In re: The Weinstein Company Holdings LLC et al
Filing
16
MEMORANDUM OPINION. Signed by Judge Maryellen Noreika on 3/16/2021. (dlw)
Case 1:21-cv-00171-MN Document 16 Filed 03/16/21 Page 1 of 17 PageID #: 446
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
WEDIL DAVID, DOMINIQUE HUETT,
ALEXANDRIA CANOSA AND AIMEE
MCBAIN,
Appellants,
v.
THE WEINSTEIN COMPANY
HOLDINGS, LLC, et al. and the OFFICIAL
COMMITTEE OF UNSECURED
CREDITORS,
Appellees.
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C.A. No. 21-171 (MN)
MEMORANDUM OPINION
Frederick B. Rosner, Zhao (Ruby) Liu, THE ROSNER LAW GROUP LLC, Wilmington, DE; Douglas
H. Wigdor, Bryan L. Arbeit, WIGDOR LLP, New York, NY; Kevin Mintzer, THE LAW OFFICE OF
KEVIN MINTZER, P.C., New York, NY; Thomas P. Giuffra, RHEINGOLD GIUFFRA RUFFO &
PLOTKIN LLP, New York, NY – Attorneys for Appellants.
Robert J. Feinstein, Debra I. Grassgreen, Jason H. Rosell, Colin R. Robinson, PACHULSKI STANG
ZIEHL & JONES LLP, Wilmington, DE – Attorneys for Appellee, the Liquidation Trustee of the
TWC Liquidation Trust, as successor-in-interest to, and representative of, The Weinstein
Company Holdings, LLC and its affiliated Debtors.
March 16, 2021
Wilmington, Delaware
Case 1:21-cv-00171-MN Document 16 Filed 03/16/21 Page 2 of 17 PageID #: 447
NOREIKA, U.S. DISTRICT JUDGE:
Pending before the Court is Appellants’ Emergency Motion By Non-Consenting Sexual
Misconduct Claimants For Stay Pending Appeal of Confirmation Order (D.I. 4) 1 (“the Emergency
Stay Motion”). The Court has considered the opposition (D.I. 11) filed by Dean A. Ziehl, as
Liquidation Trustee of the TWC Liquidation Trust (“Appellee”) formed pursuant to the Fifth
Amended Joint Chapter 11 Plan of Liquidation, dated January 20, 2021 (Bankr. D.I. 3203-1) (“the
Plan”), and as successor-in-interest to, and representative of, The Weinstein Company Holdings,
LLC and its affiliated debtors (collectively, “the Debtors”). The Emergency Stay Motion is fully
briefed. (D.I. 4, 11, 14). The Court did not hear oral argument because the facts and legal
arguments are adequately presented in the briefs and record, and the decisional process would not
be significantly aided by oral argument. For the reasons set forth herein, the Court will deny the
Emergency Stay Motion.
I.
BACKGROUND
On March 19, 2018 (“the Petition Date”), each of the Debtors filed a voluntary petition
with the Bankruptcy Court for relief under chapter 11 of the Bankruptcy Code. On November 17,
2020, the Debtors and Official Committee of Unsecured Creditors (“the Committee,” and together
with the Debtors, “the Plan Proponents”) filed the Fourth Amended Joint Chapter 11 Plan of
Liquidation (Bankr. D.I. 3096) (“the Fourth Amended Plan”), which, inter alia, embodied a
comprehensive settlement of all the claims related to Harvey Weinstein’s misconduct. The
proposed plan was approved by approximately 83 percent of the holders of sexual misconduct
claims (37), and by over 96 percent in amount and number of general unsecured claims.
1
The docket of the Chapter 11 cases, captioned In re The Weinstein Company Holdings
LLC, et al., No. 18-10601 (MFW) (Bankr. D. Del.), is cited herein as (Bankr. D.I. __).
