American court hearing recordings and interviews - Season 7. Episode 6. October 27, 2023. In re Yellow Corporation et al., chapter 11 bankruptcy case no. 23-11069, audio of hearing held in the Yellow Corp. bankruptcy proceedings pending in Delaware, USA, #trucking

Episode Date: October 30, 2023

Sorry about the sound... the audio recording is the official court audio and was posted this way to the court's docket. For other filings on the court's docket and more other information about the chapter 11 bankruptcy proceedings, see: https://dm.epiq11.com/case/yellowcorporation/info

Good morning. We are on the record in the Yellow Corporation, which is case number 23-11069. Hi, good afternoon, Your Honor. Good afternoon, that's what it is. Good afternoon. Sorry about that. I think just barely. Allison Smith, Kirkland, and Ellis Council for the Debtors. It's nice to be before you're in person today. I'm joined in the courtroom today by Peter Keene from the patrolski team, as well as my other Kirkland colleagues, Pat Nash, Casey McGushin, and Aaron Metbiner. Also with us today is Cody Caldenberg from the Ducera team. She is our declarant in support of the agency agreement motion. We just have a few items before the court today, and if I'll write, I'd like to begin with TSC's motion to compel. Certainly. That motion was originally filed at docket number 576. We're not

proposing to go forward today with arguments, rather just a status conference to provide an update to the court. TSC is an equipment lessor to the debtors. Since the filing of their motion, the debtors have been in active discussions with TSC regarding resolution and have actually come to an agreement in principle that will provide for the rejection and return of equipment while preserving all claims and defenses of each party. We are working to finalize and document that with parties and anticipate being in a position to submit a stipulation and proposed order to the court in the coming days. In the unlikely event that something goes completely sideways, we will, of course, reach out

to chambers and ask for time before your honor. I do see Mr. Palmer on the line. He has counseled to TSC, so I'll give him a moment to correct me. if I'm not stated anything, but that is the status of the TSC motion to compel. Okay. Thank you, Mr. Palmer. On the behalf of TSC implement finance, I have nothing to add to Ms. Smith's presentation. Okay. Okay.

Very well. Thank you. Okay. So you can proceed. Thank you, Your Honor. The remaining items for today all relate to approval of the agency agreement motion. Want to see if the court had a preference with how to proceed, whether addressing the motion itself or the motion to seal first. So, actually, to begin, can you bring me up to speed on what's...

So I saw that, from the agenda, that the only remaining dispute was with the Office of the U.S. trustee. That's correct. And then, with respect to the retention itself, it was mostly about, and without prejudice to the rights to you, Mr. Sheppard Carter's right to tell me I've got it wrong, mostly about the search of records. And since seeing that objection, there have been a number of supplemental declarations. And I guess I'm curious to understand what remains disputed in light of those declarations, if that's a fair question. Sure. No, absolutely, Your Honor.

You're correct. The motion to seal does just have the sole objection of the U.S. trustees' offices with respect to the agency agreement motion itself. Yes, just the trustees' objection outstanding. But it is our understanding, again, about prejudice and Mr. Jeff Carter, limited to the search is run in connection with disinterested. We did file those two supplemental declarations this morning, one from Richie Brothers and one from Nation's Capital. The debtor's position and the agent's position is that those adequately address any disinterestedness concerns.

There were extensive searches done, disclosures made. The one thing I do want to flag for the court is you likely saw there were reactions in the file version. We have a motion to seal that we'll be getting on file today. Obviously not before the court today. We'll set that for the upcoming Nominabust hearing, but we will be seeking to to keep those confidential parties confidential. Okay. So I guess I'm interested in Mr. Sheppercarter in, have you had,

I appreciate these all came in this morning and everyone is working hard and doing their best, but have you had a chance to review the supplemental declarations? Yes, I have. You wonder. Whatever, sure. I guess there are people on Zoom, so. It may make sense for you to go to the podium. Thank you, Mr. Smith.

See you in the podium. If you want to get into argument now or not. I first want to understand what's still disputed and what is... Okay, that's perfect. That actually works. They did file supplemental declarations, and we had a lot of gold back and forth before that. And they got about halfway there. We'll say you'll get that 50-yard line. They still have another 50-yard to go.

And that 50-yards is found in the fact that... They disclose, Your Honor, I don't know if you've had a chance to read them, but they just... Looked at them quickly. Right, and I'm sure you did. And your quick look is probably better than my detailed look. Very much doubt, be that as it may. They don't get to the point where they talk about the entities, there's like the five entities that make up Richie Brothers, then there's Nations Capitol, which I understand is like a trailer.

new entity. They get to the point where with respect to the Ritchie brothers, like the five entities, they don't go as far as the search, whatever that search was done. And that's part of it. The actual mechanics of it is important.

