Full title: Objection to Confirmation of Plan Filed by Creditor Andes Technology USA Corporation (Song, Brian) (Entered: 01/25/2021)
Document posted on Jan 24, 2021 in the bankruptcy, 10 pages and 0 tables.
Bankrupt11 Summary (Automatically Generated)
1063 0 (“To the extent that Class 5 includes General Unsecured Claims against multiple Debtors, the 1 treatment of Class 5 described herein potentially constitutes a partial substantive consolidation of 2 the applicable Debtors.”)By 8 arranging all claims and interests for seven debtors under a single joint plan and classify them 9 accordingly, Debtors devise one consolidated system to acquire votes necessary to accept the Plan 0 from impaired creditors, at a single cast.If the Debtors (here, Wave and MIPS) each filed separate plans or 9 this instant Plan were to provide different classes of claims per each of the Debtors, ANDES would 0 be entitled to receive distributions from both Debtors. The Plan 8 is a single plan for all Debtors and does not even classify classes of claims per Debtor and the 9 proposed voting procedure is not designed for creditors to cast a vote per-Debtor.The Plan 2 would do so even though Debtors only sought, and this Court allowed, joint administration and T
34 nboyt tshueb sCtaonutritv’es coorndseor.l id Fatoior na.n oStuhcehr ae xmaamnpeluev, esre icst ihoanr d1l1y2 i9n( ag)o(o7d) fimaitpho saensd tihs ea l“sboe nsto ti npteerrmesitt teodf
1 BRIAN H. SONG, ESQ. (CABN 188662)
2 NA RAE LEE, ESQ (CABN 326972)
3 SONG & LEE, LLP
2559 S. Bascom Ave.
4 Campbell, CA 95008
Tel: (408) 628-4257
5 Fax: (408) 628-4258
6 File No. 732
7 Attorney for Creditor
Andes Technology USA Corporation
9 UNITED STATES BANKRUPTCY COURT
0 NORTHERN DISTRICT OF CALIFORNIA
1 SAN JOSE DIVISION
3 In RE: Lead Case No.: 20-50682 (MEH)
4 WAVE COMPUTING, INC., et al.,
Chapter 11 (Jointly Administered)
(Including Case No.: 20-50692)
7 CREDITOR ANDES TECHNOLOGY
USA CORP.’S OBJECTION TO
8 CONFIRMATION OF FIFTH
AMENDED JOINT CHAPTER 11
9 PLAN OF REORGANIZATION FOR
WAVE COMPUTING, INC. AND ITS
0 DEBTOR AFFILIATES; JOINDER;
RESERVATION OF RIGHTS
2 January 25, 2021 at 4:00 p.m. (PST)
3456 CDTCJuitoamdrtnmgeef:e:i: : r FZ 1mHe0obo:aor1ntmu5i.ao MarVny. mi. H d1E.e0e l(o,aaP c2irSnoi0neTn 2 gf)H1e Draemantcmee o anndd Time: el: (408) 628-4257; Fax: (408) 628-4258 7
1 A. OBJECTIONS
2 Creditor Andes Technology USA Corporation (“ANDES”) objects to the Debtors’ FIFTH 3 AMENDED JOINT CHAPTER 11 PLAN OF REORGANIZATION FOR WAVE COMPUTING, INC. AND ITS 4 DEBTOR AFFILIATES (Dkt. 1063) (the “Plan”) on the following grounds:
5 Objection #1
6 The Plan Is Facially Unconfirmable – Presumes Unauthorized Substantive Consolidation 7 The Plan disingenuously presumes substantive consolidation. For instance, the Plan 8 provides for a single joint distribution scheme which does not specify where assets are found or 9 where liabilities lie. See Dkt. 1063, Article III.B. of the Plan; see also foot note 2 to Dkt. 1063 0 (“To the extent that Class 5 includes General Unsecured Claims against multiple Debtors, the 1 treatment of Class 5 described herein potentially constitutes a partial substantive consolidation of 2 the applicable Debtors.”) For another example, the Plan provides for a consolidated liquidation 3 analysis assuming these cases are substantively consolidated. See Dkt. 848-3, Liquidation 4 Analysis, ECF Page at 4 (“2. Consolidated Liquidation. The Liquidation Analysis assumes that the 5 Debtors would be liquidated in a jointly administered and substantively consolidated proceeding.
