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Application/Motion to Employ/Retain Greenberg… — In re KServicing Wind Down Corp., et al. (f/k/a Kabbage,… (Dkt. 107)
Summary
An application filed October 14, 2022 as Doc 107 in the jointly administered Chapter 11 cases of Kabbage, Inc. d/b/a KServicing, et al., Case No. 22-10951 (CTG), in the U.S. Bankruptcy Court for the District of Delaware. The debtors ask for authority under sections 327(e), 328(a), and 330 of the Bankruptcy Code to employ Greenberg Traurig, LLP as special counsel to the Board of Directors, effective as of the October 3, 2022 petition date. The application lists hourly rates for the principal attorneys and ranges for the firm's shareholders, associates and paralegals. It states the firm received $512,388.50 in the 90 days before the petition date, including a $250,000 evergreen retainer, and holds a Retainer Balance of $202,706.50. It sets an objection deadline of October 31, 2022 and a hearing on November 7, 2022, and is supported by declarations attached as Exhibit A and Exhibit B.
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No. 22-10951 · Doc. 107 · Docket on CourtListener
Full text
Case 22-10951-CTG Doc 107 Filed 10/14/22 Page 1 of 13
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
------------------------------------------------------------ x
:
In re : Chapter 11
:
KABBAGE, INC. d/b/a KSERVICING, et al., : Case No. 22-10951 (CTG)
:
1
Debtors. : (Jointly Administered)
:
: Obj. Deadline: October 31, 2022 at 4:00 p.m. (ET)
: Hearing Date: November 7, 2022 at 1:00 p.m. (ET)
------------------------------------------------------------ x
APPLICATION OF DEBTORS FOR AUTHORITY TO
EMPLOY AND RETAIN GREENBERG TRAURIG, LLP
AS SPECIAL COUNSEL TO THE BOARD OF DIRECTORS OF
KABBAGE, INC. D/B/A KSERVICING EFFECTIVE AS OF THE PETITION DATE
Kabbage, Inc. d/b/a KServicing and its debtor affiliates, as debtors and debtors in
possession in the above-captioned chapter 11 cases (collectively, the “Debtors”), respectfully
represent as follows in support of this application (the “Application”):2
Relief Requested
1. By this Application, pursuant to sections 327(e), 328(a), and 330 of title 11
of the United States Code (the “Bankruptcy Code”), Rules 2014(a) and 2016 of the Federal Rules
of Bankruptcy Procedure (the “Bankruptcy Rules”), and Rules 2014-1 and 2016-1 of the Local
Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District
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.
2
The facts and circumstances supporting the relief requested herein are set forth in the First Day Declaration (as
defined herein). Capitalized terms used but not defined herein shall have the respective meanings ascribed to such
terms in the First Day Declaration.
Case 22-10951-CTG Doc 107 Filed 10/14/22 Page 2 of 13
of Delaware (the “Local Rules”), the Debtors request entry of an order (i) authorizing the Debtors
to employ and retain Greenberg Traurig, LLP (“Greenberg Traurig” or the “Firm”) as special
counsel to the Board of Directors of Kabbage, Inc. d/b/a KServicing (the “Board”) in the above-
captioned chapter 11 cases, effective as of the Petition Date, to advise the Board on the exercise
of its duties and responsibilities and to perform such other services as the Board may require; (ii)
directing that copies of all notices, pleadings, and other documents filed in these cases and any and
all related adversary proceedings be served upon Greenberg Traurig, as special counsel to the
Board; and (iii) granting related relief.
2. In support of this Application, the Debtors submit (i) the declaration of
David B. Kurzweil, a shareholder of Greenberg Traurig, annexed hereto as Exhibit A and
incorporated herein by reference (the “Kurzweil Declaration”), and (ii) the declaration of Holly
Loiseau, the General Counsel and Secretary for the Debtors, annexed hereto as Exhibit B and
incorporated herein by reference.
3. A proposed form of order granting the relief requested herein is annexed
hereto as Exhibit C (the “Proposed Order”).
