American court hearing recordings and interviews - Season 7. Episode 8. January 22, 2024. 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: January 30, 2024

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Thanks. Be seated. So good afternoon. We're here in Inray Yellow Corporation at all, case number 23-11069. Good afternoon, Your Honor. Mike Slade for the debtors. Your Honor, we don't actually have a lot for you today, but I did want to provide background on what's going on with all of the lift stay motions. That would be super helpful. I've seen a lot of the paper, and there are a lot of moving parts, and I can't keep track of them all. So a general status would be super helpful. Yeah, many, many phone calls and many more emails. I'm sure if everyone's working hard, and it's much appreciated. So more than 200 proofs of claim have been filed by property damage or personal injury

of claimants that were timely filed before the bar date. And in addition, there are more than 300 additional claimants. They did not file a proof of claim before the bar date, even though they got notice. And even though they didn't file a proof of claim, OREC, the insurance company, filed a proof of claim, the logic of which was that if they had to pay out to those particular claimants, they had a claim back against the estate based on a language of their policy. So while we would argue those people who didn't timely file a claim don't have a claim against the estate, we still have to effectively resolve those claims to process this bankruptcy case. And so the issue of how to address all of those claims, and there's a very large number, it's complicated, and it could be material of the credit recoveries. We've spent a lot of time on it working with Oric and with counsel for the committee. We've also spent a ton of time talking with the move-ants, the various lift-stay claimants, and about 40 of them have been filed, more than 40 lift-stay motions have been filed so far.

I'm confident that if one or more were granted, more would be filed. So many of the move-ants have worked with us to try to understand the coverage issues or lack of coverage issues, and we are appreciative of the claimants for working with us. I mean, the truth, as we would argue, if the if and when the list say motions come before the court, the debtors are not in a position to deal with these claims outside of the court at this time for a lot of reasons. Pre-petitioned, Yellow had a group of employees that worked on these claims handling issues. Yellow would engage outside counsel outside of the bankruptcy court and pay them, and it paid claims working with its third-party administrator, which is an entity called Sedgwick. The vast majority of those people are gone with the company of the state that it is right now, and the few that are left are spread extremely thin and definitely do not have time to work on.

40 cases. That said, there does need to be some mechanism, right, for liquidating the liquidated claims. We totally recognize that at some point in time, the claims do have to get resolved. It's really a question of process and timing. And so we've been working with Oric and with the creditors committee to put a set of procedures together. And we're very close and we filed our latest set of amended proposed procedures on the docket. Even though they're not done. We wanted to give people an update, basically telling them that we were listening to what they said to us when they communicated to us informally or whether they filed objections to the procedures with the court. The revised proposed procedures are at docket number 1817, and those

have continued to February 14th. So hopefully we can present an agreed set of procedures. And if there are folks that are listening to this hearing and they want to talk to us further about issues that they still have with the procedures, please reach out because we would like those to be as consensual as possible. In addition, Your Honor, this morning, I saw that you entered the stipulation with respect to three of the claims, which we actually did get resolved on the merits, which I think hopefully people see as a sign that everyone is going to work in good faith and try to get these claims resolved.

Those were three real claims that were resolved, and those claimants, by working with us, they are going to be paid and they won't have to wait. But it's a process. And if and when we were before the court arguing the lift stay motions on the merits, we would be telling you at this point in time, we don't think there's a basis to lift the stay. With respect to the ones that were up for today, there's two that I need to make statements on the record about.

The first is the Hubert motion, which was docket 758 and its number 32 on the agenda. That relates to a case that was pending in Wisconsin, is pending in Wisconsin State Court against the debtors and against the insurance company, Oreck. They have agreed they are not going to move forward with the case against the debtors, but they are not at this point going to dismiss the debtors. We have agreed that the state does not apply to the state. direct action claim against OREC and that they can submit the insurance order that your honor previously entered to the state court and then it will be up to the state court about whether it wants to proceed with a direct claim or whether the state court

wants to wait until the debtors can also be part of that. Okay, so Mr. Sleid, that actually calls to mind a question. And if you want to continue with the other things, you want to put on the record, I'll give you that chance. But at some point, I'm interested in understanding the state of play with respect to I mean, look, I'm not asking to hear about ongoing settlement negotiations, but I recall earlier in the case there being the question of there being a dispute about whether there is insurance. And I don't want to stick my nose in where it doesn't belong. But I guess I am interested in understanding as we think about moving along the claims process to understand the state of play there.