6 Therefore, the Liquidation Analysis considers a consolidated liquidation.”). Furthermore, the Plan 7 provides for a single joint classification of claims and interests. See Article III. of the Plan. By 8 arranging all claims and interests for seven debtors under a single joint plan and classify them 9 accordingly, Debtors devise one consolidated system to acquire votes necessary to accept the Plan 0 from impaired creditors, at a single cast.
1 Yet, Debtors never officially sought, and the Court never authorized, substantive 2 consolidation of the matters; the matters are consolidated only for the purpose of joint T
34 a(“dJmoiinnti satdramtiionnis. t rTahtiiosn i sw iinldl insoptu atadbvleer.s eSlyee a fDfekct.t 2th, eD reigbhtotsrs o’ fM paorttiioens fino ri nJoteirnets At bdemcianuissetr tahtiios nM, 7o:t1io-n3 el: (408) 628-4257; F56 rseuqbusetasntst ivoen clyo nsthoeli daadtimonin.”is),t r7a:t4iv (e“ ecaochn scorleiddiattoior nw iollf cothneti neuset attoe sh oflodr i tsp rcolaciemdu argaal inpsut rap opsaertsi,c unloart ax: (408) 628-4258 7 Debtor’s estate […]”); see also Dkt. 50, Order Directing Joint Administration 4:16-17 (“Nothing
1 contained in this Order shall be deemed or construed as directing or otherwise affecting the 2 substantive consolidation of any of the above-captioned Chapter 11 Cases.”) The fact that 3 the matters were jointly administered is not an excuse for confirming such plan that is premised 4 on substantive consolidation. Bunker v. Peyton (In re Bunker), 312 F.3d 145, 153 (4th Cir. 2002) 5 (“Joint administration does not affect the substantive rights of either the debtor or his or her 6 creditors.”)
7 As such, the Plan ignores both the substantive rights of the creditors and corporate 8 separateness; the Plan improperly combines separate creditor entities from multiple closely related 9 Debtors. See In re Owens Corning, 419 F.3d 195, 210-11 (3d Cir. 2005) (“the general expectation 0 of state law and of the Bankruptcy Code … is that courts respect entity separateness absent 1 compelling circumstances calling entity … into play.”) For starters, substantive consolidation is 2 “extreme” for the exact reasons that ANDES raises here (altering creditors’ substantive rights – 3 see below). See In re Owens Corning, supra, 210—11 (“substantive consolidation is extreme (it 4 may affect profoundly creditors’ rights and recoveries)”). (Italics added.) Considering such 5 extreme nature, Debtors should not improperly seek to substantively consolidate the matters in this 6 confirmation process. Confirmation of a plan is not meant to address the issue of substantive 7 consolidation. See In re Owens Corning, supra, (expressing concerns about substantive 8 consolidation as “imprecise” in nature). Id.
9 This is not a trivial matter as it affects creditors’ substantive rights. For instance, creditors 0 of one Debtor may have a different prospect of recovery as compared to creditors of other Debtors.
1 Here, there are 28 creditors of a Debtor, MIPS Tech LLC (“MIPS”), whose claims are totaling 2 $29,933,900.08. Dkt. 400. In comparison, there are 181 creditors of another Debtor, Wave T
34 CMoImPSp uTtiencgh, LInLcC. (a“nWd aWvea”v)e w Choomsep ucltainimg,s I narce. htoatvael indgif f$e1re2n9t, 8a3s0se,4t 1h6o.l7d3i.n g Ds kwt.i th3 9d7i.f fFeurerntht evrmaluoeres,. el: (408) 628-4257; F56 Cwoilml lpikaerely D hkatvse. d4i0f0fe (rMenItP aSm’ oausnsetst so)f w fuitnhd s3 9o7r a(sWseatvs ea’vsa ailsasbeltes )f.o rT dhiesrtreifbourtei,o tnhse i nc rceodmitoprasr iosof nM wIPitSh ax: (408) 628-4258 7 the creditors of Wave. One can also reasonably assume different assets will have different
1 prospects of liquidations or sales, hence likely causing different distribution dates, yet again 2 affecting the substantive rights.
