Full text
1
UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
In re:
PANTHERA ENTERPRISES, LLC,
Case No. 2:19-787
Chapter 11
Debtor-in-possession.
WEST VIRGINIA ECONOMIC
DEVELOPMENT AUTHORITY,
Movant,
v.
PANTHERA ENTERPRISES, LLC,
Respondent.
DEBTOR’S OBJECTION AND RESPONSE IN OPPOSITION TO WEST VIRGINIA
ECONOMIC DEVELOPMENT AUTHORITY’S MOTION FOR RELIEF FROM THE
AUTOMATIC STAY TO FORECLOSE AGAINST THE DEBTOR’S REAL PROPERTY
AT 2506 FISH POND ROAD, OLD FIELDS, HARDY COUNTY, WEST VIRGINIA
AND NOW, comes Panthera Enterprises, LLC (“Debtor”), by and through its
undersigned counsel, and files this objection and response in opposition (the “Response in
Opposition”) to West Virginia Economic Development Authority’s Motion for Relief from the
Automatic Stay to Foreclose against the Debtor’s Real Property at 2506 Fish Pond Road, Old
Fields, Hardy County, West Virginia (the “Motion”). In support of its Response in Opposition,
Debtor states as follows:
JURISDICTION AND VENUE
1. This Court (hereinafter defined) has jurisdiction over the Motion pursuant to 28 U.S.C. §
1334(b). This matter is a core proceeding under 28 U.S.C. § 157(b).
2. Venue of this Motion is proper in this district under 28 U.S.C. §§ 1408 and 1409(a).
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 1 of 12
2
INTRODUCTION
3. West Virginia Economic Development Authority’s (“EDA”) Motion for Relief from Stay
(the “Motion”), if granted, would short-circuit Debtor’s opportunity for and efforts at
reorganization and would serve to benefit only the EDA to the detriment to all other creditors
and parties in interest. The EDA ironically claims to be concerned with the estate while at the
same time seeking to foreclose on the Debtor’s primary asset for the EDA’s sole benefit. As the
Court has perceived and noted on the record on multiple occasions, the Debtor has available
business that can and should function in any way to benefit all parties in interest if certain issues
and disputes can be resolved amongst certain key parties. The Debtor is in the midst of the very
process of attempting to resolve such issues so that it can maximize value for ALL creditors and
parties in interest and achieve a successful reorganization. Besides not being supported by
relevant facts or applicable law, the EDA’s Motion is premature and contrary to the Chapter 11
goals of providing the debtor with an opportunity to remedy past financial difficulties and
challenges and successfully rehabilitate itself. The EDA’s request is particularly egregious given
that it is overwhelmingly adequately protected by both the value of the Property serving as its
collateral and the fact that it receives loan payments in the amount of $52,000 every month.
4. The Debtor has significant equity in the Property and the Property is necessary for a
successful reorganization. The EDA’s interest is adequately protected and the Debtor is entitled
to an opportunity to develop and propose a Chapter 11 plan that will benefit all creditors and
parties in interest. The EDA’s Motion, if granted, would benefit only the EDA and would have
the unfortunate effect of drastically diminishing the value of the estate to the detriment of all
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 2 of 12
3
other parties in interest. As discussed more fully below, the EDA’s Motion should accordingly
be denied.
BACKGROUND
5. On September 13, 2019 (the “Petition Date”), the Plaintiff filed a voluntary petition for
relief under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (as
amended, the “Bankruptcy Code”) of the Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of West Virginia (the “Court”) at case number 19-00787 (the
“Case”).
6. The Plaintiff owns the real property located at 2506 Fishpond Road, Old Fields, West
Virginia 26845 (the “Real Property”), including the improvements, structures and various
personal property situated on such real property (collectively, the “Property”), all of which is
utilized as a training facility for various of the Plaintiff’s clients and customers (the “Facility”).
7. Beginning in or October, 2015, the Debtor’s business of fulfilling government training
contracts began experiencing financial difficulty due to uncontrollable issues with the
government’s defense business and sequestration. Prior to that time, the Debtor had operated
successfully and continued to grow its business.
8. Due to the financial difficulties it was experiencing, on or about June 1, 2018, the Debtor
and Panthera Training, LLC (“Training”) entered into a commercial lease (the “Lease”) by which
Training was to occupy the Property and the Facility and conduct certain trainings (the
“Trainings”) to fulfill certain contracts held by the Plaintiff (the “Training Contracts”). A true
and correct copy of the Lease is attached hereto as Exhibit A.
