In re: DNIB UNWIND, INC. et al.

Filing 35

MEMORANDUM OPINION Signed by Judge Colm F. Connolly on 2/27/2019. (nmf)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
IN RE DNIB UNWIND, INC. (f/k/a BIND
THERAPEUTICS, INC.),

Chapter 11
Case No. 16-11084 (BLS)
(Jointly Administered)

Post-Effective Date Debtor.
B.E. CAPITAL MANAGEMENT FUND, LP,
Adv. No. 17-50882 (BLS)
Appellant,
Civ. No. 17-945 (CFC)

V.

GEOFFREY L. BERMAN, in his capacity as
Trustee of the Liquidating Trust ofDNIB Unwind,:
Inc. (f/k/a Bind Therapeutics, Inc.),
Defendant/Appellee.

Julia B. Klein, KLEIN LLC, Wilmington, Delaware

Counsel for Appellant
John H. Knight, Amanda R. Steele, Brett M. Haywood, RICHARDS, LAYTON &
FINGER, P.A., Wilmington, Delaware; Peter M. Gilhuly, Kimberly A. Posin, Amy
C. Quartarolo, LATHAM & WATKINS LLP, Los Angeles, California

Counsel for Appellee

MEMORANDUM OPINION

February 27, 2019
Wilmington, Delaware

(}t_~{l~ATES DISTRICT JUDGE

CONNOLLY, UNITE

I.

INTRODUCTION

Presently before the Court is the appeal (D.I. 1) of Appellant B.E. Capital
Management Fund LP ("BEC") from a Bankruptcy Court's decision (B.D.I. 694) 1
("Decision") denying BEC's Motion for Determination that the Trustee's
Conditioning ofDistributions to Shareholders on their Submission ofEquity
Distribution Form Violates the Plan, or, Alternatively, is an Impermissible Plan
Modification (B.D.I. 615) ("Motion for Determination"), which sought a
determination that Appellee' s conditioning of distributions to shareholders upon
receipt of certain tax documents and equity certifications is impermissible under
the debtors' confirmed plan. Related to the appeal is BEC' s pending motion for
reconsideration (D.I. 18) ("Motion for Reconsideration") of the Court's Order (D.I.
13) denying BEC's motion for a preliminary injunction, temporary restraining
order, and stay of the Decision pending appeal (D.I. 4) ("Emergency Motion").
For the reasons that follow, the Court will affirm the Decision and deny the Motion
for Reconsideration as moot.

1 The

docket of the Chapter 11 case, captioned In re DNIB Unwind, Inc., Case No.
16-11084 {BLS) (Bankr. D. Del.), is cited herein as "B.D.I. _." The docket of the
adversary proceeding, captioned B.E. Capital Management Fund LP v. Berman,
Adv. No. 17-50882 (BLS) (Bankr. D. Del.), is cited herein as "Adv. D.I. _."
BEC's appendix (D.I. 30-31) is cited herein as "APP-_," and Trustee's
supplemental appendix (D.I. 26-29) is cited herein as "SA-_."

II.

BACKGROUND
On September 26, 2016, the Bankruptcy Court entered an order (B.D.I. 457)

("Confirmation Order") confirming debtors' plan of liquidation (B.D.I. 415)
("Plan"), which, inter alia, established the Liquidating Trust of DNIB Unwind,
Inc. ("Trust") and appointed Appellee Geoffrey L. Berman as trustee ("Trustee").
On October 11, 2016, the Plan's effective date occurred. On December 15, 2016,
Trustee made an initial distribution of $8 million to shareholders, as required under
the Plan. (See B.D.I 694 at 3). Shareholders that held their shares in street name
received their distributions through the Depository Trust Company ("DTC").
Thereafter, the Trust's tax professionals advised Trustee that further distributions
to the debtors' former shareholders should be conditioned upon submission of
certain tax documents, consisting of a Form W-8 or W-9 (the "Tax Forms") and an
equity certification form (the "Equity Certification")2 to be completed by the
nominees ofDNIB shareholders (the "Nominees") who held their shares in street

2

The Equity Certification requires that each Nominee provide the following: (1)
DTC participant name, number, contact name, contact number and email address,
and authorized signature; (2) beneficial holder name and account number; and (3)
number of shares of CUSIP 05548N 107 that were held by the Nominee for the
indicated account as of the Distribution Record Date. (See B.D.I. 627-1, ,r 8, Ex.
2). It is Trustee's position that because most DNIB stock in existence on the
Distribution Record Date was held in street name, Trustee does not know the
identity of each individual shareholder, nor does Trustee know how many shares of
DNIB stock each such holder owned as of the Distribution Record Date. As a
result, Trustee required that all Nominees complete the Equity Certification. (See
D.I. 9 at 11-12).
2

name (i.e., through a broker or nominee) (collectively, the "Tax Documents").
(B.D.I. 627-1 at 16). On February 7, 2017, Trustee sent a notice requesting
submission of same on or before August 7, 2017 (the "Submission Deadline").

