The Court understands that in complex cases such as this one, Rule 2014(a) disclosures are a difficult, time-consuming task. To be clear, all applicants for professional employment have a continuing duty of disclosure of any connections. The Court finds that V&E was not deficient in its disclosure obligations in this case. It appears that all V&E’s connections were disclosed in advance of the hearing on its Employment Application on May 9th.7 V&E acknowledged its belated disclosure of Oaktree as a client, but V&E described Oaktree as a “late entrant” into the Debtors’ debt structure, and the Court accepts that explanation. This is not a case where an undisclosed conflict is discovered deep into the case. The Court finds that V&E’s disclosures satisfied the requirements of Rule 2014(a). Its disclosures are not a reason to disqualify the firm from representing the Debtors in this case.

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The Court finds that V&E’s simultaneous representation of Riverstone renders V&E not disinterested under Bankruptcy Code Section 327(a). Riverstone has a 43% interest in the Debtors’ common stock. It has two of the Debtors’ thirteen directors’ seats. V&E’s representation of Riverstone is extensive.

V&E argues that it only represents Riverstone in unrelated matters, Riverstone has consented to V&E’s representation of the Debtors in this case, and the Debtors have consented to V&E’s continuing representation of Riverstone. While consent may satisfy certain State bar rules on conflicts, it is not a substitute for disinterestedness under Section 327(a).

Typically, the antecedent debt element is a given; judgments are basically for prior existing debts. Simple physics separates the two. But in this instance, Baptist argues that it was a “prevailing party” seeking reimbursement of its fees, which effort was a claim first and only a debt when awarded contemporaneously with the imposition by law of the judgment lien. In Bankruptcy Code terms, Baptist suggests that it enjoyed only a claim, that is, an unliquidated, contingent, disputed “right to payment,” until entry of the Fee Award which converted the claim to a debt, or “liability.” Thus, we have the odd circumstance where a creditor is arguing that it was not pursuing a debt but solely a claim that became a debt only upon entry of the Fee Award.

Both the claim and the debt, however, are antecedent to the entry of the Fee Award and lien transfer. Claim and debt are inseparable. The moment there is a claim or right to payment, there is a debt, or liability. The terms describe each side of any creditor/debtor relationship and simply do not exist without the other. A claim is a right to payment. Debt is the liability to make that payment. The Bankruptcy Code is designed to manage financial distress, and from that prism creditors enjoy claims and debtors suffer debt. The definition of a claim is subsumed within the definition of a debt, a recognition that for bankruptcy purposes debt and claims are administered “whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” 11 U.S.C. § 101(5). Accordingly, whether fixed, disputed, contingent, liquidated, or unliquidated, Baptist most assuredly was pursuing a debt—or liability—from Williams when pursuing its claim—or right to payment. The Fee Award merely concluded the dispute for purposes of liquidation and created a lien—a transfer—for purposes of collection for a debt owed by Williams before the transfer occurred.

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Here, Williams’s liability to Baptist became contractually conclusive when he lost his lawsuit against his employer. Baptist’s assertion “that [Williams’s] (vigorously contested) liability to [Baptist] was triggered only upon the entry of the Fee Award” is misplaced; Baptist prevailing in William’s lawsuit triggered liability contractually and per Baptist’s bylaws. The inchoate and potential contractual cause of action was neither a claim—right to payment—or debt—liability—before Williams sued his employer. The inchoate and potential contractual cause of action became both a claim and a debt when Baptist won the lawsuit Williams filed against it. The Fee Motion and Fee Award conclusively resolved the disputed aspects of the right to payment and commensurate liability and afforded involuntary collection thereof. A dispute resolved through litigation is an everyday occurrence; the fact that collection must be pursued to judgment does not change the antecedent nature of the debt the creditor is pursuing.