But they need to bring in the affiliates that they may have. Because if affiliates have connections with some of the parties in interest, that needs to be disclosed. The issue is that each entity served with respect to its own connections, not of affiliates in your position is that if there's an affiliate. And they've done that, not they've done it, but Gordon Brothers has done it

and David's bottle. They explained it. That's just fine. But that's where we need to just go that much further. So can I throw out for both sides consideration a proposed approach to this problem? So let's assume for this purpose that those additional disclosures should be made. So what I have before me is some evidence. It's imperfect evidence, but it's the best evidence of the parties have been able to generate in the time afforded. Judges make decisions based on imperfect evidence all the time,

and it seems to me the evidence that I do have supports the proposition that the agent is disinterested. It seems to me, then again, this is, that we give you all a chance to react to it, I can make that finding and enter that order, basically, the evidence that's in front of me. And you should continue talking about additional disclosures, and if there's a further disclosure that is made, that shows that that finding was incorrect while vacate it. But I don't think that I'm required to hold up the pace of progress, you know, in the search for perfection. So let me give you a chance to respond to that.

But it's not perfection. It's just the requirement. I understand. We're looking for connections. We can say, like, back in the day. I'm old. I could say back in the day. When they would file a declaration, it would be like three pages.

And it would basically say, we did a search, we're disinterested, and we're, you know, and we satisfy 327A. Boom. That was kind of a. And then over time, it just. Right, the state of the art has evolved into... Right, and I'm not saying they shouldn't do that. They should.

Right, and over the past few years, as a result of one notable case, I'm not going to mention the name, but there's a notable case out there where one professional through another professional and that... I'm aware. Yes, and that eventually ended up with a number of different disclosures. Parties have made, like Kirkland Ellis, their disclosure is much broader than it was before and much more descriptive. No, so, Mr. Chappacarter, I'm not fighting you about the proposition that the disclosure should cover, right?

But for all of those years back in the day, courts entered these orders based on disclosures that are less complete than what I have now. But we need to have more. More is not less. More is more and more is appropriate because what happens is if there's a connection that results in a conflict and the party's already been in the case, it causes a great problem. I understand that. And I'll tell you, if it turns out, based on additional evidence, that we've got an auctioneer that is not disinterested,

I'll vacate my order, and the debtor, if they want to go forward, and everyone is proceeding at their own peril. But we've gotten an amount of disclosure that's meaningful. Well, Your Honor, talked about evidence. The burden of proof is on them. They need to be able to disclose. They need to be able to make all those disclosures because it's not my job, not even your job,

to pull it out of them like a dentist. Like, they need to be able to give you everything you need, tell you everything that you need to be told. And then if there's additional disclosure after that, if something pops up that they didn't know about, then they disclosed. So you can't go like halfway and then say... Let me say the following.

In an ordinary course where there's the luxury of time, what you're describing is how this should go is undoubtedly the best practice. So I'm not encouraging a world in which we do this in a sort of incomplete way, enter an order and then vacate it if subsequent disclosure contradicts the finding. I'm not saying that I love doing that. I'm saying that life is sometimes imperfect. And we've got people working in good faith, it seems to me, and that the record that I do have in front of me, while not as complete as it should be, is meaningful. And that based on – and that courts will all the time make findings based on the best evidence they have. And that – and so therefore, that's how I propose – But let me ask you this, Your Honor, if I'm like.

You may? If we're going to do it on, I don't want to say half a record, but if we're going to do it on the imperfect evidence that your honor mentioned, are they still going to go as far as disclosing, doing that search as saying who the affiliates are and that they search those databases? Let me hear from them as to why they shouldn't, but what I was contemplating was saying it should proceed as you suggest, but that we shouldn't hold everything up in the meantime given the meaningful disclosure that I already have. Okay. All right. Ms. Leamy may address that hold up as well. Okay. So that might be another issue.

That might be a non-starter, but I'll let them. Okay. Ms. Smith? Thank you. Thank you, Your Honor. Mr. Shepard Carter did mention Gordon Brothers. He did raise that with us shortly before the hearing this morning. To our knowledge and what the agent has represented,

Gordon Brothers is not involved in these cases. I will let the DLA team counsel of the agent speak further on that, but we're, of course, happen to continue working. to find something that satisfies concerns. Okay, very well. Good afternoon, Your Honor, Stuart Brown, D.L.A. Piper. If I may make a couple introductions. Certainly.