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 3 of 12
4
9. The Debtor subcontracted the Training Contracts to Training to allow Training to
facilitate the Trainings while it was leasing the Property (the “Subcontract”). A true and correct
copy of the Subcontract is attached hereto as Exhibit B.
10. Prior to the Lease and the Subcontract, the Debtor performed all obligations under the
Training Contracts through an affiliated subcontractor.
11. In a related proceeding well known to the Court, the Debtor and Training traded requests
for preliminary injunctive relief, all of which has been denied by the Court. In the process of that
dispute, Debtor and Training have entered into an agreement to ensure that certain crucial
December Trainings are conducted as scheduled, including the very important DEA Trainings.
12. Even after the Debtor entered into the Lease and Subcontract, the Debtor has remained
involved in various aspects of the business operations conducted at the facility.
13. In particular, the Debtor’s involvement in the Facility was and is crucial to Training’s
preparation of a proposal to obtain new government Training Contracts since Training did not
and does not have the experience, track record or resources necessary to prepare such proposals
and be awarded such contracts. By way of example, as recently as June of 2019, the Debtor’s
principals, particularly Raymond Jones, prepared an RFI to be submitted to the DEA for a
proposed Disaster Readiness Course.
14. The EDA is a secured creditor of the Debtor as a result of two prepetition loans made to
the Debtor (the “Loans”). The Loans are secured by Deeds of Trust on the Debtor’s Property and
the EDA has alleged first priority liens on the Property.
15. As of the Petition Date, the total amount due under the loans to the EDA was
$6,433,609.38.
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 4 of 12
5
16. As a result of the Debtor’s Lease with Training, Training pays $52,000.00 a month to the
EDA as payment on the Loans. The $52,000.00 would otherwise be due to the Debtor as
monthly rent, but Debtor forgoes such rent in order to ensure monthly payments to the EDA.
17. Since July of 2018, EDA has been timely paid all monthly payments due to it from
Debtor.
18. The Debtor and various other parties entered into a forbearance agreement on July 6,
2018 (the “Forbearance Agreement”). Under the Forbearance Agreement, the EDA agreed to
forbear from exercising its rights under the Loans for a period of six months and in exchange, the
monthly rental payments in the amount of $52,000.00 that Training owed to the Debtor under the
Lease were to be made directly to the EDA.
19. The Debtor did not default on the Forbearance Agreement during the six-month period
and the EDA timely received its monthly payments as required.
20. The Forbearance Period expired on January 6, 2019.
21. EDA waited until August 14, 2019 – more than eight months from the expiration of the
Forbearance Period – to send letter a notice of default under the Loans and Deeds of Trust.
22. On November 2, 2019, the EDA filed the Motion seeking relief from stay to foreclose on
the Property. Simultaneously, the EDA filed a motion to convert this Case to a chapter 7
proceeding, or in the alternative, dismiss this Case (the “Motion to Convert”) [Doc. No. 55].
23. Simultaneous with the Debtor’s filing of this Objection and Response in Opposition, the
Debtor has also filed an Objection and Response in opposition to the Motion to Convert (the
“Objection to the Motion to Convert”). Debtor’s Objection to the Motion to Convert,
including all Exhibits thereto, is fully incorporated herein by reference and asserted in
opposition to the instant Motion for Relief from Stay.
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 5 of 12
6
ARGUMENT AND LEGAL AUTHORITY
24. Section 362(d) of the Bankruptcy Code provides, in pertinent part, that:
“On request of a party in interest and after notice and a hearing, the court shall grant relief
from the say provided under subsection (a) of this section, such as be terminating, annulling,
modifying, or condition such stay –
(1) For cause, including the lack of adequate protection of an interest in property of such
party in interest;
(2) With respect to a stay of an act against property under subsection (a) of this section, if
-
(A) The debtor does not have an equity in such property; and
(B) Such property is not necessary to an effective reorganization.
11 U.S.C. §362(d).
25. When a creditor moves for relief from the automatic stay, the moving creditor bears the
initial burden of showing cause for relief from stay. See In re Toomer, No. 10-07273-JW, 2011
Bankr. LEXIS 3744, *6 (Bankr. D. S.C. Oct. 5, 2011).
26. Only after the movant shows that cause exists for relief from the automatic stay does the
burden shift to the debtor to demonstrate the lack of cause and the existence of adequate
protection. See id.
27. The EDA has failed to meet its burden of showing that cause exists to grant relief from
the stay. Further, the EDA is adequately protected by the value of the Property as demonstrated
by the most recent appraisal and EDA’s of monthly loan payments.