(See B.D.I. 590). DTC subsequently informed the Trustee that it would not agree
to make any further shareholder distributions if such distributions were made to
less than all shareholders (which would result where at least one shareholder failed
to provide its Tax Documents timely and was deemed to forfeit future distributions
from the Trust). (See APP-0170).
On March 22, 2017, BEC filed the Motion for Determination,3 arguing that
Trustee is mistaken (or at least overly cautious) in his position that the Tax
Documents are necessary; that there may be alternative approaches (such as
seeking a private letter ruling from the IRS); and that requiring submission of this
information unfairly burdens shareholders, placing an unreasonable and
unnecessary condition upon their right to receive their distributions. (B.D.I. 615).
BEC further argues that permitting Trustee to condition distributions on the receipt
of the Tax Documents will result in a substantial number of shareholders forfeiting

3

On March 22, 2017, BEC also filed a complaint in this Court against DTC and
the Financial Industry Regulatory Authority, Inc. ("FINRA"), seeking an order
requiring FINRA to set an October 11, 2016 ex-dividend date. (See Civ. No. 17311 (CFC), D.I. 1 ("DTC/FINRA Action")). Trustee is not a party to the
DTC/FINRA Action. On October 10, 2018, the parties to the DTC/FINRA Action
filed a Joint Status Report which indicated their agreement that if the Bankruptcy
Court's Decision is affirmed in this appeal, the DTC/FINRA Action should be
dismissed as moot. (See Civ. No. 17-311 (CFC), D.I. 26 at 2).
3

future Plan distributions to which they legally are entitled. (See D.I. 4 at 11 ). A
hearing on the Motion for Determination was held on May 31, 2017. (D.I. 4-4).
On July 13, 2017, the Bankruptcy Court issued its Decision denying the
Motion for Determination. (B.D.I. 694). The Bankruptcy Court determined that
the Plan and Confirmation Order, along with the post-confirmation trust instrument
(SA-079-101) ("Trust Agreement"), govern the rights and responsibilities of
Trustee and the Trust beneficiaries, and that those governing documents permit
Trustee to demand from Trust beneficiaries any forms or information relating to
Trustee's obligations to withhold and to condition distributions upon receipt of
such forms or information. (B.D.I. 694 at 2). The Bankruptcy Court noted that
"Trustee's documentation requests here impose at most a modest burden on the
shareholders/beneficiaries," and the Court declined, on a post-confirmation basis,
to second-guess the judgment of Trustee in the exercise of his duties where those
actions are directly contemplated by the governing documents. (See id. at 3).4
On July 14, 2017, BBC filed a timely Notice of Appeal with respect to the
Decision. (D.I. 1). The same day, BBC initiated an adversary proceeding against
Trustee by filing a complaint in the Bankruptcy Court seeking declaratory and
injunctive relief (Adv. D.I. 1, 14) ("Complaint"), together with an Emergency

4

In declining to substitute its own judgment for Trustee's, the bankruptcy court
stated: "[BBC] may be correct that there are other avenues available to the Trustee.
But the Trustee is entitled to exercise his discretion and judgment in construing and
carrying out his duties." (B.D.I. 694 at 3).
4

Motion for Preliminary Injunction and Temporary Restraining Order (Adv. D.I. 4)
("TRO Motion"). The TRO Motion sought an order enjoining Trustee, through a
final adjudication of the Motion for Determination, from:
(i) conditioning further distributions to DNIB
shareholders on the receipt of the required Tax
Documents; and
(ii) making any further distributions to DNIB
shareholders until further order of the court.

(See Adv. D.I. 4 at 12; D.I. 4 at 1-2). The TRO Motion further sought a stay
pending appeal as alternative relief to the injunctive relief it sought. (See Adv. D.I.
4 at 11-12). On July 20, 2017, the Bankruptcy Court promptly set a hearing on the
TRO Motion for August 3, 2017. (See Adv. D.I. 9). Notwithstanding BBC's
knowledge that an emergency hearing date had been set by the Bankruptcy Court,
BBC filed the Emergency Motion in this Court on July 25, 2017. {D.I. 4). The
Emergency Motion sought precisely the same relief sought in the TRO Motion: a
preliminary injunction, temporary restraining order, and stay pending appeal of the
Decision. (D.I. 4). 5

5

Ordinarily, a motion seeking a stay pending appeal of a bankruptcy court's order
must be brought first in the bankruptcy court. See FED. R. BANKR. P. 8007(a)(l).
Only if bringing the motion in the bankruptcy court is impracticable or if the
bankruptcy court has failed to rule on the motion seeking a stay may the movant
bring the motion to the district court before giving the bankruptcy court an
opportunity to consider the relief sought. See FED. R. BANKR. P. 8007(b)(2)(A)(B). Clearly neither condition arose here, as the Bankruptcy Court promptly
scheduled the matter for hearing. With respect to these duplicate requests for
relief, BBC found it sufficient to state: "[s]hould the Bankruptcy Court grant relief
5

On August 3, 201 7, the Bankruptcy Court held a hearing on the TRO
Motion, and, on August 7, 2017, BEC advised the Court that its request for a stay
had been denied. (D.I. 11). On August 8, 2017, the Court denied the Emergency
Motion. (D.I. 12, 13). On August 14, 2017, BEC filed the Motion for
Reconsideration of same, which is fully briefed. (D.1. 18, 20, 22). The merits of
the appeal are also fully briefed. (D.1. 21, 25, 33). The Court did not hear oral
argument because the facts and legal arguments are adequately presented in the
briefs and record, and the Court's decisional process would not be aided by oral
argument.

