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Full title: Response And Objection To Motion Of The Debtors For Entry Of An Order (A) Dismissing The Chapter 11 Cases, And (B) Granting Related Relief Filed by Maricopa County Treasurer (related document(s)929). (Muthig, Klaus) (Entered: 06/08/2021)

Document posted on Jun 7, 2021 in the bankruptcy, 5 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

MCT objects to the Motion based on non-payment 14 taxes, as more fully set forth below, and requests that the Court direct the Debtors and/15 Buyer to pay the taxes owed to MCT in accordance with the Sale Order (DE ) prior t16 dismissing the cases.Pursuant to 11 U.S.C. 503(b)(1)(D), MCT is n5 required to file a request for payment of the 2021 taxes as an administrative expens6 however, MCT did file an administrative expense claim for the 2021 taxes relating t7 YouFit leases that were assumed by the Buyer pursuant to the authorized Sale Order (D8 564).MCT requests the Cou14 direct the Debtors and Buyers to reconcile and pay the property taxes owed to MCT prio15 to remitting all Cash and Excluded Cash to Buyer and prior to dismissal of the cases.Further, the APA provided that “The Sellers and the Buyer agree to furnish each othe18 with such documents and other records as each Party reasonably requests in order t19 confirm all adjustment and proration calculations made pursuant to this Section 2.1120 (APA, Section 2.11, p. 28).Debtors and/or Buyer to pay the taxes owed to MCT, including accrued and accruin23 post-petition interest at the statutory rate through the date of payment, prior to Cash an24

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FOR THE DISTRICT OF DELAWARE 2 In Re: Chapter 11 Proceedings 3 YouFit Health Clubs LLC., et al., Case No. 20-12841-MFW 4 Debtors. (Jointly Administered) 5 Hearing Date: June 23, 2021 6 Hearing Time: 10:30 a.m. (ET) 7 [Related to Docket No. 929] 8 MARICOPA COUNTY TREASURER’S RESPONSE AND OBJECTION TO MOTION OF THE DEBTORS FOR ENTRY OF AN ORDER (A) DISMISSING THE CHAPTER 19 CASES, AND (B) GRANTING RELATED RELIEF 10 Maricopa County Treasurer (“MCT”), a secured tax lien creditor, by and throug11 its undersigned counsel, hereby responds to the Motion of the Debtors for Entry of a12 Order (A) Dismissing the Chapter 11 Cases, and (B) Granting Related Relief filed on Ma13 27, 2021 (the “Motion”) (DE 929). MCT objects to the Motion based on non-payment 14 taxes, as more fully set forth below, and requests that the Court direct the Debtors and/15 Buyer to pay the taxes owed to MCT in accordance with the Sale Order (DE ) prior t16 dismissing the cases. 17 MCT CLAIM 18 MCT filed its Secured Tax Proof of Claim (the “MCT Claim”) in the amount 19 $29,574.98 representing Debtors’ 2020 personal property taxes. MCT’s liens on th20 personal property attached on January 1, 2020, for the 2020 tax year taxes. Arizona la21 provides that the tax liens are “prior and superior to any other liens of every kind an22 description regardless of when another lien attached.” A.R.S. § 42-191061. Post-petitio23 24 1 See also A.R.S. § 42-17153.

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2 taxes and interest are paid in full. See 11 U.S.C. § 511 and A.R.S. § 42-18053. 3 In addition, tax liens for 2021 attached on January 1, 2021 to Debtors’ person4 property, if any, in Maricopa County. Pursuant to 11 U.S.C. 503(b)(1)(D), MCT is n5 required to file a request for payment of the 2021 taxes as an administrative expens6 however, MCT did file an administrative expense claim for the 2021 taxes relating t7 YouFit leases that were assumed by the Buyer pursuant to the authorized Sale Order (D8 564). The 2021 tax amounts will be known around September 1, 2021, with the 1st ha9 2021 due on October 1, 2021 and the 2nd half 2021 due on March 1, 2022. 10 OBJECTION 11 Motion Seeks to Remit All Cash and Excluded Cash to the Buyer 12 MCT objects to the Motion because it seeks to remit all Cash and Excluded Cas13 to the Buyer. (Proposed Dismissal Order, p. 4, Section 8(ii)). MCT requests the Cou14 direct the Debtors and Buyers to reconcile and pay the property taxes owed to MCT prio15 to remitting all Cash and Excluded Cash to Buyer and prior to dismissal of the cases. 16 The Sale Order provided that the tax liens would remain as Permitted Liens on th17 property and that the taxes, to the extent a liability, would not be an Excluded Liabilit18 (Sale Order, DE 564, pp. 41-42). The Closing Date of the Sale occurred on February 119 2021. The taxes owed to MCT have not been paid in accordance with the Sale Order 20 the Asset Purchase Agreement (“APA”). The sale included personal property located i21 Maricopa County. Per the APA, acquired assets included “all machinery, fixture22 furniture, equipment, computer and other information technology equipment…part23 supplies, tools and other tangible property owned by any Seller and all other Furnishing24 and Equipment.” (APA, Section 2.1(e); also see Section 2.1(u). The Sale Order provide 2