Jurisdiction
4. 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). Pursuant to Rule 9013-1(f) of the Local Rules, the Debtors consent
to the entry of a final order by the Court in connection with this Application to the extent 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. Venue is proper before the Court
pursuant to 28 U.S.C. §§ 1408 and 1409.
2
Case 22-10951-CTG Doc 107 Filed 10/14/22 Page 3 of 13
Background
5. On October 3, 2022 (the “Petition Date”), the Debtors each commenced
with this Court a voluntary case under chapter 11 of the Bankruptcy Code (the “Chapter 11
Cases”). The Debtors are authorized to continue to operate their business as debtors in possession
pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory
committee of creditors has been appointed in these Chapter 11 Cases.
6. Pursuant to Bankruptcy Rule 1015(b), the Chapter 11 Cases are being
jointly administered under the above-captioned case.
7. Additional information regarding the Debtors’ business, capital structure,
and the circumstances leading to the commencement of these Chapter 11 Cases is set forth in the
Declaration of Deborah Rieger-Paganis in Support of the Chapter 11 Petitions and First-Day
Relief (the “First Day Declaration”) [Docket No. 13], filed on the Petition Date in these Chapter
11 Cases.
8. The Debtors’ Board is comprised of four directors: Robin Gregg, Eric Hartz,
Laquisha Milner, and Lawrence X. Taylor (collectively, the “Directors”). Ms. Gregg and Mr.
Hartz have served on the Board since October 2020, immediately following the sale of most of the
Debtors’ assets to affiliates of American Express (the “AmEx Transaction”). Ms. Milner was
elected to the Board on March 19, 2021. The Board subsequently determined that it would be in
the best interests of the Debtors to expand the Board to four directors, and on August 31, 2022, the
Board elected Mr. Taylor as a director.
9. The Board engaged Greenberg Traurig on August 13, 2022, to advise the
Board with respect to corporate governance matters and the exercise of the Directors’ duties with
respect to matters arising in and related to these Chapter 11 Cases.
3
Case 22-10951-CTG Doc 107 Filed 10/14/22 Page 4 of 13
Greenberg Traurig’s Qualifications
10. The Debtors seek to retain Greenberg Traurig as special counsel to the
Board given the Firm’s extensive knowledge, expertise, and experience in the field of restructuring
and corporate governance. The Board requires separate counsel to assist in the exercise of its
fiduciary duties during these Chapter 11 Cases due to the complexities of the cases and the unique
issues presented. The Debtors believe that retaining knowledgeable and experienced independent
counsel to advise the Board is appropriate and necessary to maximize the value of the Debtors’
estates and allow the Board to diligently perform its duties.
11. The Debtors believe that Greenberg Traurig is uniquely well qualified to
advise the Board in connection with the performance of the Board’s fiduciary duties during these
Chapter 11 Cases. Greenberg Traurig is an international law firm with approximately
2,500 attorneys in 43 offices. The members of the Firm practice in almost every practice area,
including corporate governance, bankruptcy, workouts, finance, litigation, business, tax, labor,
corporate, employment, securities, and commercial law. In addition, Greenberg Traurig has
advised numerous boards of directors, debtors, creditors, and other interested parties, in large and
complex chapter 11 cases throughout the United States. As set forth in the Kurzweil Declaration,
Greenberg Traurig’s knowledge, expertise, and experience will enable the Firm to perform its
services to the Board in an efficient and cost-effective manner. Accordingly, the Debtors submit
that Greenberg Traurig should be retained as special counsel to the Board in these Chapter 11
Cases effective as of the Petition Date.
Professional Compensation and Expense Reimbursement
12. Section 328(a) of the Bankruptcy Code authorizes the employment of a
professional person on any reasonable terms and conditions of employment, including on an hourly
basis. See 11 U.S.C. § 328(a). Greenberg Traurig intends to apply for compensation for
4
Case 22-10951-CTG Doc 107 Filed 10/14/22 Page 5 of 13
professional services rendered in connection with these Chapter 11 Cases, subject to the approval
of this Court and in compliance with the applicable provisions of the Bankruptcy Code, the
Bankruptcy Rules, and the Local Rules, on an hourly basis, plus reimbursement of actual,
necessary expenses and other charges incurred by Greenberg Traurig. A statement pursuant to
Bankruptcy Rule 2016 and section 329 of the Bankruptcy Code is incorporated herein by reference.
