|
Case 120-bk-12043 Doc 573 Filed 01/13/21 Entered 01/13/21 110353 Desc Main
<br />Document Page 21 of 44
<br />Case 1:20-bk-12043 Doc 573 Filed 01/13/21 Entered 01/13/21 1103:53 Desc Main
<br />Document Page 22 of 44
<br />debtor is a corporation ... of a provision prohibiting the issuance of
<br />nonvoting equity securities, and providing, as to the several classes of
<br />securities possessing voting power, an appropriate distribution of such
<br />power among such classes...." 11 U.S.C. § 1123(a)(6). Here, section
<br />1123(a)(6) is not applicable to these Chapter 11 Cases because the Debtors
<br />are being liquidated pursuant to the Plan.
<br />• Section 1123(a)(7). Section 1123(a)(7) of the Bankruptcy Code requires
<br />that a plan "contain only provisions that are consistent with the interests
<br />of creditors and equity security holders and with public policy with
<br />respect to the manner of selection of any officer, director, or trustee under
<br />the plan and any successor to such officer, director, or trustee." 11 U.S.C.
<br />§ 1123(a)(7). No directors and officers are being appointed following the
<br />Effective Date in these Chapter 11 Cases. In addition, on December 15,
<br />2020, the Committee disclosed in the Notice of Filing of Selection of
<br />Liquidating Trustee and Liquidating Trust Board Representatives and
<br />Filing of Form of Liquidating Trust Agreement (Docket No. 563) (the
<br />"Liguidatine Trustee Notice") the selection of GlassRatner Advisory &
<br />Capital Group, LLC d/b/a B. Riley Advisory Services as the Liquidating
<br />Trustee and Whayne Supply Company, Phillips Machine Service, Inc.,
<br />Genco Mine Service, Joy Global Underground Mining, LLC, and Austin
<br />Sales LLC as Liquidating Trust Board Representatives. The Plan,
<br />therefore, satisfies section 1123(a)(7) of the Bankruptcy Code.
<br />3. Discretionary Contents of the Plan (1123(b))
<br />(a) Generally
<br />Section 1123(b) of the Bankruptcy Code identifies various discretionary provisions that
<br />may be included in a chapter 11 plan but are not required. For example, a plan may impair or Leave
<br />unimpaired any class of claims or interests and provide for the assumption or rej ection of executory
<br />contracts and unexpired Leases. 11 U.S.C. § 1123(b)(1), (2). A plan also may provide for: (i) "the
<br />settlement or adjustment of any claim or interest belonging to the debtor or to the estate," (a) "the
<br />retention and enforcement by the debtor, by the trustee, or by a representative of the estate
<br />appointed for such purpose, of any such claim or interest," or (in) "the sale of all or substantially
<br />all of the property of the estate, and the distribution of the proceeds of such sale among holders of
<br />claims or interests." Id. §§ 1123(b)(3)(A)-(13), (b)(4). Finally, a plan may "modify the rights of
<br />holders of secured claims ... or ...unsecured claims, or Leave unaffected the rights of holders of
<br />21
<br />Case 1:20-bk-12043 Doc 573 Filed 01/13/21 Entered 01/13/21 1103:53 Desc Main
<br />Document Page 23 of 44
<br />plan, provided that the confirmed plan contain a third party release and other provisions consistent
<br />with the Released Party Settlement, and (in) the release of all claims against the Debtors' estates,
<br />subject to recoupment by the Released Parties of the settlement amounts paid to the Debtors'
<br />estates. See Released Party Settlement RR 1-3, 4(a).
<br />Most relevant for the issue of plan confirmation, the Released Party Settlement provided
<br />that (i) the Proponents shall pursue confirmation of a chapter 11 plan of Liquidation; (a) all creditors
<br />voting in favor of the plan release the Released Parties under terms consistent with provisions of
<br />the Released Party Settlement (i.e. the Third Party Release), (in) the Released Parties shalt be
<br />exculpated from all post -petition actions under the Plan under the standard exculpation provision
<br />applicable to estate professions (i.e. the inclusion of the Released Parties in the definition of
<br />Exculpated Parties), and (iv) the Plan would be consistent with the terms of the Released Party
<br />Settlement (i.e. the Debtor Release"). See Released Party Settlement, RR 5-6. The provisions of the
<br />Article XI of the Plan do nothing more than codify or effectuate the terms of the Released Party
<br />Order.