The standard for obtaining a stay pending appeal are likelihood of success on appeal and irreparable harm in the absence of a stay. As MOAC correctly observes, this court wrestled mightily with the decision in this "unicorn" of a case; I went back and forth several times before reaching a result. And while I think I reached the right result, I cannot and will not pretend that there is not an argument of substance on the other side. So while I could not in good conscience find that MOAC is likely to succeed on appeal - as has often been pointed out, few district judges are willing to predict that they will be reversed on appeal - there are sufficiently serious questions going to the merits2 on this appeal so that a properly secured stay pending an expedited appeal would serve the interests of justice. And while Transform is correct that MOAC can prevent any the Liquidating Trustee from assigning the lease to a different assignee pending appeal by exercising its right of first refusal, that does not mean MOAC would not suffer irreparable injury in the absence of a stay. The remedy MOAC ultimately seeks is reversion of the lease to itself, on the ground that Sears can no longer assume the lease (its earlier assumption having been vacated by this court, and the § 3 65( d)( 4) period having long since expired), which means that the lease must be tendered back to the landlord. . . . If MOAC is right, then it is entitled to the lease without paying so much as a dime, to Sears or anyone else. The prospect of an imminent assignment in the absence of a stay pending appeal would effectively force MOAC to exercise its right of first refusal and part with a considerable sum of money in order to preserve the possibility of securing the remedy it seeks if it were to succeed on appeal. And the Sears bankruptcy estate (which is already contractually obligated to Transform for the value of anything it receives in respect of the Sears lease) is in no position to make MOAC whole if it is forced to match an offer from a proposed assignee - which means there is no way to compensate MOAC with money.

So on the whole I am inclined to enter a stay pending appeal.

But only on two conditions. As there is presently an offer pending for the lease - which offer gives the lease a current value of $43 million - a further lengthy appellate process gives rise to the possibility that the Estate will suffer harm from the entry of a stay. I am not insensible to conditions in the commercial real estate market; there is no guarantee that what is being offered for the Sears lease today will be available tomorrow, or in three or six months ( or four years, if prior proceedings in this matter are any guide). Any stay pending appeal should, therefore, be adequately secured by the posting of a substantial bond. However, I disagree with Transform/Sears that the bond should be in the full amount of the offer, because while the $43 million figure gives us a starting point to calculate any damages suffered as a result of a stay pending appeal, I doubt very much that the value of the Sears lease will decline to zero pendente lite. A bond in the amount of $2.5 million will afford sufficient security, especially if the appeal can be expedited. MOAC has ten days within which to post the bond, or the stay (which becomes effective immediately) will expire.

Second, while I cannot direct the Second Circuit to decide any appeal expeditiously, I can condition a stay on MOAC's making good on its promise to seek an expedited appeal - and on its expressing to my colleagues on the Court of Appeals my firm conviction that this case needs to be decided quickly.

The Jefferies Entities contend that conversion of these chapter 11 cases is appropriate as the Debtors have sought bankruptcy protection in bad faith. In support, the Jefferies Entities assert that (i) the Debtors have no intention of reorganizing; (ii) this case is a two-party dispute between the Debtors and the Jefferies Entities; (iii) the Debtors’ filing of these cases was nothing more than an attempt to thwart the Jefferies Entities’ threatened litigation; and (iv) the Debtors have made and continue to make false statements in court filings.

First, the Debtors have made clear that they elected to implement their wind down in chapter 11. This is, indeed, a proper use of chapter 11 and its protections.

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There is nothing improper about the Debtors seeking chapter 11 to implement a wind down of their businesses and operations that would enable them to do so in an efficient and orderly manner that also complies with governing regulations and is in accordance with their fiduciary duties.

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The Jefferies Entities make much ado about the irrelevancy of the Debtors’ business judgment to the relief they seek, including the Debtors’ determination that filing was a “necessity,” their decision to liquidate, the role of the Debtors’ regulatory and fiduciary obligations, and their belief that management is best suited to oversee the wind down of operations. However, a company’s decision to seek bankruptcy at all and its timing is generally reserved for a company’s business judgment.

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[E]ven if the Debtors’ chapter 11 filing was indeed an attempt to thwart the Jefferies Entities’ threatened litigation, the Debtors have also indicated that the lawsuit would have triggered indemnification obligations. The Debtors submit that preparation for a bankruptcy filing only began in earnest when “it became evident that an orderly wind down could not occur outside of court.” Accordingly, the Debtors have established that the bankruptcy filing was not simply solely a delay tactic with respect to the Jefferies Entities but an overall means to an end to achieve an orderly wind down of all of the Debtors’ businesses and affairs. Therefore, this assertion is without merit as well.

