In Re: SC SJ HOLDINGS LLC, et al.

Filing 6

Recommendation that Bankruptcy Appeal be withdrawn from mandatory mediation. Signed by Judge Mary Pat Thynge on 6/23/2022. (dat)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

In re:

SC SJ Holdings, LLC, et al.,

Bankruptcy Case No.21-10549 (JTD)

Debtors.

SC SJ Holdings and LLC, FMT SJ LLC
Appellants,
v.

C.A. No. 22-689-MN

Pillsbury Winthrop Shaw Pittman LLP,

Bankr. BAP No. 22-36

Appellee.

RECOMMENDATION
At Wilmington this 23rd day of June, 2022.
WHEREAS, pursuant to paragraph 2(a) of the Procedures to Govern Mediation
of Appeals from the United States Bankruptcy Court for this District dated September
11, 2012, the court conducted an initial review, which included information from counsel,
to determine the appropriateness of mediation in this matter;
WHEREAS, as a result of the above screening process, the issues involved in
this case are not amenable to mediation and mediation at this stage would not be a
productive exercise, a worthwhile use of judicial resources nor warrant the expense of
the process.

This Appeal arises from Appellee’s legal representation of Appellants in the
underlying Bankruptcy proceedings. This Appeal is based on an Order denying
Appellants request for relief from release, exculpation and injunctive provisions which
prevent Appellants from suing Appellee for legal malpractice. Certain aspects of this
dispute remain pending before the Bankruptcy Court, including a recently filed objection
by Appellants to Appellee’s final fee application for over $6 million. Appellants rely on
the opinions of three (3) experts witnesses and expect Appellee will disclose rebuttal
expert opinions shortly. The Parties are scheduling depositions on the fee dispute and
anticipate a multi-day evidentiary hearing on Appellee’s final fee application by midSeptember 2022 in the Bankruptcy Court.
Appellee notes that the Bankruptcy Court’s May 12, 2022 order found that the
Debtors requested relief from their own confirmed plan of reorganization was untimely
under 11 USC §§1127(b) and 1144. According to Appellee, § 1127(b) of the
Bankruptcy Code prohibits modifications of a confirmed plan of reorganization after the
plan has been substantially consummated, which occurred by November 8, 2021, and
Appellee contends is undisputed. It further maintains that requests for relief from a
confirmed order must be filed within 180 days of confirmation and must be based on
fraud. Appellant points out that there is no dispute that the confirmation order was
entered more than 180 days before Debtors sought relief through this Appeal. Further,
the Debtors did not allege fraud. It argues that Appellants’ position on the resolution of
Appellee’s fee request application bears on the timing of this Appeal is meritless The
issue of this Appeal is the resolution of Appellee’s fee application, and not the unrelated,
untimely request for relief from the confirmed plan and confirmation order.
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The Parties provide competing briefing schedules. Appellants propose a briefing
schedule, which it maintains will allow the consolidation of any future appeal into this
one, and would enable resolution of all appellate issues in one set of briefing. Their
proposed briefing schedule is as follows:
Appellants’ Opening Brief

On or before October 31, 2022

Appellee’s Responsive Brief

On or before January 31, 2023

Appellants’ Reply Brief

On or before February 28, 2023

Appellee’s counter with the following briefing schedule, which it maintains is in
accordance with the Federal Rule of Bankruptcy Procedure 8018 and is directed to the
present issue before this Court, that is, its fees:
Debtors/Appellants Opening Brief

July 22, 2022

Appellee’s Answering Brief

August 30, 2022

Debtors/Appellants Reply Brief

September 5, 2022

THEREFORE, IT IS RECOMMENDED that, pursuant to paragraph 2(a)
Procedures to Govern Mediation of Appeals from the United States Bankruptcy Court
for this District and 28 U.S.C. § 636(b), this matter be withdrawn from mandatory
mediation and proceed through the appellate process of this Court. Through this
Recommendation, the parties are advised of their right to file objections pursuant to
28 U.S.C. § 636(b)(1)(B), FED. R. CIV. P. 72(a) and D. DEL. LR 72.1.
Local counsel are obligated to inform out-of-state counsel of this Order.

/s/ Mary Pat Thynge
Chief U.S. Magistrate Judge Mary Pat Thynge
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