Create an Account or Login to Existing Account
7-Day Free Trial
HTML Document View
Full title: Motion for Order (i) Approving Omnibus Claim Objection Procedures and (ii) Finally Resolving Interest Rate Applicable to Certain Claims Filed by Trustee John Cornwell Hearing scheduled for 6/2/2021 at 10:00 AM at telephone and video conference. (Attachments: # 1 Proposed Order # 2 Service List) (Vasek, Julian) (Entered: 04/28/2021)
Document posted on Apr 27, 2021 in the bankruptcy, 14 pages and 0 tables.
Bankrupt11 Summary (Automatically Generated)
Rule 3007 contemplates omnibus objections in certain limited instances, including but not limited to claims that are objectionable based on one or more of the following categories: (1) they duplicate other claims; (2) they have been filed in the wrong case; (3) they have been amended by subsequently filed proofs of claim;In light of the Shareholder Settlement terms and the foregoing considerations, the Trustee seeks to resolve, with notice to all parties in interest, any arguably unresolved interest rate applicable to General Unsecured Claims completely and fairly by this Motion, and requests that the Court affirm the federal judgment rate as the interest rate applicable to all such claims. Moreover, the Shareholder Settlement and Plan read in such a manner that parties in interest reasonably could have proceeded with the understanding that the federal judgment rate applies, and requesting that no interest be paid on account of such claims may frustrate the legitimate expectations of certain creditors.Accordingly, the Trustee requests that the Court enter an order approving the Trustee's exercise of his discretion to apply and accrue post-petition interest at the federal post-judgment rate of 0.1% to Seller Note claims and other Class 4 General Unsecured Claims, until the date that is (at most) three (3) days prior to the date on which the Trustee issues the relevant distributions.WHEREFORE, PREMISES CONSIDERED, the Trustee respectfully requests entry of an order: (i) granting this Motion; (ii) allowing the Trustee to file omnibus claim objections asserting the Additional Objection Grounds, if and to the extent he deems appropriate; (iii) setting the post-petition interest rate for Seller Note claims and Class 4 General Unsecured Claims at 0.1 %; and (iv) granting to the Trustee such other and further relief as is just.
List of Tables
Document ContentsIN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re: § § Jointly Administered VETERINARY CARE, INC. d/b/a § VITALPET, et al., § Case No. 19-35736 § (Chapter 11) Debtors. § TRUSTEE'S MOTION FOR ORDER (I) APPROVING OMNIBUS CLAIM OBJECTION PROCEDURES AND (II) FINALLY RESOLVING INTEREST RATE APPLICABLE TO CERTAIN CLAIMS A hearing will be conducted on this matter on June 2, 2021 at 10:00 am. You may participate in the hearing by audio/video connection. Audio communication will be by use of the Court's dial-in facility. You may access the facility at (832) 917-1510. You will be responsible for your own long-distance charges. Once connected, you will be asked to enter the conference room number. Judge Lopez's conference room number is 590153. You may view video via GoToMeeting. To use GoToMeeting, the Court recommends that you download the free GoToMeeting application. To connect, you should enter the meeting code "JudgeLopez" in the GoToMeeting app or click the link on Judge Lopez's home page on the Southern District of Texas website. Once connected, click the settings icon in the upper right corner and enter your name under the personal information setting. If you object to the relief requested, you must respond in writing. Unless otherwise directed by the Court, you must file your response electronically at https://ecf.txsb.uscourts.gov/ within thirty days from the date this motion was filed. Otherwise, the Court may treat the pleading as unopposed and grant the relief requested. TO THE HONORABLE CHRISTOPHER M. LOPEZ, U. S. BANKRUPTCY JUDGE: COMES NOW John D. Cornwell, Trustee ("Trustee") of the VitalPet Liquidating Trust ("Liquidating Trust") in the above styled and numbered chapter 11 bankruptcy case (the "Bankruptcy Case"), and files this Trustee's Motion for Order (i) Approving Omnibus Claim