III.

JURISDICTION AND STANDARD OF REVIEW
This Court has jurisdiction over this appeal from the Bankruptcy Court

under 28 U.S.C. § 158. The Decision denying the Motion for Determination is
based on the Bankruptcy Court's interpretation of the Confirmation Order, which
incorporated the Plan and Trust Agreement. The interpretation of an order is a
conclusion of law. In re Duplan Corp., 212 F.3d 144, 151 (2d Cir. 2000)
(bankruptcy court interpretation of confirmation order is conclusion of law). Legal
conclusions of the bankruptcy court are subject to plenary review by the district

duplicative of that sought herein, [BEC] will promptly notify this Court." (D.I. 4
at 6).
6

court and are considered de novo on appeal. In re Klaas, 858 F.3d 820, 827 (3d
Cir. 2017); In re Cont'! Airlines, 150 B.R. 334, 336 (D. Del. 1993).

IV.

ANALYSIS
On appeal, BEC asserts that the Bankruptcy Court erred as a matter of law in

holding that "the Plan, the Confirmation Order and the Trust Agreement all operate
to provide Trustee with the authority to demand the tax forms and the
Certifications." (D.I. 21 at 1). BEC asserts that this legal conclusion is not
supported by the provisions in the operative plan documents upon which the
Bankruptcy Court relied. (Id. at 7-12). BEC further asserts that the Decision
violates principles of contract construction and interpretation because permitting
the Trustee authority to condition distributions on the submission of Tax
Documents would render all provisions relating to the Debtors' transfer agent
meaningless. (Id. at 12-14). Trustee has challenged BBC's standing, and
therefore the Court will address that issue before turning to the merits of the
appeal.

A.

BEC Has Standing to Prosecute the Appeal

Trustee argues that BEC lacks standing to prosecute the appeal. (D.I. 25 at
5-6). "[A]n appellant must qualify as a 'person aggrieved' to be eligible for
appellate review of a bankruptcy court order." Gen. Motors Acceptance Corp. v.

Dykes (In re Dykes), IO F.3d 184, 188 (3d Cir. 1993). Thus, "[t]o appeal from an
order of a bankruptcy court one must show that the order diminishes one's
7

property, increases one's burdens or impairs one's rights." Id. at 188-89. Trustee
cites the three elements comprising what the Supreme Court has referred to as "the
irreducible constitutional minimum of standing:"
First, the plaintiff must have suffered an "injury in fact" an invasion of a legally protected interest which is (a)
concrete and particularized . . . and (b) "actual or
imminent, not 'conjectural' or 'hypothetical[.]"' ...
Second, there must be a causal connection between the
injury and the conduct complained of-the injury has to
be "fairly ... trace[able] to the challenged action of the
defendant, and not ... the result [of] the independent
action of some third party not before the court." ...
Third, it must be "likely," as opposed to merely
"speculative," that the injury will be "redressed by a
favorable decision."
(D.I. 25 at 6 (second alteration added; other alterations in D.I. 25) (quoting Lujan

v. Deft. of Wildlife, 504 U.S. 555, 560-61 (1992))). Trustee argues that BEC has
suffered no injury in fact. (Id. at 6). "BEC (through its Nominee) provided its Tax
Documents to the Trust on June 16, 2017 (28 days before BEC filed its Notice of
Appeal) and now is entitled to its pro rata share of all future distributions to be
made to shareholders under the Plan. As such, BEC does not have a financial
interest in the outcome of this appeal." (Id.). Conversely, BEC argues that it will
be harmed, even if it receives a distribution by virtue of having turned in its Tax
Documents. (D.I. 33 at 2-3). "This is so because, by circumventing the transfer
agent and [] DTC, the Trustee will deprive [BEC] of the dividends to which [BEC]
is entitled from other shareholders on account of shares that it purchased after the

8

Distribution Record Date by virtue of applicable SEC rules." (Id. at 3 ). Trustee
has conceded that BEC has a financial interest in the outcome of the appeal. (See
D.I. 25 at 16 n.14). Thus, BEC has standing to prosecute the appeal. 6

B.