I'm joined by my partner, Rachel Avon, used today. And I'm doing by the Declarence Jake Lawson and Jim Burke. And I don't know that their declarations or the agent's declaration have been moved into evidence for this record, but I assume counsel for the debtors will do that. We'll get there. I'm just trying to understand tentatively where we are and then we can we can hear your your honor the nation's capital is a business that's about three years old they have done a number of transactions and the number of transactions that they've done and the number of parties with whom they have contacts is fairly limited

they took the debtors 36,000 item list of potentially interested parties and they went through it with great care they don't maintain what one would consider to be a database that you can put the names in and it'll spit out a result. But they know who they've done business with and they went through the list and we've identified those people for Nation's Capital. Nations Capital is the entity that is affiliated with Gordon Brothers. They went and had a conversation with Gordon Brothers and Gordon Brothers represented to them that Gordon Brothers and their whatever interests they have are not interested in.

involved in, don't plan to be involved in, in any aspect of the yellow cases. And we've made that disclosure. On the Richard Brothers side, it doesn't have affiliates. It is itself a public company. It maintains a database which may, I understand it's a global database, but I don't want to represent to your honor that it is, but I understand that. All right, and so what I've got are disclosures, if I understand what I have correctly, what I've got are disclosures with respect to nation's capital based on the information of the people. Yes. And you say there isn't a data. And look, I mean, the entity that is being retained is the legal entity, not the human. And so therefore, to the extent there are connections that are within, that are,

to the sense there's information that is within the possession, custody, or custody. of the entity, you need, and that information reveals a connection that's disclosed. And the information that was searched and the knowledge of the transactions is the entity's information. Okay. So you're not limiting the knowledge to, to you, you're saying that. If it came across that way, I apologize. No, no, no, I'm not. to be limited. Okay. So, so it sounds to me, tell me if I have this right. Well, I would like to add one additional factor for your consideration. And that is, there's two sides to to what basic sides to what the agent will be doing.

On the one hand, the agent will run auctions. The auctions are anonymous as to who's on the buy side. I understand. The auctions run. There's no opportunity for the agent to influence the auction, influence the bidding, or anything. At the end of the auction, somebody was the highest bidder. We then learn and match up the bidding number, paddle, whatever it is, with the high bid, bid, and we close a transaction.

We have no ability to know in advance in the bidding. Okay, but you're nevertheless identified as a professional person within the meaning of the code, so the disclosure requirements apply, right, whether I think that's a good idea or bad idea. I'm not arguing that they should. I'm just trying to explain where we... I understand. Where we intend to take another step. So with respect to the other side, I don't know if your honor is familiar with the term private treaty or not.

If not, I'll be happy to explain it. You won't hurt my feelings by explaining things. I didn't hurt them yesterday, so I hope I won't hurt them today. So private treaty is just a transaction where the agent, auctioneer, whatever you want to call them on the one side for the benefit, for the account of yellow, enters into a direct discussion and agreement with a counterparty. So with respect to private treaty,

we have to go to the... the debtors and disclose, we want to do a private treaty with party acts at this price, do you consent? They then have the obligation to go to all the consultation parties and have that conversation to come back to us. At the time that we know who the buyer will be in a private treaty transaction, there will be disclosure. And if that disclosure is such that it raises a connection, there will be an additional disclosure to this court. I understand that. And I want to separate for this purpose the connections of the agent as of now, right, which are bare on the retention issues from the essentially the sale issues. And, right, to do the sale,

I'm sorry. No, go ahead. So the point I'm trying to make, Your Honor, is we don't know all the names to search. Exactly. No, I understand. The potential buyers who might be out there who might come out of the woodwork, you can't disclose those today. But to the extent there are connections within the end with you know existing clients what have you they're all on the lists okay that are attached so if I understand the state of play I've got disclosures of those connections um with respect to nations and with respect to um we call them RB group okay got it well okay so and with respect to Richie brothers

but not with respect to Gordon Brothers. And Gordon is an affiliate, but it's a different entity. And I understand the law typically respects the corporate form. I get that. But it's typically been the practice that where there are affiliates, those are, that's a sufficient, basically a connection of the, because there's a connection, right, between an entity and its own affiliate, therefore a connection of the affiliate is typically viewed as a

connection of the professional person. And so I think that's been the custom in practice. That's how I used to do it for what it's worth. And so it seems to me that making that search and making those disclosures, am I missing something about the burden associated with that? There's 36,000 names on the list. Okay. And you run them through a database and you disclose the hits and do redactions as necessary. I know that's annoying, but sometimes this is annoying. It's extraordinarily burdensome as well, but I understand the court's proposal. I would have to consult with my client, but I believe that it will be acceptable to them, and we will commit to the court and to the office of the United States trustee

to do that extra work that is being asked or required and get it done. Okay. So, Mr. Shepakar, I know this isn't your first choice, and I think you've told me what your issue with it is, but if you've got issues beyond what you've told me, let me give you that opportunity. Okay, thank you. Again, for the record, Richie Teppacquhar and for the ninth seats, trustee.