Section 1104(a) of the Bankruptcy Code provides that a Court shall appoint a Chapter 11 Trustee for cause, or when such appointment is in the best interest of creditors. See 11 U.S.C. § 1104(a). Though the standard under Section 1104(a) permits the Court to analyze a wide array of conduct in determining whether a Chapter 11 Trustee should be appointed, the appointment of a Chapter 11 Trustee is considered an extraordinary remedy and parties seeking such an appointment must prove by “‘clear and convincing evidence’ that the appointment of a trustee is warranted.”

These cases began when certain petitioning creditors commenced involuntary bankruptcy proceedings against the Debtors. Though these cases have since been converted to voluntary Chapter 11 proceedings, the adversarial spirit inherent in an involuntary bankruptcy case remains, and has, most recently, resulted in the motions to appoint a Chapter 11 Trustee presently pending before the Court. While the Court understands many of the movants’ concerns, the Court ultimately finds that the movants have not met the high burden necessary for such an extraordinary remedy.

Because the Class Action Creditors have not satisfied their burden of proof on their objection, Debtors’ property listed in Schedule C is exempt pursuant to § 522(l). As the Supreme Court noted:

Law v. Siegel, 571 U.S. at 426-27. While the result may seem harsh and inequitable given the serious wrongdoing alleged in the adversary proceedings that are pending, Debtors may eventually be denied their discharge, depending on the outcome of the adversary proceedings brought by the Class Action Creditors and the U.S. Trustee. Moreover, as Trustee’s counsel indicated at the hearing, it appears unlikely that the Class Action Creditors would ultimately benefit from having Debtors’ homestead exemption limited or disallowed, as any extra funds realized from sale of the Primary Residence would be paid to judgment lienholders first.

The Claimant Trust was created for the benefit of “Claimant Trust Beneficiaries,” which was defined under the Plan and the Claimant Trust Agreement to be the holders of allowed general unsecured (Class 8) and subordinated claims (Class 9) against Highland.

The Adversary Proceeding was brought more than two-years post-confirmation by Plaintiffs Hunter Mountain Investment Trust (“HMIT”) and The Dugaboy Investment Trust (“Dugaboy,” and, together with HMIT, the “Plaintiffs”).3 These two Plaintiffs are controlled by Highland’s co-founder and former President and Chief Executive Officer, James D. Dondero (“Dondero”). The Plaintiffs held equity interests (i.e., limited partnership interests) in Highland. Pursuant to the terms of the Highland Plan, Plaintiffs now hold unvested contingent interests in the Claimant Trust—since the limited partnership interests in Highland were cancelled in exchange for unvested contingent interests in the Claimant Trust. These contingent interests will vest if, and only if, the Claimant Trustee certifies that the Claimant Trust Beneficiaries (i.e., the Class 8 general unsecured claims and Class 9 subordinated claims under the Plan), have been paid in full and certain other obligations – primarily, the Claimant Trust’s significant indemnity obligations – have been satisfied.

In this Adversary Proceeding, Plaintiffs seek: (1) an order from the bankruptcy court compelling the Reorganized Debtor and the Claimant Trustee to disclose certain information about the assets and liabilities remaining in the Claimant Trust, and, if they are compelled to disclose that information, (2) a declaratory judgment regarding the relative value of those assets and liabilities, and (3) if assets exceed liabilities, a declaratory judgment that HMIT’s and Dugaboy’s unvested contingent interests in the Claimant Trust are likely to vest at some point in the future.

To be clear, it is undisputed that neither HMIT nor Dugaboy are currently Claimant Trust Beneficiaries under the terms of the Plan and Claimant Trust Agreement and that the vesting conditions under the terms of the Plan and Claimant Trust Agreement have not occurred.

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Now, as before, the court finds and concludes that under the terms of the CTA and Delaware law, Plaintiffs are not beneficiaries or “beneficial owners” of the Claimant Trust who would be entitled to assert rights under the CTA. The court specifically rejects an argument of Plaintiffs that Delaware trust law does not define “beneficiary,” so the court should ignore the terms of the CTA and look to the definition of “beneficiary” under the Restatement (Third) of Trusts, under which they would be considered “beneficiaries” of the Claimant Trust, albeit a contingent beneficiary, who would be entitled under Delaware law to the relief they are requesting.