<br />(1) The Plan's Release and Exculpation Provisions are
<br />Appropriate
<br />Article XI ofthe Plan contains provisions that provide for an exculpation provision in favor
<br />of the Exculpated Parties (Section 11.03), a release by the Releasing Parties of certain Claims
<br />against the Released Parties (Section 11.04) (the "Third -Party Release"), and the release of
<br />claims by the Debtors and their Estates against the Released Parties (Section 11.05) (the "Debtor
<br />Release"). The term "Released Parties" means (i) the DIP Secured Parties, (a) the Prepetition
<br />Secured Parties, (in) Pledge Servicing Partners, LLC, (tv) ARC Financial Partners, LLC, (v)
<br />Appalachian Resource Company, LLC and (vi) with respect to each of the foregoing parties in
<br />clauses (i) through (v), such party's respective current and former affiliates, and such party's and
<br />any class of claims" and may "include any other appropriate provision not inconsistent with the
<br />applicable provisions of [Title II].."Id. §§ 1123(b)(5)-(6).
<br />As described above, the Plan provides for (i) the impairment of certain classes of Claims
<br />and Interests, while Leaving others Unimpaired, thereby modifying the rights of the holders of
<br />certain Claims and Equity Interests and Leaving the rights of others unaffected,4 and (a) the
<br />assumption or rejection of executory contracts and unexpired Leases to which the Debtors are
<br />parties (Article VII of the Plan).
<br />(b) Specific Provisions
<br />Section 1123(b)(6) of the Bankruptcy Code provides that a chapter 11 plan may "include
<br />any other appropriate provision not inconsistent with the applicable provisions of [the Bankruptcy
<br />Code]." 11 U.S.C. § 1123(b)(6). Here, the Plan contains various provisions in accordance with the
<br />discretionary authority granted under section 1123(b) of the Bankruptcy Code.
<br />The majority of the relief requested related to exculpation and releases has been previously
<br />approved by this Court. On November 2, 2020, the Court entered the Order Approving Settlement
<br />Agreement with Prepetition Secured Parties and DIP Secured Parties, Pursuant to Bankruptcy
<br />Rule 9019 (Doc. No. 483) (Docket No. 504) (the "Released Party Order") which approved a
<br />settlement agreement between the Debtors, Committee and Released Parties (the "Released Party
<br />Settlement"). In part, the Released Party Order approved the Released Party Settlement, which
<br />contained a release of claims against the Released Parties. In exchange for such release, the
<br />Released Parties agreed to, among other things, (i) the immediate payment of $400,000 to the
<br />Debtors' estates, (ii) the payment of $100,000 to the Debtors' estates upon the Effective Date of a
<br />'The following Classes are Imparted: 1, 2, 4, 5, and 6. The following Class is Unimpaired: 2,
<br />22
<br />Case 120-bk-12043 Doc 573 Filed 01/13/21 Entered 01/13/21 110353 Desc Main
<br />Document Page 24 of 44
<br />their current and former affiliates' current and former officers, managers, directors, equity holders
<br />(regardless of whether such interests are held directly or indirectly), predecessors, successors, and
<br />assigns, subsidiaries, principals, members, employees, agents, managed accounts or funds,
<br />management companies, fund advisors, advisory board members, financial advisors, partners,
<br />attorneys, accountants, investment bankers, consultants, representatives, and other professionals.
<br />Notably, the Plan does not provide for a discharge of the Debtors (Section 11.01) and does
<br />not release any Causes of Action or Avoidance Actions unless previously released by the Debtors
<br />under the DIP Order, the Sale Order, the Settlement Agreement or the Released Party Order
<br />(Sectionll.02). As discussed below, each of these provisions is permissible under section 1123(b)
<br />of the Bankruptcy Code and appropriate in these Chapter 11 Cases.
<br />(i) The Exculpation and Limitation of Liabilitv is
<br />Appropriate
<br />Among the permissive provisions customarily included in chapter 11 plans in this Circuit
<br />(and elsewhere) under section 1123(b)(6) are exculpation provisions. See, e.g., In re Murray
<br />EnergyHoldings Co., Case No. 19-56885 (JEH) (Docket No. 2135) (Banta. S.D. Ohio Aug. 31,
<br />2020) (approving an exculpation provision in a plan in its entirety). In re Alpha Natural Res., Inc.,
<br />556 B.R. 249, 260 (Banta. E.D. Va. 2016) ("Exculpation provisions as the one in the Debtors'
<br />Plan [i.e., exculpation provision with respect to the Debtors' retained professional] are not unusual
<br />and generally are permissible, so Long as they are property limited and not overly broad") (internal
<br />quotations removed); see also In re Nat'l Heritage Found., Inc., 478 B.R. 216, 234 (Banta. E.D.
<br />Va. 2012); In re PWSHolding Corp., 228 E3d 224, 245-47 (3d Cir. 2000) (exculpation provisions
<br />are "commonplace ... in Chapter 11 plans."; Blixseth v. Credit Suisse, 961 E3d 1074 (9th Cir.
<br />2020). As the PWSHolding court noted, such clauses are not true releases, but instead "sets forth
<br />the appropriate standard for liability." Id. at 246. Such provisions also are consistent with public
<br />23 24
<br />
|