Court filing

First Monthly Fee Application (Jones Day, Special Counsel) — In re KServicing (Bankr. D. Del.)

Filed December 2, 2022 in Kservicing Bankruptcy; one of 140 filings from this case.

Record facts

Court	U.S. Bankruptcy Court for the District of Delaware
Filed	2022-12-02

U.S. Bankruptcy Court for the District of Delaware · No. 22-10951 · Doc. 325 · 2022-12-02 · Docket on CourtListener

Full text

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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
------------------------------------------------------------ x

In re
:
Chapter 11

KABBAGE, INC. d/b/a KSERVICING et al.,
:
Case No. 22-10951 (CTG)

:
(Jointly Administered)
Debtors.1
:

:
Obj. Deadline: December 22, 2022 at 4:00 p.m.

:
Hearing Date: Scheduled only if necessary
------------------------------------------------------------ x

SUMMARY OF FIRST MONTHLY APPLICATION OF JONES DAY,
SPECIAL COUNSEL TO THE DEBTORS, FOR ALLOWANCE
OF COMPENSATION FOR SERVICES RENDERED
AND FOR REIMBURSEMENT OF EXPENSES FOR THE
PERIOD FROM THE PETITION DATE THROUGH OCTOBER 31, 2022
Name of Applicant:

Jones Day
Authorized to Provide Professional
Services to:

The above-captioned Debtors

Date of Retention:

November 2, 2022, effective as of
October 3, 2022

Period for which compensation and
reimbursement are sought:

October 4, 2022 through October 31, 2022

Amount of Compensation sought as actual,
reasonable and necessary:

$85,562.00 (80% of $106,952.50)
Amount of Expense Reimbursement sought
as actual, reasonable and necessary:

$80,446.40

This is a(n): X monthly interim final application

1
The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax
identification number, as applicable are: Kabbage, Inc. d/b/a KServicing (3937); Kabbage Canada
Holdings, LLC (N/A); Kabbage Asset Securitization LLC (N/A); Kabbage Asset Funding 2017-A LLC
(4803); Kabbage Asset Funding 2019-A LLC (8973); and Kabbage Diameter, LLC (N/A). Kabbage is a
trademark of American Express used under license; Kabbage, Inc. d/b/a KServicing is not affiliated with
American Express. The Debtors’ mailing and service address is 925B Peachtree Street NE, Suite 383,
Atlanta, GA 30309.
Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 1 of 15

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COMPENSATION BY PROFESSIONAL
FROM THE PETITION DATE THROUGH OCTOBER 31, 2022
Name of
Professional
Individual
Position/Group*/Bar Year
Hourly
Billing Rate
(including
changes)
Total
Hours
Billed
Total
Compensation
Y W Chan
Partner/B&TL/2007
$1,200
.50
$600.00
J M Hall
Partner/IWC/2003
$1,075
6.40
$6,880.00
F A Lavallee
Partner/GR/1988
$1,250
1.80
$2,250.00
A E Lelling
Partner/IWC/1994
$1,275
14.30
$18,232.50
D J Merrett
Partner/BR&R/2007
$1,100
27.50
$30,250.00
S P Parrinello
Partner/Tax/2007
$1,225
.70
$857.50
S J Kenny
Associate/GR/2013
$950
1.10
$1,045.00
S E Morgado
Associate/B&TL/2020
$550
3.80
$2,090.00
A Nazarenko
Associate/Tax/2016
$825
1.10
$907.50
I Perez
Associate/BR&R/2016
$725
1.60
$1,160.00
B N Wilhelm
Associate/B&TL/2017
$625
41.20
$25,750.00
L Fischer
Staff Attorney/BR&R/1995
$600
25.50
$15,300.00
C L Smith
Paralegal/BR&R
$425
1.20
$510.00
D A Doell
Project Manager
$350
3.20
$1,120.00
TOTAL

129.90
$106,952.50
* B&TL – Business & Tort Litigation; BR&R – Business Restructuring & Reorganization;
GR – Government Regulation; IWC – Investigations & White Collar Defense

BLENDED RATE OF PROFESSIONALS – TOTAL
Professionals
Blended Rate
Total Hours
Total Compensation
Partner
$1,153.71
51.20
$59,070.00
Associate
$634.27
48.80
$30,952.50
Staff Attorney
$600.00
25.50
$15,300.00
Paralegal
$425.00
1.20
$510.00
Project Manager
$350.00
3.20
$1,120.00
TOTAL
$823.34
129.90
$106,952.50

Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 2 of 15

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COMPENSATION BY PROJECT CATEGORY
Project Category
Total Hours
Total Fees
Case Administration
3.80
$3,370.00
Creditor Inquiries
0.00
$0.00
Executory Contracts/Unexpired Leases
0.00
$0.00
Automatic Stay/Adequate Protection
0.00
$0.00
Plan of Reorganization/Disclosure Statement
0.00
$0.00
Use, Sale or Lease of Assets
0.00
$0.00
Financing matters
0.00
$0.00
Claims Administration
0.00
$0.00
Court Hearings
0.00
$0.00
General Corporate
0.00
$0.00
Schedules/SOFA/U.S. Trustee Reporting
0.00
$0.00
Employee Matters
0.00
$0.00
Non-Working Travel
0.00
$0.00
Tax Advice
4.70
$5,060.00
Department of Justice Investigations
51.40
$39,872.50
Congressional Investigation
15.70
$12,192.50
Federal Trade Commission Investigation
.50
$312.50
Litigation and Adversary Proceedings
0.00
$0.00
Professional Retention/Fee Issues
53.80
$46,145.00
Fee Application Preparation
0.00
$0.00
TOTAL
129.90
$106,952.50
Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 3 of 15

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EXPENSE SUMMARY
FROM THE PETITION DATE THROUGH OCTOBER 31, 2022
Expense Category
Total Expenses
Travel – Air Fare
713.32
Travel – Food and Beverage Expenses
18.23
Travel – Hotel Charges
234.12
Travel – Other Costs
40.00
Travel – Taxi Charges
75.73
Consultant Fees
79,365.00
TOTAL
$80,446.40

Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 4 of 15

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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
------------------------------------------------------------ x

In re
:
Chapter 11

KABBAGE, INC. d/b/a KSERVICING et al.,
:
Case No. 22-10951 (CTG)

:
(Jointly Administered)
Debtors.1
:

:
Obj. Deadline: December 22, 2022 at 4:00 p.m.

:
Hearing Date: Scheduled only if necessary
------------------------------------------------------------ x

FIRST MONTHLY APPLICATION OF JONES DAY,
SPECIAL COUNSEL TO THE DEBTORS, FOR ALLOWANCE
OF COMPENSATION FOR SERVICES RENDERED
AND FOR REIMBURSEMENT OF EXPENSES FOR THE
PERIOD FROM THE PETITION DATE THROUGH OCTOBER 31, 2022
Pursuant to Sections 330 and 331 of title 11 of the United States Code
(the “Bankruptcy Code”), Rule 2016 of the Federal Rules of Bankruptcy Procedure
(the “Bankruptcy Rules”), Rule 2016-2 of the Local Rules of Bankruptcy Practice and Procedure
of the United States Bankruptcy Court for the District of Delaware (the “Local Rules”) and the
Order Establishing Procedures for Interim Compensation and Reimbursement of Expenses of
Professionals [Dkt. 136] (the “Interim Compensation Order”), Jones Day hereby files this First
Monthly Application of Jones Day, Special Counsel to the Debtors, for Allowance of
Compensation for Services Rendered and for Reimbursement of Expenses for the Period from the
Petition Date through October 31, 2022 (the “Application”). By this Application, Jones Day

