IS IN VIOLATION OF THE AUTOMATIC STAY. 46. JMFM further incorporates its argument with respect to Origin’s actions in the various state-court actions as in violation of the automatic stay. See ¶¶ 30-45, 50-52 of the Lift Stay Response; see also Ex. B to the Lift Stay Response. 47. Any order allowing for the abandonment of estate assets should not include any findings with respect to Origin. Rather, if the Court determines to accept the Trustee’s business judgment to abandon whatever rights it may have, then the Order should do nothing more than clarify and affirm that business judgment. CONCLUSION For the foregoing reasons, JMFM respectfully requests this Court (i) deny or, in the alternative, clarify and limit, the Trustee’s request to abandon the “Assets,” and (ii) grant such other and further relief that is just and proper under the circumstances. 6 Origin clearly finds value in such action and intends to pursue (and already is pursuing) the action for its benefit. JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 12

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Dated: August 17, 2021 Respectfully submitted, By: /s/Katharine Battaia Clark Katharine Battaia Clark Texas State Bar No. 24046712 THOMPSON COBURN LLP 2100 Ross Avenue, Suite 600 Dallas, Texas 75201 Tel Phone: (972) 629-7100 Fax: (972) 629-7171 KClark@ThompsonCoburn.com COUNSEL FOR J&M FAMILY MANAGEMENT, LLC CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the above and foregoing instrument has been served via this Court’s electronic case filing system on the 17th day of August, 2021. /s/Katharine Battaia Clark Katharine Battaia Clark JMFM’s RESPONSE TO TRUSTEE NOTICE OF INTENT TO ABANDON - Page 13

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