August 20, 2021
A recent Law 360 story by Jeff Montgomery, “US Trustee Opposes Ch. 11 Fees For MTE Service Providers”, reports that the Office of the U.S. Trustee opposed a $2 million fee award for the ad hoc committee of service providers in MTE Holdings LLC's contentious Chapter 11 in Delaware, arguing that the committee failed to show how it benefited the estate. Several other participants in MTE's case, including MTE itself, had also opposed the request, asserting that the committee failed to show that its efforts were for the benefit of any constituency "other than its own members."
No official committee of unsecured creditors was formed in the case, with the ad hoc group asserting rights under liens. An insufficient number of creditors agreed to serve in a traditional unsecured creditor capacity, the trustee observed. The debtors waded through complex disputes, the trustee wrote, including a push for the appointments of a Chapter 11 trustee and a new board, chief restructuring officer and other key figures, as well as the appointment of a mediator.
"There is nothing in the mediator motion, or in the ad hoc committee's motion for substantial contribution, that indicates that the ad hoc committee played a role in negotiating the appointment of a mediator," the trustee objection said, adding separately that "Creditors are presumed to act in their own interest until they satisfy the court that their efforts have transcended self-protection." Committee members failed to show they acted beyond self-interest, the trustee wrote, or filed motions that duplicated those of the other groups in the case.
"Importantly, the motion fails to present any evidence that the ad hoc committee's actions permitted the reorganization to proceed with a minimum of litigation, keeping costs low and hastening the reorganization by, for example, ensuring that key parties were satisfied with the direction of the case," the trustee wrote. MTE's own objection went further, arguing that "voicing support for work already done by other creditors or constituencies hardly rises to the lofty level of 'substantial contribution.'"
The committee presented a different picture in its motion, which included a request for more than $1 million in fees for its counsel from Potter Anderson & Corroon LLP. "With no official committee of unsecured creditors appointed in these cases, the ad hoc committee stepped in and led the charge on behalf of all statutory lienholders," the group's motion said. Its actions were said to have "ultimately resulted in the filing of a plan of reorganization, which benefited all interested parties and the debtors' estates." A decision on the motion is pending.