1
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The sole objectors to plan confirmation were the four Appellants, who each hold sexual
misconduct claims against Harvey Weinstein. The Plan includes a global settlement which
provides, among other things, for nonconsensual third-party releases of insurers and former
officers and directors. In exchange for the releases, insurers will contribute a $35,214,822.30 for
the benefit of the Debtors’ estates and creditors, of which $17,064,525.60 will be set aside in a
trust for the benefit of claimants holding sexual misconduct claims. 2 In exchange for their release,
former officers and directors are contributing a significant portion of their insurance coverage
rights, including a waiver of their potential indemnity claims against the Debtors and a waiver of
their rights under the respective insurance policies to seek full and priority reimbursement of their
defense costs. 3 On December 18, 2020, the Appellants filed their objection to confirmation of the
proposed plan (Bankr. D.I. 3145) (“the Objection”) which asserted that, among other things, the
non-consensual third party release of former officers and directors contained in the proposed plan
did not satisfy the Third Circuit standard for approval because the release was not necessary to a
reorganization, and the former officers and directors did not give fair consideration in exchange
for their release.
2
See Plan, Bankr. D.I. 3203-1 at 17, § 5.4.
3
See Plan, Bankr. D.I. 3203-1 at 20, § 5.7. In exchange for their release, former officers and
directors have agreed to waive, in part, their entitlement to reimbursement of all defense
costs and expenses as a priority to payment of any liability or settlement amount pursuant
to the terms of the applicable insurance policies. As a result of such waiver, the former
officers and directors shall be reimbursed only 50% of the fees and expenses incurred by
the former officers and directors as of April 25, 2019. For any other defense costs or
expenses incurred by the former officers and directors after that date, the former officers
and directors will be reimbursed 0% of their fees and expenses. Absent the waiver provided
by the former officers and directors, reimbursement of all of their defense costs and
expenses would have priority in right of payment against the payment of any liability or
settlement amount pursuant to the terms of the applicable insurance policy. See id.
2
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On January 20, 2021, the Plan Proponents filed the Fifth Amended Joint Chapter 11 Plan
of Liquidation (Bankr. D.I. 3182), which contained minor revisions to the Fourth Amended Plan,
and also filed their brief in support of confirmation (Bankr. D.I. 3184) (“the Confirmation Brief”).
Following an evidentiary hearing held on January 25, 2021, the Bankruptcy Court issued a bench
ruling (see D.I. 4-2, 1/25/21 Hr’g Tr. at 112-19) (“the Bench Ruling”) which overruled Appellants’
Objection and confirmed the Plan. The Confirmation Order was entered on January 26, 2021.
(Bankr. D.I. 3203).
On February 18, 2021 (“the Effective Date”), the effective date of the Plan occurred, the
Liquidation Trust was established, and the Debtors filed their Notice of Effective Date (Bankr.
D.I. 3258). Pursuant to section 6.3 of the Plan, the Liquidation Trustee is appointed as the
successor-in-interest to, and the representative of, the Debtors’ estates for matters that arose prior
to the Effective Date. (See Plan § 6.3).
On February 9, 2021, Appellants filed their notice of appeal of the Confirmation Order
(Bankr. D.I. 3228) and also filed in the Bankruptcy Court an Emergency Motion by NonConsenting Sexual Misconduct Claimants for Stay Pending Appeal of Confirmation Order (Bankr.
D.I. 3230) (“First Stay Motion”), which sought to stay consummation of the Plan.
On
February 11, 2021, Plan Proponents filed their opposition.
On
(Bankr. D.I. 3240).
February 17, 2021, the Bankruptcy Court entered an Order denying the First Stay Motion (Bankr.
D.I. 3252).
II.
JURISDICTION AND STANDARD OF REVIEW
The Confirmation Order is a final order, and the Court has jurisdiction over this appeal
pursuant to 28 U.S.C. § 158(a). On appeal, district courts “review the bankruptcy court’s legal
determinations de novo, its factual findings for clear error and its exercise of discretion for abuse
3
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thereof.” In re Trans World Airlines, Inc., 145 F.3d 124, 131 (3d Cir. 1998). The Bankruptcy
Court’s application of facts to a controlling legal standard will be reviewed on appeal for clear
error. See Pa. Higher Educ. Assistance Agency v. Gillins, 2003 WL 22844398, at *1 (D. Del. Nov.
24, 2003) (reviewing lower court’s application of facts to controlling legal test for clear error); In
re Paige, 2008 WL 1994905, at *2 (D. Utah May 8, 2008) (determination was factual where there
was “no real issue as to the controlling law” but only to the court’s application of that legal standard
to facts).