BEC Failed to Present Evidence Contradicting the Trust's Tax
Reporting Obligations or Present Viable Alternatives

At the core of this appeal is a dispute as to whether the information
contained on the Tax Documents is required for the Trust to meet its tax reporting
obligations. BEC argues that the Trust's provision of shareholder tax identification
numbers to the IRS is strictly "optional" (D.1. 21 at 10-11 ), and Trustee has
consistently asserted that it is not. (D.1. 25 at 7-9). In its answering brief, Trustee
sets out the tax reporting obligations specified by the Trust Agreement, 7 the
specific statutes and related regulations with which the Trust must comply
(including 26 C.F.R. § 1671-4(a)), the required forms, and the instructions

6

Based on the caption of this appeal, BEC also purports to represent, without
analysis, a purported class of similarly situated shareholders that failed to timely
return the Tax Documents and will forfeit their distributions. Having apparently
complied with Trustee's request, it cannot be said that BEC is similarly situated.
7
Trustee's declaration sets forth the advice that the Trust has received from its tax
professionals; specifically, that the Trust's accountant has advised Trustee that the
Trust is required to provide the IRS with tax identification numbers for each
individual DNIB shareholder entitled to a distribution to the plan. (See D.I. 9-1, ,r,r
5-6). Trustee contends that, because most DNIB stock in existence on the
Distribution Record Date was held in street name, Trustee does not know the
identity of each individual shareholder, nor does Trustee know how many shares of
DNIB stock each such holder owned as of the Distribution Record Date, and as a
result, Trustee required that all Nominees complete the Equity Certification. (See
id. at 11-12).
9

governing completion and submission of same. 8 BEC has suggested that, as an
alternative to the reporting requirements of26 C.F.R. § 1671-4(a), Trustee may
comply with 26 C.F.R. § l.671-4(a) by solely reporting DTC's tax identification
number (instead of the tax identification number of each shareholder). (See D.I. 21
at 12 n.11 ). Trustee argues this alternative is not viable because ( 1) the
instructions to Form 1041 are clear that Trustee must provide a tax identification
number for "the person(s) to whom the income is taxable" and (2) the income of
the Trust is taxable to each grantor/shareholder and not to DTC. 9 (D.1. 25 at 8).

8

The Trust Agreement requires the Trustee "to file returns for the Liquidation
Trust as a grantor trust pursuant to Treasury Regulation section l.671-4(a)."
(APP-0064; APP-0384). According to Trustee, specific tax provisions, namely 26
U.S.C. § 6012(a)(4) and 26 C.F.R. § l.671-4(a), require the Trustee to file a Form
1041, "U.S. Income Tax Return for Estates and Trusts," on behalf of the Trust.
(See D.I. 25 at 7-8). Under the Form 1041 reporting method, the regulations
require the Trust to report taxpayer identification numbers in accordance with the
directions for Form 1041. See 26 C.F.R. § 301.6109-l(c). The instructions to
Form 1041 provide (at pages 12-13) that (A) where the trust is a grantor trust, the
Trustee is required to "fill in only the entity information of Form 1041" and to
show "dollar amounts" "only on an attachment to the form"; and (B) the
attachment to Form 1041 must include "[t]he name, identifying number, and
address of the person(s) to whom the income is taxable" (i.e., each shareholder).
(APP-03 80).
9 See Trust Agreement, § 8.2(b) ("Thus, the Beneficiaries shall be treated as the
grantors and owners of a grantor trust for federal income tax purposes.") and §
13 .2 ("[T]he [Trustee] shall prepare and distribute a statement setting forth the
information necessary for each Liquidating Trust Beneficiary to determine its share
of items of income, gain, loss, deduction or credit for United States federal income
tax purposes.") (APP-0076); Plan, Art. XVI.J ("[E]ach Holder of an Allowed
Claim or Allowed Equity Interest that is to receive a Distribution under the
Combined Plan and Disclosure Statement shall have the sole and exclusive
responsibility for the satisfaction and payment of any tax obligations imposed on
10

BEC also suggests that Trustee may, in the alternative, comply with the
requirements contained in 26 C.F.R. § l.671-4(b)(3). (See D.I. 21 at 12 n.11).
Trustee argues that this alternative is not viable because 26 C.F.R. § 1.671-4(b)(3)
requires that the Trust file Forms 1099. (D.1. 25 at 8-9). "Under the 1099
reporting method, the Treasury Regulations similarly require the Trust to report all
items of income paid to the Trust by all payors and to identify 'each grantor or
other person treated as an owner of the trust as the payee."' (D.I. 25 at 9 (quoting
26 C.F.R. § l.671-4(b)(3)(ii)(A))). Accordingly, "Trustee can comply with these
requirements only if the shareholders that held their shares in street name identify
themselves by providing the Tax Documents." (D.I. 25 at 9). BEC offers no
response to these tax reporting requirements in its reply. (See D.I. 33).
The Court finds no basis to question that the information contained in the
Tax Documents is required in order for the Trust to fulfill its tax reporting
obligations. BEC has provided no evidence to the contrary, and it points to no
evidence in the record on appeal in support of its assertion that there are viable
alternatives to the reporting requirements upheld by the Bankruptcy Court. 10

such Holder by any Governmental Unit, including income, withholding and other
tax obligations, on account of such Distribution.") (SA-0073 ).
10 Indeed, BBC's Managing Director testified that he has not consulted with an
accountant on these issues. (APP-0317).
11

C.

Operative Plan Documents Authorize Trustee to Condition
Distributions on Submission of Tax Documents

The Bankruptcy Court stated that "[t]he Plan and Confirmation Order, along
with the post-confirmation trust instrument, govern the rights and responsibilities
of the Trustee and the [Trust] beneficiaries." (B.D.I. 694 at 2). The Bankruptcy
Court cited the following specific provisions in support of this statement: (i) Plan
at Art. XVI.J; (ii) Confirmation Order at ,r 3; and (iii) Trust Agreement at§ 4.l(f).