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moves this Court, pursuant to the Interim Compensation Order, for reasonable compensation for
professional legal services rendered as special counsel to the above-captioned debtors
(the “Debtors”) in the amount of $85,562.00 (80% of $106,952.50), and the reimbursement of
actual and necessary expenses incurred in the amount of $80,446.40 for a total of $166,008.40
for the period from the Petition Date (as defined below) through October 31, 2022
(the “Compensation Period”). In support of this Application, Jones Day respectfully represents
as follows:
Background
1.
On October 3, 2022 (the “Petition Date”), the Debtors each commenced a
case under the Bankruptcy Code. Pursuant to an order entered on October 4, 2022 [Dkt. 42], the
Debtors’ chapter 11 cases (collectively, the “Chapter 11 Cases”) have been consolidated for
procedural purposes only and are being administered jointly. The Debtors continue to manage
and operate their businesses as debtors-in-possession pursuant to sections 1107 and 1108 of the
Bankruptcy Code.
2.
On October 14, 2022, the Debtors filed the Application for Authority to
Employ and Retain Jones Day as Special Counsel to the Debtors Effective as of the Petition Date
[Dkt. 108] (the “Retention Application”). By the Retention Application, the Debtors sought
authority to retain and employ Jones Day as special counsel, effective as of the Petition Date, to
represent them in connection with certain federal investigations (collectively, the “Federal
Investigations”) regarding the Debtors’ paycheck protection program loan practices and related
matters. The Federal Investigations include: (a) investigations by the Civil Division of the
Department of Justice in the District of Massachusetts and Eastern District of Texas; (b) an
investigation by the Federal Trade Commission; and (c) an investigation by the United States
House of Representatives Select Subcommittee on the Coronavirus Crisis.
Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 6 of 15

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On November 2, 2022, the Court entered the Order Authorizing Debtors to Employ and Retain
Jones Day as Special Counsel to the Debtors Effective as of the Petition Date [Dkt. 198]
(the “Retention Order”) granting the relief requested in the Retention Application.
Jurisdiction
3.
The Court has jurisdiction to consider this matter pursuant to
28 U.S.C. §§ 157 and 1334, and the Amended Standing Order of Reference from the United
States District Court for the District of Delaware, dated February 29, 2012. This is a core
proceeding pursuant to 28 U.S.C. § 157(b). Venue is proper before the Court pursuant to
28 U.S.C. §§ 1408 and 1409.
4.
Pursuant to Local Rule 9013-1(f), the Debtors consent to the entry of a
final order by the Court in connection with this Fee Statement to the extent that it is later
determined that the Court, absent consent of the parties, cannot enter final orders or judgments
consistent with Article III of the United States Constitution.
Summary of Professional Compensation
and Reimbursement of Expense Requested
5.
By this Application, Jones Day requests allowance and payment of
$85,562.00 (80% of $106,952.50) as compensation for professional services rendered to the
Debtors during the Compensation Period and allowance and payment of $80,446.40 as
reimbursement for actual and necessary expenses incurred by Jones Day during the
Compensation Period. All services for which compensation is requested by Jones Day were
performed for or on behalf of the Debtors in furtherance of the purposes for which Jones Day
was retained.
6.
During the Compensation Period, Jones Day received no payment and no
promises of payment from any source for services rendered or to be rendered in any capacity
Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 7 of 15

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whatsoever in connection with the matters covered by this Application. There is no agreement or
understanding between Jones Day and any other person, other than members of Jones Day, for
the sharing of compensation to be received for services rendered in these Chapter 11 Cases.
7.
The fees charged by Jones Day in these Chapter 11 Cases are billed in
accordance with its existing billing rates and procedures in effect during the Compensation
Period, and in accordance with the Retention Order.
8.
Jones Day maintains detailed records of the time spent by professionals
and paraprofessionals in connection with Jones Day’s representation of the Debtors. Annexed
hereto as Exhibit A are copies of Jones Day’s itemized time records for professionals and
paraprofessionals performing services for the Debtors during the Compensation Period. Jones
Day’s time records comply with the requirements set forth in Local Rule 2016-2 and the
Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed
Under 11 U.S.C. § 330 by Attorneys in Larger Chapter 11 Cases (the “Guidelines”), including
the use of itemized time entries and separate matter numbers for different project types, as
hereinafter described in greater detail. In addition, for the convenience of the Court and parties
in interest, Jones Day has maintained separate matter numbers for each of the Federal
Investigations described above.
Summary of Services
The following is a summary of the activities performed by Jones Day
professionals and paraprofessionals during the Compensation Period, organized by project
billing category.2 If a project billing category does not appear below, then Jones Day did not bill

2
The summary set forth below is qualified in its entirety by reference to the time and services detail attached
hereto as Exhibit A.
Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 8 of 15

