HTML Document View

Full title: Objection to Claim Number 71 by Claimant Timothy Thompson. Timothy Thompson. Hearing scheduled for 8/12/2021 at 10:00 AM at telephone and video conference. (Attachments: # 1 Declaration # 2 Proposed Order)(Vasek, Julian) (Entered: 06/29/2021)

Document posted on Jun 28, 2021 in the bankruptcy, 8 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

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 Objection to Claim 71.1 Filed by Timothy J. Thompson, DVM, and Request for Estimation (the “Objection”), respectfully stating as follows: I. JURISDICTION AND VENUE 1. 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 distributions of the net proceeds of all Liquidating Trust assets.On April 22, 2020, Timothy J. Thompson, DVM (“Dr. Thompson”) filed unsecured Claim No. 71-1 in the amount of $1,267,000.00 (the “Objectionable Claim”) in Case No. 19-35736.Rule 3001(f) of the Federal Rules of Bankruptcy Procedure provides that a properly executed and filed proof of claim constitutes prima facie evidence of the validity and amount of the claim under section 502(a) of the Bankruptcy Code.The Bankruptcy Code specifically provides for the estimation of claims “for purposes of allowance” for “any contingent or unliquidated claim, the fixing or liquidation of which, as the case may be, would unduly delay the administration of the case ….”

List of Tables

Document Contents

IN 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 OBJECTION TO CLAIM 71-1 FILED BY TIMOTHY J. THOMPSON, DVM, AND REQUEST FOR ESTIMATION This is an objection to your claim. This objection asks the Court to disallow the claim that you filed in this bankruptcy case. If you do not file a response within 30 days after the objection was served on you, your claim may be disallowed without a hearing. A hearing has been set on this matter on August 12, 2021 at 10:00 a.m. in Courtroom 401, 515 Rusk, Houston, TX 77002. Such hearing may be conducted remotely. 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 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 objection 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

1

“Bankruptcy Case”), and files this Objection to Claim 71.1 Filed by Timothy J. Thompson, DVM, and Request for Estimation (the “Objection”), respectfully stating as follows: I. JURISDICTION AND VENUE 1. This Court has jurisdiction over the Bankruptcy Case and this Objection pursuant to 28 U.S.C. §§ 157 and 1334. This Objection constitutes a core proceeding pursuant to 28 U.S.C. § 157(b). 2. Venue of the Bankruptcy Case, and of this Objection, is appropriate before this Court in this district under 28 U.S.C. §§ 1408 and 1409. II. FACTS A. Background 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. 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 Management, 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. 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 to consider confirmation of the Debtors’ First Amended Joint Combined Chapter 11 Plan and Disclosure Statement of Veterinary

2

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 distributions 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. Following the Effective Date and his appointment, the Trustee initiated his claims review process in order to formulate and identify potential objections, and has begun conferring with claimants in order to attempt to resolve objections where appropriate. 1 Capitalized terms used and not otherwise defined herein have the same definitions as are set forth in the Plan.

3

B. The Claim 11. On April 22, 2020, Timothy J. Thompson, DVM (“Dr. Thompson”) filed unsecured Claim No. 71-1 in the amount of $1,267,000.00 (the “Objectionable Claim”) in Case No. 19-35736. A “Proof of Claim Addendum” attached thereto provides as follows: 1. Promissory notes and calculation by Vital Pet as of December 19, 2018 (Robert Cossick VP Finance) without interest attached as Exhibit A. Principal Balance of $730,000.00 plus interest at 6%; 2. Amended and Restated Employment Agreement wrongfully terminated June 2018 resulting in damages in excess of $517,000.00, and buy-out as provided in section 4.2 of the Restate Employment Agreement in the amount of $437,000.00; 3. Removal of commercial bar-b-que pit by VitalPet in the value of $20,000.00 from Hope Clinic, which was the personal property of Dr. Thompson. As Part 2 of this addendum indicates, this claim is not fully liquidated—i.e., Dr. Thompson’s alleged damages are in excess of $517,000.00. 12. As an initial matter, the Debtors paid Dr. Thompson’s promissory notes on or about January 2, 2019 by wire transfer in the amount of $706,500.00. Upon information and belief, the Debtors withheld 22,500.00 from the total outstanding balance due to a dispute over the bar-b-que pit referred to in part 3 of Dr. Thompson’s Proof of Claim Addendum. Upon further information and belief, Dr. Thompson took possession of the pit despite the fact that it was believed to be the Debtors’ property. 13. Furthermore, the purported evidence attached to the Objectionable Claim does not support it. Among the attachments is correspondence dated July 30, 2018 from Warren Resell, DVM to Dr. Thompson. This correspondence effectively accuses Dr. Thompson of providing services in violation of his non-compete agreement. But there is no statement from Dr. Thompson, for example, denying this allegation. In other words, the evidence submitted only indicates the basis for termination. There is no evidence attached to the Objectionable Claim tending to