(Id. at 2-3). BEC argues on appeal that the particular provisions cited by the
Bankruptcy Court do not support its conclusion. (D.I. 21 at 7-8). Trustee argues
that the governing documents, including but not limited to the provisions cited by
the Bankruptcy Court, support the Decision to deny relief. (D.I. 25 at 9-14). The
Court addresses each provision in tum.
i.

Plan, Art. XVI.J

Article XVI.J of the Plan provides:
J. Withholding and Reporting Requirements
In connection with the consummation of the Combined
Plan and Disclosure Statement, the Debtors and Postconfirmation Liquidating Trustee shall comply with all
withholding and reporting requirements imposed by any
federal, state, local or foreign taxing authority and all
distributions hereunder shall be subject to any such
withholding and reporting requirements. Notwithstanding
the above, each Holder of an Allowed Claim or Allowed
Equity Interest that is to receive a Distribution under the
Combined Plan and Disclosure Statement shall have the
sole and exclusive responsibility for the satisfaction and
payment of any tax obligations imposed on such Holder
12

by any Governmental Unit, including income,
withholding and other tax obligations, on account of such
Distribution. The Debtors and the Post-confirmation
Liquidating Trustee have the right, but not the obligation,
to not make a Distribution until such Holder has made
arrangements satisfactory to any disbursing party for
payment of any such tax obligations. The Debtors or
[T]rustee may require, as a condition to receipt of a
Distribution, that the Holder of an Allowed Claim or
Allowed Equity Interest complete and return a Form W-8
or W-9, as applicable to each such Holder. If the Debtors
or [T]rustee make such a request and the Holder fails to
comply before the date that is 180 days after the request
is made, the amount of such Distribution shall
irrevocably revert to the Debtors or the [T]rustee and any
Claim in respect of such Distribution shall be disallowed
and forever barred from assertion against the Debtors or
the [T]rustee, or their respective property.
(SA-0073-74). Article XVI.J of the Plan explicitly requires Trustee to "comply
with all withholding and reporting requirements imposed by any federal, state,
local or foreign taxing authority" and permits Trustee to "require, as a condition to
receipt of a Distribution, that the Holder of an ... Allowed Equity Interest complete
and return a Form W-8 or W-9, as applicable to each such Holder." (Id.). BBC
argues that Article XVI.J of the Plan provides no authority for the Trustee to
request Tax Documents because there are "alternatives" to the Trust's tax reporting
method. (D.I. 21 at 8-11). "Read as a whole, [Article XVI.J] permits Trustee to
'require, as a condition of receipt of a Distribution' that the recipient 'complete and
return a Form W-8 or W-9"' only "to the extent those forms are necessary for him

to fulfill his withholding and tax reporting requirements." (Id. at 9-10 (emphasis

13

in original)). Relying entirely on the subheading- "Withholding and Reporting
Requirements" - BBC argues that the Trustee should be permitted to request the
Tax Documents only where necessary to withholding and tax reporting
requirements. (Id. at 10). According to BBC, "if those forms are not a
requirement, i.e., optional, this Plan provision does not authorize the Trustee to
condition distributions on their completion and receipt." (Id.). "[I]fthere are
alternative[] [reporting methods], the W-9 Form, by definition, is optional." (Id. at
11).
The limitation advanced by BEC is not supported by a plain reading of
Article XVI.J. Even if the Plan contained such a limitation, as discussed above,
BEC has provided no evidence that the reporting requirements are merely
"optional," and BEC points to no evidence in the record on appeal in support of its
assertion that there are viable alternatives to the reporting requirements. The plain
language of the Plan provides that Trustee may require that eligible shareholders
return a completed Tax Form to the Trust by a date certain to receive distributions
from the Trust. In short, Article XVI.J of the Plan supports the Bankruptcy Court's
ruling.

ii.

Confirmation Order, , 3:

Paragraph 3 of the Confirmation Order provides:
Compromise of Controversies. For the reasons stated
herein, the Plan constitutes a good faith, arm's length
compromise and settlement of all Claims or controversies
14

relating to the rights that a Holder of a Claim or Equity
Interest, or any assignees thereof, may have with respect
to any Allowed Claim or Equity Interest or any
Distribution to be made or obligation to be incurred
pursuant to the Plan, and the entry of this Confirmation
Order constitutes approval of all such compromises and
settlements. For the avoidance of doubt, the Debtors are
required to make all required withholding payments and
[comply] with all applicable tax laws with respect to the
Distributions.
(SA-0496, il 3 (emphasis added)). BBC argues that this paragraph pertains not to
Trustee but rather to creditors that are giving up their claims for distributions. (D.1.
21 at 8). BBC argues that, while this provision imposes an obligation on the
Debtors, it does not confer any affirmative right on the Trustee or authority to
require the Tax Documents. (See id.). BBC further argues, because Trustee "was
not appointed until several months later," that Paragraph 3 applies only to "the
Debtors" and not Trustee. (See id. at 7-8). According to Trustee, this argument is
nonsensical as it was always contemplated that Trustee would administer the Plan.
(See D.I. 25 at 11-12).