III.
ANALYSIS
“The granting of a motion for stay pending appeal is discretionary with the court.” In re
Trans World Airlines, Inc., 2001 WL 1820325, at *2-3 (Bankr. D. Del. Mar. 27, 2001). Staying a
plan confirmation order is an “extraordinary remedy.” In re W.R. Grace & Co., 475 B.R. 34, 205
(D. Del. 2012) (quoting United States v. Cianfrani, 573 F.2d 835, 846 (3d Cir. 1978)). The movant
bears the burden of establishing that imposition of a stay is warranted. Id. In determining whether
the moving party met its burden, courts in the Third Circuit consider the following factors:
(1) whether the stay applicant has made a strong showing that [it] is
likely to succeed on the merits; (2) whether the applicant will be
irreparably injured absent a stay; (3) whether the issuance of the stay
will substantially injure the other parties interested in the
proceeding; and (4) where the public interest lies.
In re Revel AC, Inc., 802 F.3d 558, 568 (3d Cir. 2015) (citing Hilton v. Braunskill, 481 U.S. 770,
776 (1987)). “‘[T]he most critical’ factors, according to the Supreme Court, are the first two:
whether the stay movant has demonstrated (1) a strong showing of the likelihood of success and
(2) that it will suffer irreparable harm.” Id. (quoting Nken v. Holder, 556 U.S. 418, 434 (2009)).
Because all four factors are interconnected, the Third Circuit has instructed that the analysis should
proceed as follows:
4
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Did the applicant make a sufficient showing that (a) it can win on
the merits (significantly better than negligible but not greater than
50%) and (b) will suffer irreparable harm absent a stay? If it has,
we balance the relative harms considering all four factors using a
‘sliding scale’ approach. However, if the movant does not make the
requisite showings on either of these first two factors, the inquiry
into the balance of harms and the public interest is unnecessary, and
the stay should be denied without further analysis.
Id. at 571 (internal quotations and citation omitted) (emphasis in original).
A.
Likelihood of Success on the Merits
Whether the moving party has established a likelihood of success on the merits is one of
the two most critical factors in determining whether the moving party carried its burden to obtain
a stay pending appeal. Revel AC, 802 F.3d at 571. Although the moving party must show that its
chance of succeeding on appeal are “significantly better than negligible,” the moving party’s
chance of success need not be “greater than 50%.” Id. Appellants assert that they are likely to
succeed on the merits of their appeal of the Confirmation Order based on two arguments: (1) that
the Bankruptcy Court erred as a matter of law in approving a plan of liquidation containing nonconsensual third-party releases (see D.I. 4 at 16-19, 22-24); and (2) with respect to the Plan’s nonconsensual third-party releases, the Bankruptcy Court’s factual findings as to necessity, fairness,
and exceptional circumstances were clearly erroneous (see id. at 20-22, 24-27).
1.
Plan of Liquidation Containing Non-Consensual Third-Party Releases
In Continental, the Third Circuit declined to adopt a per se rule but held that “[t]he
hallmarks of permissible non-consensual releases [are] fairness, necessity to the reorganization,
and specific factual findings to support these conclusions.” Gillman v. Continental Airlines (In re
Continental Airlines), 203 F. 3d 203, 214 (3d Cir. 2000). Appellants argue that they are likely to
succeed on the merits of their appeal because the releases at issue do not satisfy the Continental
standard, and the Plan should not have been confirmed. (D.I. 4 at 2).
5
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Appellants assert that “the Debtors have been out of business for years” and “Third-Party
Non-Consensual Releases should only be available to a debtor that is truly reorganizing and
entitled to a discharge.” (See id. at 16, 18). Appellants argue that the “Plan is not preserving and
protecting the Debtors enterprise value or saving any jobs. The Debtors are simply liquidating,
which they could easily accomplish in a chapter 7.” (Id. at 17). Appellants are not likely to succeed
on the merits of this argument.