3 ANDES would be among such creditors’ whose legal rights will be adversely affected.
4 ANDES holds joint and several claims against both Wave and MIPS. See Claim No. 34-1 and 2-5 1 on Wave / MIPS Claim Registries, respectively. Therefore, ANDES would be entitled to 6 distributions from both Wave and MIPS (subject to the ‘single recovery rule’). See Dkt. 591, 705 7 (ANDES’ Responses to Debtors’ Objection to Claims) and Dkt. 971 (Debtors’ withdrawal of the 8 objections alleging duplicity). If the Debtors (here, Wave and MIPS) each filed separate plans or 9 this instant Plan were to provide different classes of claims per each of the Debtors, ANDES would 0 be entitled to receive distributions from both Debtors. However, as is now, the Plan effectively 1 results in substantial consolidation of the bankruptcy proceedings of MIPS and Wave, classifying 2 all unsecured creditors, including ANDES, in the same class and turning ANDES’ claim from a 3 joint and several claim into a single unsecured claim against the consolidated estate. As such, 4 ANDES’ recovery is likely much smaller than otherwise would be.
5 In conclusion then, since the Plan would impermissibly alter creditors’ substantive rights, 6 and will do so without first affording creditors to weigh on the prospect of substantive 7 consolidation, the Plan is facially unconfirmable. At a minimum, Debtors must first have sought 8 to substantively consolidated the matters, a step which they so far failed to do. Debtors should not 9 now be allowed to do as part of this confirmation hearing.
0 Objection #2
1 The Plan Fails to Meet Section 1129(a)
2 Given the improper attempt of substantive consolidation, the Plan naturally fails to meet T
34 tSheee lIeng arel rSeoquutihre Bmeeancths Sunecd.e, rI n1c1. ,U 3.7S6.C B. .sRe.c 8ti8o1n (1B1a2n9k(ra.) (N1.0 D). . TIlhl.e 2 f0a0il7u)r e(“ iFso fra taa cl haas pitte irs 1a1 “ pmlauns tt”o. el: (408) 628-4257; F56 b1e1 2c9o(naf)i”r)m ed, the plan must meet each requirement of section 1129(a) of the Code, 11 U.S.C. § ax: (408) 628-4258 7
1 Section 1129(a)(10) requires at least one impaired class of claims approve the plan before 2 it can be confirmed. 11 U.S.C § 1129(a)(10). In a case of joint administration, this requirement 3 must apply to each debtor; i.e., each debtor must satisfy this requirement. See In re Tribune Co., 4 464 B.R. 126, 183 (Bankr. D. Del. 2011) (“absent substantive consolidation or consent” section 5 1129(a)(10) “must be satisfied by each debtor in a joint plan.”) Here, no such substantive 6 consolidation or consent is present; thus, the exception does not apply and as a result, each Debtor 7 must satisfy the requirement per the Plan. Yet, the Plan is not even set up for such test. The Plan 8 is a single plan for all Debtors and does not even classify classes of claims per Debtor and the 9 proposed voting procedure is not designed for creditors to cast a vote per-Debtor. See Dkt. 667, 0 Debtors’ Motion for Solicitation and Voting Procedures (providing no procedures for each 1 impaired classes of creditors to approve the reorganization plan for each Debtor); see also Dkt.
2 667-3 to 667-5, Class 3-5 Ballot (no space provided to state a name or identity of relevant Debtor 3 entity). Hypothetically, if a creditor of an impaired claim were to approve the Plan, there is no 4 way of telling which Debtor met the requirement on account to the creditor’s approval. As a result, 5 under the Plan, there is no means by which the 1129(a)(10) requirement is met per-Debtor. Thus, 6 there is no way of ascertaining each Debtor satisfies 1129(a)(10) requirement as required under In 7 re Tribune Co.
8 For similar reasons, the Plan fails to meet the requirements of section 1129(a)(3) and 9 section 1129(a)(7). For example, section 1129(a)(3), which requires that the plan be proposed in 0 good faith and not by any means forbidden by law, cannot be satisfied if not all debtors meet it.
1 Here, however, the Plan effectively would substantively consolidate the proceedings. The Plan 2 would do so even though Debtors only sought, and this Court allowed, joint administration and T
34 nboyt tshueb sCtaonutritv’es coorndseor.l id Fatoior na.n oStuhcehr ae xmaamnpeluev, esre icst ihoanr d1l1y2 i9n( ag)o(o7d) fimaitpho saensd tihs ea l“sboe nsto ti npteerrmesitt teodf el: (408) 628-4257; F56 crirgehdtisto arnsd” tdeoset.s Asog awinit,h tohuet P alfafno rcdainnngo ct rmedeietto trhs ids utees pt raosc iet sdsi stion goepnpuooseu salnyd a tbteem hepatsr dto o anl ttehre c irsesduieto. r s’ ax: (408) 628-4258 7
1 As such, the Plan will not satisfy any of the requirements under section 1129(a). Thus, the 2 Court should not confirm the Plan.