The Court agrees with Trustee. Paragraph 3 of the Confirmation Order
explicitly provides that "the Debtors are required to ... [comply] with all
applicable tax laws with respect to Distributions," and complying with applicable
tax laws is the reason that the Trustee is requiring the Tax Documents. Moreover,
the record reflects that: as of August 1, 2016 (71 days prior to the Plan's effective
date); Trustee, Mr. Berman, served, and continues to serve, as the sole officer of

15

the Debtors; Mr. Berman was appointed as Trustee 15 days after the Confirmation
Order was entered (not "several months later"); and therefore the Trustee (not the
Debtors) must administer the Plan, including facilitating the Initial Equity
Distribution (and all subsequent distributions) to shareholders, filing tax returns for
the Debtors and the Trust, and complying with laws applicable to the Debtors and
the Trust. As an officer of the Debtors and in his fiduciary capacity, Trustee has an
obligation to comply with all laws applicable to the Debtors and the Trust,
including tax laws and regulations. BEC's argument that Trustee does not have
any obligation to comply with such laws solely because Paragraph 3 of the
Confirmation Order refers only to "the Debtors" is unavailing.
iii.

Trust Agreement,§ 4.l(f)

Section 4.l(f) of the Trust Agreement provides:
Tax Identification Numbers. The Liquidation Trustee is
authorized to request and obtain from the Liquidation
Trust Beneficiaries or any other Person Forms W-8
and/or W-9 or such other forms or information relating to
the Liquidation Trustee's obligations to withhold as the
Liquidation Trustee may reasonably request, and the
Liquidation Trustee may condition any distribution to
any Liquidation Trust Beneficiary or other distributee
upon receipt of such forms or information.
(SA-0088). BEC argues that§ 4.l(f) provides Trustee with authority to demand
the Tax Documents only to the extent necessary for the Trustee to meet his
obligation to withhold. (See D.I. 21 at 11-12). Because Trustee will not be
withholding taxes from distributions to Trust beneficiaries, BEC argues, § 4.1 (f)
16

does not grant Trustee authority to condition distributions on submission of the
Tax Documents. (See id.). Trustee counters: "As written, Section 4.l(f) explicitly
permits the Trustee: (1) to request from each shareholder (a) a Form W-8 or W-9;
or (b) other forms relating to withholding requirements; and (2) to condition
distributions to shareholders upon the receipt of such documents. Thus,§ 4.l(f) of
the Trust Agreement supports conditioning distributions to shareholders upon
receipt of the Tax Forms." (D.1. 25 at 12).
In addition to citing to§ 4.l(f) of the Trust Agreement, the Bankruptcy
Court noted in its Memorandum Order that the Plan, Confirmation Order, and
Trust Agreement "govern the rights and responsibilities of the Trustee and the
beneficiaries" and that "Trustee is entitled to exercise his discretion and judgment
in construing and carrying out his duties." (B.D.I. 694 at 2-3). Trustee further
argues that principles of contract interpretation require that contract "provisions
not be examined in a vacuum, but by reference to other provisions." (See D.I. 25

17

at 13). Citing §§ 2.2 11 and 2.4 12 of the Trust Agreement, Trustee asserts that he is
permitted a significant amount of discretion in administering the Trust. Id. When

11

Section 2.2 of the Trust Agreement provides in relevant part:
Within the limitations set forth herein, and subject to the
oversight provisions set forth in this Agreement, the
responsibilities and authority of the Liquidation Trustee
shall include, without limitation: (i) holding and
administering the Liquidation Trust Assets . . . (iv)
calculating and implementing distributions to the
Liquidation Trust Beneficiaries in accordance with the
Plan and this Agreement, (v) filing all required tax
returns for the Liquidation Trust as a grantor trust
pursuant to Treasury Regulation section l.671-4(a), (vi)
performing such acts as are necessary for the
administration, resolution and wind-down of the Debtors
after the Effective Date ... and (x) carrying out such
other responsibilities not specifically set forth herein as
may be vested in the Liquidation Trustee pursuant to the
Plan, this Agreement, Bankruptcy Court order, or as may
be necessary and proper to carry out the provisions of the
Plan or this Agreement.
(APP-0066-67).
12 Section 2.4 of the Trust Agreement provides in relevant part:
In connection with the administration of the Liquidation
Trust, subject to and except as otherwise set forth in this
Agreement or the Plan, the Liquidation Trustee is hereby
authorized to perform those acts necessary to accomplish
the purposes of the Liquidation Trust. Without limiting,
but subject to, the foregoing, the Liquidation Trustee
shall, unless otherwise provided in this Agreement and
subject to the limitations contained herein and in the
Plan: ... (2) be expressly authorized and required to
protect and enforce the rights to the Liquidation Trust
Assets vested in the Liquidation Trust by the Plan by any
method deemed appropriate in his discretion, including,
without limitation, by judicial proceedings or pursuant to
any applicable bankruptcy, insolvency, moratorium or
similar law and general principles of equity; (3) be
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read in conjunction with the Plan and Confirmation Order, the Court agrees with
the Bankruptcy Court's conclusion that Trustee is granted broad discretion in
administering the Plan and making distributions, including requesting and
obtaining the Tax Documents from beneficiaries.