1Objection Procedures and (ii) Finally Resolving Interest Rate Applicable to Certain Claims (this "Motion"), respectfully stating as follows: I. JURISDICTION AND VENUE 1. This Court has jurisdiction over the Bankruptcy Case and the Motion pursuant to 28 U.S.C. §§ 157 and 1334. This Motion constitutes a core proceeding pursuant to 28 U.S.C. § 157(b). 2. Venue of the Bankruptcy Case, and of the Motion, is appropriate before this Court in this district under 28 U.S.C. §§ 1408 and 1409. 3. The statutory predicates for the relief requested herein are section 502 of Title 11 of the United States Code, §§ 101 et seq. (as amended, the "Bankruptcy Code"), Rule 3007 of the Federal Rule of Bankruptcy Procedure ("Bankruptcy Rules"), and Rule 3007-1 of this Court's Local Rules of Bankruptcy Procedure ("Local Rules"). This Motion and matter arise in a case pending under the Bankruptcy Code and pursuant to the above-referenced sections of the Bankruptcy Code and Bankruptcy Rules. The Bankruptcy Court thus has authority consistent with the U.S. Constitution to enter a final order in disposition of this Motion and all relief sought herein. II. BACKGROUND FACTS 4. On October 10, 2019 (the "Petition Date"), Warren Resell, D.V.M, James H. Kelly, D.V.M., and Larry D. Wood, D.V.M. (collectively, "Petitioners") filed an involuntary Chapter 11 petition against debtor Veterinary Care, Inc. d/b/a VitalPet ("VCI"), thereby initiating this Bankruptcy Case. 5. On November 8, 2019, this Court entered its Order Granting Involuntary Petition providing for its order for relief with respect to VCI. On November 18, 2019, TVET
2Management, LLC ("TVET" and, collectively with VCI, the "Debtors") filed its voluntary Chapter 11 petition. The two cases are being jointly administered. 6. On January 31, 2020, the United States Trustee filed its Notice of Appointment of an official committee of unsecured creditors (“Committee”). Prior to plan confirmation in this Bankruptcy Case, the Debtors remained in possession of their assets and administered their bankruptcy estates as debtors-in-possession. 7. On December 17, 2020, this Court held a hearing (“Confirmation Hearing”) to consider confirmation of the Debtors’ First Amended Joint Combined Chapter 11 Plan and Disclosure Statement of Veterinary Care, Inc. and TVET Management, LLC [Docket No. 442] (the "Plan").1 Pursuant thereto, on the same date, the Court confirmed the Plan by entry of its Order Confirming the First Amended Joint Combined Chapter 11 Plan and Disclosure Statement of Veterinary Care, Inc. and TVET Management, LLC [Docket No. 492] (the "Confirmation Order"). 8. Under the Plan, inter alia, the Liquidating Trust was established as the successor to the Debtors and their bankruptcy estates for all relevant purposes, and funded and vested with all assets of the estates. See, e.g., Plan, at Art. V, pp. 27-28. The Confirmation Order expressly approves of the appointment of the Trustee for the Liquidating Trust, as well as approving the Liquidating Trust Agreement (the "Trust Agreement"), incorporated into, and attached as Exhibit “C” to, the Plan. Confirmation Order, at ¶¶ 39-40, 42, 49-50. See also Notice of Filing of Plan Supplement [Docket No. 468]. 9. Pursuant to the Plan, the Confirmation Order, and the Trust Agreement, the Trustee is charged with, among other things, the administration of claims and making 1 Capitalized terms used and not otherwise defined herein have the same definitions as are set forth in the Plan.