A couple of things. One is, on the Richie Brothers end of it, I think I heard counsel say that they didn't have any affiliates. So they should say that in the declaration. Look, we search what we can search. We don't have affiliates, so we're good. But on the other hand, the connection is with Gordon Brothers is that it owns Nation's Capital. Nation's capital did its own search, but I think that as an affiliate, Gordon Brothers

can do and will do its own search. Now, my preference would be they do it beforehand. I understand your preference. Their preference is, well, their preference is probably not to do it. Correct. Their second preference is that they'll fall back to the position. and we'll do it, it's going to take some time. And I think that's probably where we are,

sort of where the water's going to. Right. I propose to make everyone a little bit unhappy. Right. What I do for a living. Yeah. Well, you could be my parents, so they try to do the same thing. And I suspect what Mr. Martin was about to say,

is that to the extent you need him to make a further disclosure about the absence of affiliates, he's happy to make that supplemental disclosure. Right, right. I'm sorry. I'm sorry. Mr. Brown, apologies. That's okay.

You can – oh, sorry. Your Honor, what I was going to get up and say is that in light of Your Honor's comments about revoking the order, we recognize that we're at risk and the longer it takes us to get it done than we are. Right. I don't expect you to be dilatory. Yes, and I apologize for using our name Mr. Brown. I do know who you are.

So thank you. That sounds like a good solution, you know, Your Honor. Again, they're at risk, and they understand they're at risk, and I think that, you know, it is what it is. I hate to use it. Right. Somebody kind of fits here, so I think that's where we are. So I know I sort of hijacked the presentation

and done it as an unconventional way, and that it is the debtor's motion and that they may need to present the evidentiary case. So let me, Ms. Smith, with my apology, for hijacking, give you the opportunity to present your motion. That is all, Your Honor. Moving then, I will do the housekeeping items, if that's all right, moving the declarations into evidence.

As you're aware by now, there are four of them. First, the declaration of Ms. Cody Caldenberg, of DeSera Partners, product docket number 855, excuse me. Ms. Caldenberg is president of the courtroom today, and unless your honor has any questions, we would ask that for declaration be submitted into evidence. Any objection to the introduction of the Caldebert Declaration? If not, it'll be admitted.

Thank you. Then we have the three declarations from the agent, the original filed at docket 856, and then the two supplemental filed this morning at 973 and 974. I did already flagged for the court, the redaction of the supplemental, and we will work to get that motion to seal on as soon as possible. Unless any questions, we would also ask for those three be submitted. Any objections in introduction to evidence of those declarations? Okay, seeing none, those will be admitted.

I take it, there's no party that wishes to cross-examine any of the four declarants. Okay, seeing none, you can proceed. Thank you, Your Honor. Then, as noted, the only outstanding objection is of the trustee's office. It sounds like we've come to a resolution there. But otherwise, the formal and informal objections and comments received were reflected in the order filed last night. I'm happy to walk through any of those changes. Otherwise, we would just ask that the order be entered.

Okay. So I've seen the revision. order, I'm satisfied that the relief sought is appropriate. I do think the best practice remains that the complete disclosure should be made beforehand, but I think under the circumstances of this case, I'm satisfied that I can make a finding of disinterestedness and enter the order. That doesn't relieve the need to complete the disclosures. And as I mentioned, if it turns out, those disclosures suggest that my finding is incorrect. I'll vacate the finding. and the order, but that if parties are agreeable to proceed on that understanding,

I don't think we need to hold up the clock while we get to perfection. So with that, I'm prepared to enter the order. Thank you, Your Honor. And as Mr. Brown said, we'll work quickly to get those supplemental. And I do appreciate everyone's good work here. I appreciate both the U.S. trustees help in making sure that I've got a record I need to make the findings I'm statutorily required to make and the good work of all of the parties to try to develop that record in, you know, quite a short period of time.

So I want to express my thanks to everyone for your help and allowing me to do my job. Thank you, Your Honor. The final item then is the motion to seal. That was filed at docket 854. Again, there's just one objection received. It was from the U.S. trustee's office. The debtors and the agent are seeking to seal commercially sensitive information. It is limited to the commission rates heavily negotiated and agreed to within the agency agreement.