13. Greenberg Traurig has advised the Debtors and the Board that the current
hourly rates applicable to the principal attorneys proposed to advise the Board are:
Professional Hourly Rate
Anthony W. Clark $1,565
David B. Kurzweil $1,540
Brian Greer $1,125
Dennis A. Meloro $1,255
Matthew A. Petrie $870
14. Other attorneys and paralegals will render services to and advise the Board,
as needed. Generally, Greenberg Traurig’s hourly rates are in the following ranges:
Professional Hourly Rate
Shareholders $600 - $1,700
Of Counsel $825 - $1,685
Associates $550 - $870
Legal Assistants/Paralegals $340 - $475
15. Greenberg Traurig has explained to the Debtors and the Board that the
hourly rates set forth above (a) are set at a level designed to fairly compensate Greenberg Traurig
5
Case 22-10951-CTG Doc 107 Filed 10/14/22 Page 6 of 13
for its work and to cover fixed and routine overhead expenses, (b) are standard for services of this
nature inside or outside bankruptcy, and (c) remain subject to periodic, Firm-wide adjustments in
the ordinary course of Greenberg Traurig’s business.
16. It is Greenberg Traurig’s policy to charge its clients in all areas of practice
and for all other expenses incurred in connection with the client’s matters. The expenses charged
to clients include, among other things, mail and express mail charges, special or hand delivery
charges, document processing, photocopying charges, travel expenses, expenses for working
meals, computerized research, and transcription costs, as well as non-ordinary overhead expenses
such as overtime for secretarial personnel and other staff. Greenberg Traurig will charge the
Debtors’ estates for these expenses in a manner and at rates consistent with charges made generally
to Greenberg Traurig’s clients outside of bankruptcy. Greenberg Traurig believes that these
expenses should be fairly charged to the clients incurring them rather than to increase the hourly
rates and spread the expenses among all clients.
17. In addition, Greenberg Traurig intends to seek compensation for all time
and expenses associated with its retention in accordance with sections 330 and 331 of the
Bankruptcy Code and any orders of this Court, including the preparation of this Application, the
Kurzweil Declaration, and related documents, as well as any monthly fee statements or interim or
final fee applications and related issues. Greenberg Traurig also intends to make a reasonable
effort to comply with the U.S. Trustee’s requests for information and additional disclosures as set
forth in 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, effective as of
6
Case 22-10951-CTG Doc 107 Filed 10/14/22 Page 7 of 13
November 1, 2013 (the “Fee Guidelines”), both in connection with this Application and any
interim and final fee applications to be filed by Greenberg Traurig in these Chapter 11 Cases.3
18. Other than as set forth herein, there is no proposed arrangement to
compensate Greenberg Traurig. Greenberg Traurig has not shared, nor agreed to share, (a) any
compensation it has received or may receive with any other party or person, other than with the
shareholders, counsel, associates, and employees of Greenberg Traurig, or (b) any compensation
another person or party has received or may receive.
19. During the 90-day period prior to the Petition Date, Greenberg Traurig
received payments and advances in the aggregate amount of $512,388.50, including an evergreen
retainer of $250,000 (the “Retainer”). A summary of the payments invoiced and received by
Greenberg Traurig in the 90 days prior to the Petition Date is set forth in Attachment 3 to the
Kurzweil Declaration. After reconciliation and application of the Retainer to amounts incurred
prior to the Petition Date for approved invoices, Greenberg Traurig holds the balance of the
Retainer in the amount of $202,706.50 (the “Retainer Balance”) as security during these Chapter
11 Cases until Greenberg Traurig’s fees and expenses are awarded by final order of this Court and
payable to Greenberg Traurig.
20. In this district, evergreen retainer agreements reflect normal business terms
in the marketplace. See In re Insilco Tech., Inc., 291 B.R. 628, 634 (Bankr. D. Del. 2003) (“[T]he
practice [of receiving security retainers] in this district has been engaged in since at least the early
1990’s.”). Greenberg Traurig believes that its request for approval of an evergreen retainer in
these Chapter 11 Cases satisfies the five-part test articulated by Judge Carey in Insilco. First,
3
Further information regarding Greenberg Traurig’s compliance with the Fee Guidelines is set forth in the Kurzweil
Declaration.