3 Objection #3
4 Debtors’ Impermissible Retention of Rights
5 The Plan seeks to retain impermissible retention rights presumably under 11 U.S.C. section 6 1123(b)(3)(B). For example, Article I.A of the Plan provides, in relevant part:
7 24. “Claims Objection Deadline” means the deadline for Filing an objection to any Claim … which deadline shall be one hundred eighty (180) days after the 8
Effective Date, subject to any extensions approved by an order of the Bankruptcy Court […]
0 The Plan reinforces Debtors’ overbroad right to claim objection in Article IV.G of the Plan in case 1 the Restructuring occurs. Article IV.G.2. states:
2 If the Restructuring occurs, the primary right to object to or otherwise contest Claims or Interests shall be retained by the Reorganized Debtors, except as 3 otherwise agreed between the Reorganized Debtors and the Liquidating Trust Manager in writing in accordance with Section XIII.G.
Debtors’ overbroad right to claim objection is also reserved in the Plan when the Asset Sale 5
Distribution is elected. Article IV.G.2. further states:
If the Asset Sale Distribution is elected, all rights to object to or otherwise 7
contest Claims or Interests … shall be transferred to, and shall vest in, the Wind-8 Down Debtors, except as otherwise agreed between the Wind-Down Debtors and the Liquidating Trust Manager in writing in accordance with Section XIII.G.
These provisions, however, does not comport with 1123(b)(3)(B). Section 1123(b)(3)(B) 0
permits “the retention . . . of any such claim or interest”; on the other hand, it does not permit the 1
Debtors to retain rights to object to claims. Therefore, the Plan is objectionable to the extent it 2
34 p urportsE tvoe nre itfa itnh es uPclahn “ wrigehret tcoo rorbejcetc tto” raest asiunc thh ree rtiegnhtito tno iosb njeoct tf, othuen dp rionv Siseicotniosn a 1re1 2im3(pbe)r(m3)i(sBsi)b. ly el: (408) 628-4257; F56 borbojeacdt iaonnds vaangdu eg. r oTuhned Ps lathne arnefdo trh eth deiys calores urreet adion innogt. p rSouvcidhe bsruofafidc ielannt gnuoatgicee sd aose sto n woth amt,e ief ta nthye, ax: (408) 628-4258 requirement of Section 1125. See Paramount Plastics v. Polymerland (In re Paramount Plastics), 7
1 172 B.R. 331 (Bankr. W.D. Wash. 1994) (Section 1125 requires the disclosure of adequate 2 information in order to allow a claimant to make an informed decision on how to vote on a plan); 3 see also In re Mako, Inc., 120 Bankr. 203, 209 (Bankr. E.D. Okl. 1990) (“the retention provision 4 of section 1123(b)(3)(B) requires specific and unequivocal language of reservation”).
5 Thus, the plan must at least apprise the claimant as to whether his claim will be subject to 6 later objections or claims. Failing to meet this standard, a plan’s retention is impermissible, often 7 resulting in the debtors’ loss of such rights. See In In re Mickey’s Enterprises Inc. v. Saturday 8 Sales, Inc. (In re Mickey’s Enterprises Inc.), 165 B.R. 188 (Bankr. W.D. Tex. 1994) (failure to 9 provide adequate notice prejudiced possible claimant and as such, operated as res judicata); see 0 Kelly v. South Bay Bank (In re Kelly), 199 B.R. 698, 704 (B.A.P. 9th Cir. 1996) (affirming the 1 bankruptcy court’s decision that res judicata precludes the debtor from objecting to a proof of 2 claim despite a provision reserving the right to object to claims).
3 Under the standard, the Plan fails. It fails because it does not provide specific and 4 unequivocal language of reservation, which would enable creditors to evaluate the Plan and decide 5 as to how to vote. Taking ANDES, for example, while ANDES is now entitled to vote (see Dkt.
6 955, 958 (the 3018 Stipulation and Order, permitting ANDES to vote)), ANDES is unsure whether 7 under the Plan it will be later subject to an objection, as the Plan does not indicate whether it would 8 object to ANDES’ claims and why.