3distributions of the net proceeds of all Liquidating Trust assets. See Plan, at Art. V, pp. 27-29; Confirmation Order, at ¶ 50; Trust Agreement, at §§ 4.01, 5.01. Under the Plan, "[f]ollowing the Effective Date, the Liquidating Trustee shall have the sole and exclusive right to object to the allowance of any Claims or Interests payable by the Liquidating Trust under the Plan." Plan, at p. 32. 10. Confirmation of the Plan also included the Court’s approval of that certain Settlement Term Sheet (the "Shareholder Settlement") among the Debtors, Benjamin Thomas, VP Senior Capital LLC, VP Midtown LLC, William Van Pelt IV, and certain additional equity owners that was expressly incorporated into, and attached as Exhibit “A” to, the Plan. See Notice of Filing of Plan Supplement [Dkt. No. 468]; Confirmation Order ¶ 10. 11. The Confirmation Order further provides that: On the Effective Date, except to the extent otherwise provided in the Plan, Plan Supplement, or Shareholder Settlement, all notes, instruments, certificates, and other documents evidencing Claims or Interests shall be cancelled and the obligations of the Debtors or Liquidating Trustee, if any, shall be deemed satisfied in full, cancelled, discharged, and of no force or effect. Holders of, or parties to, such cancelled instruments, securities, and other documentation will have no rights arising from or relating to such instruments, securities, and other documentation, or the cancellation thereof, except the rights provided pursuant to the Plan, Liquidating Trust Agreement, Shareholder Settlement, and this Confirmation Order. Confirmation Order, at ¶ 43. 12. Page 6 of the Shareholder Settlement provides in relevant part that, "Holders of Seller Note claims and allowed general unsecured claims shall receive interest on account of their allowed claims at the applicable federal judgment rate." 13. However, appended to the back of the Shareholder Settlement is “Rider 1”, which provides that the foregoing language is replaced with the following language: "Holders of allowed Seller Note Claims and general unsecured claims are unimpaired by the Debtors' Plan.3"
4The referenced Footnote 3 to this Rider 1, in turn, acknowledges potential disputes regarding the interest rate applicable to such unsecured claims, and proceeds to state that, "The appropriate interest rate shall be determined by the Court at the confirmation hearing." Likewise, the Plan itself provides, "The appropriateness of, and any applicable interest rate, shall be determined by the Bankruptcy Court at the Confirmation Hearing." Plan, at p. 25. 14. Notwithstanding the foregoing, at the hearing to consider confirmation of the Plan, the Plan was presented as fully consensual, and no party raised at the Confirmation Hearing any issue of an unresolved interest rate applicable to unsecured claims. As a result, the Court’s Confirmation Order does not directly address the applicable interest rate for unsecured claimants. 15. The Effective Date of the Plan was December 31, 2020. See Notice of Effective Date [Docket No. 506]. 16. From and after the Effective Date, the Trustee has administered the Liquidating Trust in accordance with the provisions of the Plan, Confirmation Order and Trust Agreement, and as of the date of filing this Motion has generally resolved administrative expense priority claims asserted in the Bankruptcy Case, as well as attending to various current and historical tax reporting and corresponding obligations. 17. In connection with the Trustee’s obligation to administer claims and interests, including but not limited to objecting to claims and interests as appropriate and making distributions on account of allowed claims and interests, the Trustee has identified certain objections that apply or may apply to multiple filed claims or interests. Such objections are in addition to the categories set forth in Bankruptcy Rule 3007, as specifically detailed below.
5III. ARGUMENTS AND AUTHORITIES A. Approval of the Omnibus Objection Procedures is in the Best Interests of the Liquidating Trust and the Claimants 18. Under the Bankruptcy Code, "[a] claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest … objects." 11 U.S.C. § 502(a). Rule 3001 provides, "a proof of claim executed and filed in accordance with these rules shall constitute prima facie evidence of the validity and amount of the claim." Fed. R. Bankr. P. 3001. In chapter 11, claims that are scheduled as liquidated, undisputed, and non-contingent are treated as proofs of claims. See 11 U.S.C. § 1111(a); Fed. R. Bankr. P. 3003(b)(1). 19. Generally speaking, the rules require a claim objection to be in writing and to address only one claim. See Fed. R. Bankr. P. 3007. However, Bankruptcy Rule 3007 contemplates omnibus objections in certain limited instances, including but not limited to claims that are objectionable based on one or more of the following categories: (1) they duplicate other claims; (2) they have been filed in the wrong case; (3) they have been amended by subsequently filed proofs of claim; (4) they were not timely filed; (5) they have been satisfied or released during the case in accordance with the Code, applicable rules, or a court order; (6) 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; (7) they are interests, rather than claims; or (8) they assert priority in an amount that exceeds the maximum amount under § 507 of the Code. Fed. R. Bankr. P. 3007(d).