7
Case 22-10951-CTG Doc 107 Filed 10/14/22 Page 8 of 13
Greenberg Traurig submits that the proposed terms of its engagement reflect normal business terms
in the marketplace. Second, Greenberg Traurig submits that it and the Debtors are sophisticated
business entities that have negotiated the Retainer at arm’s length and in good faith. Third,
Greenberg Traurig believes that approval of the Retainer Balance as an evergreen retainer is in the
best interests of the Debtors’ estates. Fourth, Greenberg Traurig is currently unaware of any
creditor opposition to the approval of the Retainer Balance as an evergreen retainer. Fifth, given
the size, circumstances, and posture of the Debtors’ Chapter 11 Cases, Greenberg Traurig believes
that approval of the Retainer Balance as an evergreen retainer (particularly in light of the modest
size of the Retainer Balance as compared to the size of these Chapter 11 Cases) provides it with
an appropriate level of risk minimization in connection with the payment of its prospective fees
and costs incurred for services performed in these Chapter 11 Cases.
No Duplication of Services
21. By separate application, the Debtors have sought the Court’s approval to
retain and employ Weil, Gotshal & Manges LLP (“Weil”) as the Debtors’ general bankruptcy
counsel. By contrast, Greenberg Traurig’s postpetition work is comprised of its representation of
the Board with respect to corporate governance and the exercise of the Directors’ fiduciary duties.
These matters do not involve the conduct of the Chapter 11 Cases themselves. Accordingly, the
services rendered and functions to be performed by Greenberg Traurig will not be duplicative of
any bankruptcy-related work performed by Weil on behalf of the Debtors. Furthermore,
Greenberg Traurig will coordinate with the Debtors’ other professionals (individually, (i) Weil,
Gotshal & Manges LLP (“Weil”), general restructuring counsel, (ii) Richards, Layton &
Finger, P.A. (“RLF”), co-counsel, (iii) AlixPartners, LLP, financial advisor, (iv) Omni Agent
Solutions, Inc. (“Omni”), claims and noticing agent and administrative agent, and (v) Jones Day,
8
Case 22-10951-CTG Doc 107 Filed 10/14/22 Page 9 of 13
governmental investigations counsel, and collectively, the “Retained Professionals”) to ensure
that its services are, to the maximum extent possible, complementary to and not duplicative of the
Retained Professionals’ services.
No Adverse Interest
22. To the best of the Debtors’ knowledge, and except as otherwise disclosed
herein and in the Kurzweil Declaration, Greenberg Traurig (i) has no connection with the Debtors,
their creditors, other parties in interest, or the attorneys or accountants of any of the foregoing, or
the United States Trustee or any person employed in the Office of the United States Trustee for
the District of Delaware; and (ii) does not hold any interest adverse to the Debtors’ estates with
respect to the matters for which Greenberg Traurig is to be employed, as required by section 327(e)
of the Bankruptcy Code.
23. As disclosed in the Kurzweil Declaration, the Firm currently represents
certain of the Debtors’ creditors, equity holders, and other parties in interest in matters wholly
unrelated to these Chapter 11 Cases. Greenberg Traurig has fully informed the Debtors and the
Board of its ongoing representation of such entities, and the Debtors and the Board have consented
to the Firm’s continued representation of these entities in matters unrelated to these proceedings.
24. Greenberg Traurig will periodically review its files during these Chapter 11
Cases to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new,
relevant facts or relationships are discovered or arise during these Chapter 11 Cases, Greenberg
Traurig will use reasonable efforts to identify such further developments and will file a
supplemental declaration in conformity with Bankruptcy Rule 2014(a).
