In re One2One Commc'ns, LLC

• Citation: 627 B.R. 273
• Decision Date: 30 March 2021
• Docket Number: Case No.: 12-27311 (SLM)
• Parties: IN RE: ONE2ONE COMMUNICATIONS, LLC, Debtor.
• Court: U.S. Bankruptcy Court — District of New Jersey

627 B.R. 273

IN RE: ONE2ONE COMMUNICATIONS, LLC, Debtor.

Case No.: 12-27311 (SLM)

United States Bankruptcy Court, D. New Jersey.

Signed March 30, 2021

Richard D. Trenk, Esq., Henry M. Karwowski, Esq., Trenk, DiPasquale, Della Fera & Sodono, P.C., 347 Mount Pleasant Avenue, Suite 300, West Orange, NJ 07052, Michael M. Schmahl, Esq., Mason, Pollick & Schmahl, LLC, 1319 N. Wood Street, Suite 3B, Chicago, IL, Counsel for Debtor, One2One Communications, LLC

Courtney A. Schael, Esq., Ashford Schael, LLC, 100 Quimby Street, Suite 1, Westfield, NJ 07090, Timothy F. Nixon, Esq., Godfrey & Kahn, S.C., 333 Main St., Suite 600, P.O. Box 13067, Green Bay, WI 54307, Counsel for Creditor, Quad/Graphics, Inc.

OPINION

STACEY L. MEISEL, UNITED STATES BANKRUPTCY JUDGE

INTRODUCTION

This matter is before the Court on a motion filed by Quad/Graphics, Inc. ("Quad") to reopen the chapter 11 bankruptcy case pursuant to 11 U.S.C. § 350¹ and seeking derivative standing to pursue alleged causes of action on behalf of creditors (the "Motion").² The Reorganized Debtor, One2One Communications, LLC (referred to as either the "Debtor" or, after confirmation, the "Reorganized Debtor") opposes the Motion. The Court reviewed fully the submissions of the parties—including the supplemental pleadings—and considered the arguments set forth on the record during the hearings on September 26, 2017 and October 4, 2017. For the reasons set forth below, the Court finds and concludes that Quad fails to set forth a legal basis or equitable grounds to reopen this case. The Motion is denied.

JURISDICTION AND VENUE

This Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and 157(a) and the Standing Order of the United States District Court dated July 10, 1984, as amended September 18, 2012, referring all bankruptcy cases to the bankruptcy court. This Court has jurisdiction to consider a motion to reopen a closed case pursuant to 11 U.S.C. § 350(b) and FED. R. BANKR. P . 5010.³ This matter constitutes a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) as it concerns the administration of the estate.

Venue is proper in this Court under 28 U.S.C. § 1408.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The factual background and procedural history of this matter are complex. They are well known to the parties and will not be repeated in detail here. In relevant part, the Debtor filed its voluntary petition for relief under chapter 11 of the United States Bankruptcy Code on July 10, 2012.⁴ On July 31, 2012, the Office of the United States Trustee formed an official unsecured creditors' committee (the "Committee") of which Quad was a member.⁵ On January 25, 2013, after filing earlier drafts of proposed plans of reorganization that failed to confirm, and following negotiations with the Committee, the Debtor filed its Fourth Disclosure Statement and Fourth Chapter 11 Plan (the "Plan").⁶ Pursuant to the Plan, a new entity known as One2One Holdings, LLC, a newly formed limited liability company owned and controlled by an outside investor, would acquire the membership interest in the Reorganized Debtor.⁷ The Plan also provided for the release of actions against insiders and certain third parties.⁸ Quad objected to confirmation of the Plan.

The confirmation hearing in this case began on February 13, 2013 (the "Confirmation Hearing") before the Honorable Novalyn L. Winfield, U.S.B.J (Retired). On February 25, 2013, after several days of hearings, Judge Winfield issued an oral decision confirming the Plan subject to corrections.⁹ The details of the positions taken, evidence presented, and findings made during the Confirmation Hearing will be discussed below as they pertain to the parties' arguments in the instant Motion.

Shortly after Judge Winfield's oral ruling, Quad filed a motion for stay pending appeal.¹⁰ Judge Winfield denied Quad's motion for a stay pending appeal and confirmed the Debtor's Plan on March 4, 2013 (the "Confirmation Order").¹¹ On March 18, 2013, Quad filed a Notice of Appeal of the Confirmation Order and a Notice of Appeal of the Order Denying Motion for Stay (collectively, the "Appeal").¹² The following day, Quad filed a motion for stay and other relief in the district court.¹³ On March 20, 2013, the district court entered an Order denying Quad's motion for a stay and other relief.¹⁴ On June 7, 2013, the Debtor then filed a motion in the district court seeking to dismiss Quad's Appeal as equitably moot.¹⁵ On July 24, 2013, the district court entered an Order granting the Debtor's motion and dismissed Quad's Appeal as equitably moot.¹⁶ Quad filed a Notice of Appeal of the district court's Order on Motion to Dismiss to the Third Circuit Court of Appeals.¹⁷