Although Appellants are correct that the Third Circuit has not yet had occasion to rule on
third party non-consensual releases in the context of a liquidating debtor, Appellants fail to cite a
any cases supporting their assertion that plans of liquidation may never contain non-consensual
third-party releases. This lack of authority does not bode well for the likelihood of success on
appeal. See Mickens-Thomas v. Martinez, 2005 WL 1586212, at *3 (3d Cir. July 7, 2005) (“The
District Court noted the paucity of legal support for [the movant’s] claims, and reasonably
concluded that those claims do not have a reasonable likelihood of success on the merits.”); Miller
v. Penn Manor Sch. Dist., 588 F. Supp. 2d 606, 626-27 (E.D. Pa. 2008) (“[P]laintiffs have cited
no legal authority to support their conclusion. . . . In the face of the utter lack of authority . . . I
conclude that plaintiff fails on his [] challenge on this point and has no likelihood of success on
the merits of this claim.”).
In support of their argument, Appellants have attempted to broaden the Third Circuit’s
holding in Continental and that of its more recent decision, In re Millennium Lab Holdings II,
LLC, 945 F.3d 126 (3d Cir. 2019). Appellants argue that Continental and Millennium hold that
non-consensual third-party releases are permissible where they are “necessary to the
reorganization,” and therefore plans of liquidation, like the Plan at issue here, cannot satisfy the
test. (D.I. 4 at 4). Nowhere in Continental or Millennium, however, does the Third Circuit hold
6
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that a court may not approve a plan of liquidation containing a non-consensual third-party release
where that plan otherwise satisfies the “exacting standards” established by Third Circuit precedent.
See Millennium, 945 F.3d at 139 (“Our precedents regarding nonconsensual third-party releases
and injunctions in the bankruptcy plan context set forth exacting standards that must be satisfied
if such releases and injunctions are to be permitted . . .”) (emphasis added).
Appellants cite decisions from other jurisdictions which either characterized such releases
as “extraordinary relief” or found such releases to be impermissible. (See D.I. 4 at 16-19).
Precedent from outside this Circuit will not raise Appellants’ likelihood of success to a level
warranting the extraordinary relief of staying a confirmed plan. Courts in the Third Circuit and
others have approved plans of liquidation containing non-consensual third-party releases based
upon a showing of fairness, necessity, and exceptional circumstances. See e.g., In re Blitz U.S.A.,
2014 WL 2582976 at *13-23 (Bankr. D. Del. Jan. 30, 2014) (approving a plan of liquidation
containing non-consensual third-party releases); see also In re Residential Capital, LLC, 2013 WL
12161584, at *14 (Bankr. S.D.N.Y. Dec. 11, 2013) (same); In re Movie Gallery, Inc., 2010 Bankr.
LEXIS 5778, at *21 (Bankr. E.D. Va. Oct. 29, 2010) (same).
Appellants have failed to carry their burden of demonstrating they have a “significantly
better than negligible” chance of success on the merits of their argument plans of liquidation may
not contain non-consensual third-party releases.
2.
Appellant Points to No Clear Error in the Bankruptcy Court’s Findings
In Support of Confirmation
Appellants assert that they are likely to succeed on the merits of their appeal of the
Confirmation Order because the Bankruptcy Court’s factual findings as to necessity, fairness, and
exceptional circumstances were clearly erroneous. (See D.I. 4 at 11-14, 20-22, 24). Appellate
courts review a bankruptcy court’s findings of fact for clear error. In re Culp, 550 B.R. 683, 695
7
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(D. Del. 2015). Under the clear error standard, a factual determination will not be set aside unless
“that determination is completely devoid of minimum evidentiary support displaying some hue of
credibility or bears no rational relationship to the supportive evidentiary data.” In re Dr. R.C.
Samanta Roy Inst. of Sci. Tech. Inc., 465 F. App’x 93, 96 (3d Cir. 2011) (citation omitted). If a
party is seeking a stay of a bankruptcy court order on the basis that the bankruptcy court made
clearly erroneous factual findings, the moving party must either point to evidence clearly
contradicting the bankruptcy court’s findings or show that there is no evidence in the record to
supporting the bankruptcy court’s findings. See Culp, 550 B.R. at 698; see also In re THG
Holdings LLC, 2019 WL 6615341, at *3-5 (D. Del. Dec. 5, 2019). When an appellee has
introduced evidence into the record and “an appellant has presented no relevant evidence, there
little chance of it prevailing” on appeal. In re Prospector Offshore Drilling S.a.r.l., 2018 WL
1419086, at *3 (D. Del. Mar. 22, 2018).