9 As such, Debtors’ Plan is objectionable and, if otherwise compliant, the Plan should be 0 stripped off of such overbroad retention of rights.
1 B. JOINDER
2 To the extent not inconsistent with the foregoing, Andes join in any objections to T
34 confirmation of the Debtors’ PlCan. RfiEleSdE bRy VanAyT pIaOrtNy iOn Fin RteIrGesHt. T S el: (408) 628-4257; F56 provideAd nbdye Ds erbetsoerrsv oers urpiognh tasn yto d iffufertrheenrt roeblijeefc rt etqou etshtee dP blyan D ebbatsoerds iunpcolund ianngy, wnietwho uint floimrmitaattiioonn , ax: (408) 628-4258 7
1 any further proposed modifications or amendments to the Plan, Plan Supplement and other relevant 2 documents.
3 D. CONCLUSION
4 For the reasons set forth above, ANDES respectfully requests that the Court should deny 5 the confirmation of the Plan.
6 Dated: January 23, 2021
7 Respectfully submitted,
8 SONG & LEE, LLP
9 /s/ Brian H. Song
Brian H. Song (SBN188662)
Attorneys for Creditor
Andes Technology USA Corporation
34 el: (408) 628-4257; F
56 ax: (408) 628-4258
1 CERTIFICATE OF SERVICE
2 I certify and declare as follows:
3 I am a resident of the State of California, over the age of eighteen years, and not a party to 4 the within action. My business address is 2559 S. Bascom Ave., Campbell, California 95008. On 5 January 23, 2021, I served a true and correct copy of the following document(s):
CREDITOR ANDES TECHNOLOGY USA CORP.’S OBJECTION TO
7 CONFIRMATION OF FIFTH AMENDED JOINT CHAPTER 11 PLAN
OF REORGANIZATION FOR WAVE COMPUTING, INC. AND ITS
8 DEBTOR AFFILIATES
9 on the interested parties in this action by serving:
0 The Office of the United States Trustee Debtors
Region 17 Wave Computing, Inc. and MIPS Tech, LLC
1 Attn. Jason B. Shorter, Esq. and Jason M. Attn: Lawrence R. Perkins Blumberg, Esq. 355 S. Grand Ave., Suite 1450
2 280 South First St., Room 268 Los Angeles, CA 90071
San Jose, CA 95113
Counsels For Debtors
Sidley Austin LLP Sidley Austin LLP
Attn: Samuel A. Newman, Esq. Attn: Charles M. Persons, Esq.
555 West Fifth Street 2021 McKinney Avenue, Suite 2000, Dallas, 6
Los Angeles, CA 90013 Texas 75201
Counsel to the Official Committee of Counsel for DIP Agent and DIP Lender 8
Binder & Malter LLP
Hogan Lovells US LLP Attn: Robert G. Harris, Esq.
Attn: Richard L. Wynne 2775 Park Ave.
1999 Avenue of the Stars, Suite 1400 Santa Clara, CA 95050 Los Angeles, CA 90067
on the parties in this action, by the following means:
34 iabbnbuu ossaiiv nnseeeeB assaYlssen fddpFo reerap ndcclvEtoaiexlcclle:eoe dscpI. te cit o ahoInuer s apaeemnadncd vak rpe aemrlgaoodeepc mieaelysd bs dfeiofrnraer gm os scfoi eolmfidl alc yertoo csrw trttihaeoistfenhfp p otaetonhnr,d sedooe nnbnm cust ehsaa iiitfnsl oit enhdrs geasm ,t a epad,fi rodleailrncnleoctgsiwlc.so ee isOns e ag lntti h stotmeheu eddyr o sinopacm rultadhmceiene e da lnaiortsyysft el: (408) 628-4257; F56 tcphoraeutpr saceiod ro.r ef sbpuosnidneenscs ew isit hp lathcee dF feodre rcaoll lEecxtpiorens sa,n din maa sileianlge,d i te insv deeloppoes itwedit hin p tohset aogred ifnualrlyy ax: (408) 628-4258 7
1 I declare under penalty of perjury under the laws of the United States of America that the 2 above is true and correct. Executed on January 23, 2021, at Campbell, California.
/s/ Brian H. Song 0 Brian H. Song
34 el: (408) 628-4257; F
56 ax: (408) 628-4258