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time for that project billing category during the Compensation Period, but may bill time to that
project billing category in the future. Certain services performed may overlap between, or
appropriately be allocated to, more than one project billing category.
9.
Case Administration — 3.80 hours — $3,370.00
During the Compensation Period, Jones Day professionals devoted time to this
project category regarding matters that deal solely with the administration of the bankruptcy
case, including communications not within the scope of other project billing categories and the
maintenance of the case docket and calendar.
10.
Tax Advice — 4.70 hours — $5,060.00
During the Compensation Period, Jones Day professionals provided advice
regarding certain tax issues associated with the Federal Investigations.
11.
Department of Justice Investigations — 51.40 hours — $39,872.50
During the Compensation Period, Jones Day professionals devoted time to
various matters associated with the DOJ Investigations. In particular, Jones Day professionals:
•
Prepared for and defended the civil investigative demand
deposition of the Debtors’ former Chief Financial Officer;
•
Addressed issues relating to the production of documents in
connection with the DOJ Investigations; and
•
Communicated and coordinated with the Debtors’ management,
Department of Justice representatives and other parties regarding
document requests and other matters.
12.
Congressional Investigation — 15.70 hours — $12,192.50
During the Compensation Period, Jones Day professionals worked on matters
related to requests for production received in connection with the Congressional Investigation,
including by:
Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 9 of 15

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•
Analyzing the requests and the Debtors’ disclosures in these
Chapter 11 Cases for responsiveness;
•
Communicating and coordinating with members of the
congressional defense common interest group regarding the
requests; and
•
Reviewing, preparing and producing documents responsive to the
requests.
13.
Federal Trade Commission Investigation — .50 hours — $312.50
During the Compensation Period, Jones Day professionals devoted a small
amount of time to this project category relating to the coordination among parties involved in the
FTC Investigations.
14.
Professional Retention/Fee Issues — 53.80 hours — $46,145.00
During the Compensation Period, Jones Day professionals worked on the
preparation and supplementing of the Retention Application, which was filed 10 days after the
Petition Date on October 14, 2022. These efforts included:
•
Drafting and revising the Retention Application and related
disclosures, declarations;
•
Reviewing numerous conflict reports generated in connection with
the schedule of parties related to the Chapter 11 Cases provided by
the Debtors to confirm Jones Day’s disinterestedness; and
•
Addressing certain questions received from the Office of the
United States Trustee in connection with the proposed retention
and preparing a supplemental declaration in support of the
Retention Application.
15.
The foregoing professional services performed by Jones Day were
necessary and appropriate to the administration of these Chapter 11 Cases and were in the best
interests of the Debtors’ estates and their stakeholders. Compensation for the foregoing services
as requested is commensurate with the complexity, importance, and nature of the problems,
issues, and tasks involved. The professional services were performed skillfully and efficiently.
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Actual and Necessary Disbursements
16.
Section 330 of the Bankruptcy Code authorizes “reimbursement for actual,
necessary expenses” incurred by professionals employed in a chapter 11 case. Accordingly,
Jones Day seeks reimbursement for expenses (“Expenses”) incurred in rendering services to the
Debtors during the Compensation Period in the amount of $80,446.40. Itemized records
detailing the Expenses incurred by Jones Day during the Compensation Period are attached
hereto as Exhibit B.
17.
Jones Day maintains the following policies with respect to Expenses:
a.
No amortization of the cost of any investment, equipment or
capital outlay is included in the expenses. In addition, for those
items or services that Jones Day purchased from or contracted with
a third party, Jones Day seeks reimbursement only for the exact
amount billed to Jones Day by the third party vendor.3
b.
Photocopying by Jones Day is charged at 10 cents per page.
To the extent practicable, Jones Day utilizes less expensive outside
copying services.
c.
Meals charged to the Debtors either are associated with:
(a) out-of-town travel; (b) meetings at Jones Day with the Debtors
and other professionals; or (c) attorneys working late on matters
concerning the Debtors.
d.
Computer-assisted research is billed on a per-search and/or
per-minute basis, depending upon the provider.
e.
Charges for airline and train travel include the cost of each airline
or train ticket used in connection with the provision of services to
the Debtors.
f.
The time pressures associated with the services rendered by Jones
Day at times require Jones Day’s professionals and
paraprofessionals to devote substantial amounts of time during the
evenings and on weekends. Jones Day charges for secretarial and