620. As discussed above, however, under the particular circumstances of this Bankruptcy Case, it is in the best interests of the Liquidating Trust and its beneficiaries, as successors to the Debtors’ estates and their creditors and interest holders, to allow the Trustee to file and prosecute omnibus objections under additional categories. Those additional categories and bases for omnibus objection authority requested from this Court are (collectively, the “Additional Objection Grounds”): (a) claims that have been paid by or assumed by a third party, such as but not limited to Destination Pet, LLC (“Destination Pet”), the purchaser of substantially all of the Debtor’s operating assets; (b) claims that fail to specify the asserted claim amount (or only list the claim amount as “unliquidated”); (c) claims and/or interests that conflict with the Debtors' books and records; and (d) claims that fail to sufficiently specify the basis for the claim or provide sufficient supporting documentation. 21. Rule 3007 expressly provides that the Court may authorize the relief requested herein. See Fed. R. Bankr. P. 3007(c) ("Unless otherwise ordered by the court or permitted by subdivision (d), objections to more than one claim shall not be joined in a single objection.") (emphasis added). Furthermore, "[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code]." 11 U.S.C. § 105(a). Though such powers are not limitless, "[f]rom this section emanate the general equitable powers of bankruptcy courts." Omni Mfg. v. Smith (In re Smith), 21 F.3d 660, 665 (5th Cir. 1994). 22. Authorizing the Trustee to assert the Additional Objection Grounds as omnibus objections pursuant to Rule 3007 will maximize the efficiency of administration of the Liquidating Trust, minimize expense and delays, and thereby promote the Trustee’s ability to maximize value to the Liquidating Trust’s beneficiaries as soon as reasonably possible.
723. Moreover, other than his request to broaden the scope of Rule 3007 to include the Additional Objection Grounds, the Trustee will comply with all provisions and requirements of the rule, including but not limited to notice requirements and the number of claims that may be the subject of a single omnibus objection. The Trustee is expressly not proposing to shift any applicable burdens of proof, which the Trustee agrees will remain the same for the Additional Objection Grounds. B. The Court Should Apply the Federal Judgment Rate to Seller Note Claims and General Unsecured Claims 24. As discussed above, both the Plan and the Shareholder Settlement contemplated that the Court would determine the interest rate applicable to certain claims at the Confirmation Hearing, if there was a dispute with payment at the federal judgment rate. However, perhaps due to the structure of the Shareholder Settlement and its Rider 1 that was appended to it, no party in interest raised the issue at the Confirmation Hearing. Instead, the Trustee, and upon information and belief certain parties in interest who had a material role in the negotiation of the Shareholder Settlement, have proceeded with the understanding that the provision of the Shareholder Settlement providing for interest to accrue on General Unsecured Claims at the federal judgment rate (prior to the attachment of Rider 1) is effective and enforceable. 25. Notwithstanding, the Confirmation Order does not specifically address the matter and, therefore, there is the potential argument that the issue remains unresolved. 26. As a result, by this Motion and out of an abundance of caution, the Trustee requests that this Court enter an Order affirming that the interest rate accruing from and after VCI’s Petition Date applicable to General Unsecured Claims allowable in the Bankruptcy Case and corresponding beneficial interests in the Liquidating Trust, accrues at the federal judgment
8rate in effect at the time of the Confirmation Hearing. That proposed rate is: 0.1%.2 Such interest should accrue until the date that is, at most, three (3) days prior to the date on which the Trustee issues the relevant distributions. 27. The Trustee does not necessarily have an interest in this particular matter, but believes that such relief is also in the best interests of the of the Liquidating Trust and its beneficiaries as successors to the Debtors’ estates and their creditors and interest holders. First, a singular interest rate applicable to all allowed General Unsecured Claims plainly promotes efficiency and minimizes expense and delays. Absent a global resolution of this issue, the Trustee cannot make distributions to holders of “Seller Notes” (as referenced in the Plan) or other General Unsecured Claims until he knows what interest rate, if any, to apply. 28. As a result, the Trustee and his professionals would otherwise have to individually analyze each such General Unsecured Claim and its contractual documentation, if any, in order to evaluate the particular interest rate allowable in connection with the individual claims. Such an effort will be costly and result in delayed distributions, which the Trustee seeks to avoid for the benefit of all stakeholders. 29. The potential issue similarly impairs—or reasonably contravenes—the Trustee’s ability to make interim distributions because the Trustee would need to reserve both potential amounts payable as interest and funds to litigate and resolve interest rate disputes. In addition, if the underlying contracts at issue provide for the recovery of attorneys’ fees by a prevailing party, the Trustee might arguably need to reserve additional amounts to address such potential liabilities. Reserved distributions may also be implicated where disputing creditors may end up owing offsetting attorneys’ fees back to the Trustee in connection with such a dispute. 2 The federal judgment rate of interest in effect on the date of filing of this Motion was .06%.