D.

Decision Does Not Render Plan Provisions Meaningless

BEC argues that by permitting the Trustee to condition distributions on the
Tax Documents, the Bankruptcy Court condoned the Trustee's manual distribution
mechanism and thus rendered meaningless all the provisions in the Plan and Trust
Agreement relating to the transfer agent, OTC. 13 According to BBC, such an
interpretation would be contrary to principles of contract construction and
interpretation. (See D.I. 21 at 13 (citing Pac. Emplrs. Ins. Co. v. Glob.

Reinsurance Corp. ofAm., 693 F.3d 417,426 (3d Cir. 2012) (holding that a court

expressly authorized and required to ... make
distributions and pay any other obligations owed by the
Liquidation Trust from the Liquidation Trust Assets as
provided herein and in the Plan, ... and ( 11) be expressly
authorized and required to assume such other powers as
may be vested in or assumed by the Liquidation Trust
pursuant to the Plan or Bankruptcy Court order, or as
may be necessary and proper to carry out the provisions
of the Plan or this Agreement.
(APP-0067-68).
13 Debtors' transfer agent is American Stock Transfer & Trust Company, LLC.
However, OTC served as the holder of DNIB stock for broker-dealers/Nominees
who held such stock in street name for their customers and facilitated the
distributions to such broker-dealers/Nominees that were made in December 2016.
(See D.I. 25 at 15 n.13).
19

will not interpret one provision of a contract in a manner which results in another
provision being annulled))). Trustee disputes BBC's argument that the operative
documents require that all distributions to shareholders that held DNIB stock in
street name must be made through DTC. (D.1. 25 at 14-15). Trustee argues such
an interpretation would lead to an inequitable and untenable result for several
reasons, including: the Trust is required to provide tax identification numbers for
each shareholder to the IRS; the Trustee is permitted under the Trust Agreement to
withhold distributions from shareholders that fail to timely provide tax
identification information; DTC has confirmed that it is not prepared to make any
future distributions to shareholders unless the distribution is made to all
shareholders that held their shares in street name as of the August 30, 2016
distribution record date (APP-0170); and shareholders that held approximately
24.9% of the total number ofDNIB shares outstanding as of the Distribution
Record Date failed to timely provide the Tax Documents and have forfeited future
distributions. (D.I. 25 at 14-15). As a result of the foregoing, only the Trustee is
capable and prepared to make further distributions to shareholders, and BBC's
argument must be rejected. (Id.).
The Decision does not render provisions pertaining to the transfer agent
illusory or meaningless. BBC points the Court to the following: (i) Plan at Art.
X.K; (ii) Confirmation Order at ,r 20; (iii) Trust Agreement at § 4.2; and (iv) Trust

Agreement at§ 9.1. But, as set forth below, the Court agrees that these provisions
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describe the types of information upon which the Trustee may rely in
administering the Trust and do not require all shareholder distributions to be made
through DTC.

i. Plan, Art. X.K
BEC argues that the Bankruptcy Court's interpretation qf the Plan renders
Article X.K of the Plan illusory because that section provides that "Distributions to
... Allowed Equity Interests shall be made ... through the transfer agent for BIND
Equity Interests." (D.I. 21 at 14). The full text of Article X.K provides:
Except as provided herein, Distributions to Holders of
Allowed Claims and Allowed Equity Interests shall be
made: (1) at the addresses set forth on the respective
proofs of claim or interest Filed by such Holders; (2) at
the addresses set forth in any written notices of address
changes delivered to the Post-confirmation Liquidating
Trustee after the date of any related proof of claim or
interest; (3) at the address reflected in the Schedules if
no proof of claim or interest is filed and the Postconfirmation Liquidating Trustee has not received a
written notice of a change of address; or (4) through the
transfer agent for BIND Equity Interests.
(SA-0058 (emphasis added)). Trustee argues this provision ensures that the
Trustee either uses the most recent addresses it has for each stakeholder in making
distributions or makes distributions through the transfer agent. The Court agrees.
Article X.K provides that Trustee may make distributions to holders of claims and
shareholders in a number of different ways, including through the transfer agent,
but does not require it.

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ii.