3
By this Application, Jones Day is requesting payment for an Expense in the amount of $79,365.00 for
services provided by Forensic Risk Alliance, Inc. (“FRA”), Jones Day’s consultant with respect to the
Federal Investigations. Consistent with the requirements of Local Rule 2016-2, a copy of FRA’s invoice is
attached hereto as Exhibit C.
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other staff overtime expense that is directly associated with such
after-hours work and is necessary given the circumstances of these
cases. Jones Day does not consider such expenses to be part of its
ongoing overhead expenses because they are special incremental
expenses arising from the specific services being provided to the
Debtors.
Adjustments to Fees and Expenses
18.
Consistent with its own internal policies and to comply with the
“reasonableness” requirements of section 330 of the Bankruptcy Code, Jones Day has reviewed
its monthly service descriptions and has determined that certain fees should not be charged to the
Debtors. In particular, Jones Day has voluntarily determined that $6,320.00 in fees should not be
charged to the Debtors. This Application reflects this adjustment.
Reservation of Rights
19.
To the extent time or disbursement charges for services rendered or
disbursements incurred relate to the Compensation Period but were not processed prior to the
preparation of this Application, or Jones Day has for any other reason not sought compensation
or reimbursement of expenses herein with respect to any services rendered or expenses incurred
during the Compensation Period, Jones Day reserves the right to request additional compensation
for such services and reimbursement of such expenses in a future application.
Notice
Notice of this Application will be provided in accordance with the Interim
Compensation Order on the Fee Notice Parties (as defined in the Interim Compensation Order).
No further notice is required.
WHEREFORE Jones Day respectfully requests (a) interim allowance of
compensation for professional services rendered to the Debtors during the Compensation Period
in the amount of $85,562.00, (b) interim allowance of Expenses incurred by Jones Day during
Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 12 of 15

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the Compensation Period in the amount of $80,446.40, (c) that, in accordance with the Interim
Compensation Order, the Debtors pay Jones Day a total of $166,008.40 consisting of $85,562.00
(representing 80% of the total amount of fees allowed) and $80,446.40 (representing 100% of the
Expenses allowed), if no objections are timely filed and Jones Day files a certificate of no
objection with the Court in accordance with the Interim Compensation Order, (d) that the interim
allowance of such compensation for professional services rendered and reimbursement of actual
and necessary expenses incurred be without prejudice to Jones Day’s right to seek such further
compensation for the full value of services performed and expenses incurred and (e) that the
Court grant Jones Day such other and further relief as is just.

Dated: December 2, 2022

Atlanta, Georgia
Respectfully submitted,

/s/ Daniel J. Merrett

Daniel J. Merrett (GA 924076)
JONES DAY
1221 Peachtree Street, N.E., Suite 400
Atlanta, Georgia 30361
Telephone: (404) 521-3939
Facsimile: (404) 581-8330
E-mail: djmerrett@jonesday.com

ATTORNEYS FOR DEBTORS

Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 13 of 15

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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
------------------------------------------------------------ x

In re
:
Chapter 11

KABBAGE, INC. d/b/a KSERVICING et al.,
:
Case No. 22-10951 (CTG)

Debtors.1
:
(Jointly Administered)

------------------------------------------------------------ x

DECLARATION OF DANIEL J. MERRETT
I, Daniel J. Merrett, hereby declare the following under penalty of perjury:
1.
I am a partner of Jones Day. I make this declaration in accordance with
the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for
the District of Delaware (the “Local Rules”) and the Guidelines for Reviewing Applications for
Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. § 330 by Attorneys in
Larger Chapter 11 Cases (the “Guidelines”) regarding the contents of applications for
compensation and expenses.
2.
I have read the First Monthly Fee Application of Jones Day, Special
Counsel to the Debtors, for Allowance of Compensation for Services Rendered and
Reimbursement of Expenses for the Period from the Petition Date Through October 31, 2022

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(the “Application”).2 The Debtors have been provided with a copy of this Application. As of the
date hereof, the Debtors have not reviewed or approved the Application.
3.
I have reviewed the requirements of the Interim Compensation Order, the
Guidelines, and the Local Rules, and I believe this Application complies therewith.

Dated: December 2, 2022

/s/ Daniel J. Merrett

Daniel J. Merrett

2
Capitalized terms not otherwise defined herein have the meanings given to them in the Application.
Case 22-10951-CTG Doc 325 Filed 12/02/22 Page 15 of 15

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First Monthly Fee Application (Jones Day, Special Counsel) — In re KServicing (Bankr. D. Del.)

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