While Quad's appeal to the Third Circuit was pending, litigation and negotiation between the parties continued. On July 10, 2014—the date on which the statute of limitations for avoidance actions expired—Quad filed a Motion for Order Granting Derivative Standing to Pursue Avoidance Actions and Extending the Time Periods Under 11 U.S.C. §§ 108 and 546(a) for Filing Actions Pursuant to Federal Rule of Bankruptcy Procedure 9006(b)(1) (the "First Derivative Standing Motion").¹⁸ In the First Derivative Standing Motion, Quad sought

an order granting Quad derivative standing to pursue actions released under the Plan to the extent Quad is successful on the pending appeals and to extend the time periods for bringing actions under sections 108 and 546(a) of the Bankruptcy Code until 90 (ninety) days after entry of a Final Order on the appeals.¹⁹

Quad explained that it objected to the releases, in part, because of inadequate consideration and that, according to its expert report, the causes of action released under the Plan had "significant value."²⁰ Judge Winfield denied the First Derivative Standing Motion in an Order dated August 7, 2014 (the "First Denial Order").²¹ Quad never appealed the First Denial Order. On May 11, 2015, the bankruptcy case was closed.²²

On July 21, 2015, the Third Circuit determined that the district court abused its discretion in dismissing Quad's Appeal as equitably moot and reversed the district court's judgment.²³ The Third Circuit remanded the case to the district court to consider the merits of Quad's Appeal.²⁴ On June 14, 2016, the district court rendered its decision on Quad's Appeal and entered an Order reversing Judge Winfield's approval of the releases and remanding the matter to this Court for further consideration (the "Remand Order").²⁵

On June 6, 2017, this Court held a status conference on the matters remanded by the district court during which the Debtor agreed to forego consideration of the issues remanded. The Court entered a Stipulation and Consent Order on Remand from Appeal to District Court (the "Consent Order on Remand") memorializing the parties' agreement, and the district court's invalidation of the releases became final.²⁶ The Consent Order on Remand left the remainder of the Confirmation Order intact and did not reference any other orders of the Court.

On August 15, 2017, Quad filed the instant Motion.²⁷ In the Motion, Quad cites to its expert report—previously submitted in connection with its opposition to confirmation—which concludes that the causes of action relating to insiders (the "Actions") have significant value.²⁸ Quad asserts that the bankruptcy case must be reopened to pursue and liquidate the Actions for the benefit of creditors, and Quad seeks derivative standing to do so.²⁹ The Reorganized Debtor opposes the Motion on multiple grounds, discussed below. The Court entertained oral argument on the Motion on September 26, 2017 and October 4, 2017 and the parties engaged in substantial briefing.³⁰

DISCUSSION

The unique procedural posture and complex timeline of events in this case—including concurrent motions and appeals before different courts—preclude a simple ruling on the merits of Quad's Motion. The parties' attempts at answering questions during the hearings on this matter, held on September 26, 2017 and October 4, 2017, resulted in more unanswered questions. As discussed with the parties on the record, the Court had reservations as to Quad's ability to bring the instant Motion given the express terms of the Consent Order on Remand. The Court also had concerns relating to timeliness, statute of limitation issues, and the merits of Quad's Motion given the Confirmation Order and Judge Winfield's First Denial Order. On October 10, 2017, the Court directed the parties to provide additional briefing to address these issues ("Order Continuing Motion to Reopen").³¹ After full consideration of the parties' submissions and relevant law, the Court's concerns remain. For the reasons set forth below, Quad's Motion fails.

I. Effect of the Final Decree (Docket No. 395)

As set forth above, of the Court entered an Order on May 11, 2015 closing the bankruptcy case (the "Final Decree").³² The Final Decree explicitly contemplates Quad's Appeal of the Confirmation Order to the district court³³ and provides the following language in Paragraphs Two and Three:

2. Upon the filing of a notice with the Court by either Quad or the Reorganized Debtor no later than sixty (60) days after a final order is entered reversing the Confirmation Order and/or remanding the Appeal (including any subsequent appeals) to this Court, the Chapter 11 Case shall be reopened, and "cause" as used in Section 350(b) of the Bankruptcy Code shall be deemed to exist. ...

3. Entry of this Order is without prejudice to the rights of the Reorganized Debtor or any other party in interest to seek to reopen the Chapter 11 Case for good cause shown pursuant to Section 350(b) of the Bankruptcy Code.³⁴

The Appeal was remanded to this Court by way of the district court's Remand Order entered on June 13, 2016.³⁵ The instant Motion, however, was not filed until August 15, 2017,³⁶ well beyond the sixty-day time frame set forth in Paragraph Two of the Final Decree. During the hearings on...