Necessity. First, Appellants argue that the Bankruptcy Court erred in finding that the nonconsensual third-party releases of the former officers and directors are necessary to the Plan.
(D.I. 4 at 20-22). Appellants assert that neither the former officers’ and directors’ waiver of their
potential indemnity claims against the Debtors nor their waiver of their rights under the Insurance
Policies to seek full and priority reimbursement of their defense costs constitute substantial
contributions to the Plan. (Id.). Appellants argue that the claims the former officers and directors
have for reimbursement of defense costs is “disputed,” and the Plan Proponents did not
demonstrate that the release of those claims is a significant contribution to the Debtors’ plan. (Id.).
The Bankruptcy Court made a clear finding that the non-consensual third-party release of
the former officers and directors was necessary to the Plan: “it is clear that without the
contributions by the insurance company and the directors and officers who are being released,
8
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there could be no confirmation. The debtor has $3 million, which is not sufficient to pay
administrative claims, let alone any recovery for other creditors. So, without the settlement, no
plan is possible.” (D.I. 4-2, 1/25/21 Hr’g Tr. at 115:7-12). The Bankruptcy Court further found
that the directors’ and officers’ contribution of their subordination and waiver was significant.
(See id. at 113:4-14). These findings are supported by the uncontroverted evidence in the record.
(See Bankr. D.I. 3125 (November 2020 monthly operating report showing Debtors had $3.5
million of cash on hand); Bankr. D.I. 3185, Decl. of Ivona Smith (Debtors’ Director) (attesting
that (i) absent the Plan’s releases, “the Debtors likely would be subject [to] a substantial number
of claims and lawsuit related to Sexual Misconduct Claims,” holders of those claims “would be
forced to litigate their claims in the tort system,” and “[e]ven if successful at obtaining a judgment
against the Debtors, Holders of Sexual Misconduct Claims would have recourse only to the
limited, dwindling funds of the Debtors’ Insurance Policies with respect to recovery on such
claims, and the Insurance Companies would have the right to assert coverage defenses” (id. ¶ 22);
(ii) D&O and Employment Practices Liability policies, which cover the Debtors and former
officers and directors, are “wasting policies” “whereby each dollar expended to reimburse covered
fees and expenses or to satisfy covered claims against parties reduces available coverage
thereunder on a dollar-for-dollar basis” (id. ¶ 14); and (iii) “suits against the Former [officers and
directors] may involve the Debtors and any recoveries against the Former [officers and directors]
will deplete the Debtors’ coverage, give rise to certain indemnification obligations, and otherwise
deplete limited estates resources” (id.)).
Moreover, as Appellee correctly points out, the Bankruptcy Court’s finding that these
releases were necessary to the Plan is consistent with other cases which have considered similar
relief. See e.g., In re 710 Long Ridge Rd. Operating Co., II, LLC, 2014 Bankr. LEXIS 863, at *53-
9
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55 (Bankr. D. N.J. Mar. 5, 2014) (finding that the non-debtors’ waiver of claims against the debtors
and the non-debtors’ providing the plan funding constituted a critical contribution to the plan);
Residential Capital, 2013 WL 12161584, at *14 (same).
Appellants appear to argue that the Bankruptcy Court committed an error of law by
reducing the “necessity” analysis of the Continental test to an inquiry merely concerning “the
amount of money necessary to return one cent more to creditors under a plan than they would
receive a chapter 7.” (See D.I. 4 at 18). As Appellee correctly points out, this argument is plainly
contradicted by the arguments and evidence put forth by the Plan Proponents, and the Bankruptcy
Court’s specific factual findings on the necessity of the Plan’s non-consensual third-party releases
(discussed below). (See Confirmation Brief ¶¶ 44-72; D.I. 4-2, 1/25/21 Hr’g Tr. at 112:17-119:13).