So I think the state of play is that OREC has asserted defenses to coverage and intends to, if the matters are not resolved, it would make those arguments that there is no coverage. That's fine. But in context of these procedures, one of the things we did clarify in the amended set was people were confused and they said it's not clear to me. Maybe I'll settle with the debtors and then Oric will assert a coverage defense. And so that is not what's going to happen as part of these procedures. If folks participate and there's a negotiated settlement, part of that settlement will be the claims will be paid by Oric. Okay. So the issue of whether there's coverage or the extent of coverage or when coverage is triggered,

we are trying to avoid the need to litigate that issue by resolving the underlying claims on the merits. the alternative being the debtors could initiate it at proceeding before the court of seeking coverage, we could try to do that somewhere else. We would prefer not to have to do that if we can actually get the claims resolved on the merits. I understand. No, the only reason I asked was about whether there was any relationship between the direct action proceeding and anyone else's right to coverage in the case, but it sounds like no one is contending that that's immediately an issue. I think that's correct.

Okay. All right. Let me let you continue. I apologize for the interruption. So that's with respect to the Hubert matter. They're going to continue their motion to February 14th, but they are going to provide a copy of the order you're already entered with respect to insurance to the state court of Wisconsin, and it'll be up to the state court about what it wants to do. The second manner that I need to discuss with your honor is the Ellis matter, which was docket 829 and number 35 on the agenda. That was the one that is not a pending case yet.

The plaintiff is in Tennessee state court, and they want to initiate a lawsuit against both a debtor entity and also their uninsured motorist coverage. Their issue that they have asserted to us is that they want to make sure they comply with the statute of limitations, and they believe that in Tennessee that to pursue their own insurance, their own uninsured motorist coverage, they have to initiate a case against the tortfeasers.

So they believe they couldn't even pursue their own insurance without suing a debtor entity. And so the compromise we've reached with them is that they can file their lawsuit in state court in Tennessee. I agree that I will accept service on behalf of the debtors. They agree that they will stay the case immediately through the end of the bankruptcy. So they will satisfy what they believe they need to do to get to their own coverage, and it won't have any impact subjectively on the estate. Okay. While we're on the Ellis case, let me just say the following. I noticed in preparing for the hearing that the lawyer for Mr. Ellis, the Delaware Council, is from the firm where my judicial assistant's husband is employed.

I looked at this. I don't believe it creates a recusal issue, but it looked like the prudent thing to do is to make that disclosure. So I've made it. I'm satisfied that I will resolve the matter fairly and impartially, and it won't affect my ability to do my job,

and will not include my judicial assistant in any substantive discussion of that matter, but I wanted just to make that disclosure so that I dotted the eye and crossed the T with respect to the ethics. Okay. Very good. Thank you. Okay. That presents no issues for the debtors.

And I think the only one... I'm sorry, Ms. Anderson, looks like you wanted to be heard on that? Not on that issue. Okay. Yes. Okay. And I think the only remaining one was the Vizcayino matter, which is 47 on the agenda, docket 1661. We spoke to their lawyer, and they were not sure about whether they wanted to proceed today.

So I think I would just leave it to them. Okay. Okay, Ms. Anderson. Margaret Anderson, Your Honor, on behalf of Old Republic Insurance Company, just one point of clarification. In the ADR procedures, we are preserving whatever coverage defenses we have. Any settlement offer made will take those coverage defenses if we have any into effect. But if we make a settlement offer of, let's say, $300,000, that's what we're going to pay. Got it.

I understand that, and that makes sense. And no one is asking you to waive any substantive. Right. So the only question that I had with respect to the, look, as you know well, the law around the treatment of insurance and bankruptcy is complicated, and the question of, is it or isn't it property via state? The question about the applicability, I know I entered an order that was to the state with respect to direct actions, and that is what it is. It was an unopposed order, and I entered it, and that's fine. The only concern, it triggered was if there in cases in which, regardless of whether it is or isn't, whether the proceeds are or are not property of the estate, it's, as you're aware, it's common in cases in which it turns out there's a question about whether there will be sufficient insurance to satisfy all the claims. It's common in those cases to treat the insurance or its proceeds as property of the state so that it's distributed rattably among covered claimants.

as opposed to living in the world to first come, first serve. And my only concern was whether allowing that state relief to go forward was going to give rise to that problem. But in a world in which no party interest has raised it, I'm happy to resolve disputes when they come to me, not inject them because I'm curious. So in a minute, that was the only reason I raised that question, not trying to solicit a waiver of anyone's rights,

if that makes any sense at all. unfortunately for my client, Your Honor, there are no policy aggregates. It's a perclaim I see. Okay. Well, that solves that problem. Yes. Okay. Thank you. That's very helpful. I appreciate that. Do you have any other questions about the Old Republic coverage? No, I don't. If the parties are talking, but your question about they're not being an aggregate resolved the question that I did have. So that's very helpful. And I appreciate it and I'm happy otherwise to let the parties continue to work. Thank you. Thank you. So with respect to the Viskayano dispute, here's what I understand.