4

demonstrate that Dr. Thompson’s termination for cause was wrongful. This calls into question the wrongful termination component of the Objectionable Claim. 14. Similarly, the same correspondence indicates that a buy-out payment of $203,635.68 was being wired to Dr. Thompson’s account “in full.” Dr. Thompson does not dispute receiving this payment, and therefore, the payment appears to have been an accord and satisfaction. Finally, as previously mentioned, the Objectionable Claim includes $20,000.00 for the alleged removal of a commercial bar-b-que pit by VitalPet from Hope Clinic, which Dr. Thompson claims was his personal property. There is no evidence whatsoever attached to the Objectionable Claim related to the bar-b-que pit. Ultimately, the Objectionable Claim is of the type that ordinarily would need to be reduced to judgment after trial, which has not occurred. III. ARGUMENTS AND AUTHORITIES 15. Section 502 of the Bankruptcy Code provides in relevant part that, “A claim or interest, proof of which is filed under § 501 of this title, is deemed allowed, unless a party in interest … objects.” 11 U.S.C. § 502(a). However, a claim is objectionable to the extent that “such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured ….” 11 U.S.C. § 502(b)(1). 16. Rule 3001(f) of the Federal Rules of Bankruptcy Procedure provides that a properly executed and filed proof of claim constitutes prima facie evidence of the validity and amount of the claim under section 502(a) of the Bankruptcy Code. See In re O’Connor, 153 F.3d 258, 260 (5th Cir. 1998); In re Texas Rangers Baseball Partners, 10-43400, 2012 Bankr. LEXIS 4425, at *2 (Bankr. N.D. Tex. Sept. 25, 2012). The same is true of a scheduled claim that is not disputed, contingent, or unliquidated. Fed. R. Bankr. P. 3003(b)(1). But to receive the benefit of prima facie validity, “[i]t is elemental that a proof of claim must assert facts or allegations … which

5

would entitle the claimant to a recovery.” In re Heritage Org., L.L.C., 04-35574, 2006 Bankr. LEXIS 4577, at *8 (Bankr. N.D. Tex. Jan. 27, 2006), aff’d sub nom., Wilferth v. Faulkner, 3:06 CV 510 K, 2006 Bankr. LEXIS 75823 (N.D. Tex. Oct. 11, 2006). Furthermore, a proof of claim is entitled to prima facie validity under Rule 3001(f) only until an objecting party rebuts “at least one of the allegations that is essential to the claim’s legal sufficiency.” In re Am. Reit, Inc., 07-40308, 2008 Bankr. LEXIS 1206, at *3 (Bankr. E.D. Tex. Apr. 15, 2008); In re Starnes, 231 B.R. 903, 912 (N.D. Tex. May 14, 2008). “The ultimate burden of proof always lies with the claimant.” In re Armstrong, 347 B.R. 581, 583 (Bankr. N.D. Tex. 2006). 17. Based on the evidence attached to the Objectionable Claim, it is simply impossible to determine whether or not “such claim is enforceable against the debtor ….” The Objectionable Claim has been paid in part and is plainly unliquidated in part, if not previously satisfied in full, and discovery will be necessary to determine any remaining extent of the Debtors’ liability. This is especially the case given the fact that the Trustee has succeeded to the Debtors’ interests, and he was not involved in any of the underlying transactions or disputes. 18. In order to facilitate the expeditious resolution of this Objection, the Trustee therefore requests that, to the extent it is necessary, the Court estimate any remaining claim. The Bankruptcy Code specifically provides for the estimation of claims “for purposes of allowance” for “any contingent or unliquidated claim, the fixing or liquidation of which, as the case may be, would unduly delay the administration of the case ….” 11 U.S.C. § 502(c). It cannot reasonably be disputed that liquidating a wrongful termination claim through the ordinary litigation process would unduly delay the administration of this case. 19. Thus, in an estimation proceeding, the Court “should use whatever method is best suited to the circumstances” even though the Court “is bound by the legal rules which govern the ultimate value of the claim.” In the Matter of Brints Cotton Marketing Inc., 737 F.2d 1338, 1341

6

(5th Cir. 1984). Some courts, for example, have employed procedures akin to a “summary trial” involving affidavits, depositions, exhibits, discovery responses, and limited live testimony. E.g. In re MacDonald, 128 B.R. 161, 166 (Bankr. W.D. Tex. 1991) (citing Fed. R. Civ. P. 43, made applicable by Fed. R. Bankr. P. 9017); see In re Zolner, 173 B.R. 629, 633 (Bankr. N.D. Ill. 1994) (noting, “Under Rule 3018(a), a summary-type hearing is contemplated. Accordingly, the Court only heard about twelve hours of evidence and argument, although all evidence was admissible under evidence rules.”). 20. The Trustee accordingly requests that the Court sustain this Objection and disallow for all purposes the Objectionable Claim, or, following summary estimation proceedings, enter an order allowing the Objectionable Claim in an appropriate amount that is supported by the evidence. IV. PRAYER WHEREFORE, PREMISES CONSIDERED, the Trustee respectfully requests entry of an order: (i) Sustaining this Objection; (ii) either disallowing the Objectionable Claim or allowing the Objectionable Claim in an appropriate amount; and (iii) granting to the Trustee such other and further relief as is just. RESPECTFULLY SUBMITTED this 29th day of June, 2021.

7

MUNSCH HARDT KOPF & HARR, P.C. By: /s/ Julian P. Vasek 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 jong@munsch.com jvasek@munsch.com COUNSEL FOR THE LIQUIDATING TRUSTEE CERTIFICATE OF SERVICE I hereby certify that on this 29th day of June, 2021, I personally caused to be served a true and correct copy of the above and foregoing objection, including all exhibits, if any, (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 following recipient(s): Timothy J. Thompson, D.V.M. c/o Jesse R. Castillo Castillo Snyder PC 700 N. St. Mary’s Suite 1560 San Antonio, TX 78205 By: /s/ Julian P. Vasek Julian P. Vasek

8