Appellants offered no evidence in support of its assertions that the releases were not
necessary to the Plan. Appellants rely primarily on the Third Circuit’s analysis in Continental. In
that case, they argue, the Third Circuit considered but dismissed the District Court’s finding that
“the release and permanent injunction of Plaintiffs’ lawsuits [was] a ‘key element’ of [the]
[r]eorganization because the Continental Debtors were obliged to indemnify the D&Os, and thus
would ultimately bear the burden of Plaintiffs’ lawsuits.” Continental, 203 F.3d at 215 (internal
citations omitted). In making this finding, the Third Circuit noted that “the District Court assumed
facts not of record,” id. at 215, and it found “no evidence in the record before us supporting the
possibility or probability of D&O indemnification as a factual or legal matter. Even if the D&O
defendants’ obligations culminating from Plaintiffs’ class actions were indemnifiable, the fact that
the reorganized Continental Airlines might face an indemnity claim sometime in the future, in
some unspecified amount, does not make the release and permanent injunction of Plaintiffs’ claims
‘necessary’ to ensure the success of the . . . reorganization.” Id. at 216 (emphasis added).
10
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Contrary to the Appellants’ assertions, these Chapter 11 Cases are easily distinguishable
from Continental, where the Third Circuit rejected non-consensual third-party releases because
“the order confirming the [] [d]ebtors’ plan of reorganization and releasing and permanently
enjoining [the] [p]laintiffs’ claims was not accompanied by any findings that the release was fair
to the [p]laintiffs and necessary to the [] [d]ebtors’ reorganization.” See Continental, 203 F.3d at
214 (emphasis added). Here, tort actions against indemnified former officers and directors have
already commenced (D.I. 4 ¶¶ 13, 15-16; Confirmation Brief 9; Decl. of Paul H. Zumbro, Ex. 2
§ 2). More importantly, unlike Continental, the Bankruptcy Court’s ruling that the releases were
necessary to the Plan was accompanied by specific findings supported by the record. (See D.I 42, 1/25/21 Hr’g Tr. at 114:1-7; see also Confirmation Brief ¶¶ 9, 47-50; Bankr. D.I. 3185, Decl. of
Ivona Smith, ¶¶ 5, 8, 13-4, 22-23; Zumbro Decl., Ex. 2). In sum, Appellants fail to establish that
their necessity argument has a more than negligible chance of success on appeal. See Culp, 550
B.R. at 698; see also THG Holdings, 2019 WL 6615341, at *3-5; Prospector, 2018 WL 1419086,
at *3.
Fairness. Second, Appellants argue that the Bankruptcy Court erred in finding that the
non-consensual third-party releases are fair. (See D.I. 4 at 24). Part of the inquiry into the fairness
of non-consensual third-party releases is determining whether reasonable consideration is given in
exchange for the releases. See United Artists Theatre Co. v. Walton, 315 F.3d 217, 227 (3d Cir.
2000) (citing Continental, 203 F.3d at 214-15). The consideration provided is reasonable if under
the proposed plan, recovery of the non-consenting creditors is greater than under a chapter 7
liquidation scenario. See In re Genesis Health Ventures, Inc., 266 B.R. 591, 607-08 (Bankr. D.
Del. 2001); see also 710 Long Ridge, 2014 Bankr. LEXIS 863 at *55. Appellants argue that the
Debtors did not introduce evidence showing that Appellants will fare better under the Plan. (D.I. 4
11
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at 22-24). The record reflects, however, that the Plan Proponents introduced into evidence the
Declaration of Kyle Herman (Bankr. D.I. 3186) and the Liquidation Analysis (Bankr. D.I. 3098, ¶
15 & Ex. B) prepared by Mr. Herman (see D.I. 4-2, 1/25/21 Hr’g Tr. at 80:11-81:12), which
establish that recoveries for Holders of Sexual Misconduct Claims such as Appellants likely are
significantly greater under the Plan than any potential recoveries in a chapter 7 liquidation
scenario. Appellants declined the opportunity to cross-examine Mr. Herman or introduce any
contradictory evidence showing that their likely recoveries in a chapter 7 liquidation scenario
would be greater than their likely recoveries under the Plan. (See id. at 81:4-6). Based on the
uncontroverted evidence submitted by the Plan Proponents, the Bankruptcy Court found “it’s clear
that under this plan, creditors are getting more than if there were a chapter 7 liquidation.” (Id. at
113:15-19).