Confirmation Order, ,r 20

BBC argues that permitting the Trustee to require the Tax Documents would
render Paragraph 20 of the Confirmation Order meaningless, which provides that
"[i]n making any Distribution with respect to any Claim or Equity Interest, the ...
Trustee shall be entitled ... to recognize and deal with, for all purposes hereunder,
only the Entity that ... is listed on the Debtors' books and records or on a record
maintained by the Debtors' transfer agent as having been the Holder of an Equity
Interest on the Distribution Record Date." (D.1. 21 at 15). The full text of
Paragraph 20 provides:
Distribution Record Date. The Distribution Record Date
shall he August 30, 2016. Except as otherwise provided
in a Final Order of the Bankruptcy Court, the transferees
of Claims that are transferred pursuant to Bankruptcy
Rule 3001 or Equity Interests on or prior to the
Distribution Record Date will be treated as the Holders of
those Claims or Equity Interests for all purposes. The
Post-confirmation Liquidating Trustee shall have no
obligation to recognize any transfer of any Claim or
Equity Interest occurring after the Distribution Record
Date. In making any Distribution with respect to any
Claim or Equity Interest, the Post-confirmation
Liquidating Trustee shall he entitled instead to
recognize and deal with, for all purposes hereunder, only
the Entity that, as to Claims, is listed on the proof of
claim Filed with respect thereto or on the Schedules as
the Holder thereof as of the close of business on the
Distribution Record Date and, as to Equity Interests, is
listed on the Debtors' hooks and records or on a record
maintained by the Debtors' transfer agent as having
been the Holder of an Equity Interest on the
Distribution Record Date, and upon such other evidence
or record of transfer or assignment that are actually
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known to the Post-confirmation Liquidating Trustee as of
the Distribution Record Date.
(SA-0501-02 (emphasis added)). Trustee argues that BEC has conveniently
omitted that portion of Paragraph 20 that provides that the Trustee has no
obligation to recognize any stock transfers that occurred after the August 30, 2016
Distribution Record Date, which is relevant to BEC as it purchased approximately
1.1 million shares of DNIB stock after the Confirmation Order was entered on
September 26. (See D.I. 25 at 16 (citing APP-0315)). Trustee further argues that
the portion of the Confirmation Order that BEC does rely upon notes only that the
Trustee "shall be entitled" to recognize only the shareholders that are listed in the
Debtors' books and records (which would include the Tax Documents) or on a
record maintained by the transfer agent of shareholders as ofAugust 30, 2016.
(Id.). DTC has since confirmed that it has no such list; rather, DTC makes

distributions through the Nominees and does not know the identity of individual
shareholders. (Id.). The Court agrees with the Trustee that the Decision does not
render Paragraph 20 of the Confirmation Order meaningless.
iii.

Trust Agreement, § 4.2

BEC argues that the Decision renders meaningless § 4.2 of the Trust
Agreement, which governs Delivery of Distributions, and states that "distributions
and deliveries to the Liquidation Trust Beneficiaries shall be made at the address of
each such Liquidation Trust Beneficiary set forth on the [records of] the transfer

23

agent for the Debtors' Equity Interests." (See D.I. 21 at 15). The full text of§ 4.2
of the Trust Agreement provides:
Subject to the provisions of Federal Rule of Bankruptcy
Procedure 2002(g), and except as otherwise provided
herein, distributions and deliveries to the Liquidation
Trust Beneficiaries shall he made at the address of each
such Liquidation Trust Beneficiary set forth on the
Debtors' hooks and records unless superseded by (i) the
address set forth on proofs of claim filed by any such
Liquidation Trust Beneficiary or in the books and records
of the transfer agent for the Debtors' Equity Interests or
(ii) the address provided in connection with a transfer
pursuant to Section 14.1.
(APP-0072 (emphasis added)). Trustee argues that the "books and records" upon
which the Trustee are permitted to rely include the addresses that were provided by
shareholders in the Tax Documents. The Court agrees.

iv.

Trust Agreement, § 9.1

BBC argues that the Decision renders meaningless § 9 .1 of the Trust
Agreement governing "Identification of Liquidation Trust Beneficiaries" because
this section directs the Trustee to "conclusively rely on the names and addresses set
forth [i]n [the records of] the Debtors' stock transfer agent." (D.I. 21 at 16). The
full text of§ 9.1 of the Trust Agreement provides:
In order to determine the actual names and addresses of
the Liquidation Trust Beneficiaries, the Liquidation
Trustee shall be entitled to conclusively rely on (i) the
names and addresses set forth in the Debtors' Schedules
or filed proofs of claim or (ii) the Debtors' stock transfer
agent.

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(APP-0076 (emphasis added)). Trustee argues that this provision speaks only
about the addresses on which the Trustee "shall be entitled to rely," and does not
require the Trustee to make distributions solely through DTC. (D.1. 25 at 17). The
Court agrees.

V.

CONCLUSION
Trustee has been advised by its tax professionals that the Trust is required to

provide the IRS tax identification numbers for each beneficiary of the Trust,
including all shareholders entitled to a distribution under the Plan. Although BEC
clearly disagrees with the tax advice provided by the Trust's tax professionals,
BEC offers only its own opinion that there are other ways in which Trustee may
satisfy his obligations. BEC has provided no contradictory expert opinion or
testimony from a tax professional to support its allegation that the Tax Documents
are not required and suggests no viable alternative to the Equity Certification. The
Bankruptcy Court's Decision is supported by the Plan documents and violates no
rules of contract construction and interpretation. The Court therefore finds no error
in the Decision denying BEC's Motion for Determination and.will affirm the
Bankruptcy Court's Decision. Accordingly, BEC's Emergency Motion is rendered
moot.
The Court will issue a separate Order consistent with this Memorandum
Opinion.

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