Counsel for the claimant has reached out to chambers a number of times over the past several days asking for permission to appear remotely by Zoom. And while I hate to be difficult or the one to enforce rules for the sake of enforcing rules, The rule that we have uniformly applied since the return to court has been that in any contested motion in the absence of extraordinary circumstances, if someone is sick, it's one thing, but otherwise the council, plead counsel for the party that is seeking or opposing relief in a contested motion is required to appear in court. and so I did I see Mr. Hiller reached out to say that he I don't I'm not sure if he is counsel for this on this motion or not he reached out to and represented that he actually had the flu so he's permitted to appear remotely for that reason that that's the kind of circumstance in which it's better for everyone if we we permit remote appearance but Mr. Lee has reached out asking to as counsel to Mr. Viscayano to present argument in support of his motion for Lee from the stay remotely and simply to be fair and consistent, the answer is no. But I did indicate that we, for the purpose of having this conversation, allow Mr. Lay to be heard simply for the purpose of seeking any clarification or the like

with respect to that matter. And Mr. Hiller, to the extent this is – you're involved in this. obviously you'll also have the chance to be heard. So Mr. B, why don't I give you the chance first? And, well, whichever of you wants to address it, you're welcome to. Actually, Your Honor, this is Adam Hiller. I did reach out to chambers on Thursday or Friday to ask about this. Since that time, however, I have disengaged from this client.

So I am no longer, Mr. Viscata's Delaware Council. I just wanted to alert the court to that. Okay. Okay. Thank you, Mr. Lee. I hope you feel better and thank you. Okay, Mr. Lee, any questions about what I just described? Did I misdescribe any of the previous communications? So that we won't be able to appear in person to make our substantive argument, but we're not ready to do that today. Okay. Very well. So this matter, I take it, will be adjourned. You'll work with the debtor to reschedule this at a time that's a time. appropriate and agreeable to both sides? Yes, sir. That's fine, last your honor. Thank you.

Okay, very well. So we'll treat that matter as being adjourned. Thank you very much to all. And thanks to everyone for understanding that, you know, we, well, we don't mean to be difficult or create inconvenience or create burden or expense for no reason, I do feel a need to sort of apply the rules in an even-handed way. Okay. Anything else that we should address? Hi, yes, good afternoon.

You are. Allison Smith, Kirkland Ellis for the debtors. Just one other item on today's agenda going forward. It's just the matter of the interim fee applications. Yes. So here's what I can tell you, which is a number of them have been submitted, and I believe there are certificates of no objection with respect to them. We're looking at them because we do that.

To the extent we run into any issues, we propose to reach out and address them. If you don't hear from us, you should expect in order to be entered. And if in the course of our review, which is ongoing, we run into something that raises a concern, you'll hear from us. That's perfect. Honestly, what we assumed, Your Honor. One thing I did want to alert the court to is we became aware very recently that certain holdback amounts were accidentally paid by the company. It was to, there was miscommunication about C&Os and what that meant.

It was four professionals, A&M, Ernst & Young, KPMG, and Pcholsky. We did alert Ms. Leamy's office as well as soon as we found out. We have not yet asked them to pay those funds back, but we are not making any further payments to those professionals and obviously have alerted them that it is still pending entry in order. But I did want to full share. I appreciate the disclosure. Obviously, once the holdbacks have been trued up in one manner or another,

that will be, from my perspective, but I do appreciate. To the extent that the court has additional reductions or something, will obviously determine the best path to accommodate that. Okay. Well, appreciate that. And thank you for the disclosure and I appreciate the professionalism and to exempt their issues, we'll address them as they arise.

Perfect. Otherwise, I think that was it, Your Honor. Okay. While we're here, is there any other party in interest that would like to be heard on any matter? Or is there any other way in which the court can be helpful to the parties as you all continue your ongoing work in the matter. Okay, well, seeing none, thank you for the report. It's very helpful. And I guess we have adjourned these matters until some time next

month. February 14th, okay, Valentine's Day, Your Honor. Wonderful. Okay, well, let me encourage you to continue your conversations. Thank you so much for what you've done. And until then, we're adjourned. Thank you.