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Plaintiffs ask the court to ignore the plain terms of the CTA and to grant them the relief they have requested on an equitable basis because they “are unable to determine whether their Contingent Claimant Trust Interests may vest into Claimant Trust Interests.” But, they have not alleged any set of facts that would entitled them to equitable relief either. The court makes the same observation regarding Plaintiffs as it made in its Order Denying Valuation Motion: It appears that Plaintiffs “may be frustrated that they did not negotiate or obtain the same oversight rights as the actual Claimant Trust Beneficiaries in the Plan and CTA.” The Plan with the incorporated CTA was confirmed over three years ago now, and neither of the Plaintiffs objected to or appealed the terms of the Plan or CTA that dictate oversight rights.75 The Fifth Circuit, in September 2022, affirmed the Confirmation Order and the terms of the Plan and its incorporated documents, including the CTA, in all respects other than striking certain exculpations As was the case when the court entered its Order Denying Leave to Bring Claims Pertaining to Claims Trading, “[i]t is undisputed that HMIT’s [and Dugaboy’s] Contingent Trust Interest[s] ha[ve] not vested under the terms of the Plan and the CTA, and the court does not have the power to equitably deem HMIT’s [and Dugaboy’s] Contingent Trust Interest[s] to be vested.” 76 The court did not have that power back in August 2023 (when it entered the Order Denying Leave to Bring Claims Pertaining to Claims Trading), and the court does not have that power now. Equitable relief is not available where, as here, the parties’ rights and obligations at issue are set forth in the Plan and the CTA.

Before the Court is whether to confirm Debtor’s chapter 13 plan. The chapter 13 trustee objected to confirmation because the Plan separately classifies Debtor’s student loan debt and treats it much more favorably than Debtor’s other unsecured debt. The trustee also objected to the proposed payment of interest on the student loan debt. The Court concludes that the Debtor has not carried his burden of showing that the separate classification and favored treatment of the student loan debt is “fair” discrimination, nor that the proposed interest payment is permissible. His plan therefore cannot be confirmed.

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Debtor’s $75 a month, 40-month plan is a half-hearted effort to minimize the pain of being in chapter 13 rather than where Debtor wants to be—in his fourth no-asset chapter 7 case. Part of Debtor’s design to achieve a somewhat chapter 7-like result is a plan that pays only his lawyer, the trustee, and his nondischargeable student loan debt (with interest). The plan cannot be confirmed because it unfairly discriminates against Debtor’s credit card debt and violates the prohibition against paying interest on unsecured debt unless all debts are paid in full.

Mr. Ghodasara argues that the state court already has a process underway to determine the best use for the Debtor’s property, and the state court proceedings have been going on for two years so they should remain with the state court. He argues that dismissal and allowing the state court to determine what happens with the property will be less expensive, but he offered no evidence on that point.

The Court considers disposition of the Debtor’s property to be distinct from the members’ litigation among themselves. The fact that the state court has been involved with the members’ litigation for two years might factor more strongly in the Court’s consideration of Mr. Ghodasara’s motion for remand.

Ultimately, the Court looks at the best interests of the Debtor and creditors. While Mr. Ghodasara prefers to remain in state court, he has not presented any evidence to support that the Debtor’s and creditors’ interests are best served in state court. To the contrary, FirstBank clearly prefers to be in bankruptcy court and has argued strongly against dismissal. The Debtor also benefits economically from remaining in bankruptcy due to FirstBank’s waiver of default interest and due to the potential for a more expedient sale process with the benefit of a sale free and clear of interests under § 363 of the Bankruptcy Code.

The basic facts are uncontested, even though the parties characterize the same facts differently. The Debtors entered into a Loan Agreement, Promissory Note and Security Agreement with TitleMax (collectively, “First Loan”). The First Loan lent the Debtors $5,571.00 at an interest rate of 176.06% per year, with TitleMax retaining a security interest in the Debtors’ vehicle. The Documents did not contain a “future advance” or “dragnet” clause.3 Less than a month later the Debtors entered into yet another set of financing documents (“Second Documents”) with TitleMax (collectively, “Second Loan”). This time, TitleMax advanced $9,988.00 at an interest rate of 181.55% annually. The Second Loan satisfied the First Loan and increased Debtors’ obligations to TitleMax by an additional $4,417 over the balance of the First Loan. On September 7, the Debtors filed bankruptcy in the Western District of Texas (Case No. 22-51009, the “Main Case”). Main Case, ECF No. 1. The next day, the Texas Department of Motor Vehicles issued a certificate of title covering the Chevrolet Traverse, which identified TitleMax as a lienholder and identified the “lien date” as August 2, 2022 (reflecting the date of the First Loan). After it advanced funds for the Second Loan, TitleMax never filed the Second Documents with the Texas Department of Motor Vehicles seeking to obtain a new lien notation on the Chevrolet Traverse certificate of title, which would have again identified TitleMax as a lienholder, but would have also identified a new lien date, corresponding to the Second Loan date.