9Accordingly, if the requested relief is granted, the Trustee expects to make distributions on General Unsecured Claims promptly following the finality of the Court’s order3 but absent such relief and due to the foregoing resulting uncertainties, the Trustee would be unable to presently formulate a schedule to make such distributions until greater clarity is achieved. 30. In light of the Shareholder Settlement terms and the foregoing considerations, the Trustee seeks to resolve, with notice to all parties in interest, any arguably unresolved interest rate applicable to General Unsecured Claims completely and fairly by this Motion, and requests that the Court affirm the federal judgment rate as the interest rate applicable to all such claims. This relief would abrogate any need to incur wasteful expense and will efficiently apply a singular interest rate to all General Unsecured Claims entitled to distribution under the Plan. Such relief thus maximizes fairness and will allow the Trustee to consistently and efficiently calculate allowable interest and more promptly make distributions. 31. Absent such relief, one could argue that the applicable interest rate should be zero because any such rate under the terms of the Plan and Shareholder Settlement were required to be resolved at the Confirmation Hearing and under the Confirmation Order, and that it is now too late to attempt to litigate it. "Res judicata 'bars the litigation of claims that either have been litigated or should have been raised in an earlier suit.'" United Indep. Sch. Dist. V. Vitro Asset Corp. (In re Vitro Asset Corp.), 656 Fed. Appx. 717, 723 (5th Cir. 2016) (quoting Southmark Corp. v. Coopers & Lybrand (In re Southmark Corp.), 163, F.3d 925, 934 (5th Cir. 1999)). "This principle is equally applicable to 'bankruptcy plan confirmations.'" Id. (quoting Sun Fin. Co. v. Howard (In re Howard), 972 F.2d 639, 641 (5th Cir. 1992)). 3 The Trustee reserves all of his rights to object to any claim against the Trust that has not been resolved by a prior final order.
1032. While that risk adheres to any continuing dispute over the appropriate interest rate(s), the Trustee believes that the relief requested herein is plainly more equitable. Because the matter was not raised by any party in interest, it is also arguable that the Trustee now has discretion with respect to this issue. The Trustee’s confirmed powers include: (i) receive, hold, manage, sell, prosecute, resolve, invest, supervise, protect, abandon and liquidate the Liquidating Trust Assets; * * * (iv) calculate and implement Distributions to Beneficiaries out of the Liquidating Trust Assets in accordance with the Plan; * * * (vi) compromise, adjust, arbitrate, sue on or defend, abandon, or otherwise resolve or settle, in accordance with the terms hereof, claims in favor of, or against, the Trust; (vii) determine and satisfy any and all liabilities created, incurred, or assumed by the Trust, and to establish and maintain appropriate reserves to ensure same, in his sole and absolute discretion; Trust Agreement ¶ 4.01. 33. If efficiently resolved, the Trustee expects to distribute substantial value to former equity holders in the Debtors. Therefore, as contemplated under the Shareholder Settlement, payment of interest on account of General Unsecured Claims is generally appropriate. Moreover, the Shareholder Settlement and Plan read in such a manner that parties in interest reasonably could have proceeded with the understanding that the federal judgment rate applies, and requesting that no interest be paid on account of such claims may frustrate the legitimate expectations of certain creditors.