28. Notably, the EDA does not argue for relief from stay under §362(d)(2), even though the
relief it seeks relates to an act against property, because it is readily apparent that the Debtor has
equity in the Property and that the Property is necessary for a successful reorganization. These
factors weigh heavily in favor of denial of the EDA’s Motion.
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 6 of 12
7
I.
The existence of prepetition consent to relief from stay is not determinative of
cause.
29. The existence of a prepetition consent to relief from stay in a forbearance agreement is
not determinative of finding the cause necessary to lift the relief from stay. See In re Drawdy,
No. 01-04844-W, 2001 Bankr. Lexis 2395, *14-15 (Bankr. D. S.C. Sept. 20, 2011).
30. The existence of such a provision consenting to relief from stay is only one element that
may support a finding of cause, but courts consider a variety of factors and employ a totality of
the circumstances analysis when determining whether to grant the relief from stay where the
debtor had made a prepetition agreement to allow a creditor to obtain relief from stay. Id.
31. In determining whether to grant a creditor’s motion for relief from stay where a
prepetition agreement consented to such relief, the court in In re Drawdy set forth eight factors
that a court may consider in determining whether such a provision should be enforced:
(1) whether the affected party understood the terms and consequences of the waiver
of stay, (2) the benefit the debtor received from the workout agreement, (3) the kiss of
consideration or potential prejudice to the creditor if the waiver is not enforced, (4)
the effect of enforcement on other creditors, (5) the likelihood of a successful
reorganization, (6) public policy that favors pre-petition workouts outside of
bankruptcy, (7) objections by other parties to the relief from stay, and (8) the waiver
as a means of inducing the creditor to surrender enforcement rights.
In re Drawdy, No. 01-04844-W, 2001 Bankr. LEXIS 2395, *13 (Bankr. D. S.C. Sept. 20, 2001
(relying on In re Riley., 188 B.R. 191, 192-92 (Bankr. D.S.C. 1995) and In re Darrell Creek
Assocs., L.P., 187 B.R. 908, 913-15 (Bankr. D. S.C. 1995).
32. The effects of the motion on other creditors is a crucial consideration in the court’s
determination of whether to enforce such prepetition provisions because, regardless of the
debtor’s willingness to enter into agreements affecting its rights, the other creditors of the estate
who would be affected by the relief from stay did not agree to have their rights altered. The
Debtor has multiple general unsecured creditors and they have significant claims. Protection of
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 7 of 12
8
their interests by preserving the Real Property and allowing the Debtor to seek to reorganize is
wholly against the EDA’s self-interest of attempting to foreclose on the Real Property for only
its benefit. Substantial emphasis and weight should be allocated to this factor in order to
preserve value in the estate and seek to accomplish what is in the best interests of all creditors.
33. Further, the six month period under the Forbearance Agreement expired nearly a year ago
while the Debtor only filed its petition for relief less than three months ago.
34. The creditor had nine months to proceed with its rights under the Loans and should not be
permitted to obtain relief from the stay now where doing so would detrimentally affect the rights
of other creditors of the estate.
35. Also, the EDA will not be prejudiced if relief from stay is not granted because the EDA is
adequately protected by both the value of the Property and its receipt of monthly loan payments.
36. As stated at length in its Response to the Motion to Convert or Dismiss, the Debtor has
both the intent and the ability to reorganize under Chapter 11.
37. Lastly, it is not clear that the Debtor fully understood the potential consequences of the
waiver provision.
38. Accordingly, considering the totality of the circumstances, particularly the detrimental
effect a waiver would have on third party creditors, enforcement of the prepetition waiver
provision is not supported and would not be in the best interests of the estate and other creditors.
II.
The Debtor did not File this Case in Bad Faith.
39. In the Fourth Circuit, courts employ a totality of the circumstances analysis to determine
whether a debtor has filed a bankruptcy petition in bad faith. In order to for a court to make such
a determination of bad faith, the movant must establish that (1) the debtor’s reorganization effort
is objectively futile and (2) the debtor’s filing was motivated by subjective bad faith. See Carolin
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 8 of 12
9
Corp. v. Miller, 886 F.2d 693, 700-01 (4th Cir 1989). Both prongs must be met in order for a
court to find bad faith.
40. The Debtor’s Objection to the Motion to Convert or Dismiss and the entirety of the
arguments set forth therein regarding the EDA’s failure to show that Debtor filed the Case in bad
faith are fully incorporated herein by reference.