Appellants argue that “showing that tort claimants fare better under the Plan than in chapter
7 . . . is a false comparison. They always will fare better even if the plan pays 1 cent more on the
dollar. There must [be] testimony as to how they fare if they are permitted to pursue their claims
in the tort system.” (D.I. 4 at 5). Appellants cite no authority in support of their argument.
In support of confirmation, Plan Proponents submitted evidence that the Plan releases were
the subject of extensive arm’s-length negotiations among all of the parties and are an essential part
of the plan. (Bankr. D.I. 3185, Smith Decl. ¶ 8). Plan Proponents also presented evidence, and
the Bankruptcy Court correctly found, that absent the Plan’s global settlement, which includes the
non-consensual third-party releases of former officers and directors, the almost certain result
would be a chapter 7 liquidation 4 with no economic recovery whatsoever for the survivors of
4
Prior to the confirmation hearing the Debtors filed a conditional motion to convert the cases
to chapter 7 liquidation in the event the Plan was not confirmed. (See Bankr. D.I. 2357;
see also D.I. 4-2, 1/25/21 Hr’g Tr. at 115:23-25).
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Weinstein’s misconduct. 5 Against this potential outcome, the Plan provides a meaningful recovery
to victims like Appellants. The Bankruptcy Court’s fairness finding is further supported by the
fact that the Holders of Sexual Misconduct Claims overwhelmingly voted to accept the Plan – over
82% 6 – after Plan Proponents clearly described the releases in the Disclosure Statement and the
consideration being given in exchange for the releases. As the Bankruptcy Court found:
83 percent of the victims have expressed very loudly that they want
closure through acceptance of this plan, that they do not seek to have
to go through any further litigation in order to receive some
recovery, some possible recompense for what was done to them;
although, it is clear that money alone will never give them that. But
I can only deal with the financial aspect of this, and the Bankruptcy
Code provides that creditors should decide, as a class, how they want
their claims to be treated. And in this case, both the trade creditors
and the tort creditors, have come to a resolution with some recovery
for the victims of Mr. Weinstein’s terrible conduct.
(D.I. 4-2, 1/25/21 Hr’g Tr. at 116:22-117:8). Appellants may disagree with the rest of their class,
but that does make the Plan unfair. Appellants’ failure to controvert the Plan Proponents’ evidence
regarding the fair consideration provided in exchange for the releases shows that their argument
on this issue “has little chance of success on appeal.” See Prospector, 2018 WL 1419086, at *3.
5
See also Smith Decl. ¶ 5 (“Based on my knowledge of the mediation sessions, I believe
that the Injunctions and Plan Releases were necessary inducement for the signatories to the
Plan Support Agreement (the “Settlement Parties”) to reach agreement on the contributions
set forth therein and as reflected in the Settlement embodied in the Plan. Absent the
Injunctions and Plan Releases . . ., I do not believe that the Settlement Parties would have
reached agreement on the terms of a Plan Support Agreement and Settlement, and without
the Plan Support Agreement and Settlement, I do not believe that the Debtors could
formulate and consummate a confirmable chapter 11 plan.”).
6
See Bankr. D.I. 3160, Declaration of Stephenie Kjontvedt of Epiq Bankruptcy Solutions,
LLC. Regarding Solicitation of Votes and Tabulation of Ballots Cast on the Fourth
Amended Joint Chapter 11 Plan of Liquidation.
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Exceptional circumstances. Appellants argue that they are likely to succeed on the merits
of their appeal because the Bankruptcy Court’s exceptional circumstance finding was clearly
erroneous. Appellants argue that there is “nothing exceptional about a moribund chapter 11 case
that lacks sufficient cash to pay its expenses of administration” and “nothing exceptional about
insurance companies paying less to fund a plan of reorganization that would cost them if they were
forced to litigate further in the tort system.” (D.I. 4 at 26-27). The Bankruptcy Court, however,
based its exceptional circumstances finding on the Plan’s prospect for a meaningful recovery by
victims that would be unavailable absent the global settlement:
I think that the case that is before me is one of the most exceptional
cases. It cries out for the granting of third-party releases; albeit,
nonconsensual third-party releases, as to the other directors and
officers. Because without that, I find that the victims of
Mr. Weinstein’s actions would get minimal, if any, recovery.
(D.I. 4-2, 1/25/21 Hr’g Tr. at 117:16-21). This finding is well supported by the record. (Bankr.