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2 liens of the Maricopa County Treasurer for tax year 2020 in a principal amount not t3 exceed $29,574.98. In addition, the tax liens were permitted liens and were not a4 Excluded Liability subject to the resolution of any objections. (Sale Order, pp. 41-42). Th5 2020 taxes are based on annual property statements submitted by the Debtors and th6 deadline for the Debtors to appeal the valuations has expired. As of the date of this filin7 MCT has not received any objection to the MCT Claim or the taxes owed from either th8 Debtors/Sellers or Buyer. 9 The Debtors’ Plan filed on March 2, 2021, stated that the “Buyer is in the proces10 of finalizing the allocation of such credit bid/assumption of debt between the DIP Lende11 Claims and the Prepetition Lender Claims.” (DE 788, Plan, p. 35). Section 2.11 of th12 APA provided for proration of the personal property taxes owed to MCT between th13 Debtors/Sellers and the Buyer. The final settlement regarding proration of taxes is, 14 was, to occur “no later than sixty (60) days after the Closing Date.” (APA, Section 2.115 p. 27). Based on the Closing Date of February 18, 2021, the final settlement of the taxe16 between Debtors/Sellers and Buyer was to be completed by Monday, April 19, 20217 Further, the APA provided that “The Sellers and the Buyer agree to furnish each othe18 with such documents and other records as each Party reasonably requests in order t19 confirm all adjustment and proration calculations made pursuant to this Section 2.1120 (APA, Section 2.11, p. 28). 21 Based on the foregoing, MCT respectfully requests that the Court direct th22 Debtors and/or Buyer to pay the taxes owed to MCT, including accrued and accruin23 post-petition interest at the statutory rate through the date of payment, prior to Cash an24 Excluded Cash being transferred to Buyer and prior to dismissal of the cases as 3

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2 RESPECTFULLY SUBMITTED this 8th day of June, 2021. 3 ALLISTER ADEL MARICOPA COUNTY ATTORNEY 4 BY: /s/ Peter Muthig 5 PETER MUTHIG Deputy County Attorney 6 Maricopa County Attorney’s Office 225 W. Madison Street 7 Phoenix, AZ 85003 Telephone (602) 506-1923 8 Email: muthigk@mcao.maricopa.gov Attorney for Maricopa County Treasurer 9 10 ORIGINAL of the foregoing E-FILED this 8th day of June, 2021, with: 11 Clerk, United States Bankruptcy Court 12 District of Delaware 824 Market Street, 3rd Floor 13 Wilmington, DE 19801 14 COPY of the foregoing mailed/e-mailed, this 8th day of June, 2021, to: 15 Hannah Mufson McCollum 16 Office of the United States Trustee U. S. Department of Justice 17 844 King Street, Suite 2207 Lockbox #35 18 Wilmington, DE 19801 Email: hannah.mccollum@usdoj.gov 19 Nancy A. Peterman 20 Nicholas E. Ballen Eric J. Howe 21 Greenberg Traurig 77 West Wacker Drive, Suite 3100 22 Chicago, IL 60601 Email: petermann@gtlaw.com 23 Email: ballenn@gtlaw.com Email: howee@gtlaw.com 24 Attorneys for Debtors 4

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Greenberg Traurig 2 The Nemours Building 1007 North Orange Street, Suite 1200 3 Wilmington, DE 19801 Email: melorod@gtlaw.com 4 Attorneys for Debtors 5 Carey D. Schreiber Gregory M. Gartland Winston & Strawn LLP 6 200 Park Avenue New York, NY 10166 7 Email: cschreiber@winston.com Email: ggartland@winston.com 8 Counsel for the Debtors’ prepetition and postpetition Agent and lenders and the Buyer 9 /s/ Marcy Delgado 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 5

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