41. As set forth at length in the Debtor’s Objection to the Motion to Convert or Dismiss, the
filing of this Case was not motivated by subjective bad faith and the Debtor’s reorganization
efforts are not objectively futile.
42. Because there can be no finding of bad faith on the part of the Debtor, EDA’s allegations
in that regard provide no support to its request for relief from the automatic stay.
III.
The EDA is Adequately Protected.
43. The EDA’s concern surrounding the “lack of adequate protection” is without merit as it
has continued to receive monthly adequate protection payments in the monthly amount of
$52,000 and, despite the bald claims made by the EDA that the Property is fully encumbered, the
Property has a generous equity cushion.
44. Courts have found that an equity cushion standing alone can provide adequate protection
to a creditor. See Bank Rhode Island v. Paxtuxet Valley Prescription & Surgical Ctr., 368 B.R. 1,
5 (D. R.I. 2008).
45. The Debtor’s most recent appraisal, conducted less than five years ago, valued the
Property at $15,050,000.00 (the “Appraised Value”). A true and correct copy of the Appraisal is
attached hereto as Exhibit C. In particular, the Appraised Value includes the land ($6,727,410),
various structures on the land ($3,042,345), and various site improvements ($5,277,161).
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 9 of 12
10
46. Based upon the Appraised Value of the Property, the EDA would have an equity cushion
on its secured claim of more than twice the value of its claim.
47. As noted above, the EDA also receives it monthly loan payments in the amount of
$52,000 directly from Training as a result of the Lease agreement between the Debtor and
Training.
48. The EDA also feigns concern over how the monthly adequate protection payments will
be made to it if the Lease is terminated. The EDA’s “concern” in this regard is illusory.
Although the Debtor gave notice to Training of termination of the Lease, Training advised that it
did not recognize such termination and so the Lease obligations continue to be met, subject to the
eventual resolution of the adversary proceeding between the Debtor and Training (Adv. Proc.
No. 19-0051).
49. In any event, the only difference with regard to adequate protection payments to the EDA
if the Lease is terminated will be that the Debtor will be paying the EDA directly rather than
through Training.
50. As previously stated by the Debtor, it will redeem the Property by April 1, 2020. The
Debtor recognizes the importance of redeeming the Property and will obtain the funds required
to redeem the Property by whatever means become necessary. Again, the Debtor has substantial
time within which to determine the best and most feasible manner in which to accomplish the
redemption.
51. The EDA’s concern regarding the SMI Agreement is irrelevant to the issue of adequate
protection and does not affect the fact that the EDA is adequately protected by both the equity
cushion as well as monthly adequate protection payments. In any event, the Debtor intends to
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 10 of
12
11
satisfy the SMI debt and obtain the release of the security interest created by the Timber
Agreement through its Plan of Reorganization.
WHEREFORE, the Debtor, Panthera Enterprises, LLC, respectfully requests that the Court
deny West Virginia Economic Development Authority’s Motion for Relief from the Automatic
Stay to Foreclose against the Debtor’s Real Property at 2506 Fish Pond Road, Old Fields, Hardy
County, West Virginia.
Date: December 11, 2019
BERNSTEIN-BURKLEY, P.C.
By: /s/ John J. Richardson
John J. Richardson, Esq.
WV ID: 13140
jrichardson@bernsteinlaw.com
Robert S. Bernstein, Esq.
WV ID: 4708
rbernstein@bernsteinlaw.com
Mark A. Lindsay, Esq.
PA ID: 89487
Admitted Pro Hac Vice
mlindsay@bernsteinlaw.com
707 Grant Street, Ste. 2200
Pittsburgh, PA 15219
Phone: (412) 456-8101
Fax: (412) 456-8135
Counsel for Debtor
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 11 of
12
12
CERTIFICATE OF SERVICE
I, the undersigned, hereby certify that the within Objection and Response to Motion for Relief
from Stay was served via the CM/ECF system upon all parties and counsel of record on this 11th day of
December, 2019.
Respectfully submitted:
Date: December 11, 2019
BERNSTEIN-BURKLEY, P.C.
By: /s/ John J. Richardson
John J. Richardson, Esq.
WV ID: 13140
jrichardson@bernsteinlaw.com
707 Grant Street, Ste. 2200
Pittsburgh, PA 15219
Phone: (412) 456-8101
Fax: (412) 456-8135
Counsel for Debtor/Plaintiff
No. 2:19-bk-00787 Doc 74 Filed 12/11/19 Entered 12/11/19 16:42:55 Page 12 of
12