Basis for Relief
25. The Debtors seek to retain Greenberg Traurig under section 327(e) of the
Bankruptcy Code as special counsel for the Board to perform necessary legal services during the
9
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Chapter 11 Cases and to carry out the Board’s duties and responsibilities. Section 327(e) provides
that a debtor, subject to court approval:
may employ, for a specified special purpose, other than to represent
the trustee in conducting the case, an attorney that has represented
the debtor, if in the best interest of the estate, and if such attorney
does not represent or hold any interest adverse to the debtor or to the
estate with respect to the matter on which such attorney is to be
employed.
11 U.S.C. § 327(e).
26. Accordingly, retention of general, non-bankruptcy counsel is permissible so
long as: (i) the appointment is in the best interest of the debtor’s estate; (ii) counsel does not hold
an interest adverse to the estate with respect to the subject matter of its retention; and (iii) the
engagement does not amount to conducting the bankruptcy case for the debtor in possession. See
In re DeVlieg, Inc., 174 B.R. 497 (N.D. Ill. 1994); In re Carla Leather, Inc., 44 B.R. 457, 474
(Bankr. S.D.N.Y. 1984), aff’d, 50 B.R. 764 (S.D.N.Y. 1985) (“[Section] 327(e) bars engagement
of special counsel only in the presence of an actual conflict of interest concerning the subject
matter of the engagement.”).
27. Additionally, pursuant to section 328(a) of the Bankruptcy Code, the
Debtors “with the court’s approval, may employ or authorize the employment of a professional
person under section 327 . . . on any reasonable terms and conditions of employment, including on
a retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis.”
11 U.S.C. § 328(a). Section 328(a) of the Bankruptcy Code permits compensation of professionals
on flexible terms that reflect the nature of their services and market conditions. See In re Vertis
Holdings, Inc., Case No. 12-12821 (CSS) [Docket No. 294] (Bankr. D. Del. Nov. 20, 2012)
(authorizing the retention and employment of lead counsel to the debtors under sections 327 and
328(a) of the Bankruptcy Code).
10
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28. Furthermore, Bankruptcy Rule 2014(a) requires that an application for
retention include:
[S]pecific facts showing the necessity for the employment, the name
of the [firm] to be employed, the reasons for the selection, the
professional services to be rendered, any proposed arrangement for
compensation, and, to the best of the applicant’s knowledge, all of
the [firm’s] connections with the debtor, creditors, any other party
in interest, their respective attorneys and accountants, the United
States trustee, or any person employed in the office of the United
States trustee.
Fed. R. Bankr. P. 2014.
29. The Debtors submit that for all the reasons stated herein and in the Kurzweil
Declaration, the employment and retention of Greenberg Traurig as special counsel to the Board
is warranted. Furthermore, as demonstrated by the Kurzweil Declaration, Greenberg Traurig does
not hold any interest adverse to the Debtors’ estate with respect to the matters for which Greenberg
Traurig is to be retained, as required by section 327(e) of the Bankruptcy Code.
Notice
30. Notice of this Application will be provided to (a) the Office of the United
States Trustee for the District of Delaware; (b) the holders of the thirty (30) largest unsecured
claims against the Debtors on a consolidated basis; (c) the Federal Reserve Bank; (d) Customers
Bank; (e) Cross River Bank; (f) the United States Department of Justice; (g) the Federal Trade
Commission; (h) the Small Business Administration; (i) the Internal Revenue Service; (j) the
Securities and Exchange Commission; (k) the United States Attorney’s Office for the District of
Delaware; (l) the Banks; (m) all Retained Professionals; and (n) any party that is entitled to notice
pursuant to Bankruptcy Rule 2002 (collectively, the “Notice Parties”). The Debtors believe that
no further notice is required.
11
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No Prior Request
31. No prior application for the relief requested herein has been made to this or
any other court.
[Remainder of page intentionally left blank]
12
Case 22-10951-CTG Doc 107 Filed 10/14/22 Page 13 of 13
WHEREFORE the Debtors respectfully request entry of the Proposed Order
granting the relief requested herein and such other and further relief as the Court may deem just
and appropriate.
Dated: October 14, 2022
Atlanta, Georgia
KABBAGE, INC. d/b/a KSERVICING, et al.
(on behalf of itself and each of its affiliated
Debtors)
/s/ Holly Loiseau
Name: Holly Loiseau
Title: General Counsel and Secretary
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