Both parties move for summary judgment. The Trustee asserts TitleMax’s failure to record its Second Loan security interest on the Chevrolet Traverse certificate of title renders TitleMax unperfected, and that the Trustee may avoid the security interest created by the Second Loan under § 544.4 The Trustee asserts the security interest created by the First Loan was extinguished when TitleMax funded the Second Loan and used part of the Second Loan proceeds to satisfy and extinguish the First Loan and its security interest.

TitleMax contends that there was no need to perfect the Second Loan, because the Second Loan merely “extended and renewed” or “refinanced” the First Loan, and that the security interest created on the Chevrolet Traverse certificate of title remains in effect as originally perfected. TitleMax also argues that because the Debtors’ confirmed chapter 13 Plan5 listed TitleMax as a “secured creditor,” res judicata prevents the Trustee from challenging its secured status. Finally, TitleMax argues that because the Trustee allowed the Debtors to remove the car from the bankruptcy estate via exemption, this security interest avoidance action is not “for the benefit of the estate,” and therefore the Trustee lacks the standing necessary to bring this claim.

This subchapter V bankruptcy case regarding a relatively small medical clinic in Odessa, Texas, requires the Court to decide an important issue regarding the time period for plan payments in a nonconsensual subchapter V plan under 11 U.S.C. § 1191(c)(2)(A)1: how does a bankruptcy court determine whether a proposed three-year period of plan payments is “fair and equitable,” or if it should “fix” a longer period not to exceed five years?

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The debtor in the Urgent Care case was able to show the bankruptcy court that (1) a secured debt was going to mature during the three-year plan payment period, (2) the debtor’s principal was voluntarily deferring some portion of wages during the three-year plan payment period, and (3) a related entity owned by the debtor’s principal agreed to defer the collection of post-petition charges owed by the debtor until after the three-year plan payment period. These were actual, substantiated facts shown by the Debtor that weighed against a longer period of plan payments. The Urgent Care court acknowledged that the “simple math of an extended plan term might seem to generate a higher payment to unsecured creditors” but determined based on the facts of that case that a longer plan payment period would increase the risk of business failure.

The facts in this case are distinguishable from Urgent Care. The Debtor’s principal in this case has proposed a significant raise for himself, and the Plan’s payroll projections for W-2 employees and 1099 contractors in months 1-12 amount to $34,965.76 per month. In the post-petition, pre-confirmation period, the Debtor’s payroll for W-2 employees and 1099 contractors was approximately $28,786.92 per month. In other words, the Debtor’s principal will receive a greater than 100% raise, and the Debtor will increase payments to employees and contractors by roughly 21%. While it is possible that these increases are reasonable and justified, the Debtor did not provide the Court with the necessary evidence to support that conclusion. The Court did not receive any evidence about reasonable explanations for the increases, such as inflation or increased competition in the local job market. The Court declines to assume facts not presented in evidence, and these increases were not sufficiently justified to the Court on the record at the confirmation hearing. Furthermore, unlike the Urgent Care debtor, the Debtor in this case offered no evidence of actual, substantiated risks and consequences that make business failure more likely if a three-year plan payment period is not approved.

Under this factor, the Court also considered the Bank’s argument that the Court should fix a five-year plan payment period in this case simply because it would increase the payment to the unsecured creditors.130 While extending a plan will almost always result in a potentially larger distribution to unsecured creditors, the fact that the Debtor could possibly distribute more over a longer plan payment period should not be the sole deciding factor because of course it would always favor the creditor. The Bank’s argument that the Debtor could pay more if the plan period were longer without any analysis of the risks and consequences of a longer plan payment period is not sufficient for the Court to fix a longer period of plan payments under § 1191(c)(2)(A).