D.I. 3185, Smith Decl. ¶¶ 5-8; Bankr. D.I. 3098, Ex. B). Appellants offer no evidence to controvert
the Bankruptcy Court’s finding that, absent the approval of the releases in this extraordinary case,
and the funding of the Plan, any recovery by Weinstein’s victims would be minimal.
Appellants’ remaining arguments as to necessity, fairness and exceptional circumstances
merely repeat the arguments in Appellants’ Objection to plan confirmation, point to no additional
evidence in the record, and fail to establish a likelihood of success with respect to the previously
rejected arguments. (Compare Objection ¶¶ 28-49, 52-56, 58, with D.I. 4 at 24-27). See In re
Color Spot Holdings, Inc., 2018 WL 3996938, at *3 (D. Del. Aug. 21, 2018) (“[T]he [e]mergency
[m]otion rehashes the same arguments considered and rejected by the [b]ankruptcy [c]ourt based
on the same evidence . . . . Merely repeating these rejected arguments does not meet the
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‘substantial’ burden [a]ppellants have to show a likelihood of success on the merits of their
appeal.”).
B.
Irreparable Harm to Appellant In Absence of a Stay
Whether a moving party has established irreparable harm is the second of the two “most
critical factors” in determining whether the moving party carried its burden to obtain a stay pending
appeal. Revel AC, 802 F.3d at 571. Irreparable harm “refer[s] to ‘harm that cannot be prevented
or fully rectified’ by a successful appeal.” Id. at 568 (quoting Roland Mach. Co. v. Dresser Indus.,
749 F.2d 380, 386 (7th Cir. 1984)). Moreover, the movant must “demonstrate that irreparable
injury is likely [not merely possible] in the absence of [a] [stay].” Id. at 569 (quoting Winter v.
Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008)).
Appellants’ two arguments in support of irreparable harm in absence of a stay of plan
consummation are unavailing. Appellants first argue that “the uncertainty of how the appellate
courts in the circuit may apply the mootness principles places the [Appellants] at risk of irreparable
injury if a stay pending appeal is not granted, as they may be denied their right of substantive
appellate review absent a stay.” (See D.I. 4 at 28) (citing In re Los Angeles Dodgers LLC, 465
B.R. 18, 36 (D. Del. 2011) and Republic of Philippines v. Westinghouse Elec. Corp., 949 F.2d 653,
658 (3d Cir. 1991)).
Case law in this Circuit, including the two cases cited by Appellants in support of their
argument, establishes that a party seeking a stay pending appeal cannot establish irreparable harm
solely on the basis that the court’s failure to grant the stay may equitably moot the moving party’s
appeal. See Republic of Philippines, 949 F.2d at 658 (“[T]he fact that the decision on the stay may
be dispositive of the appeal . . . is a factor that an appellate court must consider, but that alone does
not justify pretermitting an examination of the nature of the irreparable injury alleged and the
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particular harm that will befall the appellant should the stay not be granted.”); In re Swift Energy
Co., 2016 WL 3566962, at *7 (D. Del. June 29, 2016) (“[I]t is well established that the possibility
that an appeal may become moot does not constitute irreparable harm for purposes of obtaining a
stay”) (citation omitted); W.R. Grace, 475 B.R. at 206-07 (same) (collecting cases); Los Angeles
Dodgers, 465 B.R. at 36 (same).
Appellants’ second irreparable harm argument is that the delay associated with the
prosecution of the appeal will endanger their ability to secure evidence and testimony they assert
is needed to prevail on their claims and they may be forced to dismiss their cases pending in other
jurisdictions. Appellants make no showing as to how denial of the requested stay will prevent
them from securing testimony or evidence or force the dismissal of their pending cases.
Appellants also appear to jump to the conclusion that if denied a stay they will automatically lose
the appeal, but Appellants present no support for their reasoning. In sum, Appellants have failed
to establish irreparable harm warranting a stay of the Confirmation Order.
IV.
CONCLUSION
Appellants fail to carry their burden on the two most critical factors — likelihood of success
on the merits and irreparable harm. Accordingly, no further analysis is required, and the Court
will deny the Emergency Stay Motion. See Revel AC, 802 F.3d at 571. An appropriate order
follows.
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