The proposed yellow mandate, as you can probably imagine, is arguably one of the largest, if not broadest scope project ever undertaken by the mandate or, excuse me, by the agent or potentially any auctioneer. As such, the context of this engagement is unique and required certain economic terms not applicable in the context of other mandates. The agent has a real concern that publicly disclosing these rates will harm and disadvantage them and go forward business. prospects, including with competitors or other counterparties who will endeavor to use them against them in future negotiations. Further, every stakeholder here with an economic state, the dip lenders, the pre-petition secured lenders, whose priority collateral the role in stock is, the committee and the largest equity holders were not only provided the rates but had active roles in negotiation, and

our understanding is are all supportive of the agreement being approved and staying confidential. So respectfully, we would ask that the commission rates remain confidential. So let me offer my reactions to this. So when there's a motion to seal over the objection of a party withstanding as the U.S. trustee is, as I understand the standard, the Third Circuit in Avandia requires me before sealing a public record over an objection, to me, to make a public record over an objection to make a a specific finding based on concrete evidence that there is a meaningful risk of demonstrable business harm. And I understand the statements you just made, but the actual evidentiary record that I have in front of me on this strikes me at the moment. Well, nothing has been

admitted. Well, I guess what have you, but I think the evidentiary record on this, I can imagine those facts being true. But it's not clear to me that I have before me today an evidentiary record that meets that standard. So I guess I'd be interested in giving the opportunity to present evidence that meets the standard that there's a meaningful risk of actual tangible business injury. Sir.

Mr. Brown. Your Honor, I'd like to consult my client. But my expectation is that the evidence that the client is able to present. is mostly speculation. This is a new transaction. It's been on the books and disclosed for a week and a month. So I don't think you need to get, look, I'm not telling you how to present your case.

I don't think the standard requires certainty, but, A, it requires actual evidence. And, you know, the speculative isn't the eye of the beholder, but I think it needs to be sufficiently concrete that one can say, I understand why under these circumstances there's a serious risk of a harm. I mean, look, the background is that this gets disclosed in every other case, right? And so at the very least, there needs to be a record that explains why this is different. And so I'm not telling you how to present your case. I'm just saying that based on what's in front of me, I think I've got a challenge to make the finding that the law requires me to make in order to seal the information.

So may I'd be permitted a 15-minute recess? Certainly. And before you do, let me first, Mr. Chappacarter, is there anything that I should, or Ms. Lamy, is there anything else that I should understand before giving them that opportunity? Good afternoon, Your Honor. Jane Lamy for the Estrissi.

I think you're correct, Your Honor. I mean, it's the party's bargain to demonstrate why it should be under seal, so they have to demonstrate your honor's satisfaction. Okay. And you don't dispute the, I'm not saying articulated the standard perfectly, but you're not taking the position that the standard is higher or different than what I'm asking them to present. I don't think so, Your Honor. Okay, very well.

Okay. So I'm happy to give you a recess and have a chance to present whatever evidence you think is appropriate. Thank you. Okay, so with that, it is now 1230. Why don't we take a 15-minute recess? I'll come back on at 1245. Until then, we're in recess. Thank you.

Thank you. Mr. Brown, can you proceed. Thank you, Your Honor. The agent has determined not to ask the debtors to press forward with the motion and rely on the evidence in your honors. I won't say predisposition, but disposition and move forward with entry of an order on the agency agreement. The U.S. trustee raised another issue, and they're out conferring with their clients, so maybe a few more minutes. I see them coming back in.

So I'm sorry, I apologize. So when you say that they've chosen not to go forward on the motion, which motion? The motion. The motion is a seal. Yes, Your Honor. I'm thanking for that clarification. Okay. Okay.

But there's another issue that has arisen that. Ms. Leamy? Thank you, Your Honor. Jane Leamy for the U.S. trustee. We just needed a few minutes that can tell with our client. With the agreement to withdraw the motion to seal and the agency agreement would be put on the docket, in full unredacted form, We are fine.

Okay. Very well. So it sounds like I have nothing to decide then. No. I'm just going to say, I think that is the final item for today, Your Honor. Okay. The document exists, right? Yeah, I thought you were saying it to say something.

Sorry. No, I don't see what you're going on. Okay. Yes, this afternoon, Your Honor. Okay. Okay. Okay, so then the motion to seal is withdrawn. the motion to authorize the retention of the agent. It will be granted. I take it, you'll be

able to upload an order to that effect? Yes. Okay. In that event, is there anything else that's on our agenda for today? Nothing else, Your Honor. Okay. While we're here, is there any other way in which the court can be helpful to the parties? No, you've been very helpful. Okay. In that event, Let me thank all of you for the helpful presentation. And with that, we're adjourned. Thank you so much. Thank you, Your Honor.