1134. Conversely, for the reasons stated above, utilizing a contract rate will maximize expense and delays.4 35. Additionally, the Trustee notes that the federal judgment rate is generally the appropriate rate for providing creditors the present value of their claims. See Dropbox v. Thru, Inc., No. 3:17-CV-1958-G, 2018 U.S. Dist. LEXIS 179769 (N.D. Tex. Oct. 19, 2018) (relating to plan cramdown). Respectfully, the relief requested is both appropriate and proper under the circumstances. Both the Supreme Court, in Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151, 129 S. Ct. 2195 (2009), and the Court of Appeals for the Fifth Circuit in United States v. Alcoa, Inc., 533 F.3d 278, 287 (5th Cir. 2008), have affirmed the proposition that all federal courts have the inherent authority to enter orders enforcing and interpreting their own prior orders. See also Upton Creditors, LLC v. MHR Institutional Partners III (In re Upton), 2016 U.S. Dist. LEXIS 5591, *12 (N.D. Tex. 2016) (a bankruptcy court’s order interpreting its own confirmation order is entitled to substantial deference. (citations omitted)); In re Palmaz Sci. Inc., 562 B.R. 331, 335-336 (Bankr. W.D. Tex. 2016) (jurisdiction and authority extends to bankruptcy court’s interpretation and implementation of its confirmation order). 36. This Court may grant the requested relief in order to address the ambiguity, if any, remaining under the Plan, the Shareholder Settlement incorporated into it, and the Court’s corresponding Confirmation Order. Alternatively, the requested relief could be included and approved as an Additional Objection Ground for purposes of omnibus objections, and the Trustee reserves all rights, if necessary, to request that any order entered by this Court granting this Motion approve of such objection grounds and allow the Trustee to exceed the numerosity 4 If the interests rate calculation issue is not globally resolved, as contemplated in the Plan, the Trustee may have no choice but to object to every Class 4 General Unsecured Claim. Further, the Plan expressly provides that all existing notes and other instruments are cancelled. By implication the rates set under those instruments were cancelled too.
12limitations under Rule 3007 with respect to this ground. However, given the foregoing, such a procedure should not be necessary and this Court should instead, in the interests of efficiency, consistency and finality enter such relief applicable to all General Unsecured Claims without the need for further duplicative objections to contest the post-petition interest rate applicable to any Class 4 General Unsecured Claims or establish the calculation thereof with respect to such claim. 37. The Trustee is providing notice of this Motion to all holders of allowed or potentially allowable General Unsecured Claims, and will provide all such parties at least thirty (30) days to respond to this requested relief. 38. Accordingly, the Trustee requests that the Court enter an order approving the Trustee's exercise of his discretion to apply and accrue post-petition interest at the federal post-judgment rate of 0.1% to Seller Note claims and other Class 4 General Unsecured Claims, until the date that is (at most) three (3) days prior to the date on which the Trustee issues the relevant distributions. IV. PRAYER WHEREFORE, PREMISES CONSIDERED, the Trustee respectfully requests entry of an order: (i) granting this Motion; (ii) allowing the Trustee to file omnibus claim objections asserting the Additional Objection Grounds, if and to the extent he deems appropriate; (iii) setting the post-petition interest rate for Seller Note claims and Class 4 General Unsecured Claims at 0.1 %; and (iv) granting to the Trustee such other and further relief as is just. RESPECTFULLY SUBMITTED this 28th day of April, 2021.
13MUNSCH HARDT KOPF & HARR, P.C. By: /s/ Jay H. Ong Jay H. Ong Texas State Bar No. 24028756 Julian P. Vasek Texas State Bar No. 24070790 1717 West 6th Street, Suite 250 Austin, Texas 78703 Telephone: (512) 391-6100 Facsimile: (512) 391-6149 firstname.lastname@example.org email@example.com COUNSEL FOR THE LIQUIDATING TRUSTEE CERTIFICATE OF SERVICE I hereby certify that on this 28th day of April, 2021, I personally caused to be served a true and correct copy of the above and foregoing application, (A) by electronically filing it with the Court using the Court's CM/ECF system, which sent notification to all parties of interest receiving notice in this case through the CM/ECF system; and (B) via first class U.S. mail, postage prepaid, on the attached service list. By: /s/ Jay H. Ong Jay H. Ong